Analysis of H&M: Strategic Issues, Advantages and Improvements

This report provides a comprehensive strategic analysis of H&M, a multinational clothing retailer. It begins with an overview of H&M, highlighting its global presence and brand identity. The main body delves into the strategic issues H&M faces, utilizing SWOT, PESTLE, and Porter's Five Forces analyses to identify challenges related to political instability, economic fluctuations, social and cultural factors, technological advancements, environmental concerns, and legal compliance. The report also examines H&M's key capabilities, including its resources and critical success factors like product innovation and clear strategies. Finally, the report suggests improvements for addressing the identified strategic issues, offering insights into how H&M can maintain its competitive advantage in the fashion retail industry. The report references various sources to support its analysis.

REPORT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Overview of H&M......................................................................................................................1
1.Strategic Issues H&M facing and why they arise....................................................................1
2 key capabilities of H&M that give the company as competitive advantages...........................3
3 Suggestions improvements for strategic issues........................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
A Swedish multinational clothing – retail company dealing with fashion and clothings
with men, women, teenagers and children known for Hennes & Mauritz or H&M. It is one of the
leading companies with the brand, also has its unique identity which drives consumers to dress
complete in sustainable way. I n addition to this, key capabilities and key factors that give H&M
its advantage and improvements that are made in issues are justified. Sales of H&M in 2017 is
high that is 231.771 as compared to last few years. It clearly shows that customers of the
company are increasing yearly
MAIN BODY
Overview of H&M
Fashion and interior related clothings are manufactured by H&M for men, women,
teenagers and children. Not only limited to stores, they also provide the consumers with facilities
of online shopping, and stores that are located worldwide as it is a multi national company. Over
4500 store operated in almost 62 countries (Muñoz and et.al., 2012). Also, it is the second largest
retailers of clothing facing certain strategical issues and competitive advantages and
improvements to strategies are discussed in this report.
Three strategic issues
1. Unclear and inaccessible strategy- the strategy in the firm is need to be implemented
effective and it is need to be clear so that each person can have idea about the plan and
action to the enterprise.
2. Poor communication channels and strategy- The communication plays the vital role in
order to perform the business function effectively. In this it can be said that no matter
how well the strategy is but firm need to communicate to all the employees to the firm.
3. Failure to corporate and interest of the all parties into the strategy- The strategic plan is
need to be directed to the employees in the effectively manner and it is need to
coordinated well so that firm can able to perform its function with the all employees of
the firm.
1

Figure 1H&M
Figure 2 Comparative analysis of key figures
2

1.Strategic Issues H&M facing and why they arise.
With the help of SWOT analysis, PESTLE analysis and porters five forces the strategies
that are faced and reason for arising strategies have been detailed in this report.
PESTLE: The strategical issues that caused by major factors of political, economical, social,
technological, legislative and environment.
Political: A store of H&M opened in Israel under pressure as they do not respect International
law. When, H&M refused to start a store in Israel their officials promised to promote peace in
the region, many organisations protested the decision made by H&M and got boycotted instead.
Opening of stores on controversial sites got brutally killed by Palestinians (PESTLE analysis of
H&M, 2015). Also, the issues raised second time when, H&M had a store in Bangladesh as the
get the products due to cheap labour and safety of them are ignored which laid to 1100 deaths in
fire cases. They got their reputation destroyed by which affected by decreasing in sales. Later on
with the involvement of media safety measures are opted by companies. Political factor which
can affect the firm are known as instability in political environment which can impact the
business activities. As because of regulatory reason, H&M need to collaborate with franchising
partners in order to operate business in other countries such as Saudi Arab, Oman, Bahrain etc
(Gould, and Desjardins, 2015).
Economic: H&M got many shocks by economic factors as the countries changes its rate of
interest, fluctuations made in rate of currency which created challenges while operating and
maintaining stability in terms of pricing product. Also, the laws adapts in import, export duties
to various countries crates barriers and issues while operating stores that are located
internationally (Shanbhag, Dutt and Bagwe, 2016). At the time of recession customers spending
power got down and they avoid making purchase. This can affect the company and way of its
sales. Therefore H&M need to lower its price so that they can easily avoid loss (Wicker,
Soebbing and Breuer, 2015. Instead of negative affect which is brought by Brexit for currencies
across, H&M report that its June 2017 sales was increase by 7 % on a local currency as compare
June 2016. Along with this it also grew 10% at the time of converting into Swedish, currency,
the Krona
 Social: By involving more number of women in the process of employment in H&M, by
which chances are provided to explore themselves in terms of talents and skills and equal
chance is given. Also, H&M started to work with international labour organisation by
3

