LSBM306 - H&M's Strategic Analysis: VRIO, PESTLE & Porter's

This report provides a comprehensive strategic analysis of H&M, a multinational retail organization. It begins with an introduction to strategy, enterprise, and innovation, highlighting their importance in managing organizations and facing future challenges. The report then delves into an internal analysis using the VRIO framework, assessing H&M's valuable, rare, imitable, and organized resources and capabilities, such as supply chain, technology, research and development, and service quality. An external analysis follows, employing the PESTLE framework to examine political, economic, social, technological, legal, and environmental factors affecting H&M. Key drivers of change in the market, including technological advancements, consumer behavior shifts, trade uncertainties, and the urgency for sustainability, are also discussed. Furthermore, the report analyzes competitive forces within the retail industry using Porter's five forces model, evaluating the threats of new entrants and substitutes, bargaining power of customers and suppliers, and competitive rivalry. The report concludes by summarizing the key findings and their implications for H&M's strategic positioning.

Report

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Analysing internal environment of H&M....................................................................................1
Analysing external environment of H&M...................................................................................3
Analysing competitive forces within the retail industry..............................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Strategy, enterprise as well as innovation describes the study which helps individuals in
order to develop ideas in order to operate and manage their organisation and innovation along
this it prepare them to face future challenges such as political, social and cultural in
contemporary governments, businesses as well as non-profit making organisation (Miao, 2021).
The following report is about the H&M which is multinational retail organisation as well as its
headquarters is in Stockholm, Sweden. The company is founded by Erling Persson in 1947 in
Vasteras, Sweden. It offers fast fashion clothing and accessories for women, men, teenagers as
well as children. It report covers analysis of internal and external environment with the help of
VRIO analysis and PESTLE analysis along with the Porter's five forces frameworks.
MAIN BODY
Analysing internal environment of H&M
VRIO analysis refers to an effective framework for an internal analysis which help
companies in order to identify their advantages and resources that provide competitive
advantages to them (Wendee and Sussan, 2018). It includes four important factors that help
company to analyse their capabilies and resources which includes Valuable, rare, imitable and
organised. In context of H&M, its capabilities and resources that provide competitive advantages
are described below:
Resources and
capabilities
Valuable Rare Imitable Organised Competitive
Implication
Supply chain Yes Yes Yes No Competitive
advantage
Technology Yes Yes Yes Yes Sustainable
competitive
advantage
Research and
development
Yes Yes No No Partly competitive
advantage
Service quality Yes Yes No No Competitive
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advantage
Valuable- This factor includes those resources and capabilities which add value for their
potential customers (Chen. and Zhou, 2022). This makes company in order to make their internal
capability more effective in order to exploit opportunity or neutralise competition for their
products. In case of H&M, its valuable resources and capabilities are described below:
 Supply chain- This capability of H&M is valuable as it helps in providing value to their
potential customers along with the help them to gain competitive advantage in the
market.
 Technology- This resource of H&M is valuable as it provides value to their customers by
producing most quality products to them. This will also help company to gain sustainable
competitive advantage.
 Research and development- This resource of H&M is valuable in order to provide value
to their customers. This will help company to aware about the changing needs and wants
of their customers in order to provide valuable service to them.
 Service quality- This capability of H&M is valuable because their employees are skilled
ad trained in order to provide service to their customers in better manner. This will also
help company to gain competitive advantage within its retail industry.
Rarity- This covers those capabilities and resources of H&M that are scare in the market. These
resources are more unique and different from their competitors as well as help company to gain
competitive advantages in the market (Qiyin, 2022). The rare resources and capabilities of H&M
are described below:
 Supply chain- The supply chain of H&M is come in rare resources because the company
has many stores in worldwide in order to provides only its products.
 Technology- In H&M there technology are more rare and unique in order to produce
more fashionable clothing and accessories of the company.
 Research and development- This also is rare which help company to understand the
demand and wants of their employees in the market.
 Service quality- The service provides by the H&M to their customers is rare in order to
give quality service to their customers.
