H&M Case Study

1. Situational Analysis

For a company that is operating across the globe in more than sixty-six countries

and multiple online platforms, it is unquestionable that H&M faces several political and

legal issues in its operations. First, the company has been criticized in several occasions

for its role and operations in African countries and other low-cost states such as the far

deep of East Asia. Even though it considers this as the ultimate source of cheap labor

and reduction of production costs, most legal and political organizations do not concur

with it. In some instances, some celebrities have prompted individuals to boycott their

products and encouraged looting in some of other H&M’s stores.

One of the most common sources of H&M growth has been the fact the company

produces high-quality products, but they sell them at affordable prices. Unfortunately,

the core pillar of this fashion giant has turned out to be its major economic challenge.

Today, the company faces several challenges such as labour cost issues, inflation rates,

taxes and fluctuation of the foreign currencies. As a result, these economic changes

affect the operations of the company due to its low prices and the diversity of its

geographical locations.

H&M begun its operations in Sweden in 1947. Since then, the company has

grown in size and the quality of products they offer the fashion industry. For instance,

the company has struggled to stay updated with the technology to avoid becoming

obsolete in the market (Mierzejewska, 2017). This tradition is based mainly on the

changing demands of fashion consumers. The company has undertaken several

practices to stay innovative such as opening new stores in modern cities and other

platforms such as the online markets. Besides, the company must have created its

position in the contemporary world for it to remain among the leading firms today.

Lastly, this organization focusses on low-wages as the primary measure of the

suppliers' suitability. However, the fashion industry has continued to grow and expand

as more people and institutions demand them to introduce environmentally friendly

practices (Shen, 2014 p.6237). H&M does not value environmental sustainability as part

of its operations but instead considers how its products will match the market

requirements. Other market players such as Indi-tex have introduced environmental

friendly products, and thus, gotten more market shares than the H&M.

Despite the large number of challenges and setbacks that face H&M, the firm

enjoys a particular industry attractiveness and likelihood for profitability in the long-term.

The company keeps a closer watch on its industry's rivals who encourage them to go

beyond the activities of their competitors. Therefore, it is essential to assess some of the

factors that impact the business' environment.

H&M operates in an industry with a large number of suppliers in the country and

beyond. Therefore, the bargaining power of the suppliers is low since they struggle to

sell their products to a small number of producers (Mochalova, 2017 p.6). As a result,

most retailers impose a particular demand that has more power than that of the

suppliers. Unlike expensive and luxurious fashion sectors where individuals stick to one

supplier, the providers of cheap fashion products do not enjoy a positive bargaining

power from their buyers. The price varies among retailers who lack customer
associations. Unfortunately, H&M has not formed any association, and their consumers

are forced to lure its customers into continuing buying their products.

First, there are several stores at the local, national and international level that

pose significant competition to the H&M stores. These stores have created a rivalry in

the fashion industry, whereby different players attempt to take over the industry without

considering the implications of their actions to other firms. However, the opportunities for

growth are limited since the sector is already mature and almost saturated. From the

case study, it is also noteworthy that the market considers the image of a brand

worldwide.

H&M bargaining power for suppliers is low since there are few suppliers, yet the

market for raw materials continues to grow. These suppliers tend to work in low labor

cost countries, which raises serious questions concerning the ethical responsibility of the

company. One the other hand, the bargaining power for buyers is low since there is no

loyalty from consumers. Unlike other entities that form consumer associations, this firm

does not value these formations since their products are cheap In the recent past,

several other retailers have joined the market since there are no barriers to entry.

Strategic Capabilities

H&M will manage to achieve its strategic directions by following specific

pathways. First, the firm will ensure that it penetrates the market back to its initial

position as the market leader. Notably, it will achieve this goal by offering fashionable

products that undergo continuous market development. This practice will comprise of

different practices such as product development and diversification from its traditional

fashion designs.
 H&M will manage to achieve a competitive advantage based on the value of the

laid down strategy. This strategy will ensure that the company utilizes its online platform

and expansion to grow the business beyond the current market levels. The longstanding

history of the firm and organizational culture is rare compared to other firms that are

joining the industry. The value of the products produced by H&M is extremely low. An

introduction of new manufacturing centers will reduce the cost even further, and so, it

will be difficult to imitate. The main goal of this strategy is to capture the actual value of

the products and consumers. They are organized in a manner that will support both

business and other stakeholders; this practice makes them more effective.

2. Strategic Options -TOWS Matrix

Over the past few decades, the clothing retail industry has undergone

progressive changes and immense growth. Some of the most common factors that have

contributed to this change are the growth and development of technology. This factor

has contributed mainly to the spread of fashion products as more people continue to

adopt technologically advanced strategies to access their products. As a result, e-

commerce and the quality of the products have become a common combination across

the globe. As technology helps producers to come up with advancement methods of

producing their products, the number of consumers continued to grow and spread

across the world. These and other factors have played a significant role in H&M's growth

and development as other challenges and threats continue to manifest in the company's

operations. These factors span across both internal and external contexts of the

company, and thus, creating an opportunity for its growth as well as crippling its growth

in one way or another.