which they can ensure about better wages and hygienic working conditions by which
they remain safe. In this, H&M needs to take initiatives in order to adopt that policy and
products which will be helpful to have customer awareness. Clean and drinking water is
taken in to concern by H&M and electricity saved in retail outlets. For betterment of
society recycling of waste materials are opted by H&M (Asiimwe and et.al., 2012).
Social cultural factor plays significant factor in the growth of the fashion retail industry. There
were major changes take place in last 10 years and it has directly affected the demand of fashion
products. H&M has conducted market research and makes changes in its product and services for
increasing sales (Merchant, 2014).
Technological: With the changes in trends of society H&M opted the latest fashion for
consumer by changing the technology and bringing nuances. Current demand are maintained by
H&M and rapid changes are made as per the needs. In this, H&M is taking various initiatives in
terms to develop the app for number of mobile devices, at present they are unveiling the use of
the H&M and it works as to allow the customer's from their online and in-store purchase
(Tansey, Spillane and Meng, 2014).
Environmental: By being a giant retailer and always spotlighted, activities and actions are
performed very carefully. Also H&M avoid dumping environmental hazardous into water. The
main aim of H&M to be 100% innovative and renewable by the 2030, all products are need to be
generated from the old products (Adner, Ruiz-Alisedaand Zemsky, 2016)
 Legal: H&M Mandatory accepted the laws rules and policies to avoid conflicts while
performing. They avoided child labour, safety measures are enforced by involving
technology like fire alarms, extinguishers and other needed equipment’s. On regular
basis audit of financial accounts are maintained for being transparency in business
operations (Burnell, Needs and Gordon, 2017). Legal challenges has bound the fashion
industry such as ethics and obedience which is significant emphasise areas for the big
products and they are employed dynamically in his way.
Porter's five forces of analysis: The five forces of analysis helps H&M to know about the
competition of business.
4

Threats of new entrants: H&M has threats of new entrants which decrease profit eventually.
Hence, the minimum level of profit has to be maintained. H&M is operating its business in retail
sector where threat of new entrant is moderate ((Yorio, Willmer and Moore, 2015). There are
many top companies who are operating business in this fashion industry. Therefore, for H&M
company it is not easy to make position in the market.
 Threats of substitute: Substitutes for existing products that are in high demand creates
hindrances. As, existing fashion if copied by another firm and start producing it definitely
decreases the sales of H&M.
 Bargaining power of customers:. In this the prices most variable for customers. In this
manner there is one of the most positive aspects that purchase volume of the things are
very low. Under this term single buyers in the market are irrelevant to the business
enterprise. There are many companies in retail sector who are making similar type of
products and services it is important for H&M to differentiate its products and services so
that it can lower the bargaining power of customers.
Bargaining power of suppliers:. Under this term it can be said there are number of suppliers in
the market. In addition to this, retailer can impose the demanding conditions of market because
they are having more power than the suppliers in market (Zalengera, Blanchard and Gondwe,
2014).
 Industry rivalry: Competition plays a vital role while promoting product or services.
Industrial rivalry enhanced the skills of H&M as they focused mainly on changing trends,
and fashion as per the needs of consumers. In this there are number of national, local and
international competitors available in this market. There is need to have quick changes in
requirement of customers and in this way they do not allow to have development in the
strong scale economics.
SWOT: There are certain strength, weakness, opportunities and threats to H&M are given
below.
H&M
Strength
H&M sells its commodities portfolio with the
help of many brands as are H&M, COS,
weekday and Monki etc. This all brands must
Weakness
This firm is largely dependent over third party
suppliers as their merchandise etc. They work
as to outsource product manufacturing to
5