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Imitability- This describes those resources and capabilities of the company which makes
difficulty for the company in order to find its closer substitute in the market. In respect of H&M,
its imitable resources and capabilities are described below:
 Supply chain- This resource of the company is imitable as it is found difficulty for the
company in order to found its substitute in the market.
 Technology- The resource of the company is imitable because it makes difficulty to them
to find its substitute in the market.
Organisation- These will includes those resources of the company for which they have
organised management system, structure, process as well as culture in order to capitalise them.
The organised resources and capabilities of H&M are described below:
 Technology- This resource of H&M are organised as its help company in order to gain
sustainable competitive advantage in the market.
Analysing external environment of H&M
PESTLE analysis refers to a better framework that helps company in order to analyse
their external factors in better manner (Lin, 2019). This will help in examining certain external
factors for a company which includes political, economic, social, technological, legal and
environmental. In respect of H&M, its external factors are described below:
Political factors- The production of H&M is mainly set in Turkey and Lebanon. The
political environment of Lebanon is unstable because power of supremacy which makes them to
face various issues in the organisation. Due to China vs US trade war the prices of textile
products will also increase which will also provide negative impact on the company.
Economic factors- The H&M operate their business in many countries as well as labour
law changes significantly which may also affects the business environment of the company. In
developing countries there are low labour rate which creates opportunity for the company in
order to increase their profitability by setting their manufacturing units in these countries.
Social factors- Clothing describes the field where people are directly influenced through
social media or celebrities (Sun, Xu and Yu, 2021). This makes management of H&M in order to
promote their products on social media platforms and by famous celebrities in order to increase
demand for their products in the market.
Technological factors- Technological is the key factors that change on daily basis which
creates opportunity for the company in order to enhance their functions in better manner. By the
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development of mobile application many people are thriving in order to purchase their clothes
and accessories by using their mobile. This makes company in order to make their products
available in various mobile apps and stores in order to increase demand for their products.
Legal factors- The regulatory policies are different in different countries which makes
company to find difficulty in order to operate their business in many countries in better manner.
This makes its management in order to up-to-date with the legal policies of different country in
order to operate their business in legal manner.
Environmental factors- As the textile industry is one of the most polluting sector as well
as it generate higher amount water waste (JIANG and Yonghui, , 2021). Because of this many
water bodies pollutes as well as cause several diseases to the people. This makes management of
H&M in order to use sustainable factors in order to protect environment of the country.
Key drivers to change in the market-
Changing in technology- The technology is the factors that change rapidly which
provides great impact on the company to operate their business in better manner.
Changing in consumer behaviour- This describes that the consumer behaviour is ever
changing due to daily innovation and technology which makes them to think more before making
their purchases.
Change in trade and uncertainty- International trading system is evaluating
continuously which creates uncertainty in the global economy.
The urgency for sustainability- There is constant changes in the environment due to
pollution, loss of biodiversity and climate changes which creates problems for the company in
order to operate their business.
.
Mind Map-
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Analysing competitive forces within the retail industry
Porter's five forces model can be described as an effective model which help company in
order to analyse and identifies their five competitive forces which helps in shaping the industry
as well as helps for determining the weaknesses and strengths of an industry (Jiang. and Cao,
2020). Many companies uses this model in order to determine their corporate strategy as well as
help company to identify their industry structure. It helps H&M in order to analyse their current
position in the market as per the different factors which includes customer, competitors,
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Key drivers to
change in the
market
Changing in consumer
behaviour
The management of H&M need to
provide trending and fashionable
products by understanding their
consumer behaviour properly in
order to increase their sales and
profit.
. Changing in technology
This makes management of H&M
in order to be aware about the
technological changes that help in
increasing the growth of the
company in better manner
Change in trade and
uncertainty
This makes difficulty for the
management of H&M in order
to operate their business due
changes in trade and
uncertainty in retail industry.
The urgency for sustainability
This will create urgency for
sustainability in the country which
makes H&M in order to consider
sustainable products in order to
manage it in better manner.