 In the past few years, H&M has been among the largest retailers of high-quality

clothing in the fashion industry (Cortez et al., 2014, p.3). This trend has been an

excellent internal strength to the business as its workers continue to put more effort to

maintain this position in the market. The company also enjoys having a wide range of

products in its stores. This variety allows the company to enjoy a wider variety of

consumers, unlike other firms that choose to specify on a particular line of products.

Furthermore, the fact that the company has been in existence for an extended period

ensures that it retains its customers despite changes in the market price or the fashion

dynamics across the globe. This worldwide presence, multiple supply chains, designer

products and the firm’s robust financial stability serves as the firm’s source of strengths

to continue conquering the fashion industry.

Notably, this case study indicates that the company depends largely on suppliers

across the globe to supply them with raw materials. This indicates that H&M is forced to

set aside various resources such as storages, which increase the cost of maintenance

beyond the company’s financial strength (Youell, 2013, p.108). This practice is a

weakness, and it shows adequate measures should be taken to avoid this excessive

loss of resources. Despite these weaknesses, the company has several opportunities

that will help to alleviate and eradicate these weaknesses. First, the company is focused

on having a strong online platform. H&M has already put in place nine online platforms

that are used for marketing its products as well as expand beyond the physical stores.

Moreover, the firm has introduced its stores in new markets such as the Philippines and

Indonesia where other major brands are yet to explore. Based on the price of H&M
products, there is a huge opportunity that the company will manage to increase its

revenue amid increased competition.

The clothing industry is highly competitive. In the recent past, the industry has

become more competitive as new firms join the market whilst the existing ones devise

new ways of beating the competition. This trend possesses a major threat to the

company since this could affect the sustainability of its low-priced products. Local

retailers are joining the e-commerce industry regardless of their sizes or period they

have existed in the market. The cost of labour is also rising as more opportunities

continue to erupt in different industries. The number of counterfeit products is also

increasing as malicious producers take advantage of the company's longstanding history

and reputation in the market. Therefore, these factors present an imminent threat to the

success of the company and the achievement of its objectives.

3. H&M Strategy Recommendation

The apparel industry is a multi-billion-dollar industry that continues to grow and

evolve as technology and people become more advanced and sophisticated (Youell,

2013). Therefore, H&M should take advantage of this massive industry to grow and

retain its global standards by adopting an effective strategy that would help it to reach its

market capabilities. First, the company should consider producing its own raw materials

to avoid further setbacks from the suppliers. Other firms such as Indi-tex manufactures

and sells its own products across all its stores. As a result, this firm has managed to

remain competitive. This strategy will be vital to the achievement of the company’s goals

since it would manage to produce its products at a lower cost, and thus, retain its

conventional standards of high-quality goods at low prices.

 The e-commerce concept is viewed as today's pacesetter in the online market. E-

business is considered to be the most lucrative area since the retailer’s manage to reach

a large number of consumers at a lower price. Therefore, the company should maximize

its efforts to convert its physical stores to online platforms where consumers can access

a wide range of products at a lower cost. This practice would involve an increase in

resources that are directed towards the achievement of these objectives. Lastly, the

company should position its operations according to global standards. For instance, the

firm should ensure that all workers are compensated equally to avoid raising questions

regarding the company's perception concerning specific people such as Africans and the

Asians. Also, it should consider contributing to society through different welfare projects.

This strategy is suitable for this organization since it aims to utilize the firm’s

opportunities. For instance, the globe is becoming more digitized as different platforms

continue to gain popularity among consumers. This strategy seeks to take advantage of

this growth and capture more market shares. Second, the strategy aims to overcome the

current level of competition experienced in the market. Notably, this competitiveness is a

major risk to the firm’s progress.

Moreover, this strategy meets the expectations of different stakeholders. For

instance, it meets the expectations of consumers by ensuring that the price of its

products remains affordable despite the prevailing market shocks. Second, the strategy

aims to meet the expectations of the workers by ensuring they receive equal pay for

services delivered. This strategy aims to ensure those producing these commodities are

compensated equally with those in developing countries.

 Based on the effectiveness of the proposed strategy, it is unquestionable that it

would work once it is put in place. The introduction of manufacturing centers to avoid

fluctuations from the suppliers would help the company to achieve its objectives.

Although this practice would not be cost-effective at the beginning due to its different

investment costs, it will achieve more benefits in the long run. Therefore, the firm should

acquire resources from different sources and integrate them into the business to

facilitate the achievement of this strategy.

References

Cortez, M. A., Tu, N. T., Van Anh, D., Ng, B. Z., & Vegafria, E. (2014). Fast fashion

quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), 1.

Mierzejewska, J., 2017. Analysis and evaluation of marketing strategies for clothing

companies on the example of Zara and H&M (Doctoral dissertation, Katedra

Procesów Zarządzania).

Mochalova, K., 2017. Control and Coordination of Suppliers in MNEs: Case: Hennes &

Mauritz (H&M), Case: Company X.

Shen, B., 2014. Sustainable fashion supply chain: Lessons from H&M. Sustainability,

6(9), pp.6236-6249.

Youell, M., 2013. An analysis of the growth and success of H&M. How They Could

Impact the Largest Swiss Watch Company, Swatch Group, p.108.