have unique identity and its also depends on
target group of customers ((Zalengera,
Blanchard and Gondwe, 2014).
1. It has strong and diversified presence
geographically across the globe. It has
also expanded in number of potential
market as are Africa and Asia etc.
almost 800 independence suppliers. This firm
is having lower control over production .
Opportunities
H&M is continuously focussing over to
improve the profitability condition in market.
Bottom line of firm as well as top line. In this
it can be said that H&M need to explore the
emerging markets as are Africa and Asia in
order to capitalise new demand which has been
created (Zalengera, Blanchard and Gondwe,
2014).
Threats
Social media is also plays vital role in terms to
have quick changes. This firm need to deliver
the things as new trends in the market or it can
be leg behind the country. In this each
enterprise is need to be aware of the
competition avail in market, as per the new
trends and fashion.

2 key capabilities of H&M that give the company as competitive advantages.
There are certain key capabilities and factors that are performed by H&M in terms of
generic porter's strategies are discussed in this report. With the elaboration of advantages of
competitive strategies, and the detailing about the linking of the advantages of strategies while
performing for organisation practices
Three types of resources
Three types of resources H&M company required are known as physical, human and
financial resources. For the organisation it is important to ensure that people do it hire highly
skilled employee who can make innovative products for its customers (Zalengera, Blanchard and
Gondwe, 2014). Along with this, new technologies should be adopted by firm so that they can
easily save cost and time. Apart from this, enough finance should be available so that all the
business operations can be carried out in an effective manner. Unique capabilities of the
company can help in linking with this critical success factor as because it assists in creating some
barriers for competitors.
6

Critical success factor are as follows
Constant level of product:
There is high level of newness in the market and they endlessly delight their customers with of
the minute clothing. In the last 15 month company is focusing on bring innovative products that
has grab attention of customers. 29.9% of H&M’s present contribution has been refilled. A
figure that has grownup by additional than 6% since April 2014. They also grown up with the
child’s wear ad menswear.
2. Clear strategy around discounting
H&M’s approach for discounting can be easily noticed with in varous methods. H&M have
23.9% of their present contribution cut-rate (in line with the 24.2% in April 2014), 10% of their
offer is reduced by 50%
Critical success factors: There are many critical factors that are faced by H&M to meet the
goals as the CSF are at high level. The managers and staff are important to the organisation
success. Advantages to the H&M should be considered as whole to know about the critical
success factors. Also the company should be meaningful with the goal that are in higher level.
Also, the link should be directly done to the business strategies. Company of H&M should
increase the market share by meeting the existing consumers in order to avoid barriers. Then,
they should be based on service oriented while working with consumers. The achievement
should be improved by fulfilling the excellence with online process. Incentives and rewards
should be align with the roles of employees for satisfaction of employee for increasing.
There are certain determination that are done for knowing about the success factors that
are critical to achieve. The team will be moved together that H&M has to work with team.
Employees of H&M should be allowed to submit the ideas and consideration by giving the
feedback also multiple framework are examined to know about the key elements of
acknowledging about the long term goals of H&M company.
With the use of swot analysis, objective advantage scope, and strategic plan and by
changing the agenda the frame work of multiple task can be effectively performed. By knowing
about the long term goals, implementation of strategic plans with critical success in minds can be
analysed to know about the effectiveness (Hacklin and Wallnöfer, 2012).
There are certain factors that can be taken into consideration to track the critical success
factors by getting well known about the requirements of H&M.
7

