H&M in Fast Fashion

Executive Summary

This executive summary presents an overview of a strategic study of H&M, a prominent fast-fashion store. The research focuses on the company’s competencies, resources, competitive advantages, and worldwide strategy. Critical resources and competencies of H&M include brand reputation and consumer loyalty, a worldwide supply chain, efficient logistics and inventory management, and sustainable and ethical business practices. These talents are valued, uncommon, difficult to copy, and encouraged by the organisation, providing H&M with a sustainable competitive edge. In addition, the research examines H&M’s transitory competitive advantages, including design, buying, and retail operations. H&M’s business strategy and sustainability initiatives of H&M provide the company with a competitive advantage. H&M has maintained its position as a market leader in the fashion industry due to its ability to design and provide stylish clothing at affordable prices swiftly. H&M’s commitment to sustainable and ethical business methods has allowed the company to attract environmentally conscious customers, expanding its consumer base and penetrating new markets.

Introduction

The fashion business is a quickly changing, highly competitive field, with fast fashion merchants at the forefront of offering consumers stylish, inexpensive goods. H&M is a well-known retailer of fast fashion, with over 5,000 locations globally and roughly 222 billion SEK (25.8 billion USD) in net sales in 2020. (Sandberg and Abrahamsson, 2022). With rising worries over sustainability and ethical procedures in the industry, as well as the influence of the COVID-19 epidemic on retail sales, it is crucial to evaluate H&M’s strategic skills and competitive position to decide if the firm can continue its success. This evaluation aims to undertake a strategic study of H&M’s capabilities, focusing on its resources and capabilities, competitive advantages, and worldwide strategy. The investigation will investigate the regions in which H&M have considerable resources and capabilities, differentiating between threshold and unique resources and skills and evaluating their significance for the company’s worldwide strategy. The evaluation will examine H&M’s competitive advantages in several functions, sustainability, and potential competitive threats.

H&M’s Resources and Capabilities

To evaluate H&M’s strategic competencies and position in the market, it is necessary to define the company’s critical and distinctive resources and capabilities. According to Pastore et al. (2022), brand reputation and customer loyalty – H&M has a well-established brand reputation and a large customer base due to its reasonably priced and fashionable apparel lines. The firm has established a base of devoted customers who appreciate the H&M brand and its dedication to sustainable practices. The international strategy of H&M is supported by the company’s solid brand recognition and consumer loyalty. The firm has been able to build a presence in new areas swiftly and efficiently by utilising its brand name and client base.

Global supply chain – H&M’s worldwide supply chain is a crucial resource that enables the firm to obtain raw materials and manufacture goods efficiently and cost-effectively. According to Rana (2019), the company’s supply chain is arranged to minimise costs and optimise efficiency, allowing for rapid product creation and delivery. The worldwide supply chain enables H&M to maintain its competitive edge in the fast fashion market. The company’s supply chain delivers efficient and cost-effective production and delivery, allowing H&M to provide competitive pricing.

Effective logistics and inventory management – H&M’s efficient logistics and inventory management systems are a crucial asset that enables the firm to adapt rapidly to shifting market trends and consumer needs. Lanzolla and Markides (2021) state in their study that H&M’s inventory management system is designed to prevent overstocking and understocking, hence minimising waste and optimising profitability. The effective logistics and inventory management systems of H&M complement the company’s international strategy by enabling it to adapt swiftly to shifting market trends and client needs. The company’s capacity to manufacture and sell new goods rapidly enables it to preserve its competitive advantage in the fast fashion market.

Sustainable and ethical practices – The dedication of H&M to sustainable and ethical practices distinguishes the firm from its competitors. Significant investments have been made in sustainable materials and methods, and the corporation is committed to decreasing its environmental effect (Huaranga, 2020). The dedication of H&M to sustainable and ethical standards is a distinguishing characteristic that supports the company’s international strategy. The company’s commitment to sustainability and ethical business practices has enabled it to attract environmentally concerned clients, allowing it to increase its customer base and enter new markets.

