6EC513 Global Business and Strategy

Table of Contents
Introduction................................................................................................................................3

Brief Background to Case Study Organisation......................................................................3

Internal and External Analysis...................................................................................................4

PESTLE analysis....................................................................................................................4

Porter’s five forces.................................................................................................................5

SWOT analysis Of H&M.......................................................................................................6

Identification of H&M’s Sustainable Competitive Advantage..................................................8

Strategic Recommendations Based on Analysis, and Discussion of Implementation Issues. .10

Conclusion................................................................................................................................12

References................................................................................................................................13
Introduction

Global business is a business organisation that performs its business activities in different

countries of the World. Business organisations tend to expand their business operations to

more than one country as it helps in gaining more customers for their products and services.

The global business helps in reducing the cost of production as with the increase in the

volume of goods the cost of production reduces (Peng 2016). It helps in employing

employees of different cultural backgrounds to explore the customers of different cultures.

Business organisations while expanding their business operation in the global markets needs

to formulate some strategies, which will help in gaining a competitive advantage. Strategies

help business organisations in managing their resources and in achieving their objectives and

goals in the future (Tallman et al. 2018). The case study business organisation that will be

considered in this assignment is H&M. the internal and external analysis of H&M will be

performed in this assignment, which will help in understanding the strategic decisions

undertaken for business operations at a corporate level. The identification of H&M‘s

sustainable competitive Advantage will also be analysed here to understand the strategic

position of the organisation in the global markets. Some strategic recommendations based on

the analysis and implementation of strategies will be suggested which will help in combating

the strategic issues faced by the business organisation.

Brief Background to Case Study Organisation

Hennes & Mauritz AB also known as H&M is a multinational fast-fashion clothing company

for women, men, children and teenagers. H&M is a Swedish company, which was founded

in the year 1947 by Erling Persson. The company has its headquartered in Stockholm,

Sweden. According to the data of 2019, the company is operating its business operation in

5000 stores in 74 countries of the world. H&M also provides the facility of online shopping

for its potential customers in 33 different countries. H&M is the second-largest retailer of
clothing products all over the globe after Zara. The company also sells fashion accessories

along with clothing. The number of employees presently working in H&M is more than

126,376 as per the data collected on 30th November 2019. To be the second-largest clothing

retailing company in the World, H&M uses various strategies associated with decision-

making and gaining advantages that are more competitive. H&M has opted for sustainable

strategies for investing in the future by not increasing the price of its products and providing

eco-friendly products to its customers as stated by the chief executive Karl-Johan Persson

(Jirawongsy 2020).

Internal and External Analysis

External environment analysis

PESTLE analysis

Political: The political factors or the risk associated with H&M is increasing due to the

instability of the government in various countries across the globe. H&M has to go against its

expansion strategy by collaborating with various franchising partners to start its business

operations in Kuwait, Saudi Arabia, Oman, United Arab Emirates, and any more Middle East

countries (Perera 2017).

Economic: The economic factors such as the growth rate, tax systems, exchange rate affects

the business decision of an international brand such as H&M. The negative effects on

currencies which were due to the presence of Brexit in Europe had proved to be beneficial for

H&M by increasing their sales by 7% on the local currency in the year 2017 which grew 10%

in terms of the Swedish Currency.

Socio-cultural: H&M promotes its products, using various social media platforms as the

celebrities and social media influencers easily influence customers. The changes and the

preferences of the customers are changing, as they prefer more designer clothes and clothes,
which are safe for the environment. The use of social media platforms helps the company in

updating and getting new information about the change in fashion trends of the people

(Shrivastava et al. 2020).

Technological factors: H&M is upgrading the use of various techniques so that it can keep

itself update about the changing trends in the markets and reach out to the customers easily.

H&M is providing online services to its customer so that they can experience hassle-free

shopping.

Environmental: H&M is collaborating with the Better Cotton Initiative (BCI) for improving

the quality of the cotton used in the production of their products. This project will help the

company in saving water and chemicals that are used in the production procedures.

Legal: H&M has faced various legal disputes in the last few years due to its violation in the

clothing retailer. The most recent one was in the year 2015 when H&M lost multi-million

pounds of a patent dispute against a UK manufacture for invading a coveted technology in

Bras (Alves et al. 2020).

Porter’s five forces

To understand the external business environment of H&M and its competitive markets the

porter’s five forces are done.

