BU6060 Strategic Management: Evaluating H&M's Future Strategy

This assignment provides a comprehensive strategic analysis of H&M, a leading fast-fashion retailer. It includes a background of H&M, followed by external analysis using PESTLE to assess political, economic, social, technological, environmental, and legal factors impacting the company. A competitor analysis is performed using Porter's Five Forces, examining the threats of new entrants, bargaining power of suppliers and buyers, threats of substitutes, and rivalry among existing competitors, with a comparison against Zara and Gap. Internal analysis employs the VRIO framework to evaluate H&M's resources and capabilities, including brand image, technical resources, cost efficiency, and human resources, and a SWOT analysis is conducted to identify strengths, weaknesses, opportunities, and threats. The assignment concludes with a discussion of strategic options for H&M's future development and a justification for the chosen strategy.

Strategic Management

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
1. Background information of H&M...........................................................................................1
2. External analysis of H&M.......................................................................................................2
3. Competitor analysis of H&M..................................................................................................3
4. Internal analysis of H&M........................................................................................................4
5. Strategic options for future development of H&M..................................................................5
6. Strategy selection and justification..........................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management is a ongoing process and activity of planning, determining, evaluating
and assessment of all that is required for a company to accomplish its goals and objectives. It can
be a process of making administration in the strategic tools and techniques of the venture so that
by implementing them in effective manner, the firm can accomplish is business goals
successfully (Ansoff & et. al., 2018). This report is based in H&M which is a Swedish
international clothing retail company which is known as fast fashion clothing for men, women,
youngsters and children. This document will cover information about external, internal and
competitor analysis of company. Further, will define about future growth option and their
evaluation.
MAIN BODY
1. Background information of H&M
H&M is the world’s second largest clothing retail company which operate its business
globally with the help of its 2500 stores in more than 44 nations cross wise the world. This
corporation was incorporates in 1947 by Erling Persson and is headquartered in Stockholm,
Sweden. The company is employing 126,376 and they make contribution in running its business
through its products like clothing and accessories. For long term sustainability and running its
business in market the company offer quality products and services. So that it can retain its target
audiences till long term. Apart from this the management of this venture use effective strategic
tools and techniques for the long term sustainability of it.
2. External analysis of H&M
PESTEAL analysis
It is a strategic tool which is utilised by a firm to determine the impact of macro and
external environmental factors over the business of an organisation (Ginter, Duncan & Swayne,
2018). The brief examination of this analysis towards H&M is mentioned as under:
Political- this factor consist different factors like government policies, taxation changes,
foreign trade regulations, political risks from foreign markets and changes in trade block etc. in
H&M, majority of the production of the company setup in Turkey, Egypt and Lebanon. So the
political instability of these nations negatively affects the business of respective firm.
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Economical- This factor include different factor of external environment like business cycle,
interest rate, personal disposal income, exchange rate and inflation & deflation etc. The business
respective company exposed to economic shocks cause of Brexit and due to which interest rates,
inflation and currency rates are fluctuates that make it difficult to H&M to operate while
maintaining a stable pricing scheme (Moutinho & Vargas-Sanchez, 2018). Taxes, import duties
and other import laws are changes in several nations that make it hard to source at the catalogue
price.
Social- It is another factor of this external environment analysis and it consider diverse
components like changing culture and demographics, income distribution, living standard
changes and needs or preference changes. Clothing is an area where individual are instantly
influenced by social media and celebrities and changes are occurred in their needs and demands.
They prefer designer clothes which are in trend in these days and thus the need for the same is
arising more than ever before.
Technological- It involves several elements like internet, research and development,
advance technology, artificial intelligence and technological innovation etc. In H&M, the
management of the company use effective tools and techniques to create awareness about the
products and services in form of promotional channels like social media, interment and others.
By adopting online shopping technology through mobile application and company websites, the
firm can make development in its business in form of sales and customer base.
