Strategic Analysis of H&M: Competitive Analysis and Recommendations

This report presents a strategic analysis of H&M, a global retail organization. It begins with an executive summary and introduction, followed by an in-depth examination of H&M's external environment using PESTLE analysis, identifying political, economic, social, technological, environmental, and legal factors influencing the business. The report then delves into competitive analysis using Porter's Five Forces model and internal analysis, including Porter's Value Chain. Strategic options are explored, including product development, supported by the Ansoff matrix. Finally, recommendations are provided, and a reflective report on the strategy process is included, concluding with a comprehensive overview of H&M's strategic position and future prospects.

Strategic analysis of footbal
club Manchester United
Table of Contents

Executive summery:-.......................................................................................................................3
INTRODUCTION...........................................................................................................................3
External and industry analysis of H&M......................................................................................3
Competitive analysis...................................................................................................................7
Internal analysis........................................................................................................................10
Strategic options........................................................................................................................11
Recommendation.......................................................................................................................11
Reflective report on strategy process .......................................................................................12
CONCLUSION..............................................................................................................................14
REFERENCE.................................................................................................................................15

Executive summery:-
The present report is based on strategic analysis of a company as strategies helps to attain
goal in effective manner within small period. For which there are various model and tools that is
used by the companies in order to formulate the effective strategies. In order to determine
external forces, companies uses PESTLE analysis. For competitive analysis, porter's five forces
model is used. Additionally, for gaining growth, Ansoff's matrix, in which the most viable
strategy for chosen company is product development.
INTRODUCTION
H&M is an international retail organisation which was founded in Sweden in the year
1947 which sells clothing products. The organisation has expanded to 74 international market
with more than 5000 stores all around the globe. The organisation owns 8 brands which offer
clothing, home décor and beauty products to both men and women. Zara, Uniqlo ans gap are few
of the organisations which compete with H&M in the retail fashion industry. The organisation is
a household name in fashion and has launched sustainable fashion line in order to complete their
obligations to society (Eling and Schaper, 2017). As of august 2020, the organisation made profit
of SEK-1,242 million after tax deduction. This report includes external, internal , competitor and
industry analysis of H&M. Reflective report on the company along with strategic alternatives for
the firm are included in this report.
External and industry analysis of H&M
PESTEL analysis
This is a analysis tool which help in identification of various external factors affecting the
business. This analysis is also helpful in constructing strategies for the growth and development
of the company. The PESTEL analysis of the Swedish retail company H&M is mentioned below:
Political factors
The organisation operates in several countries which currently face political disorder and
have such as Egypt and Lebanon. Political disorder in such countries affects the overall profits of
the organisation (Alotaibi, 2016Kumar and Pradhan, 2016). Apart from this the organisation has
faced global scrutiny for continuing to produce their goods in Bangladesh and exploiting cheap
labour without taking measures about safety of such workers. The increasing political conflicts

between China and US will affect the future of the company. This is because the organisation
sources most of their products from China.
Economical factors
As the organisation operates in various countries around the globe inflation rates, interest
rate and global employment rates are some of the economic factors which affect the profitability
of the company. Increase in disposable income of consumers from developing markets such as
India and China gives the organisation opportunity to expand their presence in such regions.
Such expansion is positive for the future of the company as it will generate new sources for
earning profits. The no deal Brexit imposes harsh duties on international brand which is threat to
the future of the company in UK market.
Social factors
The respective company has introduced various CSR initiatives and provide regular
business reports public platform due to increasing demands from consumers all over the globe to
create transparent business organisations which complete their responsibilities towards the public
(Liu and et.al., 2017). Increasing influence of social media celebrities and trends on fashion
preferences of consumers is positive for the future of the company as the company will be able to
predict future market trends easily. This will also help the company market their products
effectively.
Technological factors
Recent increase in usage of online channels for ordering products has made a huge
impact on the organisation. The organisation has created strong social media presence and
constructed easily accessible online portals for placing orders to grow in the increasingly digital
business environment. Advancement in automation and AI technology is major technological
factor impacting future of the company. Automation will help the company decrease labour costs
by using robots and AI in all their daily activities. Various governments all around the globe are
considering implementation of laws which limit firms from using their consumers data, this is
main factor influencing future of the organisation. As the organisation uses consumer data to
construct growth strategies and recommend their products, implementation of such laws is matter
of serious concern for the company.
Environmental factors

