Strategic Capability Analysis H&M in Fast Fashion: Continued Success?

Synopsis of H&M’s Strategy and competitive position

Erling Persson started H&M in Sweden in 1947 to focus on retailing apparel and cosmetics. H&M has expanded rapidly, now operating in over 3000 locations across 28 countries. His primary market is Germany, followed by Sweden and the United Kingdom. The target demographic for this brand has always been young, active adults (ages 18 to 25), and this has stayed the same and expanded in recent years. The company’s upper management is extremely alert and crisis-aware. The stage’s success has not made them arrogant. They maintain composure and take precautions whenever they encounter danger. H&M’s mission is to be a sustainable, people- and planet-friendly business that leads by example.

However, due to the evolution and modification of the market, H&M now faces no new competitive pressures. H&M’s core clientele are teenagers and young adults, but competition from lower-priced, more adaptable companies like Zara, Gap, and Urban Revvo has diluted the spending power of this demographic. H&M now faces its greatest competitive challenge ever from the proliferation of competing brands. E-meteoric commerce’s ascent in the modern economy has boosted H&M’s economic prospects and made other businesses more formidable. Many new companies are made possible by the convenience of online shopping. H&M’s brands are less competitive on the Internet since new brands are on par with H&M and other brands. As a result, stricter standards have been placed on product quality and features.

Competition places a premium on an organization’s strategic resources, people resources, and other intangible members, as well as its physical resources, such as its buildings and tools. Selecting the most significant skills and determining whether or not they can be implemented is crucial for every business (Rienda et al., 2021). H&M currently counts its global network of production offices, distribution centers, factories, and warehouses among its physical resources. In addition to its tangible assets, H&M continues to grow thanks to its superb people resources, innovative information technology, and the firm’s leadership (the Persson family, according to The Gentleman’s Journal, no date).

Competing with H&M is easier, thanks to the company’s strengths. H&M has its own distinct culture and business plan, which includes creating a dedicated team of employees, consistently creating new design components, and luring customers with the most affordable costs. One of H&M’s many strengths is its ability to come up with innovative and effective design concepts and schemes. H&M is popular among millennials because of the brand’s ability to produce cutting-edge, creative designs that can adapt to the ever-shifting fashion industry. H&M maintains its competitive edge through both its marketing strategy and its commitment to CSR. Testa and Karpova (2022) note that H&M has “always maintained a large presence in the fashion sector by skillfully blending classic and modern marketing strategies to consistently promote its brand.”

H&M has the potential to leverage its current strengths and resources to become more competitive in the long run. As long as the things it sells are affordable and in style, it will be able to satisfy the wants of the youth market. By doing so, H&M will be able to keep its dominant position in the fashion market.

Assessment of H&M’s resources and capabilities

H&M‘s Resources

• Tangible assets: Material possessions, including work offices (design rooms), production offices, and warehouses located in various locations throughout the world. Since H&M does not have its own clothes factory, the company contracts the production of its goods to third-party manufacturers instead (Chen et al., 2019).
• Intangible assets:
  • The legal rights and business interests of the “H&M” brand itself, including its image and reputation in the market and its reputation among customers.
  • H&M’s distinctive brand patents, design concepts, and product aspects
  • Human resources such as excellent leadership (the Persson family has been influential in the brand’s development for three generations), excellent team cohesion, employee loyalty and personal quality, excellent designers, etc., are available.
• Financial resources: the wealthy legacy that has been passed down through three generations of the Persson family has provided H&M with a solid economic base. A healthy financial ratio may also provide returns while adapting to changes in the business environment and providing support for the organization’s continued growth.