Environmental- This factor consist different elements like climate, weather, environmental
act like pollution and others. Textile sector is the second most polluting industry after oil and
petroleum industry. The high amount of water waste which is generated pollutes the water bodies
which can negatively affect the business of respective company. Because each business establish
and survive in society so this pollution can create deadly disease. Apart from this production of
clothes also generate air pollution which negatively affect environment. H&M has a goal which
is to be use totally recycled clothes material for its manufacturing.
Legal- This factor consist different laws and legislation that are devised and formulated by the
national authority (Okumus & et. al., 2019)). It consist different factors like health & safety laws,
employment law, consumer protection law and others. For instant, H&M has to collaborate with
franchising partners in UAE, Kuwait, Oman and other even when franchising was not the part of
expansion plan of action. If the management of this company manufactured an innovative design
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and if the company does not use effective intellectual property tool then it can be stolen of rivals
which negatively affect the firm.
3. Competitor analysis of H&M
Porter’s five forces analysis
Threats of new entrants- This force less affect the business of H&M as fashion industry
is an effective business sector because to establish a business in this industry company require
more capital (Carayannis, 2018). Now these days, customers are much demanded so they prefer
to purchase for those firm that rapidly adopt fashion changes.
Bargaining power of suppliers- The management of H&M have number of suppliers as
per diverse geographical locations and buy raw materials at lower cost. So the threat of
bargaining power of providers is low regarding the business of this enterprise.
Bargaining power of buyers- This force also less affect to the business of company
because the firm offer unique and good quality [products as well as with well established
marketing strategy. With the help of low cost production and less selling cost, it gets attention of
low income group people.
Threats of substitutes- This force moderately affect the business of H&M because there
are number of companies who operate their business in fashion and garments sector and offer
fashionable and trendy clothes in form of its substitutes at affordable prices.
Rivalry among existing competitors- There are number of fashion and apparel companies
who offer clothing’s as per fashion and trend like Zara, Nest Plc, M&S and many more (Ansoff
& et. al., 2018). Theses organisation creates high competition for H&M so this force highly
impacted the business of respected venture.
Competitive analysis-
Participants Positioning and
segments
Business model Key figures Financials
H&M H&M is a
retailer of
fashion apparel,
cosmetics,
accessories and
shoes for
The business of
the company is
operated from
leased store
premises by
internet and
The respective
company had
2500 stores in 44
nations. The
group out
group’s product
The firm
recorded revenue
of $25.191
billion. The
operating income
of the comoany
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women, men,
teenagers and
children. The
collection of
style. The
company also
offer unique,
trendy and
fashionable
clothes as per
consumer’s
demands. The
cheap Monday
outlets combine
impacts from
street fashion and
subcultures with
a catwalk vibe.
catalogue sales
and some
franchise outlets.
The company
make production
or manufacturing
through it’s in
depend suppliers.
The success and
growth of the
company entirely
self financed.
There are 140- in
house designers
who make
contribution in
creating
collections.
production to
700 independent
providers by its
16 local
manufacturing
offices in Asia
and Europe.
There are
126,376
employees make
contribution in
business
operations.
is $2/692 billion
and net income is
$ 2.106 billion
(Ginter, Duncan
& Swayne,
2018).
Inditex(Zara) The flagship
brand of the firm
is Zara which
also operating its
business by
offering different
products like
clothing and
accessories. The
company offer
casual wear and
is aimed at
young fashion
With an in –
house design and
a tightly
controlled
factory and
allocation
network. The
firm also has
policy of zero
advertising and
instead invest its
revenues in
opening up new
The respective
company operate
in approx 74
nations with the
help of 1608
outlets crosswise
the world
(Moutinho &
Vargas-Sanchez,
2018).
The firm
recorded revenue
of €18.021
million and the
net income was
$2,372million .
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conscious
consumer,
providing global
fashion with the
latest designs.
outlets.
Gap In this brand the
management
offer a range of
extensive range
of clothing
products at
moderate price.
