Q1. What do you think is the most critical strategic issue confronting H&M? Explain your answer by drawing on relevant topics in Strategic Management (maximum of 900 words). H&M have gone from being a single store established in 1947 in Sweden, to being a fast fashion multinational company with over 2206 stores in 43 different countries as well as 94,000 employees worldwide. However their success has and dominance within the market has been an area in which they as a company have been affected. This factor is seen as the most critical issue in which H&M have been confronted with in that their declining market position espescially with the emergence and success of rivalling fashion company Zara.
In the year 2011, H&M had an operating revenue (Turnover) of US$16,137,877 which was second to Zara who had an operating revenue (Turnover) of US$17,159,719 which is an indication that Zara are becoming increasingly larger and more successful than H&M. Sustainability is another critical issue in which H&M have been faced with, espescially in their high fashion/low-price formula/operations, whereby its sustainability has been questioned by Zara. The “Increased competitions and the fact that margins had started to decline due to increased cotton prices and rising production costs in Asia” is one of the main factors behind this formula coming under scrutiny. The Porters Five forces concept/framework, is one which can relate to H&M and the critical issues in which they have been faced with. THREAT OF NEW ENTRANTS:
New fashion labels and companies entering the market may further affect H&M’s position within the fashion market. THREAT OF SUBSTITUTE PRODUCTS: New substitute products entering the market may affect H&M because other substitute products may capture the potential consumers attention more so than what H&M have to offer. This threat offers consumers a wider range of products to choose from, which in turn increases competition between H&M’s products and others within the market. Can lead to declining market share.
Substitute products that may be cheaper and of similar quality to H&M’s products, may sit in a more favourable way with the potential consumer. POWER OF THE BUYERS:
Costs may be switched from H&M’s products to other products. There may be a threat of forward integration.
POWER OF THE SUPPLIERS:
There may be a concentration of suppliers.
There may be an availability of substitute inputs.
Buyers may switch their costs to other inputs.
Supplier’s threat of forward integration.
Buyer’s threat of backward integration.
RIVALRY AMONG EXISTING FIRMS:
Rivals offer different products to the potential consumer, which can increase the amount of competition within the market, for example, Zara, offer different types of fashion than H&M however are in direct competition with them. Each of these threats pose an issue for H&M in that these are the factors that make up their declining position within the market itself.
Q2. Drawing on relevant topics in this unit, what do you consider to be H&M’s rare and inimitable strategic capability/ies? Explain your answer. How do you think H&M can identify and leverage or exploit its rare and inimitable strategic capability/ies to achieve or sustain its competitive advantage and respond to the critical issue that you have identified in Q1? (maximum of 900 words) Q3. Drawing on relevant topics in this unit, explain how H&M’s culture as suggested by the ‘spirit of H&M’ influences the current strategic position of H&M as well as its ability to respond to the strategic issue you have identified in Q1.