H&M’s capabilities

• Organizational culture: H&M’s basic yet effective, business plan is centered on its dedicated workforce’s ability to provide customers with the season’s hottest looks at affordable costs. H&M relies on its strong culture to guarantee it has achieved its aims ( Francesco Izzo et al., 2022). This culture prizes norms and values including employee participation, speed, experimentation, taking initiative, informality, and decentralization.
• Replication; H&M’s ability to replicate its success is crucial to the success of the company’s expansion plan. Rather than relying on formal processes and norms, H&M has opted to provide staff with tacit abilities based on practical learning gleaned from the field, allowing them to establish a high volume of stores each year. In this way, the “spirit” may be replicated rapidly with little to no variation.
• Unique and superior products: H&M’s highly decentralized design process allows the company to adapt quickly to the ever-shifting fashion industry. It is another way the brand keeps pushing boundaries.
• Store (window design) concept: H&M’s store concept involves making ensuring its stores are in the greatest possible locations, that its window displays are routinely updated to attract new consumers, and that the store’s interior is laid up in a way that makes shopping there as easy as possible (Johnson et al., 2017).
• Marketing plan (brand CSR): H&M has used traditional marketing methods to raise brand recognition, and the company has also created social media profiles to monitor and respond to customer comments and ideas. Taking into account the constantly scrutinized nature of the apparel/textile sector, H&M’s increased visibility may be attributed in large part to the company’s commitment to corporate social responsibility.

H&M’s VRIO Framework Analysis

Sustained Competitive Advantage

Businesses in the fashion business must minimize the threat of copycat products as much as feasible. H&M’s market competitiveness is influenced not only by the company’s own strategic marketing and financial management abilities, but also by the strategy and development direction of rivals. H&M may achieve greater success by maximizing the synergy between its many current resources and capacities. To better fulfill the demands of local customers, a company might create a regional PR campaign by integrating its marketing or CSR strategy with its established and comprehensive sales network. H&M has a solid financial foundation and reserves that it may use toward acquiring additional hardware and improving the company’s image. H&M’s naïve corporate culture and leadership may help it recruit and retain top employees, grow its workforce, and build its reputation.

The value system and H&M international strategy

H&M’s Value Chain and System Primary Activities

Johnson et al., (2017) suggest that production and distribution are the two primary activities that makeup H&M’s key value chain and system.

Support Activities

Support operations are a separate component of the value chain system utilized by H&M. Coordination and promotion of the operations along an organization’s value chain are the two primary responsibilities of support activities. It is essential for every firm, including H&M, to have efficient administration of the support operations they provide.

H&M Internationalization Strategy

To engage in production, sales, service, and other activities in two or more countries is what is meant by “international operation” of a business. This is done so that the business can seek a larger market, better resources, and higher profits by crossing the borders of a single country and operating in more than one nation. Businesses can discover new markets for their existing goods and services, locate resources at a lower cost, and strengthen their fundamental competitiveness if they develop an internationalization strategy. Companies often diversify their customer base by moving their operations from a single local market to one in another country. They may gain new technology and managerial expertise in a bigger scope, gather knowledge of client wants, and so establish a stronger core competitiveness (King, 2022).

As a result, internationalization should be considered a significant direction for the growth of every business. Companies can improve their chances of achieving their goals of exporting products (or brands), establishing a multinational internal development, expanding globally, and expanding transnationally by making adjustments to or adding to the strategic decisions they have already made to adapt to the new environment. A brand repositioning strategy would be suitable for H & M in order to achieve better results with its efforts to internationalize the brand. A determination about the brand’s repositioning Even if the brand is doing well at the moment, the company still needs to reposition it to adapt to the changing environment. This is necessary whether the company is dealing with new competitors or shifts in the preferences of existing customers (Cappa et al., 2020). H&M is a well-known brand that has a comprehensive infrastructure and an excellent reputation on a global scale. H&M, on the other hand, cannot function in the global scope using the mode intrinsic to the company; rather, it is required to make suitable adaptations and alterations according to the environment of each location. This is because each region has its own unique cultural background.

When rivals introduce new brands after the firm’s brand to fight for the market, or when demand for the brand drops owing to changes in consumer tastes, the corporation may decide to reorient the brand (Kreiser et al., 2021). For instance, consumer tastes in Asia diverge significantly from those in Europe and the United States. Customers from Europe and the United States tend to dress more modestly than their counterparts in Asia. Additionally, H&M stores in tropical locations should sell more lightweight, cool items as opposed to bulky, warmer clothes. Managers must also be vigilant in policing any usage of written language or symbols. H&M’s efforts to internationalize its brand could be slowed by an unwarranted crisis brought on by inappropriate language.

