Strategic Management Analysis of H&M: Challenges and Opportunities

This report provides a comprehensive strategic analysis of H&M, a multinational fast-fashion retailer. It begins with an introduction to strategic management and H&M's business model, emphasizing its affordable pricing and global reach. The report then delves into the external factors impacting H&M, including political uncertainties, economic conditions, social trends, technological advancements, legal regulations, and environmental considerations. It also examines H&M's internal factors, identifying its strengths (e.g., brand recognition, design), weaknesses (e.g., design limitations, brand awareness), opportunities (e.g., government policies, social media marketing), and threats (e.g., brand switching, competitive pricing). The report explores strategic alternatives, such as analyzing the bargaining power of customers and suppliers, and the threat of new entrants and substitutes. Finally, it evaluates the effectiveness of the developed strategy, offering conclusions and future recommendations for H&M to maintain its competitive advantage and achieve its organizational goals. The report highlights the importance of adapting to changing market trends and customer preferences.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BOODY...............................................................................................................................1
Background of H&M...................................................................................................................1
External factors of H&M.............................................................................................................2
Internal factors of H&M..............................................................................................................3
Strategic alternatives....................................................................................................................4
Effectiveness of developed strategy............................................................................................5
Conclusion and Future recommendations...................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management comprises of managerial activities which are done in order to develop
effective organizational strategy through which organizational goals can be achieved. H&M is an
multinational organization which provide fast fashion clothing options to its customers at an easy
to available and affordable pricing strategy. Analysis of impact of external factors on company’s
performance is done in this report with the proper evaluation on effectiveness of company’s
internal environment. Analysis of company’s strategic options in order to achieve its objectives
is also evaluated in report through which company can implement organizational changes as per
the changing market trends and customer requirements. Development of future organizational
strategy is also analysed in this report with a proper differentiation of company’s current
performance and future requirements.
MAIN BOODY
Background of H&M
H&M is a multinational organization which provides clothing options to its customers and to
achieving this it uses creative marketing strategy with its wide geographical reach through which
it is able to attract customers towards the organization. H&M provide fast fashion products at an
affordable low pricing due to which it is able to attract new customers towards the organization,
through this competitive pricing organization is able to attract existing and new customers
towards the organization (Rana and Tajuddin, 2020). But in order to achieve this company has to
maintain a efficient relationship with its customers in such a way that it is able to reduce the
probabilities of brand switching. Thus in order to improve the communication bridge with its
customers company has to increase its engagement in social media marketing. Through this
social media marketing company will not only promote itself at a low pricing but also at the
same time can develop a close contact with the customers through the means of technological
developments like social media bots. These bots are used for taking customer feedbacks and
taking their suggestions which are used by organizations for develop effective marketing strategy
and also to find the weak areas in its developed strategy (Arrigo, 2018).
It is important for multinational organizations like H&M to get a close understanding to its
customers because if company is not able to understand the customer’s requirements then in that
1

case it will not be able to provide products as per customer requirements. Thus it is roles of
organization to provide products according to changing market trends and customer requirements
which will enable it to efficiently tack market competition enabling it get a good grip on market
(Jirawongsy, 2020). Therefore organizations like H&M cannot rely on a single strategy but
instead it has to make final organizational goals and then develop marketing strategy according
to that such that it is able to sustain in market. However it is not as easy as it is said because
continuous monitoring is required for assuring that company is able to achieve its targets and at
the same time improve its performance.
External factors of H&M
Political-
Political uncertainties of UK are making a negative impact on H&M’s economic growth,
like UK’s decision of leaving EU will lead to taxations in the areas which were freely available.
In other words company has to pay taxes in the areas which were freely available before
BREXIT this will increase organizational expenditures. With that the implementation of
Lockdown has also decreased company’s organizational sales drastically due to COVID-19.
These are the external political conditions which are making a direct impact on company’s
economical growth.
Economical-
H&M provide products at an affordable low pricing such that they are able to achieve
increment in organizational sales, but in the present times when due to the impact of COVID-19
many organizational have lost their jobs, company is also forced to reduce its product pricing.
This reduced pricing has reduced the profit margin of organization, however H&M may use this
scenario by selling out its products at even more reduced pricing by which company will may get
free space for developing new products (Illes, 2020).
Social-
Customers are changing the ways of buying products because of their busy lifestyle due
to which company’s like H&M are also forces to change the ways of selling their products. This
can seen by the scenarios in which customers are showing high interest in bulk buying products
and one stop shopping in which product buying process is very fast and efficient. Thus company
is also forced to change the ways of selling products and with that organization.
2

