Strategic Analysis of H&M: Tools & Techniques Report - Business

This report provides a comprehensive strategic analysis of H&M, a leading international clothing retailer. It begins with an introduction to strategic analysis and its importance in understanding a company's operating environment. The report then delves into H&M's strategic positioning, including its cost leadership, differentiation, and focus strategies. A stakeholder analysis identifies both internal and external stakeholders and their influence on the company. External analysis utilizes the PESTLE framework to assess political, economic, social, technological, legal, and environmental factors impacting H&M. Industry analysis employs Porter's Five Forces model to evaluate the competitive dynamics within the fashion industry. The report concludes with an internal analysis of the company, summarizing key findings and insights into H&M's strategic approach. The report aims to identify the reasons behind H&M's success, by using relevant strategic analysis methods.

STRATEGIC ANALYSIS:
TOOLS & TECHNIQUES

Contents
Contents...........................................................................................................................................2
INTRODCUTION...........................................................................................................................3
TASK...............................................................................................................................................3
Strategic position of organization................................................................................................4
Stakeholder analysis....................................................................................................................5
External analysis..........................................................................................................................6
Industry analysis..........................................................................................................................8
Internal analysis of company.....................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODCUTION
Strategic analysis is procedure of conducting research on organization and its operating
environment to create strategy (Aguinis, Edwards and Bradley, 2017). It defining the external
and internal environments to be analysed, in process of strategic analysis different types of tools
and techniques will used such as SWOT analysis, PESTLE, stakeholder’s analysis as well as
porter’s five forces. It plays vital role in strategic decision taking, it brings essential information
about development and evaluation of environment inside as well as outside of firm and reveals
possible threats & opportunities that has to be consider while making strategic decision. Strategic
analysis process helps to determine effectiveness of business existing strategies. It is external
review of what is happening in environment in which firms operates currently as well as
medium, short- and long-term futures. The present is based H&M, it is Swedish international
clothing retail organization known for their fast and latest fashion clothing for children, women
and male. This report justifies the reason behind organization success which is considered by
using relevant strategic analysis methods or techniques.
TASK
Some organization succeed within specific industry, because of selling the best quality
products to its consumer, their competitive positioning and having skilled employees within
businesses who are able to contribute in achieving objectives and goals of companies.
On the other hand, some companies get fail because they do not collect information
before starting business which is very essential to gain success and get succeed in industry. There
are different types of strategic methods will use to identify the reason behind statement that is
why some organizations succeed while other fail?

Figure 1Strategic Analysis Procedure
(Source: What is Strategic Analysis, 2019)
Strategic position of organization
It reflects the choices of H&M make about kind of value it will make and how that value
is created differently than competitors. Company defines their business strategy as procedure
through which they define where it be located their target market as well as competitors.
According to Ottosson and Kindström, (2016) Strategic positioning is very essential in defining
the firm specific niche within their business. Organization relative position within fashion sector
matters for performance. Strategic positioning of H&M translates into two or three things, cost
leadership, focus strategies and differentiation. It is concerned with impact on strategy of internal
resources, external environment and competences as well as influence and expectations of
stakeholders.
Cost leadership-

Organization provide fashionable clothing for cheap prices selling to large markets, it is
suitable for current economical condition. Firm with this strategy set high entry challenges for
their new competitors.
Differentiation strategy-
As per view of Zhao and et.al., 2017 differentiation refer to setting services and products
of company in unique style, characteristic brand from all other brands. H&M provide latest and
current fashion clothing to its consumers which is exclusively created by famous designers.
Cost focus-
Teece, Peteraf and Leih, (2016) stated that company achieved capability to be efficient,
they keep production cots lower in order to increase profitability. To low manufacturing costs,
they usually have to place orders with wider quantity of products in order to obtain the best
prices.
Differentiation focus-
According to Obeidat and et.al., (2016) differentiation focus is one of the best approaches
that help company to gain competitive advantages. H&M offer the best quality cloth to its
potential consumers with fixed cost.
Stakeholder analysis
According to Leventon and et.al., (2016) stakeholder analysis is defining as process of
determining these people before beginning project, dividing them according to their participation
levels, influence and interest in work, and identifying how best to communicate and include each
of these stakeholders’ teams throughout. Stakeholder analysis is conduct for different strategic
purpose including to enlist aid of, key organizational players, to gain early alignment among all
stakeholders on plans and goals and to help address issues or conflicts early on. While some
firms fail, because of delivering poor quality goods and services. Due to lack of differentiators
from competition and underemphasising the significance of execution are another reason behind
failure of organizations.
Stakeholders is classified into two categories: external and internal stakeholders.
Organization develop many systems to meet expectations and interests of their internal
stakeholders such as workers, owners and managers.
Employees-
 Workers are interested in getting fair
Government-
 H&M is closely connected with local

