H&M group’s multi-brand matrix targets to and wins different consumer groups.

H&M’s strategic resources and capabilities

 

Analysis of resources and capabilities

 

Primary Activities:

· Inbound logistics:

Use of materials or other sustainably sourced fibres was up to half, while all the tier one and tier two supplier factories used the Higg Index Facility Environmental Module sustainability tool during 2018 (Andrew Allen, 2019)[footnoteRef:1]. [1: More than half of H&M raw materials sustainable. https://www.cips.org/supply-management/news/2019/april/more-than-half-of-hm-raw-materials-sustainable/ ]

 

 

· Operations:

Without own factories, H&M outsources its production to over 800 independent supplies around world to build a strong and broad logistics network. With 80% of the suppliers based in Asia, H&M managed to access high-quality manufacturing with low-priced labour force to achieve cost control.

 

· Outbound logistics:

However, over rely on Asia manufactures meanwhile hinders the flexibility of logistics, making it harder for the company to respond swiftly to trends unfolding in core markets in Europe and North America. As an outcome of successful cost-controlling, lead times was sacrificed and less competitive to Zara who employs vertical integration.

 

· Marketing and sales:

1. H&M group’s multi-brand matrix targets to and wins different consumer groups. When the core brand H&M is struggling, its sister brands such as COS, & other stories and ARKET are performing good. The diverse brands matrix strategy also improves the overall corporate reputation of H&M by these high-quality brands.

2. Competitive price and price ratio

3. Worldwide presence and global awareness brought by heavy investment in marketing and advertising.

4. Continuous collaborations and campaigns with well-known fashion designers and various brands generate a young and innovative brand image, sheer exposure and sudden cash injection.

5. Strong performance in H&M sports apparel.

 

· Service: click and collect service; garment collect in return of discount.

 

Support activities:

· Firm infrastructure:

1. 4000 physical stores in 74 markets*, valuable channel to keep in touch customers and follow up with the consumer demand.

2. design team including over 200 designers and buyers in Stockholm is the solid resource for its housekeeping-refreshing design.

3. Strong loyalty program with 40-million-members

 

· Human resource management: 17,900 employees with flatten and flexible management structure.

 

· Technology development: H&M group is investing in artificial intelligence and data analytics capabilities to better read trends from the treasure trove of date it assesses (Kent, Crump, 2019). On digital transformation, billions were invested in setting up a good IT infrastructure that will stand over time, be scalable and stable(Kent, Crump, 2019).

 

· Procurement: to be identified.

 

· Model of strategic importance

 

the present and future challenges of H&M in fast-fashion industry

 

Opportunities

Threats

1. Diversify Products: customer preference changes faster with various demand. The strong in-house designer team coupled with multi-brand matrix targeting to different customer groups are the solid foundation for H&M group to attract consumers with diversify products.   2. E-Commerce reformation: Compared to other fashion retailers like Zara, H&M is far behind in terms of the exploitation of e-Commerce channels and revenue from online sales. As more consumers shop online, the company can benefit from the maximum exploitation of e-Commerce.   3. Global market present: the huge number of physical stores across globe helps to convey instant and immediate presentation of reshaping brand image and trends.   4. Focus on Emerging Markets: From Asia to Africa, the growing Generation Z with increasing purchase power in emerging market presents fashion retailers like H&M with the greatest potential for growth.   5. (Expand through Acquisition and Mergers: To circumvent barriers of entry into some markets, companies exploit the benefits of mergers and acquisitions. H&M can expand into related markets like second-hand clothes through acquisition or merger with a player in the market).

6. Impending Recession: As Europe and other regions slide into recession, as well as decreasing demand on apparel resulted by the worldwide pandemic and lockdowns, fashion retailers like H&M would experience a sharp decline in sales and profits in such core markets.   7. Intense Competition: Existing competitors are developing distinguished competitive while threshold for new entrants to fast fashion industry is low. H&M is facing stiff competition from new and old brands like Zara, Gap, Boohoo, Uniqlo and so on and threat to lose market share.   8. Rising Operation Costs: with heavy investment in fully-fledged overhaul in supply chain and tech system, the increasing costs of operation and production would threaten H&M’s capability in price leadership and thus profitability.   9. Low Customer Loyalty: brand value in fast fashion industry is less exclusive thus customers shift from brands. H&M’s heavily rely on marketing for exposure hamper its word-of-mouth reputation and customer loyalty.   10. Tariff: Nearly a third of the company’s factories are based in China, bringing new risks in the form of potentially hefty US tariffs (Kent, Crump, 2019), considering the unstable US-China relationship on trade and politics.