Tracking the H&M's critical factor success:
 The growth of the company can be made by based on the current client, and with the help
of partners, or by through the getting new clients in specific area or channel.
 Championship can be established for critical success factors by which the company can
ensure more reliability in terms of leadership and management.
With the use of software the responsibilities and roles can be assigned and easily tracked the
important factors
3 Suggestions improvements for strategic issues.
Here below are provided porter’s generic strategies that are as follow:
Cost leadership: H&M has cost leadership strategy as because it offers fashionable clothes at
cheap price selling to comprehensive market. Further, this strategy is considered is very effective
for the present economical situation. Therefore, this strategy can create barrier for its competitors
(Yorio, Willmer and Moore, 2015). H&M finds the exploitation that are made to the cost
advantages in all sources. Increase in the performance of H&M leads command price as average
performances are made. This increment in performances lead the cost leadership of H&M to
include and acknowledge the terms of economies of scale and the technological sequences that
are adapted to meet the production process as the barriers to H&M company are at large which
causes the sales of the business.
 Differentiation: Strategies differs with difference in firms that seeks to be unique in
company of H&M as dimensions are widely used by valued buyers. The selection of
attributes are made more than one so that many buyers can perceive as important and
meet those needs of positions. The made up of rewards are for its uniqueness with low
pricing strategy, this is one of the greatest advantage that are earned by H&M company.
Later the generic focus on strategy with competitive scope of choice are made within the
industry.
 Cost focus: The targets that are decided by company of H&M are taken into
consideration under cost focus by which the firms seek advantage of cost in segment of
targets. By focusing on the cost, H&M get enable to perform effectively with an
advantage of competition. As, the competition is high, the focus is converted towards cost
for the achievement (Ghosh, 2013).
8

 Differentiation focus: Differentiation that are made in the segments of target are termed
as differentiation focus. The other segments of the industry and target segments are
differentiated to know bout the variations that are made visible to the H&M company.
This segments that are made with the help of targets are supposed to have production and
system of delivery as that best services must varies from other segments in industry.
Comparing to differentiation focus, cost focus spoils the special needs of buyers while
meeting certain segments.
By the help of competitive scope, the broad target and narrow target are considered with the help
of lower cost and differentiation, in terms of cost leadership, cost focus, differentiation and
differentiation focus that have been detailed in the above report.
There are certain strategic issues that are followed effectively by taking into
consideration about their solutions, and came out with specific and various recommendations and
suggestions for improvements. As the SWOT and PESTLE analysis are detailed in the above
report considering about the barriers and issues that caused by Israel and many more things and
the H&M company overall came into existence with profits by addressing eh barriers and issues
the suggestions for improving the strategic issues are detailed in this report as follows.
Evaluation of business strategies: Many of the researchers have developed certain plans for
evaluating strategies of business to know about its effectiveness and efficiency. The evaluations
are based on three different criteria that are detailed in terms of suitability, feasibility and
acceptability.
Suitability: To know about the suitability, leaders of strategy aligns with environment
that are external (Tansey, Spillane and Meng, 2014). As several tools are used in this report to
acknowledge about the strategic issues by considering and explaining about the swot and pestle
analysis and porters five forces that affect the factors of H&M companies. The strength and
weakness and opportunities and threats are determined with elaboration in this report. In order to
increase the sales of H&M products, the company conducted training program as per suggestions
as strength and system can be ordered three version of brand are the weakness and opportunities
to raise H&M is demographic, and the competitors landed major promotion to deal in terms of
recycling the rise. This meets the tests of suitability.
Porter's five forces: Just like swot analysis, there are external pressures also impact the
company of H&M. Like the entry of new are the basic threats that needs to provide suggestion
9

and improvements by focusing on efficiency (Pestle, Crowley and Weirauch, 2014). Also, the
company of H&M deals with the buying power of the suppliers, also the bargaining power of the
consumers which definitely needs improving measures to opt by the leaders and managers. And
the buying power should also consumer be considered to competition at the higher level. And the
industry rivals increase this has to be considered by rethinking of suitability for the business.
This improves the strategies to move like form a race to bottom which is not going to end well.
Pestle: With the help of pestle the hindrances, issues and barriers are considered by knowing all
eh terms of factors that affected the sales of the business. The negative impact if Israel affected
the business a lot in terms of voiding law and other sources (Wicker, Soebbing and Breuer,
2015). But the improvements are made by H&M in terms of recycling the disposals instead of
dumping into sea water, providing irrigation and water facilities to developing and needy
countries, engaging women in employment to get their skills enhanced and avoiding child labour
are the measures and techniques that are followed and implemented by H&M company. The
remaining factors like technology, social economical and environmental and legal affected the
H&M company (Niknejad and Petrovic, 2016). The rapid changes are made effectively as per the
needs of consumers which preformed by the company by mkeeting all the sources of needs, this
brought the enhancement and nuances in the company to get promoted the business worldwide.
Many legal factors impacted negatively but the H&M came with overall development of the
company. This raised the consumer confidence with nuances and enhancement.
It can be understood with the help of safe taste model as are-
Suitability- it is the test which defines that how selected option would be helpful and how this
all are need to be adopted in relation to carry things. In order to assess the right and suitable
strategy it is essential to define the proper use of the things (Gould, and Desjardins, 2015.). The
one perfect strategy is need to be adopted which will be helpful to overcome the difficulties. This
strategy can help company in making improvement in their internal factors which are impacting
business operations
Acceptability- This is the steps which relates to the strategic model which works as to
measuring the things as are return, risk, stakeholder’s reaction etc. thus, return is need to be
calculated on the basis of terms as are profitability analysis, cost benefit analysis and shareholder
value analysis etc (Merchant, 2014).
10