suppliers, alternate solutions and financial strengths. Its five competitive forces within the retail
industry are described below:
Threats of new entrants- The threats of new entrants in the retail industry are high
because there are low barriers for the new entrants. There is no need of any technological
knowledge as well as many online platforms are available that helps them in order to market
their products. This makes H&M in order to provide more quality, trending and fashionable
products to their potential customers in order to gain their attraction in better manner.
Threats of substitutes- In retail industry, the threats of substitute for the H&M products
is moderate because the people are demanding and they wants new and trending clothes
according to the latest trend in the market (LI. and LI, 2021). H&M is constantly focus on
innovating and following trend in the market in order to provide more unique products to their
customers whose closer substitutes are not available in the market. The company will also face
higher threats of the substitute when their customers focusing on purchasing products from those
companies who provide them in lower cost.
Bargaining power of customers- The bargaining power of customers for the purchase is
high because there are many brands who offer kind of similar products in lower cost in the
market. In case of branded products, customers do not bargain as the H&M already focus on
providing their products in cheaper cost in comparison to their competitors’ products. This
makes management of H&M in order to find effective method which helps in reducing the cost
of their products to provide their products in lower cost.
Bargaining power of suppliers- This shows that the bargaining power of suppliers
within retail industry is moderate. The H&M has many suppliers which helps them in order to
supply its products to its potential customer across the world in order to gain various advantages.
As there is lower threats for the new entrants which may create higher bargaining power of
suppliers for the company in order to provide their products in the market.
Competitive rivalry- This will be intense for H&M in retail industry because their many
companies in the market that offers clothing and accessories products in the market which create
more dynamic competition for the company. The management of the company is always focus
on providing better quality and innovative products to their potential customers in order to
become more competitive for their competitors.
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CONCLUSION
From the above mentioned report, it has been concluded that strategy, enterprise and
innovation is describes as a study which helps individual to gain knowledge in order to operate
their business by solving issues that may arise in future. VRIO analysis helps company to
analyse their resources and capabilities that makes its competitive advantages. Pestle analysis
helps company to analyse about their external factors that provides impacts to the company.
Porter’s five forces help company to analyse their competitive forces within its industry.
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REFERENCES
Books and Journals:
Miao, Y., 2021. Science and technology for social good: A study of enterprise innovation
behaviors based on competitive strategy orientation. Science Research
Management, 42(8), p.1.
Wendee, P. and Sussan, F., 2018, July. THE ROLE THAT INNOVATION AND STRATEGY
PLAYS IN VALUE DRIVER THEORY TO CREATE ENTERPRISE VALUE.
In 2018 Global Marketing Conference at Tokyo (pp. 720-720).
Chen, C. and Zhou, X., 2022. Impact of Enterprise Strategic Mode on Technological Innovation
Under Information Technology. In International Conference on Cognitive based
Information Processing and Applications (CIPA 2021) (pp. 290-299). Springer,
Singapore.
Qiyin, W., 2022. An Empirical Study of Enterprise Development Strategy on Business
Performance in China. International Journal of Science and Business, 8(1), pp.42-57.
Lin, P., 2019, January. Enterprise Economic Management Innovation Strategy Based on the
Integration of Multivariate Mixture Criterion Fuzzy Model. In 2019 International
Conference on Intelligent Transportation, Big Data & Smart City (ICITBS) (pp. 425-
429). IEEE.
Sun, H., Xu, B. and Yu, H., 2021. Measurement of Tobacco Enterprise Technological Innovation
Capacity and Synergetic Development Mechanism Based on DEA Model. Tobacco
Regulatory Science, 7(4), pp.232-250.
JIANG, H. and Yonghui, C.A.O., 2021, March. Practice and reference of enterprise quality
management innovation——Case study of Chinese enterprises. In 2021 2nd
International Conference on E-Commerce and Internet Technology (ECIT) (pp. 138-
141). IEEE.
Jiang, H. and Cao, Y., 2020, April. Research on enterprise quality innovation of VE and DMAIC
tool integrated application. In 2020 International Conference on E-Commerce and
Internet Technology (ECIT) (pp. 372-375). IEEE.
LI, E.J. and LI, Q., 2021. Local Government Innovation Competition and Enterprise
Innovation. Contemporary Finance & Economics, (4), p.16.
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