Consumers and government authorities from all around the world are concerned about
various environmental factors such as global warming and climate change (Hillary, 2017). This
has increased environmental responsibilities of the company and influenced them in creating
various policies to reduce pollution and construct sustainable clothing. The organisation is
aiming to use renewable material for constructing every product by the year 2030. The company
has introduced programmes which encourage consumers to recycle their products in exchange
of discounts from the stores.
Legal factors
The company faces various legal factors which include franchising in collaboration with
other firms in certain middle eastern countries such as UAE and Kuwait. The organisation has
faced various legal conflicts which involve recent case of monitoring their employees without
their consent in Germany. The organisation was fined 35 million euros as compensation to their
workers in this case. The recent rise demands for implementing strict labour laws which increase
minimum wage and responsibilities of the firm towards their employees is major legal factor
impacting the future of the respective organisation.
Porter's Value chain analysis
Porter's value chain analysis is a framework which is used by the company to identify
parts of their daily operations which build value for the organisation and play a significant role in
helping the firm achieve organisational objectives. This is used by enterprises to understand their
perspective in the industry and ways for implementing effective business strategies. Porter's
value chain analysis of global retail organisation H&M is given below:
Primary activities:
 Inbound logistics: The organisation conducts most of their operations related to
manufacturing products by global outsourcing in 20 locations with 700 collaborators .
India, China and Bangladesh are some of the countries where the firm has outsourced
their manufacturing needs. The organisation has build 30 offices which oversee effective
coordination between various partner firms regarding latest trends and changes in
policies of the company (Beatty, Samuelson and Abril, 2018).
 Operations: The headquarters of the firm is located in Stockholm which uses internal
designing approach for constructing fashionable and trendy clothing. The organisation
collaborates with famous designers to offer clothes which grab the attention of young

consumers. The organisation has hired 100 designers which work in a collaborative
manner to finish each fashion collection in beforehand. This process creates valuable
products for the firm before other organisation which gives the company competitive
edge over their rivals.
 Outbound logistics: The organisation has constructed effective distribution channels al
across the globe by redistributing transportation activities to various firms with
experience in this sector. This has helped the company swiftly met with the demands of
their consumers. Such distribution channels have given the company competitive
advantage in the industry as the company is able to transport their goods to far off
locations swiftly and effectively.
 Marketing and sales: In order to effectively promote their brand, the organisation uses
celebrities as well as social media influencers in their marketing plans. This has helped
the company remain popular with younger generations. The organisation also recreates
their store layout and aesthetics every few years according to cultural changes and recent
trends.
Support activities:
 HRM: The organisation focuses on building a talented workforce by giving employees
challenges which help them develop new abilities and take various roles and
responsibilities. Apart from this regular training is given to new staff to enhance their
skill set and help them improve their weak points (David and David, 2016). The
organisation also gives their employees discounts and vouchers for shopping at H&M to
increase employee satisfaction. Apart from this the company conducts yearly employee
evaluations and wage reviews to gain feedback fro employees and ensure continuous
growth of their workforce. Various policies implemented by the firm for building
competent workforce are giving the organisation required aid to maintain stable growth
rate in the fashion retail sector.
 Technological development : Each department of the company communicates with each
other using digital communication tools. This helps the company keep detailed record of
daily activities and involvement of employees daily tasks. The organisation has
constructed effective IT communication channels with their global partners which allows
the company to swiftly order various material from any location across the globe. The