The firm offer
sophisticated,
fashionable
collection at
higher price.
Apart from this,
it also offers
women’s
footwear and
footwear for a
range of
activities.
The firm operate
by two segments
stores and direct
sales. The outlets
segment consists
the outcomes of
the retail stores
for each of the
firms’ brands
like Banana,
Republic etc.
The firm operate
its business with
the help of its
3200 stores in 50
countries. There
are approx
132,000 are
making
contribution in
running the
business of this
firm (Okumus &
et. al., 2019)).
The firm
recorded its
revenue $14,664
million and net
income $1,202.
There is number of companies operating their business in fashion sector like H&M, Zara,
Nest plc, John Lewis and M&S etc. H&M is a retailer which is the second largest retailer in
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fashion sector so there are competition is not due to its unique, trendy and fashionable clothing.
But Zara and M&S are some venture create competition to this company in form of offering
different similar and substitutes (Carayannis, 2018). The competition are generated by other
companies regarding H&M by pricing strategy, reach of customer and distribution channels
which can negatively affect the business of respective company in unfavourable manner and also
affect its economic condition negatively.
4. Internal analysis of H&M
VRIO analysis
It is a tool and technique in strategic planning tat utilised by organisations to make
effective business determinations (Ansoff & et. al., 2018). This analysis assist in offering
information and the outcomes will offer competitive edge to business of the venture. The
explanation of this analysis regarding H&M is as below:
Resources or
capability
Valuable Rare Inimitable Organisation
Brand image Yes Yes Yes Yes
Technical
resources
Yes No No Yes
Cost efficiency Yes No No No
Human resource Yes Yes Yes Yes
Valuable- The brand image of H&M is valuable because the company offer quality
product at reasonable cost and it offer cloths as per fashion and trend. The tehcical sources that
are used by the firm are also valuable because with the help of them firm offer products to its
consumers though online way and offer information through promotion (Holloway, 2018). The
firm offer its products by using effective pricing strategies so that people can easily buy product.
Employees of venture make effective contribution in business operation by using their skills so
they are also valuable.
Rare- The brand image is rare because H&M is the second largest clothing firm of the
world. Technological factor of this company is not rare because different companies use this
kind of technology in their business. Cost efficiency is also not rare as several firms use low and
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affordable pricing strategies for their goods (Ginter, Duncan & Swayne, 2018). The human
resource of corporation is rare due to their unique skills and knowledge.
Technology that is used by
Inimitable- Brand image cannot be copy by others because firm has its own images in
market. The technology that is used by H&M in its business like promotional tools and
distribution channels can be copy by others. The pricing strategy that are use by the management
also easily use by their business firm. But skills and knowledge of employees can be copy by
other as each person has its own competencies and cognition.
Organisation- Brand image is organisable because the management use effective
strategies and plans in business operations (Moutinho & Vargas-Sanchez, 2018). Technology
which is easy to organise by the company by offering training to employees so that they can used
in organised manner, But cost efficiency is not manageable due to external impact of economic
factors. Human resource of the firm also managed by offering training and development
program.
SWOT analysis of H&M
It is a strategic tool which is used by a company to determine the capability, weakness,
growth option and threat of a business (Ansoff and et. al., 2019). The description of this concept
regarding H&M is as under:
Strengths Weaknesses
The organisation offers quality and trendy
clothing at reasonable cost and designer clothes
are also available at department store prices.
Respective company have put in a lot of capital
and maintenance free for all the diverse kinds
of machines needed to manufacture apparel for
every target segment.
Opportunities Threats
By offering online shopping option firm can
gain a lot of importance which can be tapped
by H&M.
The newest business line home ware has not
able to gain success in Europe and hence is
leading to lowering sales.
TWOS Analysis
Internal/External Strengths Weaknesses
Opportunities Utilise famous Asian
individual to publish branding
Move the rest of
manufacturing for Asian
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such as Europe. market to Asia to minimise
cost.
