H&M in Fast Fashion: Continued Success Essay

Q1) Evaluate the international environment in which H&M operates in. External environment refers to the challenging and complexity in which the star sign operates. It is measurable to high gearlight the factors of the external environment beca r knocked out(p)ine it is very critical to the success of the firm. PESTEL beat and Porters 5 Forces (P5F) models leave be used to measure the external environment of H&M. These models will determine how challenging and irresistible the environment is for H&M. 1. PESTELPESTEL highlights 6 environmental forces namely political, economical, social, technological, ecological and reasoned (Johnson, et al. 2014). This model analyses the general environment that influences the indus pass judgment and the organisations in it as wellhead as how challenging the environment is to operate.1.1 POLITICALH&M is subjected to political pressures from the labour rights movement especially in low-wage countries. H&M has outsourced its manufacturing s ituation to low-cost countries. H&M has no or little construe everywhere the operation in those countries. Hence, the firm would be closely scrutinised by the labour rights movement to spot any abuse in the rights of employee e.g. unforesightful working condition. Government expansion and international trade policies would greatly come to the growth of the industry and ontogenys competition. flagellum1.2 ECONOMICH&M will not be sp bed from the increase in cotton prices and rising harvest cost in Asia. Economic d k todayledge shape will have an examineing on all the stakeholders in the environment especially the customers. Demand for opulence goods would decline for customers who atomic number 18 price-sensitive. They would then consider H&M competitors that offers exchangeable goods which is be much chintzyer than H&M orgo for substitutes. Threat1.3 SOCIALDue to the fast fashion business, customers taste in high fashion is constantly evolving. Customers are now more ed ucated and their adopt for good quality products at low prices have increased. H&M could meet the extremitys of the customer as it has the vantage of being a first mover in the fast fashion business. fortune1.4 technologicalThe emergence of technologies such as Facebook, Twitter, and YouTube allows organisations to r all(prenominal) out to its customers more rapidly and effectively. H&M uses these online social platforms as a way to be closer to their customers as well as sharing and updating its activities to its fanbase. Opportunity1.5 ECOLOGICALDue to education and high awareness of the importance of conserving and spill green, H&M has created a special collection of clothes line utilise sustainable or eco-friendly materials. Opportunity1.6 LEGAL reasoned refers to the restriction or liberalisation of legislative and regulatory constraints or changes. agreement in the environment would not be able to avoid this point external environment factor at that placefore organi sation has to embrace this judicial aspect. Liberalisation of the international trade has resulted in an increase of the number of suppliers globally and hence intensifying the competition among manufacturers in low-wage countries ThreatFrom the PESTEL analysis, H&M is in a moderately private-enterprise(a) environment where both threats and opportunities factors are in equal balance. Therefore, H&M has to exploit the opportunities available in social, technological and ecological factors. As for the threats, H&M has to embrace them and word strategies to overcome or steer away from them too.2. Porters 5 Forces (P5F)P5F helps to identify the attractiveness of an industry in terms of 5 competitive forces namely threat of entry, threat of substitute, business office of buyers, power of suppliers and the extent of emulation between competitors (Johnson, et al. 2014).2.1 THREAT OF ENTRYFactorHL cause evidenceEffect (High/low)Scale of experienceNeeds large not bad(p) to contest wi th the superjacents in the environment. LowAccess to supply /distribution channelPlenty of suppliers available to choose from.HighExpected retaliation expensive to compete with incumbent as they have the economies of scale. LowLegislation or government actionLiberalisation of international trade has resulted in the increase of number of suppliers. HighDifferentiationThere is differentiation in sprint and concept of the clip industry. HighHigh threat of new entries would augur that the industry is attractive and and could decrease the profit margin of H&M e.g.UNIQLO. However, these competitors must have sufficient financial resources to compete with the current incumbent in the industry. These new entries would have to build up experience over time in order to be on par with exist competitors.The competitive rivalry is moderately high because the commercialise is fragmented and there are few major incumbents in the industry. With intense rivalry e.g. Zara, each competitor is alertly competing against the rest in order to have a market share in this apparel industry.From the P5F analysis, H&M is operational is a highly attractive market where the threats of entry is high, threats of substitute is low, power of buyer is high, power of supplier is low and high rivalry. Overall, H&M is operating in a highly competitive and attractive external environment. Therefore H&M must take steps to escort into its resources and identify its strategic capabilities in order to lodge ahead of the competition.Q2a) trace and discuss the strategic capabilities of H&M. Strategic capabilities refer to the capabilities of an organisation that contributes to its long survival or competitive advantage (Johnson, et al. 2014). The components of strategic capabilities are resources (what the firm has) and competences (what they do well). The accede below lists down all the resources and competences of H&M. This control panel also identifies the type of capabilities for each competences namely threshold and classifiable capabilities. door capabilities refer to competences that are needed for the organisation to meet the necessary requirements to compete in a given market and distinctive capabilities look into competences that are required to achieve competitive advantage (Johnson, et al. 2014). ResourcesCompetencesType of capabilitiesOrganisational resourcesCompetent drawing card who has a good business acumen characteristicPhysical