Threat of new entrants: H&M helps in overtaking the new fashion brands entering the

markets by undertaking the cost-effective strategy and advantage of the industrial economies

of scale. H&M focuses on retaining its customers by undertaking a unique strategy for

marketing and product development (Adelakun 2019)

Bargaining power of suppliers: The number of suppliers in the fashion industry is more in

comparison to its buyers. It implies that the power of controlling the prices in the hand of the

suppliers is less thus making the bargaining power of the suppliers weak.
Bargaining power of buyers: The bargaining power of the buyers of H&M is strong as

there are many brands in the markets and the buyers can easily switch to other brands

providing similar products. H&M uses well-establish marketing techniques along with

providing quality and innovative products to its customers for maintaining a good reputation

in the market (Mrad et al. 2020).

Threats of substitute products: The Company focuses on selling different varieties and

good quality of products to existing and potential customers at an affordable price. H&M

outperforms its competitors by using the customer-centric and cost-effective business

strategy.

Rivalry among existing firms: H&M has been successful in providing its customers with

premium quality goods at affordable prices through effective marketing strategies and market

research. The market research helps in understanding the preferences of the new customers

along with the existing ones and the situation of supply and demand in the market.

Internal analysis

SWOT analysis Of H&M

Strengths
 H&M offers different varieties of
products such as clothing, shoes,
blankets, apparel that are of
premium quality.
 Good reputation in the global
markets with positive financial
performance.
 The global presence and expanding
business helps in minimizing the risk
associated with the business.
Weaknesses
 Cost of advertising is high
 Problem of quality arises due to
outsourcing production to other
independent suppliers, which leads
to a reduction in the control of the
manufacturing process (Sarsby
2016).

Opportunities Threats
 New source of revenues due to the  bargaining power of consumers is
 developments in the online sales
strategies.
 Expansion in new markets such as in
Asia and Africa is an opportunity for
gaining a more customer base
(Phadermrod et al. 2019).
high
 Varying preferences of consumers
due to more option of brands
offering similar products at a low
cost.
 Strong competition and irregular
global economic conditions

 Implication of SWOT Analysis

The SWOT analysis is done here to understand the competitive advantages and core

competencies such as sustainability, high profitability, and quality. The SWOT analysis helps

in matching the strengths with the opportunities of H&M while transforming the threats or

weaknesses into strengths. H&M has fewer threats and weaknesses in comparison to its

strengths and opportunities helping in gaining a good competitive advantage in the market.

H&M can easily undertake various measures to cope up with the uncertain global economic

situations and the constant changes in the demand and preferences of the customers (Sarker et

al. 2020).

Identification of H&M’s Sustainable Competitive Advantage

H&M VIRO analysis

VIRO analysis helps in identifying the internal resources that will help in providing a

sustainable competitive advantage.

Valuable: The financial resources of H&M helps in investing in various external

opportunities and combating the threats of the company. The distribution network of H&M is

also one of its valuable resources, which help in reaching out to more customers across the
globe. It helps in gaining more revenues and using different promotional activities for sell

(Singha et al. 2020).

Rare: According to this analysis, the financial resources possessed by H&M are rare as only

a few companies have strong financial resources. Another rare resource of H&M is the

distribution network as it takes a longer time for competitors to come up with a better

network of distribution.

Imitable: The financial resources of H&M are not easy to imitate, as it is costly in nature. It

took the company many years to accumulate its profits to transform into resources. The

distribution network is not easy to imitate by new entrants has it has taken many years to

develop an efficient distribution network for H&M (Lanzolla and Markides 2020).

Organisation: To capture the value the financial resources of H&M are organised by

strategically investing them to reduce the threats and gaining more opportunities. The

distribution network is organised to reach out to the customers by informing the customers

about their new products and services.

A sustainable competitive advantage is an advantage, which allows the business to be more

successful than the competitors do over a long period of time. The sustainable competitive

advantage of H&M can be categorised by its unique design, style, and premium quality of

products. The competitors of H&M to match its level of success needs to establish their stores

in the nest location by leasing a place as an alternative of acquiring like H&M. This will

provide the flexibility to change and adapts according to the changing needs and the patter of

demand in a different location (Kuncoro and Suriani 2018). The main competitor of H&M is

Zara. Zara is exploring emerging markets by opening new stores in countries like China. The

biggest advantage of Zara is that they produce their products, which helps in lowering their

cost of production and control over the supply chain products. The marketing strategy of Zara
is very different from H&M as it focuses on market research and research on big fashionista.

