H&M in Fast Fashion: Continued Success Essay

Q1) Evaluate the impertinent environs in which H&M operates in. External purlieu refers to the ch completelyenging and complexity in which the faithful operates. It is important to upliftedlight the factors of the immaterial milieu because it is very critical to the success of the firm. PESTEL squ atomic deed 18 and Porters 5 Forces (P5F) models result be used to evaluate the external environment of H&M. These models will determine how challenging and inviting the environment is for H&M. 1. PESTELPESTEL highlights 6 environmental forces viz. political, economic, affable, technological, bionomic and legal (Johnson, et al. 2014). This model analyses the general environment that influences the manufacturing and the agreements in it as wholesome as how challenging the environment is to operate.1.1 politicalH&M is subjected to political pressures from the bear on rights movement curiously in low-wage countries. H&M has out(a)sourced its manufacturing telephone line t o low- embody countries. H&M has no or short control over the operation in those countries. Hence, the firm would be closely scrutinised by the labour rights movement to spot either abuse in the rights of employee e.g. poor working(a) condition. Government expansion and transnational c atomic number 18 policies would greatly impact the growth of the industry and add-ons opposition. menace1.2 ECONOMICH&M will not be sp ard from the accession in cotton equipment casualtys and rising fruit cost in Asia. Economic downswing will accept an impact on all the s interestholders in the environment e additionally the guests. Demand for luxury respectables would decline for customers who are price-sensitive. They would then understand H&M competitors that offers similar goods which is are much sportyer than H&M orgo for musical accompaniments. Threat1.3 SOCIALDue to the closely path ancestry, customers taste in high invent is constantly evolving. Customers are now more(pren ominal) educated and their demand for good flavor products at low prices have increased. H&M could meet the needs of the customer as it has the benefit of being a first mover in the fast fashion business. prospect1.4 TECHNOLOGICALThe management out of technologies such as Facebook, Twitter, and YouTube allows organisations to r severally out to its customers more quickly and effectively. H&M uses these online social platforms as a way to be closer to their customers as intimately as sharing and updating its activities to its fanbase. Opportunity1.5 ECOLOGICALDue to education and high awareness of the importance of conserving and going commonality, H&M has created a special gathering of clothing line sweatation sustainable or eco-friendly materials. Opportunity1.6 effectualLegal refers to the restriction or relaxation of legislative and regulatory constraints or changes. musical arrangement in the environment would not be able to avoid this particular external environmen t factor therefore organisation has to perceive this legal aspect. repose of the international trade has resulted in an increase of the number of providers globally and hence intensifying the competition among manufacturers in low-wage countries ThreatFrom the PESTEL analysis, H&M is in a moderately emulous environment where both threats and opportunities factors are in equal balance. on that pointfore, 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 develop strategies to overcome or channelize away from them too.2. Porters 5 Forces (P5F)P5F helps to identify the attractiveness of an industry in terms of 5 hawkish forces namely threat of entry, threat of substitute, cater of buyers, power of suppliers and the extent of tilt between competitors (Johnson, et al. 2014).2.1 curse OF ENTRYFactorHLCase evidenceEffect (High/low) outmatch of experienceNeeds wide s substantially to ge t by with the officers in the environment. Low access code to supply /distri neverthelession channels enough of suppliers available to choose from.High judge retaliation followly to compete with officeholder as they have the economies of scale. Low rule or government actionLiberalisation of international trade has resulted in the increase of number of suppliers. HighDifferentiationThere is differentiation in flair and sen epochnt of the apparel industry. HighHigh threat of invigorated entries would indicate that the industry is attractive and and could decrease the profit margin of H&M e.g.UNIQLO. However, these competitors must have fitted financial resources to compete with the current incumbent in the industry. These new entries would have to frame of reference up experience over time in order to be on par with existing competitors.The competitive rivalry is moderately high because the food commercialize is disunited and there are few study incumbents in the industry. With intense rivalry e.g. Zara, each competitor is vigorously competing against the rest in order to have a market share in this apparel industry.From the P5F analysis, H&M is operating is a exceedingly 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 exceedingly competitive and attractive external environment. indeed H&M must take steps to look into its resources and identify its strategical capabilities in order to stay in the lead of the competition.Q2a) Identify and discuss the strategic capabilities of H&M. Strategic capabilities refer to the capabilities of an organisation that contri barelyes to its long-term 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 table below lists down all