Feasibility: With the effectiveness in performances and all the affecting factors like swot and
pestle and porters five forces the company of H&M . The rapid decisions are made by company
by opting the changing trends and fashions which enabled the company to grow t large by
meeting the increases in sales (Adner, Ruiz-Alisedaand Zemsky, 2016). The changes in the
technologies and factors of productions are opted by company in order to grow by meeting all
the barriers and hindrances in terms of causes. The advancement in planning of technology and
well and the strategic barriers increased the profitability and productivity of the business. To
boost more sales opportunities, the enhancement should be made by strategy that is notion by
creating the fear of job among the employees as they may perform effectively.
CONCLUSION
From the above report it is concluded that to operate business it is important for company
to understand micro and macro factors that can affect the company. Political instability can affect
the sales and profit of the firm. Further, it is concluded that, cost leadership strategy is effective
in respect to make good position in the market and to gain competitive advantages.
11

12

Adner, R., Ruiz-Aliseda, F. and Zemsky, P., 2016. Breaking Trade-Offs: When is
Dominating from the Middle a Winning Generic Strategy?. In Academy of Management
Proceedings(Vol. 2016, No. 1, p. 16580). Briarcliff Manor, NY 10510: Academy of
Management.
Gould, A.M. and Desjardins, G., 2015. A spring-clean of Michael Porter’s Attic: The Canadian
telecommunications sector as an exemplar of refurbished generic strategy. Competitiveness
Review, 25(3), pp.310-323.
Merchant, H., 2014. Configurations of governance structure, generic strategy, and firm size:
opening the black box of value creation in international joint ventures. Global Strategy
Journal, 4(4), pp.292-309.
Niknejad, A. and Petrovic, D., 2016. A fuzzy dynamic inoperability input–output model for
strategic risk management in global production networks. International Journal of
Production Economics, 179, pp.44-58.
13

Pestle, W.J., Crowley, B.E. and Weirauch, M.T., 2014. Quantifying inter-laboratory variability
in stable isotope analysis of ancient skeletal remains. PLoS one, 9(7), p.e102844.
Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by
construction firms during the 2007 economic recession to Porter’s generic
strategies. Construction management and economics, 32(7-8), pp.705-724.
Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by
construction firms during the 2007 economic recession to Porter’s generic
strategies. Construction management and economics, 32(7-8), pp.705-724.
Wicker, P., Soebbing, B.P., Feiler, S. and Breuer, C., 2015. The effect of Porter’s generic
strategies on organisational problems of non-profit sports clubs. European Journal for
Sport and Society, 12(3), pp.281-307.
Yorio, P.L., Willmer, D.R. and Moore, S.M., 2015. Health and safety management systems
through a multilevel and strategic management perspective: Theoretical and empirical
considerations. Safety science, 72, pp.221-228.
Zalengera, C., Blanchard, R.E., Eames, P.C., Juma, A.M., Chitawo, M.L. and Gondwe, K.T.,
2014. Overview of the Malawi energy situation and A PESTLE analysis for sustainable
development of renewable energy. Renewable and Sustainable Energy Reviews, 38,
pp.335-347.
https://edited.com/blog/2015/03/5-things-making-zara-and-hm-successful/
14