The Viability of Strategy

The brand repositioning approach is a standard way that is quick and efficient for H&M, but it also carries with it some potential dangers. The appropriate personnel’s understanding of the target market is often the foundation for a brand repositioning plan. The most successful technique is maintaining the already-established brand idea while simultaneously developing new items (Testa and Karpova, 2022). Brand repositioning offers significant prospects and potential for H&M’s worldwide expansion. However, at the same time, it runs the risk of diminishing or destroying H&M’s existing market share and idea in some way.

For the brand repository strategy to be effectively implemented, the appropriate managers at H&M need to examine, consider, and forecast what has happened in the region in the past and what may happen in the future. It is optional for H&M to preserve its brand qualities while making changes to make sure its customers understand. H&M is a brand with its own history and culture; thus, it is unnecessary for H&M to keep these characteristics. And you always need to have a fallback, sometimes known as a “Plan B,” for the brand to minimize the loss if necessary (Kreiser et al., 2021). The appropriate employees strive to avoid these dangers while thinking about the brand repositioning strategy: inadequate market research; a too complicated cultural context in the target location; significant commitment; chaotic market positioning; and an excessive number of local rivals.

The Future of H&M’s Competitiveness

In 1994, American IT strategist Bernard h. boar established five types of competitive advantages: cost advantage, value-added advantage, focused advantage, speed advantage, and mobility advantage. Considering the current state of H&M, CEO Karl Johan Persson has three key avenues to pursue to preserve and expand the company’s competitive advantage: increasing value added, mobility, and speed. The term “value-added advantage” is used to describe a company’s ability to provide customers with more appealing goods and services. H&M may tailor product designs and the concept of “limited cash” to the cultural norms of specific areas. This will be a positive talking point in the media that can help bring in additional buyers. The term “mobility advantage” describes a company’s superior ability to respond quickly to market shifts. Suppose H&M is able to introduce trendy anti-epidemic items to the market earlier than its competitors of the same kind during the COVID-19 era, for instance. In that case, it will gain significant advantages over its competitors. The company has a quicker turnaround time than its rivals, allowing it to serve its clients’ demands better. In the fast-moving consumer goods industry, where H&M competes, speed is of the essence. Customers will be more likely to shop at H&M than at its rivals since the company is better at anticipating and responding to trends in the fashion sector.

Enterprise management requires attention to three primary areas: goods; marketing; and distribution. H&M views fashion accessories like clothing as core products of enterprises that should strive to obtain maximum product potential energy through some means. However, the fashion industry’s tendency toward imitation threatens to undermine the company’s competitive edge. The following three areas can be prioritized to lessen the likelihood of H&M losing its competitive advantage as a result of imitation:

1. Products: Offer more value and impact to consumers by providing them with better design sense, preferential pricing, and high-quality items; these things will bring customers more value; the value may be defined and communicated.
2. Marketing: We are able to create a sense of trust with our consumers, which helps us generate customer loyalty and reduces the information gap between us and our customers when we use centralized marketing methods
3. Channel: Combining traditional channels, such as stores and factories, with internet channels can help increase the effectiveness of channel transformation. The key to successfully lowering client acquisition costs while simultaneously increasing conversion rates is to make use of effective distribution channels.

Udesk is H&M’s internal IT system. Udesk’s Omni channel customer service technology helps H&M provide individualized assistance via the phone and online. Udesk allows businesses to connect with their consumers on a deeper level when the volume and complexity of their online communication demands increases. Udesk makes it easy to monitor all channels at once, including orders and customers. After adopting Udesk, consumers have access to all relevant data across channels via a single interface. H&M ultimately decided on Udesk because of its omnichannel capabilities (Testa and Karpova, 2022). Both external and internal assistance can function more effectively. H&M’s staff can handle internal issues and collaborate with other departments using Udesk work orders, allowing workers to monitor issues and find solutions in real time while making management tasks more manageable. Using the Udesk Omni channel customer care system, H&M is able to monitor and respond to client issues across all channels, from initial contact through resolution. H&M’s workflow will undoubtedly be enhanced with the addition of Udesk support. H&M aspires to provide a dynamic and customized experience. Udesk’s individualized customer service is a huge boon to H&M’s after-sales efforts since the company recognizes that its employees, not its technology, ultimately determine the quality of its customers’ experiences.

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