Strategy and Competitive Vision
H&M is one of the biggest clothing retail companies in the world, being featured most prominently in Europe. Specializing primarily in selling clothing, the chain has established a variety of brands and expanded into other niches, such as home décor. H&M, and its main clothing retail stores, have managed to establish its own unique identity, an image that separates it from competitors. H&M’s marketing, strategy, and actions are in many ways distinct from other companies on the market, allowing them a high level of recognition and appraisal. To discuss this question in particular, one can examine the mission statement of the company and its general approach to business. As outlined on the website of the company’s non-profit organization, H&M’s main mission statement is “to drive long-lasting positive change and improve living conditions by investing in people, communities, and innovative ideas”. The quote highlights one of the defining qualities of the chain, relaying a conviction to working for the people.
One of the main approaches of H&M is to provide community-oriented service. This process includes selling clothing at affordable prices and employing a diverse range of individuals at their stores. Their main advantage over the competition can also be identified in the affordability of H&M production, with most items being cost-effective and cheap to make. The company also effectively uses outsourcing as its main method of production, opting to leave the production to its many collaborators instead of owning factories itself. The combination of strong brand cohesion, low production costs, and a people-oriented identity result in H&M maintaining a strong global advantage.
Resources and Capabilities
VRIO Framework
The overview based on the VRIO framework can be effectively utilize to understand and highlight some of the biggest capabilities the company has in comparison with its competition. First of all, the company can be characterized by placing increased value in its employees, as well as creating an exceptional organizational culture. Corporate resources emphasize diversity, teamwork and fair working conditions for all of their employees, taking part in the creation of positive work experiences (Our values 2021). The company also proposes the importance of constant improvement and innovation, as well as transformative leadership (Johnson et al.). While it is possible to cultivate a similar working environment in a competitor company, the process of establishing positive organizational culture is slow, requiring the involvement of management and a solid vision for the future. The prolonged history of H&M gives the corporation an edge of experience before its competitors, as well improves its market value.
Another valuable resource the company has is its superior position on the global market. H&M is one of the biggest clothing brands in the global environment, coming close just after Nike and Adidas. The company and 9 other contenders together hold 10% of the global market, presenting them with immense profits and business opportunities (Riaño, 2019). The advantageous position is one that is hard to acquire for any potential companies outside of the big 10, and the notoriety and recognition that comes with H&M status father places them at an advantage (Riaño, 2019). Design is another field where the company currently maintains a considerable advantage over others in its niche. The style and fashion presented by H&M combines two of the most important considerations for clothing – affordability and quality (All Answers Ltd, 2021). The designs lean mainly on simplicity and chic aesthetics, giving their customers products that are on par with more exclusive brands at a more reasonable price. The particular fashion style presented by the company is the main distinguishing factor, but it can be replicated and used by other companies.
Other considerations, such as the organizational structure of the company, also play a part in establishing its competitive advantage on the scene. Partially due to the need to manage a global organization with a large number of employees, H&M employs a matrix system of organization. Each employee is beholden to a number of higher-ups, creating a layered structure of management. The higher degree of management provided by this organizational structure promotes better coordination within the organization, which is a crucial factor to consider in bigger companies. While the system of organization is not unique in itself, it is effective in accomplishing its goals and valuable as a method of structuring.
On another note, another resource the company employs is the management and design practices of its store locations. Each of them is organized in a way that balances customer satisfaction and engagement, while also providing a good look at the available selection of products (Terra, 2021). The particular technology of store layout is constantly being innovated and revised, providing an avenue for improvement and future growth. The ability to both consistently cater to the needs of the customer base and change with the passage of time is a valuable resource for H&M, helping it stay relevant over the years.
The last professional capability present in H&M is its supply chain management. This is one of the company’s strongest avenues, being in large part responsible for it’s the ability to cater to public demand and perpetually grow in a changing environment. H&M relies on an efficient integrated system of managing retail inventory, one which allows it to utilize its large stock smartly and effectively. Production is heavily dependent on two factors – professional cooperation and outsourcing. By working together with producers in various locations around the world, the retailer has the ability to meet the needs of its customers and keep its costs at a minimum. Heavy usage of trend forecasting and prediction also allows the organization to be the leading force in fashion, by both expecting changes in the fashion industry and catering to the changing tastes of the people.
The interests of the customers are quickly determined and taken into account, creating an engaging system for producing new clothing. Other interesting parts of its supply chain include the sophisticated communication system for cooperation between branches, and specialized strategies to stay ahead of the competition in terms of its production. The integration of IT and smart technologies helps various branches of the company to more productively interact and accomplish their goals (Stratton, 2018). Most of the stock is produced in advance, with only about 20% of the whole being produced in accordance with contemporary fashion trends, an effort that allows H&M to significantly reduce the time it takes to manufacture and deliver goods (Manrique, 2015). The reduction in manufacturing time, in turn, drives down production costs and makes the supply steady.
Values and International Strategy
Inbound Logistics
As discussed previously, the major defining factor for H&M is its strong relationships with its manufacturers, and the use of outsourcing as a primary method of producing goods. The company collaborates with a large arrangement of other organizations, primarily based in Africa, Europe and Asia, which helps to both reduce costs of production and establish a good reputation on the market. With over 700 partners in 20 countries, H&M has the ability to micro-manage and regulate its supply to a high degree (Lu, 2020). A team of lead designers employed at the main office in Stockholm are tasked with coming up with the product designs based on current trends, an effort that is afterward shared and expanded upon by more designers in an effort to create affordable and customer-oriented clothing.
