Strategic Analysis of H&M: Market Segmentation and BCG Matrix

This report provides a strategic analysis of H&M's market performance, utilizing the BCG matrix to evaluate market segments across Europe, Asia, Oceania, Africa, and the Americas. The analysis is based on revenue data and market share, comparing H&M's performance with competitors like Zara. The report identifies key strategies for each region, including tailoring products for the Asian market, implementing penetration pricing in Africa, and leveraging location intelligence in Europe. Additionally, it proposes an alternative vision statement for H&M focused on meeting the evolving needs of consumers. The report concludes with strategic recommendations, such as adopting penetration pricing in Africa, launching new products in North and South America, and defining new market segments in Europe to enhance market penetration and increase sales. References to market data and competitor analysis support the strategic recommendations.

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BCG Matrix
Ability to segment the market based on the revenue could give an idea on how a company
could strategize its operations. In the project, the market share for H & M was estimated based
on the revenue generated from each of the geographical areas it operates. The key segments
included the Asia, Oceania, Europe, Africa, North and South America. Currently, the market
breakdown, as revealed by Market Screener (2019) is: Europe (68.2%), Americas (16.6%), Asia
and Oceania (15.2%). By comparing it with the top competitor in the industry (Zara), the BCG
matrix below was obtained.

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From the matrix, it is clear that the Europe market segment is doing well. This is
attributable to the fact that H & M has most franchise at Europe. The growth rate and the relative
market share is high in Europe segment. But the fact that H & M does not have optimum market
share could be explained by the fact that online retailers are aggressively taking over the market
in the Europe. In fact Jun and Yoshiro (2018) revealed how H & M is beginning to close some of
its stores in Europe due to fierce competition from online retailers.
Strategies for Asian and Oceania Segment
As revealed by Jun and Yoshiro (2018), H & M is second after Uniqlo in Asia region.
However, the matrix reveals that the growth rate is moderate. The reason why H & M has
moderate performance is that its designs are not optimal. Uniqlo's designs are considered more
standard and work-friendly than those of H&M. Most of consumers in these markets are
conservative and hence the best strategy H & M should adopt is to tailor its products to meet
local needs and avoid standardizing products in these markets.
Strategies for Africa Market segment
The growth rate in Africa is high and at the same time the market share is high. It means
that there exists few competitors. Since most Africans are price sensitive, the H & M should
adopt penetration pricing strategy.
Strategies for Europe Market segment

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The growth rate and relative market share at Europe is also high. However, to keep up
with competitors. In Europe, H & M should implement what is called location intelligence.
Thanks to Location intelligence, retailers who are willing to innovate and who want to avoid
mistakes that can be expensive without maximizing results can apply smart data in their
expansion strategy.
Strategies for North and South America
Most of the consumers from North and South America are choosy and goes for new
fashions. To win them, H & M should adopt differentiation strategy that would make its products
unique from that of competitors
Part 2
Alternative Vision Statement of H&M and recommendations
Fashion is about a set of trends in dress, lifestyles and ways of behaving. The alternative
vision statement of H & M is to dress generation and generations based on their needs. This
vision is anchored on the fact that having a clothing and / or fashion accessories store means
having a quick adaptation to international industry trends, as well as generating strategies to
compete with the constant introduction of international brands such as H&M, Forever 21,
Harmont & Blaine, Victoria's Secret, Sergio Tacchini, among many others. In order to compete
with international companies and increase sales in your clothing store, it is important to generate
creative strategies that are well focused on your target audience. Here are some of the
recommendations for H & M.
The first recommendation is to adopt a penetration pricing strategy in Africa by reducing
normal price by 5%. This is because most Africans are price sensitive. Many retailers try to get

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their first sales by setting lower prices than those of their competitors when they are trying to
expand into a new market. This penetration pricing strategy works well in markets where
consumers are price sensitive and retailers can obtain a large profit margin by selling a large
volume of products. Most return to adopt their usual pricing strategy when they have achieved
customer loyalty (Vicente, & De La Salle-College of Saint Benilde 2017)..
The second recommendation is to launch new products in North and South America. In
places where competitors are many, launching new product is one way of reclaiming and
increasing market share. H & M can capitalize this trend to the fullest and take advantage that
customers have a greater awareness of its product to generate a significant brand presence.
Paying attention to customer consumption habits and knowing what type of products they buy is
a fundamental part of the launch of any product. If H & M new product corresponds to the
demand and the behavior of the population, the launch will have an even greater impact, since it
will satisfy the expectations of the customers (Vicente, & De La Salle-College of Saint Benilde 2017).
The third recommendation is to define new segments in Europe. Searching for a new
audience among a large population group is also an effective way to penetrate the market. In
many cases, saturation of a specific demographic profile may prevent the increase in sales of a
product or service. Identifying a new niche in which to promote your products is an excellent
way to enter a new market and transform your customer base.

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References
Hmgroup.com. (2020). H&M Group | Reports. [Online] Available at:
https://hmgroup.com/investors/reports.html [Accessed 9 Mar. 2020].
Jun E. and Yoshiro H. (2018). Uniqlo eager to fend off Zara and H&M in Southeast Asia
[Online] Available at: https://asia.nikkei.com/Business/Companies/Uniqlo-eager-to-fend-off-Zara-
and-H-M-in-Southeast-Asia [Accessed 9 Mar. 2020].
Market Screener (2019). HENNES & MAURITZ (HM B). . [Online] Available at:
https://www.marketscreener.com/HENNES-MAURITZ-6491104/company/
Vicente, L. A., & De La Salle-College of Saint Benilde. (2017). Market penetration strategies of a new entrant:
The case of China Eastern Airlines in the Philippines.