Corporate Strategy Analysis of H&M: A Strategic Analysis Report

This report provides a comprehensive strategic analysis of H&M, a leading fashion retailer. It begins by identifying and explaining three key strategic issues facing the company, including slowing business development and the impact of market trends. The report utilizes PESTLE and Porter's Five Forces models to analyze the external environment, assessing political, economic, social, technological, legal, and environmental factors, as well as the competitive landscape. Internal analysis is conducted using SWOT analysis to evaluate H&M's strengths, weaknesses, opportunities, and threats. The report then examines H&M's resources, key capabilities, and competitive advantages, including Porter's generic strategies (cost leadership, differentiation, cost focus, and differentiation focus), unique capabilities, and skills, and value chain analysis. Critical success factors are also discussed. Finally, the report analyzes the extent to which H&M's competitive strategy addresses its strategic issues and suggests improvements, offering valuable insights into the company's strategic positioning and future prospects.

Corporate strategy: strategic
analysis report

INTRODUCTION
Corporate strategy determines activities and support which helps to attain desired results
in the enterprise. In this way, issues are carried with solution that faced by the business.
Furthermore, in order to make sure that effectiveness will be increasing with focuses on the best
availability in front of enterprise (Raithel and Schwaiger, 2015). Present report is based on H &
M which is one of the leading companies that deals in fashionable products. They consider
unique identity to make sustainability in the business environment. For gaining insight
information of the present report, it covers 3 key strategic issues faced by the enterprise.
Furthermore, it focuses on the resources and key capabilities of the enterprise which give
competitive advantages in the business. At last, it provides discussion on extent to which
enterprise is able to attain competitive strategy to solve strategic issues and improve results as
well.
MAIN BODY
1. Three key strategic issues facing the enterprise with a clear explanation of why they are
“strategic”
To deal with the different functions and operations, there are several issues that occur in
front of H&M. In this regard, mainly slowing development of the business. This is because, the
company consider their operations expansion in new stores in slowly consideration. Further, as
per the changes in market trends, the chosen business needs to make changes in their business.
Hence, it also creates impact on the business performance and outcomes (Armstrong and Taylor,
2014). In respect to analysis the firm, following tools implemented in the company to make
effective functioning:
PESTLE Analysis
To conduct PESTLE analysis, following elements are included: Political factors: H&M perceives their operations and functions as a global brand.
Therefore, they are operating across the globe and monitoring on the political risk which
is an important consideration for the chosen business. Furthermore, the chosen company
is also operating their functions and operations in different nations so that they are facing
issue of political instability.
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 Economic factors: After Brexit, some negative effects could be seen in the business that
brought for currencies across the world. In this way, the chosen organisation report for its
sales which converted to grew the current in different aspects. Social factors: For increasing the transparency level, the chosen business needs to assess
customer’s demand and requirements. In this consideration, the company can produce
things that are generally required by customers. Increasing demand of customers helps to
attain desired results in the business with branding (Morden, 2016). Hence, consumers
are increasingly influence through media and celebrities to adopt luxuries and
materialistic. Technological factors: H&M contribute larger part in the business through develop
mobile applications. In this way, advance technology activities has been promoted that
allows to consumers to implement reward from the online and in-store purchases. Third
party logistics requires to the chosen business so that they can enter in the new areas
easily. Legal factors: However, from last 2 years, the selected business is facing legal disputes
which are related with the infringement in the clothing retailer. In the most prominent
consideration, it has been seen that retail giant lost patent dispute against the UK
manufacturer which coveted technology (Armstrong and Taylor, 2014).
 Environmental factors: In this consideration, company is also facing issues and problems
which are needed to be solved so that effectiveness could be increase in successful
manner (Raithel and Schwaiger, 2015). In order to maintain effectiveness, it is important
to look towards the environmental consideration that assists to make effective functioning
in the environment.