Technological-
Technology has develop so much and has increased its reach to a wide range of
customers and with that customers are also showing high interest in utilizing these technological
development. Due to which social media is becoming very popular among customers and this
company has to change the ways of promoting itself (Ha, 2018). This social media marketing is
very useful and efficient than compared to traditional marketing in which marketing is done
through the means of TV and newspaper.
Legal-
Company is responsible for following the rules and regulations developed by
governments and because of which it has to improvise its organizational working strategy in such
a way that it is able to fulfil every criteria of government developed norms. This is important
because if it is not able to fulfil government developed laws then in that case it has to pay
penalties which will make a negative impact on company’s economic growth.
Environmental-
Company is responsible for changing its organizational working in such a way that it is
beneficial for environment this is important because it will not only benefit environment but also
at the same time company can use this for developing a positive image in front of customers.
Through this positive image company will be able to develop customer loyalty because are
getting assured that company is working for social welfare also which will increase their
engagement with the organization.
Internal factors of H&M
Strength-
H&M is one of the largest clothing service provider organization which provide wide range of
fast fashion products to its customers (Strick, 2020). Company provide unique and creative
designer options due to which it is able to maintain the loyalty of existing customers and
company is also implementing creative designs by which it is increasing its customers count.
Company uses creative marketing style by which it is able to attract trendy customers, in which
the pricing strategy also plays a role in attracting customers.
Weakness-
3

Company provide fast fashion options to its customers to its customers due to which
faces limitations in implementing attractive designs. Due to limitations in designs
implementation the design is also easily replicable, because of which customers often choose the
chap alternatives (Javed and et.al, 2020). Company faces comparatively less brand awareness
even in its geographically selected areas due to which its organizational sales are limited. Less
involvement in social media marketing is also a key role player in affective H&M’s working
procedure and organizational sales.
Opportunity-
In the present time when COVID-19 has affected the working of several organizations
due to which the governments all across the globe are providing tax relaxations and many other
policies by which company’s performance can be improved. Thus this tax relaxation and
governmental policies can be used by organization in order to improve its performance by using
organizational resources like its wide geographic reach. With that company may also increase the
brand awareness with the help of social media advertisements which will enable it to reach wide
range of customers at minimum expenditures.
Threat-
Threat of brand switching is very high for organization because its product designs are
easily replicable and at the same time there are several duplicate and cheap options provided to
customers due to which customer often choose the cost efficient other options this has limited
company’s organizational sales (Mäkelä, 2020). Company also provide other options apart from
fast fashion products but in a limited number due to which its profit is also limited due to low
and competitive pricing.
Strategic alternatives
Bargaining power of customers (low)
Company provide its fast fashion products at an low pricing to its customers due to which
low profit margin is achieved and therefore customers are getting high quality products at an low
pricing. Due to this less number of negotiations can be seen in this case due to which the
bargaining power of customers is very less.
Bargaining power of supplier (high)
4

Bargaining power of suppliers are high in case of H&M because it provide high quality
products at a low pricing and thus it require raw materials for develop a products. Therefore it
can be analysed that it has to maintain a good relationship with suppliers by which it can get
products at a low pricing (Ci, Park and Kim, 2017). Thus company has to maintain a effective
relationship with others through which it can reduce its expenditures.
Threat of new entrance (high)
Threat for new entry is very high for organization because it is providing products at a
low pricing and for which it is implementing competitive pricing, thus if a new entry arises at the
market place then in that case company’s sales will be directly affected. Therefore company has
to use its efficient relationship with other market competitors by which it can limit the new
entrance which will provide it an ability to maintain efficient economic growth.
Threat of substitute (high)
Threat for substitution is very high for H&M because its products are only limited to new
generation and at the same time even though they are at low pricing but still due to simple
designs its product’s duplicates are easily available in the market (Annie, 2020). Through this
availability of other duplicate options at low pricing, threat for substitute is very high for H&M.
Competitive rivalry (high)
Market is fill with other tough competitors like large super market chains due to which
company’s sales and customers count is directly affected by their high sales and thus
organization has to maintain the availability of new products according to the changing market
trends, Through this company can tackle competitive rivalry which will result in improved
organizational sales and thus it has to pay high efforts in developing customer engagement with
organization which will enable it to get better performance in front of its customers.
Effectiveness of developed strategy
H&M has a wide range of organizational customers through which it is able to achieve such a
high economic condition and through this only is has achieved such a efficient brand awareness
(Chen and Fang, 2019). However company is still having some limitations in its geographical
reach and fully maintaining it customers count. Therefore it has to improvise its working strategy
in such a way that is able to achieve its organizational targets by efficiently utilizing
organizational resources. This is important for organizations because if they are not able to
utilize existing organizational resources properly then it has to make expenditures in such a way
5