These assets and competencies have a substantial influence on H&M’s worldwide strategy. For instance, the company’s supply chain management and worldwide retail network enable it to swiftly adjust to local market trends and tastes, which is crucial in the highly competitive fashion sector. Moreover, H&M’s design and trend-forecasting talents allow it to remain ahead of competitors and preserve its position as an industry pioneer (Ullah, 2021). The importance of H&M’s sustainable fashion efforts in its worldwide strategy has grown. Customers are growing more ecologically concerned and are expecting apparel that is manufactured sustainably and ethically. By implementing sustainable efforts, H&M is able to appeal to and separate itself from this expanding customer demographic.

VRIO Framework and Analysis

Assessment of Competitive Advantage

Their quick fashion business strategy gives H&M a competitive advantage. H&M’s ability to rapidly develop and deliver fashionable apparel at low rates has helped the brand maintain its position as a market leader in the fashion sector. In 2019, H&M manufactured over 1.4 billion clothes, and its supply chain enabled them to deliver products from the design stage to shops within two weeks (Sandberg and Abrahamsson, 2022). This business strategy for fast fashion has allowed H&M to maintain its competitive edge by allowing the company to swiftly adapt to shifting fashion trends and client preferences. Also, H&M has a competitive edge due to its sustainability activities. Using recycled materials, eliminating waste, and introducing sustainable production processes, H&M has made great steps in becoming a more sustainable firm. In 2020, H&M said that 57% of the materials used in its goods were sourced sustainably, an increase from 48% in 2019. (Sandberg and Abrahamsson, 2022). Its dedication to sustainability has allowed H&M to distinguish itself from competitors and appeal to environmentally aware customers.

However, H&M’s competitive advantages are not assured to last. A possible danger to H&M’s business model is the increasing popularity of sustainable and ethical fashion. As customers grow more cognizant of the environmental and social effects of fast fashion, they may alter their choices toward firms that value sustainability and ethical manufacturing processes. According to Lo Pinto (2021), quick fashion stores such as Zara and Forever 21 might potentially mimic H&M’s business model and undermine its market share. Concerning H&M’s sustainability endeavors, the corporation still confronts obstacles in reaching its sustainability objectives. H&M has been criticised for its excessive clothes production, which adds to environmental damage and waste. While H&M has made progress in its use of sustainable materials, it continues to rely primarily on conventional cotton, which has a substantial environmental effect (Bowallius and Samuelsson, 2020). These obstacles may threaten H&M’s competitive edge in terms of sustainability. Online fast-fashion shops like ASOS and Boohoo pose a significant threat to H&M. Several firms have been able to duplicate H&M’s business model for fast fashion online, providing clients with an extensive selection of stylish goods at low costs. Similar to H&M, these online businesses have the ability to swiftly respond to shifting fashion trends and client preferences. So, in order to sustain its competitive edge, H&M must continue to innovate and differentiate itself.

Strategies for Sustaining and Strengthening Competitive Advantage

A lot of H&M’s resources and competencies have contributed to its success. Strong brand recognition and a fast-fashion business strategy have enabled the company to adapt rapidly to shifting fashion trends and offer inexpensive items to a wide variety of consumers. H&M may explore extending its product line to better boost its resources and competencies. According to Ly (2021), H&M may explore other product categories, such as footwear, accessories, and beauty goods, in addition to its well-known inexpensive, contemporary apparel. This would enable the business to acquire new clients and expand its income sources.

Customers are increasingly concerned about the environmental effect of the fashion industry and are investing in sustainability. H&M may separate itself from rivals by investing in eco-friendly materials and manufacturing practices (Gutestam and Lindahl, 2019). This would not only appeal to people with a concern for the environment, but it would also help the firm save money in the long term.

H&M has already made substantial investments in its online store, but the firm can expand its e-commerce skills by providing more personalised and convenient online shopping experiences (Kang and Lee, 2021). Using data analytics, the organisation may provide customised product suggestions to customers or enable in-store pickup for online purchases. As a result of H&M’s success attracting competitors, the corporation must be cautious of the possibility of copying. Haseeb et al. (2019) suggest that rivals may simply duplicate H&M’s fast-fashion strategy and supply chain, therefore weakening the company’s competitive edge. H&M might consider safeguarding its intellectual property to reduce these risks. Using intellectual property rules, H&M can defend its designs and trademarks. Moreover, the corporation can invest in R&D to generate fresh designs and unique items that are more difficult to replicate. By giving reasonable rates and investing in their talents, H&M can develop strong connections with its suppliers. This would make it more difficult for rivals to imitate H&M’s supply chain. H&M can distinguish itself from rivals by developing an in-store experience that cannot be readily imitated (Kim et al., 2020). The organisation may increase consumer loyalty by providing individual styling services or in-store events.