Porter’s Five Forces Model
Porter’s five forces model consider intensity of competition and profitability which
expected that consider in fashion retail industry. In this regard, following elements included in
the business:
 Threat of new entrants: In the UK, threat of new entry is high because with low capital,
competitors can enter in the market. However, manufacturing is an important
consideration because it requires high capital. High margin in fashion products help to
H&M to deal with different countries. Due to maximum retail industry in fashion, where
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the cited firm present. Relationship between quality and price has been improved because
outsourcing in the nation consider with lower labour cost.
 Bargaining power of suppliers (Low) : Bargaining power of suppliers is very low
because there are several suppliers in the country so that the organisation can get raw
material from different businesses easily. Hence, the chosen business can impose to the
demanding condition because suppliers possess more power (Armstrong and Taylor,
2014).
 Rivalry among the fashion industry (High) : In the UK, there are several other existing
local, international and national competitors perform functions as H&M. Hence, it can be
stated that opportunities to make high growth is very difficult. Further, alternative options
attract customers (Essen and et.al., 2015).
 Threat of substitute products (Moderate) : In order to focus on the substitute products,
it can be stated that there are different businesses provide substitute products to attract
customers. In this consideration, customers are easily attracted towards them. It will help
to attain more systematic results and outcomes at workplace to make brand image in all
over the world.
Internal analysis
In respect to implement the internal analysis, SWOT analysis consider in the business
which determines as follows:
Strengths Weaknesses
 H&M is one of the largest global
fashion industry in the world.
 The company dealing in more than
2300 stores and doing operations in 45
nations with 95000 people.
 They implement affordable pricing to
attract customers (Armstrong and
Taylor, 2014).
 However, large volume lead to the
overstocking and later it leads with
affordable pricing.
 Target customer base is highly affected
due to macro economic conditions.
 Large capital require to put unique
characteristics and produce more cloth
in each segment.
Opportunities Threats
 Online shopping helps to gain more  Weak competitive environment because
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access of customers in the industry.
 Emerging economies support to H&M
to make expansion.
 With niche organic apparel market, the
country able to implement effective
products and services.
major competitors' existence.
 High unemployment impact on the
target audience.
 Lowering cost implementation in the
sales (Raithel and Schwaiger, 2015).
2. Resources, key capabilities and key factors to attain competitive advantages
In respect to attain competitive advantages, there are several factors exist that
implemented in the business. In this way, H&M has main aim is to implement strategic goals for
next five years that linked with the profitability and competition. Hence, the company trying to
develop sales and profitability to make net profit for several years.
Porter generic strategies
The chosen business make their position to consider different strategies in the business.
In this regard, industry determines profitability on the basis of average. Hence, following
elements could be implemented in the H&M: Cost leadership: In respect to implement the cost leadership, firm sets low cost for their
products to make effective functioning. In this consideration, proprietary technology,
economies of scale, etc. elements helps to exploit different sources for cost advantages.
Hence, the firm able to accomplish sustainability and overall growth as well. Differentiation: In this strategy, H&M seeks to make unique dimensional that are widely
valued for the buyers. It helps to select the more effective attributes that are very
important to make unique position to meet with the customer demand and requirement. It
creates reward for uniqueness and premium pricing as well. Cost Focus: Generic strategy of focus consider advantages to the target segment. In this
consideration, cost focus implemented to make variants in the particular industry (Raithel
and Schwaiger, 2015). Target segment either have buyers with unusual needs and
delivery system in H&M.
 Differentiation focus: In respect to make differentiation focus, it is important to look
towards the target segment. In this aspect, it is important to look towards the cost
behaviours that exploits special needs in the certain segments (Armstrong and Taylor,
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2014). Therefore, the chosen business need to make effectiveness to attain more
significant results at workplace of the H&M.
