PGBM135: H&M Global Strategy, Competitive Advantage Report

This report provides a comprehensive analysis of H&M's global strategy and strategic foresight, focusing on its sources of competitive advantage. It explores Michael Porter's theories on competitive advantage, including cost leadership, differentiation, and focus strategies, and their relevance to H&M's operations. The report examines H&M's competitive dynamics, human resource management, and financial aspects, highlighting how the company adapts to the fast-paced fashion industry. It discusses the importance of managers in developing and implementing effective strategies to achieve sustainability and competitive advantage in a global environment. The report also covers H&M's human resource practices, financial performance, and how these elements contribute to the company's overall success in the global market, offering insights into its ability to respond to changing trends and customer demands. The report is based on the PGBM135 module for London FL9 - TRM2.

Global Strategy and Foresight
Name of the Student:
Name of University:
Author Note

Introduction
Global planning and strategic foresight is very important for a company to grow and
achieve sustainability. Strategic Foresight can be defined as the discipline which is planning
oriented. Strategies are to be developed in a business context to achieve goals. In a global
environment, companies need to achieve sustainability in order to achieve success and thrive in
the fast and competitive world. Therefore, a company should be able to gain competitive
advantage, which allows a business to position itself over the major competitors operating with
the same market. There can be several ways by which a company may achieve sustainability and
competitive advantage in the market. The company, respect to which, the report will be based to
study the strategic objectives, competitive advantage, internationalism, innovation, is H&M.
Company Overview
H&M is a Swedish company which retails clothing. It has grown since 1947 and become
one of the most well recognized clothing brands across the globe. The fashion industry is
dominated by the brand, to a great extent, with its impressive offerings and fast fashion. The
company has over 4200 stores which are situated in various parts of the world, mostly across 72
countries. H&M, as one of the most leading brands of fashion, has been able to capitalize the
fashion market with its offline as well as online presence. The company has created more
popularity with the online availability of products and services, which are preferred by the
customers, in a fast paced, global world, in which fashion has grown up to be of great
significance among people. There are over 177000 employees who work with the company,
globally. The online presence of the company is spectacular, as the interested customers can
purchase the products of their choices through the online site, which can be availed in 47
countries and connect online markets. The company responds to the changing tastes and trends in

fashion and offer products in the market which meet the needs and desires of the customers
immediately, which can also be referred to as fast fashion.
Question one
Sources of Competitive Advantage and its relevance to management
Competitive Advantage is a very essential component when it comes to strategic
management. Management of a company might be difficult in a complex and global
environment. Michael Porter has contributed to strategic management to understand complex
aspects of business and how it can be enhanced to better suit the business realities. He has laid
important theories on competitiveness and how companies can achieve competitive advantage in
a fast paced competitive world, to be ahead of the rival forces and achieve sustainability
(Hm.com 2020). The models he has theorized can be utilized and practiced in companies for
their benefit and maximization of sales and profit.
According to Porter’s Generic Strategies, an organization can achieve sustainability and
be able to compete with the dominant competing forces in the industry. The profitability of a
company is a determinant for the position of the organization in the industry. Whether a
company has a relative position, below or above the industry average, it is directly related to
profitability. The most fundamental factor for achieving profitability above the industry average
is to gain completive advantage within the industry, which should be sustainable. Competitive
advantage can be categorized into two types, which include low cost or differentiation. There are
three Generic Strategies which a company gets lead to, when the two competitive advantage
types are fused with the various activities with which they can be achieved by the company
(Hm.com 2020). These three Generic Strategies are focus, cost leadership and differentiation.