To remain innovative and ahead of the competition, H&M must investigate new resources and skills. H&M may investigate new digital technologies such as augmented reality, virtual reality, and artificial intelligence to improve its online and in-store experiences. According to a research by Na et al. (2019), H&M can produce sustainable and creative goods by investing in novel materials, such as biodegradable textiles and recycled materials. While H&M has a significant global footprint, the corporation may extend its client base and income streams by entering new countries, such as Asia or Africa.

Value System and International Strategy

Inbound logistics, operations, outbound logistics, marketing, and sales are the core functions of H&M. Its support operations include of procurement, technological development, human resource management, and infrastructure management (Hanaysha et al., 2022). H&M has established an effective inbound logistics system that enables it to acquire raw materials from global suppliers, process them in its facilities, and transport completed goods to shops worldwide. This method allows H&M to swiftly adapt to shifting client preferences and market trends. H&M has established a productive production system that enables it to produce inexpensive, high-quality goods. The manufacturers of H&M are located in nations with inexpensive labor, such as Bangladesh and Vietnam. According to Shah (2022), this allows the corporation to keep manufacturing costs low while maintaining quality. H&M has established an effective outbound logistics system that enables it to deliver merchandise to its stores throughout the world in a timely manner. With a centralised distribution system, the business is able to optimise its inventory and cut distribution expenses. H&M has created a powerful brand identity that connects with its target market. The firm promotes its products using a combination of traditional and digital marketing channels, including social media, print media, and television advertising.

H&M has created an effective procurement system that allows it to get inexpensive raw materials from global sources. According to Rathore (2022), the corporation optimises its procurement expenses through a combination of long-term contracts and spot acquisitions. H&M has made significant investments in technological development, such as the creation of its supply chain management system and online sales platform. H&M has established an inclusive and diverse company culture. The organisation provides its employees with possibilities for professional growth and competitive remuneration and benefits. H&M has established an effective business infrastructure that enables it to manage its global operations effectively. The company’s decentralised organisational structure enables it to swiftly adapt to shifting market conditions and client preferences.

Notwithstanding H&M’s strengths, the corporation can strengthen its value system in several areas. One such area is its labor policies, notably in terms of salaries and working conditions for workers. H&M has been criticised for its reliance on inexpensive labor in countries like Bangladesh, where employees earn as little as $68 a month (Bubicz et al., 2021). In response, the firm has made initiatives to enhance its supply chain management and factory working conditions. H&M has devised a platform that enables employees to anonymously report any workplace safety concerns or breaches (Alzoubi, 2021). Although the company has made some progress in this area, such as by introducing a Conscious Collection of sustainable clothing, it continues to rely heavily on traditional cotton farming, which is resource-intensive and can have negative environmental impacts (Alzoubi, 2021). To address this, H&M could explore alternative materials and production methods with smaller environmental footprints, such as recycled or organic cotton. H&M’s early push into emerging countries such as China, India, and Brazil has been profitable. H&M has been able to achieve a first-mover advantage over competitors and cultivate a loyal client base by establishing a strong presence in these markets (Hanaysha and Alzoubi, 2022). H&M has been effective in utilising technology to improve company operations, such as through implementing artificial intelligence in its supply chain management (Hazen et al., 2021). To preserve its competitive advantage, H&M may need to continue developing in this area when other firms embrace comparable technology.

