H&M Strategic Management: Analysis of External & Internal Factors

This report provides a comprehensive strategic analysis of H&M, a well-known international apparel retail brand. It begins with an overview of H&M's background, goals, and objectives, emphasizing its commitment to sustainability and customer satisfaction. The analysis includes an examination of the external environment using models like PESTEL and Porter’s Five Forces, identifying political, economic, social, technological, environmental, and legal factors impacting the company. The internal environment is assessed using SWOT and VRIO analysis, highlighting H&M's strengths, weaknesses, opportunities, and threats. Strategic directions and choices are explored through Ansoff's growth strategies and Porter’s generic tactics, focusing on market penetration, product development, and cost leadership. The report concludes with recommendations for H&M to maintain its competitive edge and achieve its strategic objectives, emphasizing the importance of innovation, sustainability, and customer-centric approaches.

STRATEGIC MANAGEMENT
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Table of Contents
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
H&M overview or background data.......................................................................................2
Strategic models use to analyse external environment in context of fashion industry...........3
Strategic tools utilize to analyse internal environment of company.......................................5
Strategic direction and choices in regard to H&M.................................................................8
Strategic selection of company and its justification...............................................................9
CONCLUSION..............................................................................................................................10
RECOMMENDATION.................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
Strategic management can be defined as procedure that has been utilized to denote a
company and its administration that is concerned with development of strategic mission, vision
and setting out tactic which help to achieve set objectives of a business. The current assignment
will be based on H&M, which falls under category of well known clothing brands in the whole
world. This study will define background information about chosen brand and will also explain
external environmental analysis by using relevant strategic models. It will describe internal
environment analysis by utilizing suitable tools and justify strategic choices & further directions
in organizational context. Furthermore, this report will clarify selected in future tactics for
company and provide clear justification based on it. It assignment will simplify appropriate
suggestions based on overall analysis.
TASK
H&M overview or background data
Hennes & Mauritz is one of the most popular Swedish international apparel retail brands
in the world (Bonilla, del Olmo Arriaga and Andreu, 2019). It builds its strong brand image by
manufacturing and then selling quality products to customers. Its production department is able
to contribute in gaining competitive edge by producing cloths for men, children, women and
teenagers according to their preferences and needs.
Goal-
With specific aim company has been grown in its sector, it wants to become 100%
circular and lead modification to sustainable fashion sector, while being an equal and fair brand.
Objectives-
 The main objective of H&M is to use 100% cotton by its company to come from
sustainable ways.
 Second objective is to increase customer satisfactory level up to 40%.
 Third objective is to increase profitability and productivity approx 20% in further years.
 Fourth objective of organization is to be competitive as always forever.
All these objectives and particular goal can be achieved by firm successfully because it’s
have skilled people at workplace approx, 1,26,376 who can work excellently and productively.
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Strategic models use to analyse external environment in context of fashion industry
External environment of H&M comprise varied factors that can impact current
management practices and decision making procedure of brand. Those elements can be identified
by using ranges of models or strategic tools like PESTEL and stakeholder matrix. It can be
analysed that this model help to determine further trends by providing overall information about
current market practices, which firm can use to grab existing and further opportunities as well as
overcome threats also.
Political factor-
Political instability in market where H&M setup its venture can put negative impact sales
and productivity of company (Nadeem and et.al., 2020). Because of this factor, when rules relate
to trade is change it influences negatively upon trading procedure of firm; administration needs
to make further modification which is not suitable for business success.
Economic factor-
There are varied elements including in this category that can impact decision making and
strategy development of companies, like H&M. Unemployment is one of the economic factors
that put positive impact on brand productivity and efficiency relate to production (Fountoulakis,
2020). This factor give power to firm in context of recruit skilled applicants who seeks to work
with well known organization, just like chosen one, where working environment is quite positive
and workplace is discrimination free.