organisation has also constructed accessible online channels to compete within the e-
commerce market which has helped the company connect with new consumers on a
global scale. This has helped the company secure advantageous position in the global
fashion retail industry.
Competitive analysis
Porter's five forces model:
The Porter five forces model was developed by Michael E Porter of Harvard Business
School in 1979. It is used to analyse the competitiveness of business environment and position
of a organisation and to determine the attractiveness of market and useful in understanding the
strength of a company's current position (Castrogiovanni and et.al., 2016). It comprises of five
forces such as bargaining power of supplier, buyer, threat of new entrant, threat of substitute and
competitive rivalry. In context of H&M this model are as follow:
Bargaining power of supplier:-
The bargaining power of suppliers is low in this industry as there are a lot of suppliers
available who can provide the raw materials without any differentiation. As the brand image of
H&M is good, it is difficult for suppliers to bargain, influence the rates so there are a lot of
suppliers who wants to join their hands with this brand.
Bargaining power of buyer:-
Buyers play a vital role in company's success. As the bargaining power of buyer is very
high because they tend to buy the items which are good quality, latest fashion and within their
affordable price so they switch from one brand to another. By using innovative technologies,
uniqueness and good quality in products as well as by their good marketing strategies, brand
focuses in building loyalty among customers and acquires large customer area. As it has low
cost of production so the selling cost is also less, it can attract the customers who have low
incomes also.
Threat of new entrant:-
Threat of new entrant in this industry is very high because it does not need a large
amount of money to invest. Brand can face threats from retail shops of clothes, local boutiques
and nowadays a lot of online shopping sites are trending. It can also face threat if successful
online brands will open their physical stores. It can overcome this threat as it is well known and

established brand so it has a large number of loyal customers. The new entrants will have to
build strong reputation also in the market.
Threat of substitute:-
Threat of substitute for H&M is high as customers go for the similar products available at
cheap rates. Due to recession and economy people hold their money and spend little of it so they
jump towards cheaper products. H&M focuses on providing a large variety of good quality
products to buyers at lowest price of selling in market (Knežević Cvelbar, and et.al., 2016).
Competitive rivalry:-
Competitive rivalry for H&M is high because it is a fast fashion clothing brand so it have
a huge number of retailers which are similar. As changes in industry are fast so brand have to
renew its products so it can meet requirements of customers. Other competitors can
immediately get profits if it does not match the taste of the customers. Its major competitors are
Tommy Hilfiger, Zara, Van Heusen, IZOD etc.
Porter Generic strategies
It is type of strategy which is used by entity to access to competitive advantage in market.
In relevance of H & M, they too uses this framework which if further discussed as follows-
Cost leadership-
It is a strategy in which entity lowers the prices of products with aim of gaining more
customer attraction within a market. It is often examined that this is used by entities when there
is business is new or sales growth is low. So, this strategy is not adopted by H & M.
Differentiation
In this strategy, it states that new product and new prices are set by organisations in order
to be unique and achieve competitive benefit appropriately. In context of selected firm, they
can use this strategy as it will assist them in achieving of competitive benefit easily.
Cost Focus-
It is another strategy in which enterprises lowers the price of product but within specific
segment. This is examined that this is beneficial strategy but is used by firms during peak period
of season. In relevance of chosen entity, they need not have to opt for this strategy.
Differentiation focus

In this tactic, it is defined as strategy in which new products are being introduced but
only within a niche segment of market. In context of selected corporation, using this strategy can
negatively impacts their brand goodwill.
Recommendation-
From above analysis of above matter, it is seen that differentiation is to be considered as
best strategy which can be used for further growth and development. Therefore, using of this
strategy will enhance chances of competitive benefits at larger scale.
Ansoff matrix-
It is kind of framework which is adopted by firm to determine company's market growth
strategy. Growth strategy helps in development of business as well as company's goodwill . So,
they are to be used in proper manner. It comprises of several components which are discussed
below-
Market penetration-
It is a growth strategy in which existing products are being sold into existing market. This
is to be considered as most beneficial strategy for business. In context of H & M, they can
choose this strategy on seasonal basis. It is because it is mostly used by small firms to maintain
their base in market (Boone and et.al., 2019).
Market development
It is another growth strategy which is being focused in which existing products and
services are used within in new market. In reference of chosen entity, they adopts this strategy
as it help them to enhance their brand goodwill effectively. Further, it is reflected that risk
associated with this strategy is low. Thus, it is crucial for H & M to use this strategy for
achieving of objectives in appropriate way.
Product development
This is related with new product at existing market. It has been found that it would be the
viable strategy for H& M, company as they are wish to expand their business by launching new
product like H&M perfumes.
Diversification
It mainly emphasis to produce new product at new location of UK. This is considered as
the risky strategy because it requires huge investment in order to promote about services. From
above analysis it has been found that it is not the viable strategy for chosen company.