wages, they have the power to
influence production procedure of
H&M and affect its employment
opportunities.
 Staff is very essential in enabling long
term sustainable development. Workers
have power to grow overall business,
they can increase operational
efficiency.
and national authorities in which their
stores are located. Government have
power to make changes in existing
operation procedure of H&M.
 They are interested in increasing GDP
and environmental sustainability.
Suppliers-
 Raw material suppliers hold power to
affect business, because they provide
products to. When suppliers offer poor
quality goods to H&M, it directly
affects reputation of brand negatively.
 Suppliers are interested in increasing
their profit margin.
Consumers-
 Potential customers have power to
change the production process of
products that H&M offer to people.
 They are interested in receiving quality
products with affordable prices.
External analysis
PESTLE analysis is essential to formulate external analysis and one of the best
approaches for considering outside business environment within specific industry. It stands for
political, economic, social, technological, legal and environmental analysis, in bellow it will
analysis H&M in accordant with PESTLE.
Political factors-
Several political factors affecting organization are restrictions on exports and imports as
well as relocation of production facilities after Brexit, that impact on H&M operational
efficiencies. Restrictions after Brexit on shipment of products and raw materials is one of the
major challenges for company which affect profit margin and productivity. Relocation of
outsourcing and manufacturing continues to be contentions problem as firm seek to maintain
profitability and reduce costs and obtain incentives to established production in particular area.

Due to regulatory reasons, organization had to collaborate with franchising partners to operate its
brand in Kuwait, Egypt, Morocco, Thailand, Indonesia, despite franchising not being the part of
company general expansion strategy. The overall impact of political factors on H&M decrease
their productivity and profit margin, which is not suitable for them. Relocation of production
require a lot of efforts in which company has to invest more than before.
Economic factors-
Rising prices of raw materials, growing Asian markets, rising labour cost in far east
nations and weak economic conditions are the different types of economic factors that affect
business production operation. Along with this, high unemployment rate is one of the biggest
economic factors in nation, that impact on current employment strategy or plan of H&M.
unemployment mean there is high supply of jobs than requirement, meaning individual is willing
to work for lower wage which lower profit margin of H&M. People who are unemployed not
been able to spend expensive products which affect on business profit margin, they have less
money to spend which do not allow consumers to purchase H&M clothes. Unemployed people
are capable to purchase fewer products and services, thus making firm less profitable.
Furthermore, high unemployment and lower wages make people more docile, it reduces H&M
costs.
Social factors-
Fast moving trends, increasing going green consciousness, changing demographic and
price sensitive consumers are considered in social factors that affect product manufacturing
procedure of business. Social factors that impact company are direct reflection of community
that firm operates in and encompasses belief, values, culture and attitudes that majority of
population hold as society. Change in consumers preferences according to market trends affect
H&M business the most, customers are directly influenced by celebrities and social media in
field of clothing. When people follow its favourite celebrities fashion style, they demand from
organization to design their clothes accordingly which is not possible within short term notice.
Consumers prefer to buy latest clothing style according to trends that affect entire procedure of
firm.
Changes in attitude of buyers purchasing products directly decrease the productivity of
H&M that is not good for brand image.
Technological factors-