The challenge which the companies might face, in order to achieve sustainable competitive
advantage, is to choose the right and effective way. Competitive Advantage can be referred to, as
the, advantage which an organization has acquired through their products and services, which
can be in terms of lower prices, great value or by other means, which satisfies the customers and
make them prefer the company over others operating within the same industry. These strategies
justify higher prices often as the customers receive better products, services and benefits.
Cost Leadership
The most effective and dominant method by which a company can achieve advantage in
the industry, is by producing on a large scale, which allows the business to grow as well as be
able to exploit the economies of sale of the industry. The market segments get dominated to keep
the costs low. If there is an average selling price while there is a company being able to make
their products available in the market at a cost which is near the average selling price, by keeping
the cost of production lowest according to the industry standards, then the company is most
likely to be most benefitted in the market. This is most applicable with large scale businesses,
which offer standardized products in the market. These products usually have little
differentiation and are acceptable to majority of the customer base. Sales are often maximized by
the company by offering discounts, which helps the company to be the cost leader of the industry
(Hm.com 2020). The companies can also expand their market share by following cost leadership.
Cost leadership should be followed by synchronizing operation across different areas of business
which include productivity, use of technology, lean methods of production, assert bargaining
power and increasing utilization of capacity. This ensures that a company is able to build
distribution channels which are most effective.
Focus

Companies can make use of the Strategy of Focus in order to produce niche products.
This allows the company to understand the expectations of the customers and offer products
which are uniquely developed, yet are made available to the customers at low costs. This strategy
help companies to create brand loyalty as their products and services meet customer
expectations. While developing strategies for a broad market, a company should ensure which
strategy is most effective whether, it’s differentiation of cost leadership. After this, a company is
able to strengthen the focus strategy for their basic approach to the market. However, the focus
strategy allows too add the extra element which attracts the customers with niche products. The
focus of adding something extra to the products and services may ensure that the cost of
production gets lowered or create differentiation instead.
Differentiation
The strategy which allows a company to create and offer products which are different
from the others which are available in the market, is referred to as the one ensuring
differentiation. This strategy is very effective to stand out in the industry and attract the buyers
for the uniqueness. This can make a product or service be more preferred than the others in the
market. This is very much specific and dependent on the industry type. The differentiation of a
product can be enhanced with respect to aspects such as brand identity functionality, features,
durability, customer support and do on (David and David 2016). These are immensely valued by
the customers and looked for, in the products which are chosen by them. In order to develop an
effective differentiation strategy a brand must research well, innovate and develop accordingly.
The organization should possess the ability to offer products which are of high quality. The
Marketing and sales team should be competent enough to persuade the buyers of it’s worth, with
respect to its offerings which are well differentiated.

Competitive Dynamics
Competitive Dynamics refers to a range of actions which a company does to cope up with
the competitive business environment. Each competitive action are determinant of the
competitive dynamics as each one of them contribute to the enhancement of the competitive
advantage of the company. Business factors are, in the recent time, as relevant and important,
when it comes to how a company and its performance. Every company has different way of
responding to the field of competitive dynamics. These responses determine whether or not the
company is able to foster positive outcomes and market position. H&M can be immensely
benefited by assessing the dynamics to understand the competitive advantage in the market. If
there are rival forces, this theory can be utilized to create awareness among the managers and
ensure motivation among the employees to achieve success and better competition in the market
(Hm.com 2020). The capability of the company can be enhanced in H&M to cope with by
implementing strategies which are best fit to yield better results and offer fast fashion clothing in
the market.
Managers at H&M to be benefitted
The most basic function of the management is to ensure that the company achieve
competitive advantage and sustainability in a fast changing global environment. The managers
are responsible for bringing effective changes and open new areas of attaining competitive
advantage. The responsibility lies with the managers to develop understanding of the strengths
and nuances of the company, with the help of which, the competitive advantage of the company
can either be developed or enhanced. Managers can create a common objective and vision, to be
followed in order to achieve sustainability success and competitive advantage. The work force