resourcesStores speckle in the best locationThresholdRapid expansion into opposite countries and new marketsThresholdHas 2206 stores in 43 countriesclassifiableAbility to ransom collection within a month of initial design DistinctiveEfficient integrated logistic teamDistinctiveTechnological resourcesOwns its own clothing line and trendsDistinctiveHuman resources200 talented room decorators and physical body makersDistinctiveEmpowerment of store managers with autonomyThresholdCollaboration with notable designers to pro duce new collection DistinctiveInnovation resourcesBuilding fictive window and store displaysDistinctiveCreated a special collection using sustainable materials (CSR) ThresholdReputational resourcesPioneered in fast-fashion businessDistinctiveEmphasize flash and chic business modelDistinctive inviolate brandingDistinctiveCultureInstils the importance of core values in employeesThresholdStrong corporate culture (spirit of H&M) Encourages experimentation, trial and error learning, decision making, initiatives, try new ideas DistinctiveInformation technology (IT)Efficient reporting of gross salesThresholdEstablishment of sound social media presenceThreshold in force(p) information sharing softwareThreshold base on the table in a higher place, H&M has more distinctive capabilities than threshold. H&M now could recognise the different types of capabilities and which are the ones the organisation should focus on and turn them into sustainable competitive advantage generating above a verage returns. H&M has to put more effort in the distinctive capabilities such as competent leaders, physical assets such as stores, its ever-changing collection of designer clothes, integrated logistics function, its talented employees, successful collaborations, creative window display, its fast-fashion business model, strong branding and lastly its strong corporate culture.With the SWOT analysis, H&M has to overcompensate its efforts strengthening its strength so that it would give the organisation an advantage over its rivals. As for its weaknesses, H&M could either eliminate or work on weaknesses by turning them into strengths. H&M should keep apart the opportunities when the time is right. Lastly, threats should be avoided or steer away from them.Identify the constitute issues, challenges and opportunities facing H&M. The come upon issues of H&M are whether their live resources, capabilities, practices and knowledge are sufficient to keep up with competition. some othe r trace issue is the threat of new and vigorous entrants. The answer to these is yes, H&M could keep up with the competition due to substantial resources, strategic distinctive capabilities, strong value creating activities, strong practices and knowledge. H&M challenges would be renew and redefining its strategic capabilities in order to be sustainable in this apparel industry. H&M has to keep up with the latest fashion trends and continue to seek other avenues to create value to its value chain activities. Another challenge is to stay ahead of its competitors especially the threats by new and vigorous new entrants, by moving fast and reaching large market based by applying a simple business model cheap and chic. The opportunities would be venturing into new areas where H&M has yet to explore e.g. online shopping, opening the largest store in the world on Fifth Avenue, recent York. H&M has to evaluate if these opportunities could give them the competitive edge against its compe titors and generating an above average returns.Based on preceding analysis, formulate and discuss allot strategies that you would recommend to H&M in order for it to achieve above-average returns in the future. H&M is now operating a cost leadership dodging. This schema involves becoming the lowest-cost organisation in the industry (Johnson, et al. 2014). Cost leadership system is an integrated set of actions taken to produce goods or go with features that are acceptable to customers at the lowest cost (Ireland, Hoskisson and Hitt 2013) Based on preceding analysis, it is timely for H&M to review its business aim strategy. Cost leadership strategy is not evermore the best strategy for H&M as there will always be the risk of being undercut on price especially during the economic downturn. Secondly, low cost has always been associated with cheap quality goods where products barely meet the market standard. H&M should be considering using the lock-in business strategy. This strat egy is where customers become dependent on H&M and are ineffective to use another supplier without substantial switching cost. With this lock-in strategy, copycats and substitutes of H&M products would have a hard time attracting customers.With customers securely locked in, H&M could charge prices which are well above cost. Lock-in strategies can be achieved in two ways mainly controlling complementary products/services and creating a proprietary industry standard (Johnson, et al. 2014). Another strategy which H&M could consider is differentiation strategies. Differentiation involves uniqueness along some dimensions that are sufficiently valued by customers to allow a price premium. Based on H&Ms strategic capabilities, one of its competitive advantage competences is having its own clothing line and trends. The fashion house could use this competency to carry out the differentiation strategy. With H&Ms large pool of over 200 talented designers and collaboration with noteworthy top designers, customers would be willing to pay more for the latest modal value and fashion. With the unpredictability of the fashion industry, H&M has to be able to stay well ahead of its major competitors by reviewing its strategic capabilities from time to time. Capabilities need to change and evolved into dynamic capabilities. Only dynamic capabilities have what it takes to be the key driver towards strategic change. Like what fashion model, Heidi Klum, from the fashion industry always said, Today you are in but tomorrow, you powerfulness be out The same goes to the chosen strategy of H&M, cost leadership mightwork today, but it wont be the correct strategy tomorrow.BibliographyIreland, R. Duane, Robert E. Hoskisson, and Michael A. Hitt. The Management of Strategy. Australia South-Western Cengage Learning, 2013. Johnson, Gerry, Richard Whittington, Kevan Scholes, Duncan Angwin , and Patrick Regner. Exploring Strategy. Harlow Pearson, 2014.