Social factor-
Preference change is the social factor that directly impact production to marketing and
then sales strategy of H&M in negative manner because people are influenced by social media
and famous celebrities (Sarkar and Ghosal, 2018). Because of this reason he or she changes his
or her preferences in context of clothes and fashion. It direct impact management tactic to
produce items for its target customers, in term of restricting overall plan and strategy that is very
challenging for them.
Technology factor-
Development of digital marketing platforms is one of the factors that always put positive
impact on strategy of H&M, relate to product promotion and marketing which in return generate
influencing brand awareness in context of company at global level.
Environmental factor-
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Customers and government concern towards environment safety can drive H&M to
reduce carbon footprint, which is quite profitable for its business success. By focusing of
conducting sustainable business practices, firm can build its powerful brand image in overall
market.
Legal factor-
Change in norms and principles of law such as Equality Act 2010 can impact H&M
employment policies in positive manner because it can improve management decision making
procedure towards staff well fare. It also drives its attention to make further change in current
strategy for workers growth.
Porter’s five forces-
Through this tool, management can determine external factors in form of competitors,
suppliers and others that can put negative or positive impact on success strategy of H&M.
Bargaining power of suppliers-
Degree of this force is low because accessibility of suppliers’ number gives H&M
excellent chance in term of conducting collaborative practices with other supplier who can
deliver or provide quality raw materials of brand, which its production team could use to
manufacture cloth.
Bargaining power of consumers-
Extent of this element is high because customers are the main source of business success
and growth they held power to improve quality and decrease sales. Substitute products
availability gives a buyer opportunity in form of switch from current brand purchase to new or
other one.
Threat of new entrance-
Degree of this factor is low because in order enter within fashion industry companies
needs to invest lot money which is not possible for everyone in regard to build strong brand
image and develop target market.
Threat of substitute products or services-
Threat of this component is high as number of alternative or substitute items such as
Brand clothes accessible that put negative impact on current practices of company.
Competition between existing players-
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Degree of this force is high because all the organization while operate in clothing sector
adopt different techniques or approaches to give tough competition to each other that directly
impact H&M current strategies and plans.
Strategic tools utilize to analyse internal environment of company
Internal environment of any company comprise some influencing factors that can put
negative or positive impact on current management practices and strategies. Here, all these
components could determine by using SWOT and VRIO chain analysis as strategic tools.
VRIO chain model-
Value-
Influencing and positive brand image of H&M is valuable for company because it is quite
difficult to build in market where a company has been operated its ventures. It can be considered
as valuable resource of firm which they could able to boost in systematic and ethical manner.
Rare-
Impressive and affective brand image of chosen company is rare because there are
several companies accessible in the world of fashion who are attempt to build its image in chosen
market, which can attract international buyers successfully. It’s also rare to have wide portfolio
of products like H&M, which bring varied benefits for organization in term of increasing
productivity and profitability level.
Imitable-
In house designer and latest collection with well known dress designer is unique thing
that has been adopted by H&M. It provides benefits to company in term of increasing
satisfactory rating of customers.
Organization-
H&M is able to be competitive for longer period of time because its management can
develop effective marketing content and produce quality items by using natural material and
fabric. Furthermore, firm can gain more benefits that can define in several terms by making
employees involvement in decision making procedure as well as strategy creation.
SWOT analysis-
Strengths-
Impressive and influencing brand image of H&M is one of its strengths which contribute
gaining competitive advantages and attracting new consumers (Nurima, 2017). Because of this
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strength company has successfully reach at global level where profitable and potential buyers are
waiting to purchase apparel according to fashion manufacture by using good quality material that
needs to be chemical free. Furthermore, wide range of items is other strength of H&M which its
management could use to increase consumer base.
Figure 1SWOT Analysis
(Source: What Is a SWOT Analysis, 2018)
Weaknesses-
The strong point that influences people to purchase products is price, it gain attention of
consumers, but because of this factor individual customer consider quality of items. In case of
Hennes & Mauritz, its affordable pricing impact above thing in negative manner. Most people
have negative perception regarding quality of goods because of its prices that affect negatively
on sales of brand.