Internal analysis
VRIO analysis
VRIO tends to an acronym, comprises four framework related with the resources of
company. It is used to uncover sustained competitive advantage. This model is used with the aim
of determination of valuable, rare, inimitable and organised resources so that the ultimate goal of
sustained competitive will be achieved (Hamilton and Webster, 2018). In context of chosen firm,
H & M, they are also used this model to identify all capabilities of company that challenges other
firm and these as follow:
Valuable: This tends to those resources which are valuable for company and provides
partially competitive advantage to them. With relevance to select company, the financial
resources are highly valuable as these help to explore new opportunities related with the external
environment as well as help in combating external threat. Employees are also valuable resources
of company as they are highly trained by firm in order to opt new technologies. Distribution
network, research & development, are other valuable resources that provides competitive
advantage to firm. But is has found that the cost structure is not valuable resources. It is due to
way of production tends to higher cost than competition and that ultimately affects overall profit
of company (Katz and Green, 2018). Additionally global presence of H&M is valuable as it is a
multinational organisation and run their business at global level.
Rare: It refers to those resource which are rare to company. With relevance to this, it has
been found that global presences, is not rare resources of H&M as there are several other
companies which operates their function at global level. But there are some other factor which
are rare for firm and these are financial resources, employees & distribution network. All these
are rare because competitor would require huge investment reach their market share as well as
need time to come up with better distribution network as compare to respective company.
Inimitable: It refers to those resources which are not easy to imitate by other companies.
For which the employees of company are imitable as they can be imitate by other companies by
offering better compensation and working environment an that forces them to level this
company. But there are some other resources which are inimitable for firm and these are
distribution network, financial resources etc. as these are very costly to imitate these resources.
All these has been developed over years gradually by H&M. In order to acquire similar
distribution channel, competitor need to invest huge amount.

Organised: It is related with the organisation of management system, process, structure
or culture in order to capitalizes on resources & capabilities. In which the patents of company are
not well organised resources as they are not using their patents with full potential. On the other
hand, financial resources & distribution channels of firm found has organised resources as their
product are available on all of their outlets. Therefore these are the resources which provides
them sustained competitive advantage to H & M.
So from above analysis it has been found that the financial resources and the distribution
channels of company provides sustainable competitive advantage to company.
Strategic options
Strategic options generation can be defined as a process that are used to build a choice
related with the possible future strategies. Within strategic planning. Strategic option is a key
step. In which it includes generation of strategic options like growth, acquisition, diversification
etc. afterwards, evaluation of options in order to examine their feasibility. Last one is to select
the strategy option that could company pursue. In relevance to this there could be more than one
option chosen by company for avoiding universalities in future. For selecting best strategic
option it vital to carry out porter generic competitive strategies & Ansoff's matrix and based on
that product development with the help of differentiation strategies they carry out the growth
methods. In which they are suing joint venture strategy. In this strategy, they carry out a
business arrangements in which two parties agree to pool their resources for the accomplishment
of common objective. With the help of this strategy, H&M will able to attain their aim of product
development of H&M perfumes (Beynon-Davies, 2020). They can carry put joint venture with
Zara company as they offers elegant quality perfumes. So by learning their strategies from their
partners they can get success in this growth strategy.
Recommendation
In order to get competitive advantage H& company can used cost effective leadership
strategies in order to offer product that can be afford by those consumers also who are not able
to buy premium and luxury products.
Apart from this, to get sustainable competitive advantage from their significant resources,
H&M needs to organised their patents in effective manner as well as trained & encourage their
valuable employees in order to adopt new technologies.