H&M has good sustainable competitive advantages over different fashion brands across the

globe except for Zara in terms of profit and revenue. The size of H&M helps in fend off the

new entrants but the rapid growth of the markets is allowing new entrants such as Uniqlo to

build their presence in the market (Torres et al. 2018).

H&M Sustainable Competitive Advantages are:

 Open-minded and straight forward- The Company is open-minded and try anything

new things, as well as new mistakes, is acceptable for the company. Moreover,

experimentation is the part of the company, not afraid of taking the risks, though the

ideas are to learn from the mistakes and later not repeat them. In the end, how the

company grows on the market (Metin 2020).

 Keeping it simple - The Company follows a strong culture, which is simplicity, style,

is non-hierarchical, democratisation of fashion, and value in humble.

 Spirit of entrepreneurial - Adapting the decentralised decision making which provides

the store manager autonomy such as increase commitment and loyalty, provide

employees the great motivator.

 Constant improvement - It is possible to maintain because of a company network with

the customers from strong social media relationship what keep possible the company

to respond to the opportunities on the market (Luo and Wang 2019).

 Teamwork - The teamwork designing in direct contract with the production offices

around the world, which allows the rapid response manufacturing procedure. The

focus of the people involved in the H&M philosophy was adopted. Encourage the

team to take the risks, trying new things which are the company pillar.
  Cost-conscious - The value is the fundamental principle of H&M since they started in

the market and the philosophy is to make fast fashion with lower costs and generate

revenues consecutively for the company (Bojonca 2019).

Strategic Recommendations Based on Analysis, and Discussion of Implementation

Issues

H&M has been facing different new challenges in the modern dynamic fashion industry even

though it is one of the popular brands in the World. Some of the strategic recommendations

for H&M based on the internal and external analysis done are:

 It can be recommended that H&M should undergo effective testing procedures before

launching its new, innovative products according to the latest trends in the markets.

 H&M should provide customers with easy return services, after-sale services, larger

warranty, and customer care services along with better packaging of its products for

convenient transportation (Lee and Lee 2020).

 H&M needs to change the pricing policy of its products by providing attractive

discounts; allowances offer to attract potential customers for its business.

 H&M should engage with its customers through the various social media platforms as

social media plays an important role in the lives of the people of the modern world.

The company should link their social media pages and online websites so that

customers can easily navigate through them.

 H&M should improve its supply chain network, which is the main reason for the

degrading quality of its products. It needs to collaborate with large retailers for

enhancing the sale of its products and gaining a more customer base.

 H&M should shift its attention towards sustainable production procedures to reduce

the chemical and carbon footprints on the ecology.

 Blue ocean strategy: H&M needs to enter into the new markets such as the over 60

aged population as a new segmentation who are assumed to spend more compared to

the young and teenage customers. H&M should pay attention to the preferences of

this segment of customers by forming a new sub-brand for succeeding the

preservation of the existing customer’s insight for the brand by not changing the

process of manufacturing (Agnihotri 2016).

Some of the issues that H&M can face due to the implementation of these strategies are:

Ethical issues: H&M can face certain ethical issues while implementing these strategies

such as environmental issues. The production procedure followed by H&M impact the

environment even though they are taken necessary steps to cut down their carbon

footprints. The textile industry is the second largest industry to produce carbon footprints

in the ecology. The increase in the production by H&M will affect the surrounding

environment largely.

Cultural issues: A global company like H&M can face various cultural issues with the

implementation of the above strategies, as people from different cultural backgrounds will

have different perspectives for gaining competitive advantages.

Conclusion

H&M is a multinational fast-fashion clothing company in the world. H&M is constantly

improving its products and services with time along with expanding their business all over

the world. The company focuses on providing affordable products to people of different

income groups. H&M has gained a good competitive advantage over its rivals by expanding

its customer base and building a loyal relationship with its existing and new customers. The

internal and external analysis has helped in understanding the strategic decisions undertaken

by H&M at the corporate level. The identification of H&M‘s sustainable competitive

Advantage is analysed here to understand the strategic position of the organisation in the

global markets H&M use various strategies associated with decision-making and gaining

more competitive advantages. H&M has opted for sustainable strategies for investing in the

future by not increasing the price of its products and providing eco-friendly products to its

customers.
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