Unique capabilities and skills
In respect to look towards the unique capabilities and skills, it is important to H&M to
look towards the innovative tools and methods (Dibrell, Craig and Neubaum, 2014). With this
regard, the chosen business analysis small town where effectiveness could be increasing with
development of the fashion. The company has experience of 60 years in clothing market so that
they contribute for women, men, children collection to provide fashion and quality at best price
to expand enterprise.
Value chain analysis
Value chain analysis considered connection in the communities, ecosystem, etc.
Therefore, in the global economy social environmental and economic impact majorly created
that significant and far reaching to make positive results (McLean, 2018).
Primary activities
In the primary activities, following elements are included in H&M that create major
impact on the manufacturing plans and outsourcing of production: Inbound logistics: The chosen business has not its own plants so that production
considered in global. Therefore, they rely on the other suppliers to deliver necessary input
in the business. Furthermore, operations are centralised to meet with the latest trends and
market analysis as well (VALUE CHAIN ANALYSIS, 2018). Training provide from
workers create values and better customer services. Outbound logistics: In this way, H&M need to make good transportation to cut their cost
through reduction in labour charges. Therefore, consideration implemented to connect
warehouse, stores, distribution centres etc. Marketing and sales: The company also providing affordable quality in fashion to
consumers. Therefore, it is benefiting to purchase from bulk. The firm can also negotiate
with suppliers to provide high discount.
 Services: The selected business also considered formal training that could be provided to
new people to create value in H&M. Hence, employees are encourages adopt initiatives
and implement new ideas as well (Prajogo, 2016).
Supportive activities
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In supportive activities, following aspect will be included: Firm infrastructure: Currently, the chosen business operating in more than 2205 stores
in more than 40 nations. Hence, their design is very creative to attract more people. HRM: H&M adopted effective HRM strategy through they can focus on the more
employees with involves and encourages more customers. In social responsibility, the
company ensure fair treatment to develop business. Technological development: IT system of the selected business improves logistics and
production capabilities. Therefore, they are able to reduce significant cost with multiple
stores as well.
 Procurement: Production factory consider supply farms which is greatly depends on the
suppliers (Raithel and Schwaiger, 2015). In this regard, H&M need to switch to supplier
to implement qualitative material and attain desired results as well.
CSF's
Critical success factors determines activities that are make successful results in the
business. It is the term that initially used for data analysis and business analysis. In the H&M, it
can be determine in the following aspect: Industry Critical Success factors: This element signify resulting from the specific
industry characteristics which assists to look towards the operations and functions of the
business environment. Strategy Critical Success factors: This aspect determines competitive strategy through
H&M can easily compete with the other business operations and attain desired results as
well (Ingram and et.al., 2015). Environmental critical success factors: With this regard, resulting consider from the
economic and technology changes which help to make creativity in the business
environment.
 Temporal critical success factors: Temporal critical success measures with the resulting
that consider from internal organisational needs and changes. It will help to focus on the
innovative functions and operations in the business environment (Armstrong and Taylor,
2014).
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Analysis of extent to which H&M' S competitive strategy addresses its strategic issues and
suggestion of improvements.
Study has determined that it is difficult for a business to survive in international market
without competitive strategies in place. This is particularly the case as the H&M is contending in
the markets overflowing with the various alternatives for consumers. Competitive strategies have
been analysed as long-term business action plan that H&M has formulated towards achievement
competitive advantage over its major competitors within retail industry (Madsen and Walker,
2015). Strategies will be formulated by organisation after examination of strength and
weaknesses of the latter and comparing them to its own. Moreover, through this cited
organisation will be able face competitive pressures and attract customers and assist in
cementing its market position. In present case study, it is analysed H&M is current facing three
main strategic issues such as slower development, high competition and political instability due
to Brexit. In order to resolve or overcome these issues management of cited retail organisation
needs to apply effective competitive strategy. It is also provided them support in achievement of
competitive advantage over competitors in retail industry. Cost leadership is the most effective
strategy that needs to be adopted by organisation to resolve its issues (Gamble and Thompson,
2014).