With the help of BCG matrix, they can get ensure about long term operation in order to
carry out product development of H&M perfumes.
Reflective report on strategy process
Concrete Experience : This phase of my journey involves the new experiences that I
have developed through this report. I have been able to learn some new skills that include time
management as there was limited availability time. I prepared detailed schedule for completing
my tasks and prioritised various activities which helped me complete this task in given time. I
have also learned research skills as identification of relevant and useful sources required such
abilities. This experience has also developed my critical thinking skills as I am able to evaluate
my results and improve them for completing better report.
Reflective Observations:At this stage of work where all were stressed out for completion
of the project within the given timeline. It was a very difficult stage for me, although I have
completed my work with full dedication and with proper planning with taking small daily
objectives and goals. I felt nervous as the deadline was near and found at time of revising my
project that a part in it was wrong (Halbert and Ingulli, 2020). It has a heartbreak situation for
me, none the less I boosted myself up and gave my best efforts and at the end I was able to
complete my part till deadline of project. In a positive note when I think over it again I found that
taking small breaks during hard work is essential for effective conduction of any work, as long
term work may lead to wastage of efforts by building up of pressure. It was a life lesson for me.
Abstract conceptualisation: In this report there are different idea which are there for this
business which can help in getting better modification. I have learned many things which is from
the different strategy which are there can help in getting better ideas. I have seen that business is
getting better by using different strategies and by implementing it in better way can help to get
better idea. There is many of the idea which comes in mind in relation to get use of such
strategies. There are different strategies which are there can help in getting better business and I
have learned many things which is by using different strategies there in the business.
Active Experimentation: Under the this process of the analysis I fund that organisation
H&M is having multiple problem in their market. Which can be use solve by the use of various
tools and theory's of the management. I used the Accommodating learning style in order to
understand the problematic situation and evaluate solution for it. In the case of H&M
organisation is facing huge problem in context to the competition in retail market which can be

improve or solve by the aid of innovation and creative changes. Organisation should focus on
innovative clothes verity and quality which can lead them to the success.

CONCLUSION
From the above report, it has been concluded that organisation using various framework
in order to effectively and efficiently analysing external environment due to achieving
organisation goal and objectives. It involves organisation using various tool and techniques such
as PESTEL, Value chain and Porter's five force model which result as analysis the market
condition and situation which result as enhancing profitability and productivity. It is essential for
organisation in order to evaluating this model on that basis they know about the competitors
strategies and accordingly formulating new strategies due to increasing effectiveness of
organisation. H&M is one of the leading organisation which using this tool and techniques as
well as effectively implementing strategies.

REFERENCE
Books & Journal
Alotaibi, Y., 2016. Business process modelling challenges and solutions: a literature
review. Journal of Intelligent Manufacturing, 27(4), pp.701-723.
Beatty, J.F., Samuelson, S.S. and Abril, P., 2018. Business law and the legal environment.
Cengage Learning.
Beynon-Davies, P., 2020. Business information systems. Red Globe Press.
Boone, L.E., Kurtz, D.L. and Berston, S., 2019. Contemporary business. John Wiley & Sons.
Castrogiovanni, G., and et.al., 2016. Where to acquire knowledge: Adapting knowledge
management to financial institutions. Journal of Business Research, 69(5), pp.1812-1816.
David, F.R. and David, F.R., 2016. Strategic Management: A Competitive Advantage Approach,
Concepts and Cases, Global Edition. Pearson Education Limited.
Eling, M. and Schaper, P., 2017. Under pressure: how the business environment affects
productivity and efficiency of European life insurance companies. European Journal of
Operational Research, 258(3), pp.1082-1094.
Halbert, T. and Ingulli, E., 2020. Law and ethics in the business environment. Cengage Learning.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Katz, J.A. and Green, R.P., 2018. Entrepreneurial small business. McGraw-Hill Education,.
Knežević Cvelbar, L., and et.al., 2016. Drivers of destination competitiveness in tourism: a
global investigation. Journal of travel research, 55(8), pp.1041-1050.
Kumar, V. and Pradhan, P., 2016. Reputation management through online feedbacks in e-
business environment. International Journal of Enterprise Information Systems
(IJEIS), 12(1), pp.21-37.
Liu, G., and et.al., 2017. Business model innovation and its drivers in the Chinese construction
industry during the shift to modular prefabrication. Journal of management in
engineering, 33(3), p.04016051.
World Bank, 2019. Doing business 2020. The World Bank.