According to Da Silva and et.al., (2017) technology advancement is one of the factors
that impact on H&M just like the other do. Online purchasing is now in trend, people are more
interested in buying products via mobile application, they do not interest in going to outlets and
purchasing clothes merchandise. Advancement of technology put pressure on organization to
adopt and develop their online sites that will help to attract new consumers towards business
products. It offers people ease of ordering clothes online from their home, workplace and
anywhere. The company have to keep up with these technologies and related changing
behaviour, which is beneficial for them. Without adopting technological advancements within
business, they cannot be able to sustain for longer within marketplace and retain its potential
consumers. Rewards points also directly in online application that is used in form of offers are
nice approach mixed with technology to maximize consumers base.
Environmental factors-
Climate change, environmental sustainability concern of government, long term
availability of natural assets and other things is included in environmental factors that put
pressure on company to adopt and make changes in their business accordingly. According to
Tian and et.al., (2019) clothing industry as an entire world, is second most polluting sector after
petroleum and oil industry. Government show their concern towards keep environment clean and
safe. They want from H&M to contribute in environmental sustainability that help to prevent
land and water from being polluted. High amount of water leftover which is produced pollutes
water bodies, population living nearby to those water places suffers from several deadly and
harmful diseases. It is one of the reasons for which local and national authority shows their
concern for keeping environment safe from large number of populations.
Legal factors-
Changes in laws related to working conditions at company, wages, legal regulations for
chemical in clothing and environmental protocols, are included in legal factors. Data protection
and intellectual properties laws directly impact on H&M strategic decision. According to these
laws they have to consider existing data protection procedure because it assures them to get
success within fashion industry.
Industry analysis
Porter’s Five forces model
Bargaining power of suppliers-

The degree of this force is low. The availability of suppliers within clothing industry do
not allow raw materials suppliers for holding the power of bargaining. In simple words, the
power is low because there are several providers with few differentiations available.
International trade give options for company to source from foreign manufacturers. However,
makers from low wages nations such as China face more competition. Clothing is almost
commodity-based market, although costs are rise continuous on cotton.
Bargaining power of buyers-
The threat of this force is high because there is range of retailers in market is available
who are able to offer low cost and quality products to consumers that drive people towards them.
Prices is essential variables for consumers, due to high prices on each product give access to
potential customers to switch from another retail, it also gives power to bargain which directly
impact on profit margin of H&M.
To lower the bargaining power of consumers H&M can set affordable prices on their
goods.
Threat of substitute products-
The threat of substitute goods is low, because no products substitute provided by means
of other sectors which performing same clothing procedures. It does not permit people to switch
from other products which is quite beneficial for H&M as they are able to sustain within
marketplace for longer time.
Threat of new entrance-
Threat of new entrance is high. Entering into fashion industry does not needed huge
capital investment, it allows other companies to enter into textile sector which increase threat for
H&M as decrease their profit margin and lose potential consumer. Along with this, there are
many industrial contractors assessable and it supports to make market open to new entrants. The
permission to distribution networks is simple for new firms which easily set up their supply
channels and come into business. To reduce this threat organization can make their brand image
and distribution network stronger.
Competition among rivals
According to Banks and et.al., (2018) degree of competition amongst exiting companies
or business competitors is high because the availability of firms in same sector arise competitive
situation that affect H&M production and marketing procedure negatively.