The biggest weakness of H&M is that its management follow pattern of new clothes after
trends that lead to decrease sales and profitability (Mäkelä, 2020).
Opportunities-
Technology advancement is one of the excellent opportunities for company, which its
marketing and production team grab and gain a lot of benefits through it. For example, firm can
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use this advanced technologies to conduct market research which make them able to identify
trends in systematic manner and on time before considering by other brands.
Brand expansion in emerging markets or regions is second opportunity that H&M can
grab along with above one.
Threat-
Increasing competitive level between companies that has been operated in fashion
industry, can posses biggest threat for chosen brand. It can put negative impact on overall
business practices and strategy development procedure.
Strategic direction and choices in regard to H&M
There are different strategic directions tools and models available in the world of
business that can be used in context of specific brand like H&M to provide ranges of strategic
directions. There are following two;
Ansoff growth strategies-
Market penetration-
In order to grab competitive edge and become an international leader, H&M can use this
strategy according to that firm needs to focus on improving quality of existing items and then
sells to target customers (Tran, 2020). This tactic can boost sales level of chosen company and
increase its profits margin even better than its rivals. It can also help to increase market share and
generate revenue.
Market development-
This tactic is quite useful and beneficial for H&M in term of increasing customer base
and productivity level (Loredana, 2017). Company with this strategy can focus on developing
new market where they can sell its existing items to women, men and other target customers
according to season or climate like winter, summer or spring. Firm can target new and profitable
buyers with it who enable to purchase goods.
Product development-
H&M can adopt this strategy as strategic direction which drives its business towards
achieving excellent growth objectives and goals. According to this tactic, company can introduce
new item especially for target customer which influence individual consumers in form of buying
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goods because of good quality. Firm can use follow this procedure as it has good market share
that enable management to produce innovative item.
Diversification-
H&M can apply and use this strategy when its production department is producing
completely new item and then introduce to new customers (Scheepers and Maher, C.R., 2019). It
can be used in form of brand expansion within new market place where success chance is high,
which provide benefits to company in term of increasing sales, revenue, market share and
profitability. Firm can get benefits with this tactic like other brand.
Porter’s generic tactics-
Cost leadership-
It is quite common for a company to develop strategies and plans as it enable its workers
and administration to achieve goals and key objectives in systematic manner. H&M can use this
technique in form of reducing its prices or cutting down it to gain attention of middle class to
high class consumers. It is one of the best approaches that firm can do to gain in future benefits.
Cost focus-
Organization can utilize this strategic direction when it find suitable for business growth
in fashion industry. According to this tactic, company can focus on cutting down price only
instead of concentrate on product quality. It caters benefits to firm in form of increasing market
size and profitability. It is not important for brand to chare low price with this strategy; they can
set high price.
Differentiation-
H&M can use this one as well if its management consider appropriate and relevant for
company. With this method, firm can differentiate its items from main competitors like ZARA,
which is actually very essential to do because it allows being competitive in overall industry. It
has big spectrum from entire item diversity through to different features within a core good.
Strategic selection of company and its justification
In order to achieve aims and gain competitive benefit, two strategic models has been used
which define varied types of strategies that H&M can use and chose the best amongst list of
many. Organization can select differentiation tactic which is one of the Porter’s generic tactics, it
is quite beneficial because people like innovation and consider creative among products that he
or she purchase from global brands like H&M. Success of this strategy will boost productivity of
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chosen company and performance level as well. Diversification allow firm to gain attention of
profitable investors who can invest in successfully companies new project or plan. Along with
advantages, it has been critically analyse that this strategy bring drawback like strain resources.
Furthermore, along with this one company will use market development strategy as well
which also bring benefits and increase ability to get excellent success while being operated
business in clothing sector. On the other hand, it can impact negatively because market
development requires a lot of efforts and money.
