Analysis of H&M: Business Model, Industry Life Cycle, and Strategies

This report provides a comprehensive analysis of H&M, a major player in the fast-fashion industry. It begins with an application of Porter's Five Forces to assess H&M's competitive environment, evaluating the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitute products, and the intensity of rivalry. The report then delves into H&M's business model, dissecting its customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partners, and cost structures. Furthermore, the report examines H&M's position within the industry life cycle, placing it within the growth stage and analyzing its strategic group model, comparing it to competitors like Zara and Macy's. The analysis incorporates various references to support the findings.

Running head: H&M ANALYSIS
H&M Analysis
Name of the Student
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Author’s Note:

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H&M ANALYSIS
1. Porter’s Five Forces Analysis of H&M Analysis
Porter’s Five Forces is a specific model, which eventually identifies as well as
analyses five distinct competitive forces for shaping the industry and helping to determine the
industrial strengths and weaknesses (Youell 2013). This type of analysis is being utilized for
identification of the industrial structure for the purpose of determining corporate strategies.
Porter’s Five Forces analysis for the organization of H&M is provided below:
1.1 The Threat of New Entrants
H&M is an UK based organization and the market of UK is not at all saturated. There
exists no major barriers to entry within distribution of lower capital that is needed for opening
a brand new store. The fashion products even comprise of a higher margin and since there are
several substitute products that can replace brands (Jamshidi 2019). Several fashion retailers
are present, where the customers can get better quality products with lower price.
1.2 Bargaining Power of Different Suppliers
This particular force is not at all high for H&M as there exists several suppliers in
different countries with lower labour costs (Danemo 2018). Hence, the retailers could easily
and promptly impose different demanding conditions since they comprise of higher power
than the suppliers.
1.3 Bargaining Power of Buyers
The respective switching costs are lower in H&M and price is the most vital variable
for consumers (Juliusson 2015). It is quite vital to check if the volume of the purchase is
smaller and a single consumer is completely irrelevant for the organization.

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1.4 The Threat of Substitute Products
The threat of different substitute products is always high for H&M as there are several
popular brands and shops in the UK fashion world (Arrigo 2018). They should take up some
of the most basic and significant steps for dealing with the threat of substitute products.
1.5 Intensity of Rivalry
Several local, international and national competitors are present for H&M and hence
the opportunities towards growth are not at all high, since the sector might get matured
eventually (Jamshidi 2019). Moreover, the price variable is highly influential within
customers, while consideration of options.
2. The Business Model of H&M
2.1 Customer Segments
Customer segments of H&M include demographic customer segment, geographic
segment, behavioural customer segment and smart customer segment. It refers to the fact that
they design clothes for different age groups in various countries with different behaviours
(Caro and Martínez-de-Albéniz 2015). Moreover, they are also considering smart customer
segmentation, which means that they have divided the customers as per several categories
and then mixed and matched different types of available combinations.
2.2 Value Proposition
The value propositions of H&M to the consumers can be considered by following on
trend clothes at the most affordable price (Mo 2015). The retailer eventually offers a
complete range of different clothing staples for swimwear, accessories, outerwear, footwear
and several others. For maintenance of value proposition, they have considered outsourcing
of products with experienced logistics (Khasbani 2018).

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2.3 Channels
The distribution channel of H&M use distribution channel outline for maintaining low
costs as well as a faster time to the market (Bocken et al. 2016). The one channel distribution
network includes only the retailer within the consumer and producer. The direct distribution
has helped H&M in directly supplying the product to their buyers.
2.4 Customer Relationships
H&M has always maintained a steady relationship with their customers, after
combining a strong digital presence and also maintaining storage globally (Rahmiati 2016).
They have gained a unique proximity to the customers.
2.5 Revenue Streams
The revenue streams are few distinct sources, from which any particular business can
earn their profit from the goods’ sale as well as service provision (Planing 2015). Revenue
streams of H&M are highly diversified, in comparison to the businesses. Different types of
revenues include revenue from goods sales and service fees, interest revenues, rent revenues
and dividend revenues (Pedersen, Gwozdz and Hvass 2018).
2.6 Key Activities
The subsequent key activities of H&M include operations, marketing of products, and
production of different products, better administration and problem solving attributes (Uriarte
Elizaga 2016). Being a fashion based organization, they have always considered the
customers’ perspectives on top priority.
2.7 Key Resources
The key resources of H&M include human resource department, manufacturing
department and their excellent production department (Bini and Bellucci 2020). The physical
resources include raw materials, machines, factory, storage facilities and transportation.

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H&M ANALYSIS
Moreover, the intellectual resources include brand, copyrights and customer databases (Lueg,
Pedersen and Clemmensen 2015).
2.8 Key Partners
The key partners are those relationships that H&M comprise with all other businesses,
non consumer entities and governmental entities and help the business model work (Foss and
Saebi 2015). The key partners could be the relationships, which the organization had with
different suppliers, business partners and manufacturers. The partners of H&M include
WaterAid, Unicef and Care (Rana 2019).
2.9 Cost Structures
H&M has considered all costs incurred for making their business model work and
these costs are considered after checking the key activities, key resources as well as key
partners (Lüdeke‐Freund, Gold and Bocken 2019). The entire cost strategy is being designed
on the basis of customers’ requirements with low price and high fashion. Due to excellent
outsourcing, it becomes quite easier for them to provide low cost products.
3. Industry Life Cycle and Strategic Group Model
3.1 Stage of H&M Industry with Explanation and Analysis
The industry life cycle shows different stages, in which the business is operating,
progressing, prospecting and slumping within any particular industry (Xuejie, Chang and
GuangHao 2019). The five stages of this particular life cycle comprises of five stages of start-
up, growth, shakeout, maturity and decline. H&M is in the stage of growth. They are growing
gradually in the UK market and is spreading their business all over the world (Fast Fashion.
2019).

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H&M ANALYSIS
3.2 Strategic Group Model
The market commonalities of H&M include new marketing paradigm and high
competition with the substitute competitors (H&M. 2019). It is the number and significance
of different markets, in which H&M is competing with its competitors. One of the most
significant examples is of the UK market (H&M purges its shelves to get back on track.
2019).
Resource similarity involves the major resources that are same for different
organizations (Campaign 2015). Zara is a major competition to H&M and they might
comprise of few similar resources for doing business.
An example of direct competitor of H&M is Zara and that of an indirect competitor is
Macy’s (Bonilla, del Olmo Arriaga and Andreu 2019). Moreover, the potential competitors
involve Abercrombie & Fitch, PVH, Fast Retailing, Inditex and UNIQLO.

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References
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