will have a direction to follow, if the managers ensure proper strategies and ways to be executed
in the company.
The role of the managers are very crucial to evaluate and assess various strategies, which
are to be followed in the company to achieve competitive advantage, such as cost leadership,
focus or differentiation. The evaluation process is very important to determine the effectiveness
of the strategy to be followed in the company to achieve sustainable competitive advantage. In a
global environment, managers, should thus be able to assess development to ensure best results. \
Question 2
Human Resource
Human Resource of H&M is continually growing as the company intends to make
growth and expand by making deeper penetration in the market. Thus, they also increase their
human resource as there is increase of number of stores by almost 15% with every passing year.
There is increase of job opportunities of approximately 5000 jobs, every year. The employees are
located across various countries where H&M offer its services through online or offline stores.
There are. The employees come from various cultural and social backgrounds, which also helps
H&M to modify and develop product ranges on the basis of regional preferences, trends and
social factors which influence fashion and clothing.
The primary objective of H&M is to become a good employer and maintain the
objectives which they have set to be achieved by the company. In some countries, there are laws
and regulations which protect employees and the rights of the labor. These often make the
operation of companies difficult, however, H&M aims to abide by these rules and offer benefits
and working conditions which make employees comfortable and feel positive about their work.

The requirements which are to be met by the companies in order to meet the rules and
regulations of the country are met, which makes the company one of the pioneers of the industry,
as the employees feel valued. The HR department aims to take into consider and meet the needs
and expectations of the employees (Hm.com 2020). The company promotes cultural diversity,
which makes the workplace positive and enriching for the employees. The human resource team
of the employees have policies which ensure diversity, equal opportunity, health and safety and
employee development of all employees.
Finance
The finance and account department of the company is one of the most important part of
the business and ensures that the company runs smooth. The team ensures that there is enough
cash flow which would ensure proper functioning of the business. The finance department is
responsible to make the most important decisions about investments to be made to the invoices
to be paid, which makes certain that the cash flow of the company happens properly. If there is
an intention to expand the business, the finance and accounting department is responsible to
make the most correct decisions, which would account if the planning and execution of the
financial aspects go right. This is very important if the company intends on an expansion, as any
error may lead to great losses, as there are great market risks in a new market.
The roles in the finance department are many which require different understanding and
comes with even greater responsibilities, to ensure that the4re is no risks and threats. Some of the
employees in the finance department make sure that the strategic transfer and pricing solutions of
the products are carried out efficiently while others study the economic conditions of the new
market. Whereas, other employees manage expenses and invoices of the company. The
employees in the financial department are highly ambitious, especially who are Salary

Administrators or Accounting Clerks. The employees are highly dedicated to take the company
to newer heights by ensuring even the smallest odds are dealt with, with precision. The financial
funds which are required for H&M to grow are monitored by the financial team, who are
extraordinary and have ensured growth in the years of H&M’s service in the fashion industry.
Marketing and Management
The marketing department at H&M comprises of the advertising agency which is owned
by H&M completely. The department is responsible to create multi channel campaigns and
create materials which are to be used for the marketing of the products, services and the brand
itself to the target audience. The brand is most nourished in this area, as the customers get to
learn about the brand, its initiatives and the offerings through the campaigning and advertisings,
which are developed by the marketing team (Hm.com 2020). The team is responsible to make
the customers make fashion and relate to the brand. The products are offered at prices which
attract the buyers and the worth is made clear to them, which makes a potential customer, as
successful one, who enjoys being associated with the brand. The department comprises of project
management, purchase, art and illustration creation, fashion coordination, production
management. These department ensure that everything collaborated together, looks appealing to
the target customers. Great advertisings are created by the brand with the help of the advertising
team which reaches audience in the global and international market. Everything, which include
packaging to promotion is done by the marketing team. They are so effective that they have
made the company one of the most leading in the world.
Question 3
The role of innovation and internationalization in a firm’s Competitive Advantage