that target is achieved, But this organizational expenditure will make direct negative impact on
company’s economic position which will affect its goal achieving capabilities. Therefore
company has to include its internal strategic capabilities and develop a efficient organizational
strategy to tackle external strategies, through which it can improve its performance in front of its
customers (Xuejie, Chang and GuangHao, 2019). This is important because customers are the
main reason for why these strategies are made and if they are not able to understand company’s
working capabilities then they will pay less interest in it, which will increase the chances of
brand switching. Therefore it order to achieve this company has to take feedbacks from it
customers and integrate that with the overall strategy.
Conclusion and Future recommendations
From the above analysis it can be concluded that organizations like H&M develop their
organizational objectives and then develop strategies in such a way that they are able to achieve
their personal objectives. Thus it is company’s responsibility that through the developed
organizational strategy it is able to achieve its organizational goals by using company’s
resources. This activity of company will enable it to improve its weak areas by concentrating on
its strengths through which it can achieve its organizational goals through which H&M will be
able to attract wide range of customers towards the organization. Through which it will get better
performance in front of its customers and at the same time attract new customers towards the
organization, which will make a direct impact on company’s economic growth resulting in
improved sales. Therefore it can be concluded that company has to integrate the activities which
has to improved its performance and improve the actions which were comparatively not fruitful,
this will improve company’s overall growth (Luo and Wang, 2019). The main reason for
developing strategy is that, that organizations like H&M can improve their performance in every
field such that it is able to increase customers engagement and by improving its performance in
every field it can achieve trendy crowd. Then organization can develop customers bonding
strategy to make these temporary customers to company’s loyal customers which will not only
increase organizational sales but also at the same time increase the chances of mouth to mouth
promotion. This type of promotion is done through the customer side and is beneficial for
organizations because buyers often take these unbiased feedbacks very seriously which is
beneficial for organization’s sales and customers count.
6

REFERENCES
Books and journals
Rana, M.B. and Tajuddin, S.A., 2020. Circular Economy and Sustainability Capability: The Case
of H&M. In Upgrading the Global Garment Industry: Internationalization, Capabilities
and Sustainability. Edward Elgar Publishing.
Arrigo, E., 2018. The key role of retail stores in fast fashion companies: The H&M case study.
In Contemporary Case Studies on Fashion Production, Marketing and Operations (pp.
121-137). Springer, Singapore.
Jirawongsy, N., 2020. Brand identity, the integration of sustainability and sustainability
communication: The case of H&M.
Illes, J., 2020. Corporate Citizenship and H&M: A case study of business participation in
society.
Ha, D.T.H., 2018. Zara and H&M pricing strategy in South east Asia-Vietnam vs Thailand
market (Doctoral dissertation, International University-HCMC).
Strick, Y.M.H.A., 2020. A study of the rising role of women in international strategic
management-the challenges and practices.
Javed, T. and et.al, 2020. The sustainability claims' impact on the consumer's green perception
and behavioral intention: A case study of H&M. Advances in Management and Applied
Economics. 10(2). pp.1-22.
Mäkelä, J., 2020. Creating an Authentic Sustainable Brand: Case Companies H&M Group and
Marimekko.
Ci, C., Park, S. and Kim, B., 2017, July. DIFFERENCES IN THE BRANDING STRATEGY OF
THE BIG 3 SPA BRANDS: ZARA, UNIQLO, AND H&M. In 2017 Global Fashion
Management Conference at Vienna (pp. 65-66).
Chen, X.J. and Fang, G., 2019, May. Analysis on green marketing strategy of clothing firm: take
H&M for example. In Proceedings of the 2019 International Conference on
Management Science and Industrial Engineering (pp. 146-150).
Xuejie, C., Chang, Q. and GuangHao, Z., 2019, August. Research on Innovation supply chain
Management in Fast Fashion Industry——A comparative analysis of ZARA and H&M.
In 2019 3rd International Conference on Education, Culture and Social Development
(ICECSD 2019). Atlantis Press.
Luo, C. and Wang, Y., 2019, November. Game Theory in the Fashion Industry: How Can H&M
Use Game Theory to Determine Their Marketing Strategy?. In International Workshop
of Advanced Manufacturing and Automation (pp. 633-638). Springer, Singapore.
Annie, R.P., 2020. 4 Strategic management practices in ready-made garments industry in
Bangladesh. The Economic Development of Bangladesh in the Asian Century:
Prospects and Perspectives. p.93.
7

8