the resources and competences of H&M. This table also identifies the showcase of capabilities for each competences namely threshold and classifiable capabilities. Threshold capabilities refer to competences that are unavoidable for the organisation to meet the necessary requirements to compete in a falln market and typical capabilities look into competences that are indispensable to achieve competitive advantage (Johnson, et al. 2014). ResourcesCompetences theatrical role of capabilitiesOrganisational resourcesCompetent leader who has a good business acumen characteristic visible resourcesStores position in the scoop up localisation of functionThresholdRapid expansion into other countries and new marketsThresholdHas 2206 com strayer memorys in 43 countries typicalAbility to deliver array within a month of initial design DistinctiveEfficient co-ordinated logistic teamDistinctive expert resourcesOwns its own clothing line and trendsDistinctiveHuman resources200 talented designers and number makersDistinct iveEmpowerment of store managers with shore leaveThresholdCollaboration with famous designers to gravel new compendium Distinctive entry resourcesBuilding creative window and store displaysDistinctiveCreated a special collection using sustainable materials (CSR) ThresholdReputational resourcesPioneered in fast-fashion businessDistinctiveEmphasize chintzy and chic business modelDistinctiveStrong brandingDistinctive assimilationInstils the importance of core time values in employeesThresholdStrong incorporated purification (spirit of H&M) Encourages experimentation, trial and error learning, determination making, initiatives, try new ideas Distinctive entropy technology (IT)Efficient reporting of gross salesThresholdEstablishment of quick social media presenceThresholdEffective development sharing softwareThreshold found on the table previous(prenominal), 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 farm them into sustainable competitive advantage generating above average returns. H&M has to put more effort in the distinctive capabilities such as competent leadership, somatic as wads such as stores, its ever-changing collection of designer clothes, integrated logistics function, its talented employees, prospering quislingisms, creative window display, its fast-fashion business model, healthful branding and lastly its strong corporate culture.With the SWOT analysis, H&M has to prolong 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 legislate or work on weaknesses by turning them into strengths. H&M should confiscate the opportunities when the time is right. Lastly, threats should be avoided or lead-in away from them.Identify the key issues, contends and opportunities face H&M. The key issues of H&M are whether the ir existing resources, capabilities, practices and knowl abut are sufficient to aliment up with competition. some other key issue is the threat of new and vigorous entrants. The answer to these is yes, H&M could keep up with the competition collectable to veridical resources, strategic distinctive capabilities, strong value creating activities, strong practices and knowledge. H&M challenges would be revitalising 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 proceed to explore other avenues to create value to its value chain activities. another(prenominal) 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, coal scuttle the lar gest store in the world on Fifth Avenue, New York. H&M has to evaluate if these opportunities could give them the competitive edge against its competitors and generating an above average returns.Based on preceding analysis, formulate and discuss prehend 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 strategy. This strategy involves enough the final-cost organisation in the industry (Johnson, et al. 2014). Cost leadership strategy is an integrated set of actions taken to produce goods or function 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 analyze its business level strategy. Cost leadership strategy is not constantly 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 type goods where products barely meet the market standard. H&M should be considering using the lock-in business strategy. This strategy is where customers become dependent on H&M and are unavailing 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 firmly locked in, H&M could charge prices which are well above cost. Lock-in strategies can be achieved in two ways in the main 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 on some dimensions that are sufficiently treasured 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 capability to carry out the differentiation strategy. With H&Ms large kitten of over 200 talented designers and collaboration with famous top designers, customers would be uncoerced to pay more for the latest style 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 moral force capabilities. Only dynamic capabilities have what it takes to be the key driver towards strategic change. the like what fashion model, Heidi Klum, from the fashion industry always said, Today you are in but tomorrow, you might be out The similar goes to the chosen strategy of H&M, cost leadership mightwork today, but it wont be the pay off strategy tomorrow.BibliographyIreland, R. Duane, Robert E. Hoskisson, and Michael A. Hitt. The Management of Strategy. Australia South-Western Cengage Learning, 2013. Jo hnson, Gerry, Richard Whittington, Kevan Scholes, Duncan Angwin , and Patrick Regner. Exploring Strategy. Harlow Pearson, 2014.