Justification-
Firm can use differentiation which enables them to reduce price competition and allow
offer unique item that people like the most. Moreover, this market development tactics firm can
gain new consumers, maximize its revenue and obtain desire outcomes.
CONCLUSION
From above analysis, it has been concluded that H&M while operated its business in
fashion industry has used several approaches and methods which make them able to increased
consumers base and profitability. By using effective strategies and developing organization has
gained competitive edge. It has been summarized that internal and external environment analysis,
has allowed company to achieve venture aims and objectives which in return boost its brand
image and productivity level even better. By using differentiation and market development
strategies, firm has gained desire outcomes in form of reach at global level with wide customer’s
base and good financial performance.
RECOMMENDATION
1. H&M has sustained its venture in clothing industry by using its key resource like
products, marketing strategy and workers. But still because of weakness they can deal
with further challenges, which is not suitable for its brand image in market. Management
of H&M should adopt relevant and suitable approaches or consider suggestions like
following one.
2. Organization must conduct market investigation on time because it helps to workers to
know what people exactly need to purchase from their favourite brand. With this element
company will analyse current and further trends that increase profits margin of business
even better.
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3. Furthermore, in order to gain competitive advantages and be competitive, H&M must use
advanced techniques or tools like search engine which enable management to analyse
current environment within industry. It allow firm to gather data about overall market
situation and then drive manager to develop effective plans which they can use to achieve
above goals.
4. Organization should create a social media page through which its skilled applicants will
take feedback from consumers directly and solve queries about products as well as new
offers.
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REFERENCES
Book and Journals
Bonilla, M.D.R., del Olmo Arriaga, J.L. and Andreu, D., 2019. The interaction of Instagram
followers in the fast fashion sector: The case of Hennes and Mauritz (H&M). Journal of
Global Fashion Marketing. 10(4). pp.342-357.
Fountoulakis, K.N., 2020. Suicides in Greece before and during the period of austerity by sex
and age group: relationship to unemployment and economic variables. Journal of
affective disorders. 260. pp.174-182.
Loredana, E.M., 2017. The use of Ansoff matrix in the field of business. Annals-Economy
Series. 2. pp.141-149.
Mäkelä, J., 2020. Creating an Authentic Sustainable Brand: Case Companies H&M Group and
Marimekko.
Nadeem, M.A and et.al., 2020. Innovation and Sustainable Development: Does Aid and Political
Instability Impede Innovation?. SAGE Open. 10(4). p.2158244020973021.
Nurima, U., 2017. AN ANALYSIS OF THE INFLUENCE OF BRAND IMAGE, BRAND
LOYALTY AND CONSUMER CULTURE TOWARDS CONSUMER BUYING BEHAVIOR
(A STUDY CASE OF H&M INDONESIA CUSTOMERS) (Doctoral dissertation, President
University).
Sarkar, M.D. and Ghosal, I., 2018. Impact of social media in small business industry: a study on
Facebook. International Journal on Recent Trends in Business and Tourism
(IJRTBT). 2(3). pp.33-39.
Scheepers, C.B. and Maher, C.R., 2019. Leadership’ s Thinking Process with Contextual
Intelligence in Executing Diversification Strategy. Journal of Economics and Behavioral
Studies. 11(1 (J)). pp.73-89.
Simakov, O. and Simakov, A., 2020, June. Analysis of adhesion factors of the external
reinforcement and base surface of the bent concrete element. In IOP Conference Series:
Materials Science and Engineering (Vol. 869, No. 5, p. 052011). IOP Publishing.
Tran, D., 2020. Market analysis and growth strategy for Norwegian supply chain traceability
systems provider in Vietnamese seafood market.
Online
Stakeholder Analysis. 2020. [Online]. Available Through:
<https://www.productplan.com/glossary/stakeholder-analysis/>
What Is a SWOT Analysis. 2018. [Online]. Available Through:
https://www.liveplan.com/blog/what-is-a-swot-analysis-and-how-to-do-it-right-with-
examples/
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