In this strategy, firm's usually set out their business to become the low cost producer
within their industry. The purpose of organization behind the implementation of cost leadership
strategy is to increase its market share and attractive more customers through reduction in prices
of products and services as compared to competitors. In this case, H&M is facing issue of slower
development because they are less profitability in market and their prices of products and service
are also high in industry. For resolving problems, there are two options for H&M in this strategy
decreasing cost or increasing sales. However, it is identified that company focus on premium
class customer selling in products and they usually charged high prices for high quality products.
Due to high prices of products and services, it is not able to achieve growth in sales because
customers demand products at low prices (Sagwa, K’Obonyo and Martin, 2015).
Along with this, company is also facing issues of high competition in retail market
because there are various competitors such as TESCO, ASDA, Marks and Spencer etc. who have
captured the high market share by adopting low prices of clothing products. Cost leadership is
also analysed the part of marketing strategy of H&M. It is highly effective for enterprise in
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gaining market share along with gaining the attention of customers in market. In this, the
management of organisation needs to constantly work upon the reduction in cost of their not just
one product but the entire range of products in their product portfolio. Cost leadership does not
refer that company produces goods which are of inferior quality at comparatively cheap rates.
That strategy will increase the problems despite of providing resolution.
As it was analysed that bargaining power of customers in market because there are large of
competitors brands in market who pretends to dominate market share in retail industry. In order
to deploy this strategy, H&M needs to provide goods which are of acceptable quality and should
remain specific to a set of customers at a price which is much lower or competitive than other
companies substitute in market (Morgan and Strong, 2015).
This strategy will support the business enterprise in increasing their awareness over cost
and price strategies which are applied by their competitor in market to attract more and more
customers towards their store. In addition to this, It was also identified that company Political
instability due to Brexit was also big challenge or issue that has influenced the organisation
policies and procedures which they have applied in past to achieve high sales and profitability in
competitive environment. There are various factors such as increase in tax rates , cost of
materials, resources , employment and expenses and restrictions relations in supplier EY
countries Increase in tax rates have also provided impact on their products . However, H&M has
increased its prices of products and services to raise it demands and increasing the prices that
needs to be accompanied by management and increase in prices of products and services.
Employers of company addittionaly requires to use the best labour in order to convert these raw
materials in to valuable goods for the consumers. Thus, this strategy is considered as especially
beneficial because in retail industry prices is an important factor. Although, decrease in prices
of products will also reduce the impact of tax rates on cost products and increase number of
customers. More and appropriate control over business operations must be their to remain
updates from changes in requirements of customers.
Apart from this, cost focus strategy will also be effective for organisation nad can be
applied to increase the number of customers . In this, H&M will seeks to attain cost advantage
in its target segment in its segment of business . This will enable the organisation to achieve
high growth rate in market as compared to competitor. Increase in business opportunities also
raise the management focus on meeting the requirements of customers and increase their
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development in retail industry. Low prices of premium quality products will create competitive
advanatge of firm in retail industry (Acquaah, Amoako-Gyampah and Jayaram, 2016).
However, analysis of both the strategies have provided understanding that cost leadership
strategies will effective for enterprise to reduce their key strategies business problems . It tends
to raise the development of H&M and reduce the influence of competitors on their sales and
increase their profitability in retail. It will also creates an major influence on perception of
customers towards their products and tends to raise the sales of clothes in market.
CONCLUSION
From the above report, it can be concluded that corporate strategy in the H&M create
systematic work performance with development of its functions and operations. In this regard,
effectiveness could be develop to make sure that company able to focus on the new areas of
expansion. Furthermore, report summarised about the internal and external analysis of the
company to make effective functioning at workplace. Moreover, there are different tools
implemented in internal and external analysis such as porter five forces, SWOT analysis,
PESTLE analysis, etc. With the help of these tools and activities, it can be stated that the
company able to undergoing systematic work performance in the enterprise.
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