Strategic Management Report: An Analysis of H&M (MGT6800)

This report presents a strategic management analysis of H&M, a multinational clothing retail company. It begins with an introduction to strategic management and a brief overview of H&M. The main body of the report comprises a PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors affecting H&M's operations. It then applies Porter's Five Forces model to assess the competitive forces within the industry, followed by a VRIO framework analysis to evaluate H&M's resources and capabilities. A SWOT analysis is also presented to determine the strengths, weaknesses, opportunities, and threats faced by the company. The report concludes with a summary of the findings and references to the sources used. The analysis covers various aspects, including the company's global presence, financial performance, product range, and competitive landscape, providing a comprehensive understanding of H&M's strategic position and challenges.

Strategic Management

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
PESTLE analysis of H&M ..........................................................................................................3
H&M Porter's 5 forces model .....................................................................................................4
Resources and capabilities (VRIO) framework of H&M ...........................................................4
SWOT analysis of H&M ............................................................................................................5
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management is management and analysis of organizational resources to achieve
the goals of the organization. It is assessing of organization's environment to frame strategies
according and as it keeps on changing. H&M is a multinational clothing retail company for men,
women, teenagers and children. It was founded in 1947 and is now the second largest global
clothing retailers. In the further report Swot framework of H&M will be presented.
MAIN BODY
PESTLE analysis of H&M
Political factor – There are many outlets of H&M in various countries and every country
have different political condition therefore their instability can affect the functioning of the
organisation. Even if firm does not have any expansion strategy like Franchising they have to do
it for regulatory reasons.
Economic factor – The company made profits even after Brexit this is a very good
indication for the business. In coming years the company is also looking forward to set up
manufacturing units in developing countries as the labour rate is low. And these countries have
people with increasing disposable income. Tax laws also also impacts the firm (Perera, 2017).
Social factor – The attitude, habits and lifestyle of people affects the firm functioning as
they have to adapt to the changing trends and interest of customers. The firm has to analyse this
factor so that no group remains untargeted.
Technological factor – As the trend of shopping is shifting from physical stores to
virtual stores. This factor impacts the firm therefore they have to consider and make efforts to
become advanced in using the technology.
Legal factor – There are various legal laws in different countries and the firm has to
abide by all the laws if they have to operate in that country. The firm has to keep in mind health
and safety laws, copyright laws, data protection laws etc.
Environmental factors – These are very important as they are operating in
environmental surrounding and taking many resources from it so it the responsibility of H&M to
follow environmental laws and also reduce the use of ingredients that negativity impacts the
environment.

H&M Porter's 5 forces model
The following are Porter's forces of H&M:
Threat of new entrants – H&M have low threat of new entrants as it is a multinational
corporation and if anyone has to enter in this segment then it has to start with higher investment
and production. Also the company now has many differentiated products and a very high brand
value.
Bargaining power of supplier – The bargaining power of supplier is low in case of
H&M, as the company has very good brand value and image and has many stores globally
therefore they can shift to other ones and can set high standards for their suppliers (Dertwinkel-
Kalt. and Wey, 2020).
Bargaining power of buyer – H&M bargaining power of buyer is moderate and high as
there are many competitor in the market that offers same quality products and at reasonable
price. But the firm has an advantage as their products are differentiated.
Threat of substitutes - The threat of substitute in case of H&M is moderate as the
substitute with same quality at the price which they offer are less as the substitutes charges
higher prices for the same quality.
Rivalry among existing firm - The degree of rivalry among existing firms are quite
high as there are many players and everyone wants to capture large market share as possible. So
the company has to innovate and bring something new to the market to stand out. H&M has Zara
and Gap and many more such rivals (ÖNEREN, ARAR. and YURDAKUL, 2017).
Resources and capabilities (VRIO) framework of H&M
Value creating – H&M create value by simplicity, being open minded in experimenting
new things, they adopt entrepreneurial spirit by decentralized decision making. They also believe
their people an appreciate ideas of everyone irrespective of the posts.
Rare – The products and quality of the company is rare and it is the pioneer of fast and
trendy fashion that gave the company a distinctive place and this made the approach difficult for
competitors.
Inimitability – The company does not follow the copy approach when it comes to
fashion and styling. They have their unique designs and patterns and they also have in-house

designer collaboration with famous designers. They also invest in R&D and gives their own
unique touch to the clothing (Lin. and Tsai, 2016).
Organizational support - H&M makes every effort to be in the limelight for this they
advertise long term campaign. H&M outsource the manufacturing of products in the countries
where the cost is low which will give economies of scale in case of supply chain management.
SWOT analysis of H&M
SWOT analysis is the technique used to determine the strengths, weakness, opportunity
and threats of the organization. Based on the above analysis the following is the SWOT of
H&M:
Strengths
H&M have wide and differentiated range of products which includes apparels, accessories,
shoes, cosmetics and many more.
Very strong global presence across many countries which minimize their business risks.
Greater customer satisfaction as they provide unique and high quality products at affordable
prices.
Better financial performance as after the Brexit also the company was bale to make profits when
all the other competitors were incurring losses.
Weakness
Sometimes affordable prices impacts quality and also there are many competitors offering
greater quality at same prices.
Sometimes the company is not good at forecasting demand and at this point its competitors take
the lead.
Investment in new and advanced technologies is lacking. The company need to put more funds
into making their process more efficient and to capture and retain the customers they need to
give them convenience.
The company has limited success outside the core business of clothing. Even if the company is
doing good in case of clothing segment but is not very effective and efficient in other segments
and also faces challenges sometimes. This can also hamper the brand image of the company.
Opportunities

As developing countries is the opportunity for H&M as they have lower labour rates and people
of developing countries have higher disposable income which can increase their scope there.
By adopting to the latest and new technologies the company can acquire new customers who use
online platforms to shop. This can increase their sales and also add on to their brand awareness
and enhances brand image (Sarsby, 2016).
By running campaigns they can also expand their customer base and also be able to retain their
existing ones, as by campaign the existing customers campaign will get their attention and they
also feel they are buying from a global brand.
Threats
There are many competitors of H&M and this acts as a threat in market share and profitability.
Restrict legal laws being introduced by countries in which H&M is operating is a real threat as
they have to follow their rules and laws and sometimes these laws act as a disadvantage to the
company.
The company can also face currency fluctuations when there is volatile political climate around
the globe.
Some environmental laws can act as a threat to H&M as to attain those laws they may have to
shut certain product lines or even stores if they are operating very much against the laws.
CONCLUSION
It can be concluded that there are various factors that impact the functioning of H&M like
political, economical, social, technological, environmental and legal. Also Porter's 5 forces
model of this company is analysed and VRIO framework. And based on all these analysis SWOT
framework of H&M is presented.

REFERENCES
Books and Journals
Dertwinkel-Kalt, M. and Wey, C., 2020. Multi-product bargaining, bundling, and buyer
power. Economics Letters. 188. p.108936.
Lin, C. and Tsai, H.L., 2016. Achieving a firm’s competitive advantage through dynamic
capability. Baltic Journal of Management.
ÖNEREN, M., ARAR, T. and YURDAKUL, G., 2017. Developing competitive strategies based
on SWOT analysis in Porter’s five forces model by DANP. Journal Of Business
Research-Turk. 9(2). pp.511-528.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Sarsby, A., 2016. SWOT analysis. Lulu. com.