H&M’s globalisation strategy has been mainly effective, as indicated by the company’s global brand recognition and stable financial performance. There are, however, possible obstacles that might threaten the company’s long-term existence. The rising competition in the fast fashion business, especially from online stores such as Amazon and ASOS, has presented H&M with a formidable task. These firms have disrupted the old retail paradigm and provide quick and simple shopping experiences, which may endanger H&M’s market share (Aslaksen et al., 2021). To overcome this issue, H&M might increase its online offers and invest in technology to improve the client experience. Changing customer desires for ethically and sustainably made apparel present a further obstacle. When customers get a greater understanding of the environmental and social implications of the fashion industry, they may change their purchase selections toward firms that value sustainability and fair labor standards (Turunen and Halme, 2021). H&M may continue to invest in sustainable production processes and promote its commitment to ethical business practices to consumers in order to remain competitive in the current environment.

H&M’s capacity to develop, manufacture, and distribute stylish items rapidly and efficiently has contributed significantly to the company’s success. The company’s unique supply chain and operating approach enables it to provide new collections to the market faster than its rivals (Del Pilar Quiroz Galvan et al., 2021). H&M should continue to invest in its supply chain and operational capabilities in order to maintain and expand its competitive edge. The business should investigate new technologies and digital tools to optimise its manufacturing and distribution processes, decrease costs, and increase its speed to market. The organisation can investigate the use of automation, robots, and artificial intelligence to optimise its supply chain and enhance its operational efficiency.

The strength of H&M’s brand image is another essential factor in the company’s success. The firm has cultivated a global consumer base through its well-established brand name for providing fashionable and inexpensive apparel. To maintain and increase this competitive edge, H&M should continue to engage in brand development and customer service enhancement. According to Dumenko and Khokhriakova (2020), the corporation should investigate new client engagement strategies, such as utilising social media platforms, providing tailored purchasing experiences, and investing in loyalty programs. H&M may concentrate on establishing sustainable and ethical production techniques in order to attract clients who are more aware of environmental and social concerns.

Imitation might weaken H&M’s competitive edge, particularly in regions where its resources and expertise are important and scarce. To reduce this danger, H&M should concentrate on developing novel, difficult-to-imitate skills (Galica, 2022). The corporation might spend in R&D to create new materials or production methods with greater quality or sustainability. H&M may also extend its product offers and seek new markets to diversify its revenue sources and minimise its reliance on traditional retail channels.

H&M and CEO KARL-Johan Persson are able to cultivate new competencies. Shop Operations and Designing are two valuable and uncommon skills that are simple to replicate. H&M should strive to improve these and make them difficult to copy. They can enhance present capabilities. Nowadays, consumers have established a demand for socially conscious products (Wadia, 2022). If H&M can accommodate the most recent trend of an organic lifestyle, it will be able to reclaim market share from Zara and re-establish its better brand image. Given that H&M can effectively repeat its business strategy, the company should enter new areas. It will be in a better position to compete with Zara and annihilate any other competition if it globalises its operations, which will result in economies of scale and lower costs.

Conclusion

The fashion business is a competitive sector, and fast fashion companies like H&M have been at the forefront of offering consumers with stylish, inexpensive apparel. With rising worries over sustainability and ethical procedures in the industry, as well as the influence of the COVID-19 epidemic on retail sales, it is crucial to evaluate H&M’s strategic skills and competitive position in order to decide if the firm can continue its success. H&M’s worldwide strategy is supported by major assets and competencies, such as its brand reputation, global supply chain, efficient logistics and inventory management, and dedication to sustainability and ethical business practices. The VRIO research reveals that H&M has a number of sustainable competitive advantages, including its culture and leadership, HRM, replication/internationalisation, brand and market position. H&M has a competitive edge because to its fast fashion business model and sustainability initiatives, which have enabled the firm to preserve its market share and appeal to environmentally concerned clients. The strategic competencies and competitive position of H&M are solid, but the business must continue to address sustainability issues and adapt to shifting customer tastes in order to maintain its fashion industry dominance. The success of H&M’s globalisation plan necessitates that the corporation be cautious against possible threats. H&M and its CEO, Karl-Johan Persson, should concentrate on creating and enhancing qualities that are unique, uncommon, and difficult to replicate in order to maintain and expand their competitive edge. To cater to the newest trend of an organic lifestyle, they should also invest in sustainable production processes and promote their dedication to ethical practices to consumers. So, H&M can maintain its relevance in the quick fashion business and continue to expand and thrive over time.

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