One of the basic criteria which ensures that a company is able to achieve sustainability
and success, is through innovation. National economies need to innovate in order to grow and
prosper in a global environment. Competitiveness of a company, in the recent times, also
characterized by a company's ability to expand a across the borders of the country of origin.
Innovation has significant relation with the consequences which are created with respect to a
firm and its economic performance. Businesses and their successes are understood with respect
to these factors in today’s world. Internationalization can also be referred to a kind of innovation
which, if a company is able to strategize and implement accordingly, will be able to become
successful and expand. If a company wishes to successfully internationalize their business, it is
very important to innovate (Chiva, Ghauri and Alegre 2014). Thus, the firm need to have precise
and correct knowledge about the nuances which play crucial role to determine success of
internationalization. Internationalization can be referred to as the process of growing and making
products available in foreign countries for sale. Therefore, the company also opens new avenues
which can be explored and addressed for their growth and expansion. It would mean that the
company can introduce new products and services, product development and diversification
according to the market conditions and opportunities.
Companies intend to internationalize and innovate their business for several reasons, out
of which, the most pertinent reason is to improve their products and services and become more
innovative, through the process of operation, services and technologies which are used by the
company. If there are companies which are investing on innovations, it is most likely that they
make profits and get repaid after entering new markets in the foreign countries and offering
newer products and services. Internationalization may mean that the firm will have more scopes
to innovate.

One of the major benefits of internationalization of business is that the business has
newer avenues to address, with which the company can quickly spread in a different location and
offer products and services by increasing the target customer base. Good ideas and products have
demands in all countries, which with the opportunity of internationalization can be addressed. If
H&M is entering a new market, it is important for them understand the expectations, needs and
preferences of the people, to come up with the best offerings. A company has great opportunities
to innovate according to the cultural and perspective differences, which are very important to
gain competitive advantage. If the company understands well the expectations and offer products
and services which suit the needs and expectations of the customers (Chiva, Ghauri and Alegre
2014). They will be able to achieve brand loyalty and create customer awareness. For instance,
when H&M aims to enter a culturally rich Asian country, they can take into consideration the
ethnic and traditional nuances, which they can incorporate in their products, which will create a
sensation among people. However, there can be challenges as well that, if a company fails to
understand the expectations, there are chances that the products and services will go less
preferred.
In order to achieve competitive advantage, H&M should be able to understand the types
of product and services which are offered by existing rival forces in the company. It is very
important to be able to offer products which stand out and have special features which help
create product differentiation. This is where innovation plays the crucial role, with which the
company can make its mark in the market. This also increases sales and revenue of the company,
as they are able to offer products in a bigger market space, with an expansion. The target
audience gets bigger as the company offers products and service which are innovative and
enhanced in their appeal, which increases sales and revenue generation (Mo 2015). If a company

focuses on cost leadership, then the company is able to lower costs of production and increase
sales, which makes revenue collection even more.
A company is able to gain competitive advantage even more, as they have opportunities
of improving the global recognition as a brand. The company, thus, by entering new market is
able to offer newer products and penetrate a bigger market, with which the company gains
competitive advantage as well as bigger customer base (Joung 2014). If the company is able to
offer quality and services which meet the expectations and need of the customers, the brand is
most likely to gain loyalty from the customers, which ensures that the company is able to create
global branding and presence in the international market, which can be referred to as
internationalization.
If a company is restricted in its offering in a single market or country, then they might as
well face great risks. Businesses may get subjected to risks and become vulnerable due to various
outcomes and situations which arise in the external environment in which a company operates. If
a company expands its market and region of operation, the company will be able to reduce the
risks and vulnerabilities which might affect the business. Therefore, even if there are negative
changes such as low GDP or disasters, resulting in detrimental outcomes of the businesses, the
company can continue to operate in the other countries through times of turmoil in the other
countries. H&M can make their business independent in the other market, which will not affect
the finances and operation in the country in which crises arise and disrupt the business.
Therefore, with innovation and internationalization, H&M can achieve risk diversion, which can
be a competitive advantage.
Conclusion