The information is then provided to outsourcing locations around the world, where orders are fulfilled and shipped. This process is regulated by a variety of methods including information sharing systems and overseeing entities. New communication and IT technologies are used in the logistics process, helping to reduce the time needed for transportation and enhance communication between professionals of different fields. Additionally, production oversight offices are used as mediators between the suppliers and the company, being responsible for communicating the needed adjustments to the collaborators (Lu, 2020). The use of multi-layered communication strategies ensures accuracy during production, and the ability of the main office to relay its needs more clearly. Furthermore, oversight facilities are responsible for testing the sample goods and ensuring their quality.
Outbound Logistics
The goods produced by international suppliers are shipped to a variety of locations all around the globe, with stores and storage facilities in more than 4000 locations being tasked with selling them (H&M Group’s ten largest markets, second quarter 2021 2021). The products that are created are displayed and sold at both physical and online locations, using the internet as a means of connecting with the customers. The company website acts as a region-based storefront where customers can order any product they need. The orders are either shipped directly to a person’s home or are available for pickup at physical locations themselves.
Marketing
The company markets itself in a broad way, catering to the majority of people with its style and approach to business. The target market for H&M is large, encompassing all age demographics, focusing primarily on low-to-middle income brackets (H&m marketing strategy: Marketing mix of h&m (4ps) 2021). It is internationally hailed as a champion of affordable fashion. The chic fashion sense primarily showcased by H&M is created with mass appeal in mind, incorporating the most recent trends of the fashion industry and established norms alike. The use of both new and old creates a balance in its public image, one that allows H&M to find mainstream success. Low prices are also a large part of the company’s marketing strategy and public image. Since its popularization, the company has been positioning itself as a brand for the common person, combining utility, quality, and costs to deliver the best experience to its clients. The clothing range it produces is vast and most physical locations are deliberately placed in places with large populations.
The combination of factors that are taken into account by H&M effectively allows it to be the best brand for the masses, and establish its hold on the low-to-middle income sector. In addition, the company heavily relies on promotion as its way of expanding its reach. Advertisements include TV and internet ads, posters, promotional campaigns, celebrity endorsement, and social media. The combination of methods is used to facilitate an all-round influence on potential customers and boost brand awareness. The effort of appealing to the public is amplified by using different channels of communication, an approach that helps an organization to create a stronger customer base. Active engagement on social media, in particular, is notable, as it allows H&M to cultivate a specific brand image and cater to the emotional side of their clientele. The promotion of a particular public image is extremely important in selling products and finding customers, and many brands throughout the years have embraced the use of the online sphere for this purpose
Areas of Improvement
There are a number of areas for potential improvement for H&M, both concerning their logistics and marketing strategies in particular. It is difficult to deny that the brand has established itself as a global force, one capable of operating in many countries all around the world. The sophisticated systems of delivery and management ensure that the goods are produced in a cost-efficient manner and delivered quickly to store locations.
However, questions of sustainability and environmental impact must also be brought up. In the current age, the role of protecting nature becomes more apparent for every global company, as the impending danger of climate change is becoming more prominent than ever. Currently, the company has several commitments to reducing both carbon emissions and using recyclable materials in its production, but the efforts are still unfinished and demand further attention (Robertson, 2021). The decrease of emissions coming from transportation and production in particular, need addressing the most. On another note, the company has been involved in a number of controversies involving its treatment of workers, with an inability to provide many of the supplier staff with living wages (Robertson, 2021). To ensure the wellbeing of H&M collaborators and employees, there is a need to ensure that each contributing party is compensated adequately.
The Future of the Company
The development and emergence of other clothing brands can present a serious issue to H&M and its development as a company. In a global environment, many competitors are able to occupy a similar niche as the company, providing affordable and fashionable options to the people. To properly address the emerging competition and the existence of a sophisticated affordable clothing sector, H&M needs to focus more on its unique identity as a brand, embracing the parts of fashion that separate it from the competition. In this effort, the use of more diverse and unique clothing styles may be a viable option.
Currently, such chains as Zara effectively produce the same kinds of products as H&M, which diminishes its value and the likelihood of customer retention. The creation of a more vibrant image for the company’s products would be a way to deviate from the expectations in a positive manner. Furthermore, it is crucial that the brand is able to further develop in areas of public relations. The use of social media and the online sphere provides a great opportunity for creating a more intimate connection with the customer base, with the use of advertisement campaigns and public relation engagements.
References
All Answers Ltd. (2021). H&m marketing analysis. UKDiss. Web.
H&M Group’s ten largest markets, second quarter 2021. H&M Group. (2021). Web.
Johnson, Whittington, Schol , Angwin, & Regnér. (n.d.). H&m case study- an overview, tips and support. Academia. Web.
Lu, C. (2020). H&m supply chain strategy – successful retail inventory control. Inventory Management Software. Web.
Manrique, C. (2015). H&m: How fast fashion translates into low prices and success. Technology and Operations Management. Web.
MBA Skool. (2021). H&m marketing strategy: Marketing mix of h&m (4ps). MBA Skool. Web.
Our values. H&M Group. (2021). Web.
Riaño, P. (2019). The winner takes it ALL: Top 10 fashion companies hold 10% of the global market. Web.
Robertson, L. (2021). How ethical is h&m? Good On You. Web.
Stratton, F. (2018). H&m tries on supply chain improvements. H&M Tries on Supply Chain Improvements – Inbound Logistics. Web.
Terra, C. (2021). Exclusive look inside: H&m’s revamped retail concept. FashionUnited. Web.