In order to gain competitive advantages organization had to reconsider their marketing
strategies as well as improve production process, delivery fast services that retain consumers
with them.
Internal analysis of company
SWOT analysis is the best technique used to analyse the internal environment of H&M
and its business capabilities that help to gain competitive benefits.
Strength-
Company is known as fast fashion retailer, H&M styles designed in collaboration with
well reputed designers such as Jimmy Choo and Stella McCartney (Okonkwo, 2016). It permits
business to stay at forefront of fashion, they are able to advertise heavily comprise with high
profile collaboration such as David Beckham, it keeps firm modern and at top of consumers
mind. Along with this, to keep all designs contemporary, company replenishes their store
inventories daily and create designs to market more rapidly than is typical in sector. This process
is complete by producing broad volume basics in low cost locations. In addition to this,
organization commitment to sustainability that enhances its brand position as well as image and
assure that assets is used effectively in long and short term. Hennes & Mauritz sustainability
commitment is strong evidenced by their help of better cotton initiative, assuring the best
practices in cotton supply.
Weakness-
As per view of Hawn and Ioannou, (2016) organization depends totally on outside
suppliers to produce their products which impact on company reputation, outsourcing is risk to
firm image. They outsource to about 700 independent distributors around the globe, its has
limited control over factories which leads to low quality goods which reflects poorly on business.
Chen, (2017) contradict that uncertainty in future product or supply, inefficiency in order
completion and leisurelier response eras to market trends, is the weakness of H&M that affect
productivity as well as profit margin the most. Affordable pricing influence quality, company is
famous for creating affordable clothing, but sometimes it affects quality of goods like clothes of
firm. The business operation is vastly centralized in European areas with excessive portion of
revenue come from there, it is not good plan for leveraging risk. Also, as supply centres is
mainly established in European regions, it becomes very difficult to create online stores in
international market.

Opportunity-
As per view of Shanthi and Desti, 2015 in recent time people are increasingly driving
towards online shopping. It is one of the best opportunities for H&M to increase their profit
margin and consumers base, they can provide online shopping facility to consumers that help to
save time and money. Castaño, Méndez and Galindo, (2016) contradict that business expansion
is good opportunity for company which they can use build strong brand position within
marketplace. They are focusing continually on expanding procedure of their store base across the
world. Organization added 400 new stores in FY, business expansion plans of H&M helps to
improve their bottom line and top line as well. E-commerce is the best platform for firm, with the
help of their presence on e-commerce in different nations they gain consumers attentions, that
support to gain competitive advantages. By expanding in this platform, they are able to serve to
broad market. It is future of apparel section and H&M had to make use of this tool to their
potential.
Threats-
Intense competition in fashion industry poses threaten for H&M, apparel sector is topic to
intense competition from global and local brands. Organization has to aware of high competition
in order to be on head with new trends.
According to Treasury, (2015) foreign exchange fluctuations also pose threaten situation
for organization which affect its sales and profit margin. Company groups reporting currency is
Swedish Krona but very of their sales come from well developed economies such as US and
Europe. Threat of this with respect to powerful currencies impact productivity and profitability.
Dunford and et.al., (2016) elucidated that increasing labour costs impact production cost
for fashion industry, such rising costs affecting profit margin for H&M.
VIRO framework-
Valuable-
This analysis states that financial resources of company are highly valuable as it supports
in investing into external chances that arise. These help organization in combating external fears.
Along with this, workers of H&M are more valuable without professional and knowledgeable
applicants they cannot be able to server in large market.
Rare-

Patents of company are rare assets as it identified by VRIO framework analysis, patents
are not easily accessible and not possessed by anyone. It permits H&M to use them without
taking permission and interference from its competitors.
Imitable-
Distribution network of organization is very expensive to imitate by other as determine
by VRIO analysis. It developed since years gradually by company, competitors will have to
invest an important amount when they are to imitate the same distribution system.
Organization-
Financial resources, distribution network and patents of H&M is well organized to gain
competitive advantage. Company use their supply network to reach out to their consumers by
assuring that goods is available on all of their outlets.
CONCLUSION
From above, it has been concluded that H&M gain success because of their ability, the
best strategies for gaining competitive advantages and taking appropriate decision after
conducting deep research that is beneficial and essential to gather data. Furthermore,
organization consider all the points that contribute in increasing their profitability and
productivity, they used advanced technologies, cater online delivery services to its consumers
that help to sustain business for long period of time.

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Online
What is Strategic Analysis. 2019. [Online]. Available

through:<https://corporatefinanceinstitute.com/resources/knowledge/strategy/strategic-
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