Threats Utilise the fact that Chinese
people hold foreign brands in
high esteem to prevent away
from localised brands (Meyer
& Xin, 2018).
By moving all Asian
production to Asia, this world
permits H&M to speed up
fashion delivery times.
From the above matrix it can be summarised that the management of H&M can growth
opportunity in term of promoting its products in Asian market with the help of celebrities and
famous people of this nation which can be strength of the venture. By moving the rest production
for Asian market can offer opportunity in term of reducing cost and can be weaknesses to target
Asian market for specific business market. In China people hold foreign brands in high esteem
which can be strength and they decent away from localised brands. By moving all Asian
manufacturing to Asia the company allows to speed up all its fashion products in these nations
which can be major weakness cause of targeting a single nation.
5. Strategic options for future development of H&M
Ansoff matrix
This model is developed by Igor Ansoff to make development in the business of company
in upcoming time by adopting four growth option of this concept. The description of this model
in context of H&M is as under:
Market penetration- It is the first growth strategy of this model, if the management of
H&M adopt it then they can make changes in its pricing strategies and promotional tools to make
increment in sales, profitability and customer base by offering existing products in existing
market. There is no risk because existing products are provided in to existing market.
Product development- Within this growth strategy, the management can make
development in its business by manufacturing new products and offering them in existing market
with the motive of maximising market share and improving economic condition (Okumus & et.
al., 2019)). This strategic option is risky more than market penetration because there is not sure
that new products are liked by exiting customers or not.
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Market development- This strategy is more risky than product development because if the
company adopt this growth option then the firm will expand its business in to new market with
its existing products (Heath, 2018). So it is not assured that products are able to fulfil the needs
and demands of new market and provide satisfaction to consumers need in improved way.
Diversification- This growth option can also be adopt the management of H&M with the
purpose of future development of respective firm in term of improving sales, customer base,
productivity and market share. This strategy is more risky because within it the company
manufacture new products and services and offered them in to new market. So it is not clear that
the commodities are capable to fulfil needs of new marketplace and consumers.
6. Strategy selection and justification
From the above analysis it can be analyse and summarise that the administration of H&M
can use market development growth option which help in making improvement in sales and
profits of the company in upcoming time. For example, the respective venture can expand its
business in African nation with the help of its existing products and services. The venture can
select this area for business expansion because it is rich in natural resources and have a
hardworking population (Carayannis, 2018). Apart for it, there are huge gaps and opportunities
to successes a business. This nation is also technologically strong which help in making
development in the business of firm in effective way.
CONCLUSION
This has been summarised form the preceding content there are different strategies that can
be adopt by a company for the development of the business. By using internal and external
business strategic tools the company can get information about the intrinsic and extrinsic
business environmental factor of business atmosphere. Competitive analysis assists in offering
information about the low and high risk of competition in particular force or factor. Growth
options of provide a direction of making development in business of firm in future.
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REFERENCES
Books & Journals
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Tourism Texts. Cabi.
Okumus, F. & et. al., (2019). Strategic management for hospitality and tourism. Routledge.
Carayannis, E. (2018). Strategic management of technological learning. CRC Press.
Holloway, S. (2018). Changing planes: A strategic management perspective on an industry in
transition. Routledge.
Meyer, K. E., & Xin, K. R. (2018). Managing talent in emerging economy multinationals:
Integrating strategic management and human resource management. The International
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Heath, R. L. (2018). Issues management. The International Encyclopedia of Strategic
Communication, 1-15.
Makadok, R., Burton, R., & Barney, J. (2018). A practical guide for making theory contributions
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Online
H&M SWOT Analysis. 2020. [Online]. Available Through: <
https://www.mbaskool.com/brandguide/lifestyle-and-retail/2934-h-and-m.html >.
H&M PESTLE Analysis. 2020. [Online]. Available Through: <
https://www.mbaskool.com/pestle-analysis/companies/17954-h-and-m.html >.
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