Critical analysis

H&M ANALYSIS 4

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H&M Critical Analysis

Background

Stephen Wilmot’s article describes the predicament of H&M, a global fashion giant whose performance has since plummeted. H&M’s plunging performance is due to stiff competition by rival stores. Measures to reverse the trend have been ineffective with forecasts predicting further decline. “H&M is a brand consumer can trust because they offer fabulous fashion without the exorbitant price tags” (SS).

Strengths: As a world-renowned clothing retailer, H&M has a wide range of products and is much cheaper than other brands. Its products include clothes, shoes, jewelry and so on. H&M also has a lot of cooperation to ensure its development. H&M is a global brand with global operations.

Weakness: H&M’s biggest disadvantage is there isn’t digital presence to recover the customers it lost to E-commerce. There is no evidence that customers have shunned its products. And H&M relies heavily on other suppliers for its goods

Core Competence: H&M currently relies on fashion designs bought from fashion designers to improve its products, and designers also serve rival companies and companies. This procurement model will help H&M achieve success in research and development (shen, 2016). Companies can implement this strategy by studying procurement. Research procurement will involve H&M exclusively contracting its market and product development needs to fashion research suppliers (shen, 2016). In this way, H&M will get more market information

Opportunity: Consumers shopping habits decide the movements of a brand, a few years ago, online shopping is not very common, but the emergence of H&M online store provide a lot of convenience for the consumer, in an era of electronic information technology, the combination of brand and network information for H&M increased a lot of profit, and H&M clothing style is numerous, the price is not expensive.

Threat: as the social development world advances, all raw materials in the market become scarce and prices increase. Labor, processing fees will increase with development. One feature of H&M is its low price. But as the price of all raw materials rises, it is hard for H&M to keep prices low. If the price increases will also affect sales.

Problem statement: H&M needs to follow the development of the network, adapt and improve the supply. The need to speed up the market for network electronics while maintaining the current market. In this way, it is convenient for H&M to increase its sales, and also helpful for H&M to increase its profits.

Financial Goal: H&M needs to increase its global sales by at least 10%

Alternative Solutions: H&M need to pick Broad Cost Leader strategies. On the other hand, H&M also could choose Broad Differentiator Strategies. 

Target Market: Due to the price of H&M, H&M is aimed at the fashionable people, but it doesn't invest a lot of money in the people wearing it. H&M targets the middle class too.

Recommendation: H&M need to pick the first Strategies. It Because H&M is a Relatively mature Brand and has the ability to control prices. On the other hand, the competition in the Clothing industry is fierce. So, Prices always determine sales of a brand. H&M also has many factories in all of the country, but it hasn’t own Factories. All of Factories are provided by third parties. “In-house branded inventory creates fast-moving products and works with designers for a one-time collection. The large inventory of basic goods comes from India and its neighbors, and its price is much lower than that of most competitors. Compared with its competitors, it can charge a lower price "(Naman). So, keeping lower price is a good strategy for the developing. 

Implementation: H&M needs to maintain R&D. H&M can investigate the situation of R&D last year by investigating. H&M also can reduce the advertising investment because H&M is a well-known brand. At the same time, the price of H&M products needs to be lower than average. If it effect the profit of H&M, the Price can slowly go down, which is beneficial to H&M sales. H&M needs to maintain the quality of raw materials while selecting as low-cost raw materials as possible. H&M can prioritize the import of raw materials from developing countries and then distribute the raw materials to factories. This approach can maximize benefits. H&M employees also need to research the market price of the current product, which is how much it helps the price setting of the product. Automation is feasible for H&M, and automation can replace labor. H&M can purchase a part of the machine instead of labor, which greatly reduces the H&M cost while greatly improving production efficiency. 

Tracking Metrics: In order to maintain R&D, we can reduce some investment in advertising. For example, H&M's products need to cooperate with the stars, which will cost a lot of investment. Since H&M is already a well-known brand, it is necessary for H&M to save the expense. H&M also needs to reduce the price of the product. For example, it can compare with the price of other competitors' products like Zara. The price of the same product need to lower than Zara. Raw materials can be purchased from developing countries, such as China. China is a good choice, because China is large in area and rich in raw materials, which can reduce the cost of raw materials. At the same time, Automation is a important part for H&M. H&M also needs to compare, such as how much this year's automation has increased compared to last year's automation. More automation than other brands. And H&M's automation rate is higher every year than before.

Conclusive Metrics: We need to compare annual statements, or Income statements. In this way, we can know whether the sales volume can be increased by 10%.

Take Away: Fast and fashion is H&M's staple. As a world-famous brand, H&M needs to provide more styles and better products. This will increase market share and profits.



                                                                Works Cited

Naman, P. (2017). Pricing strategy of H&M. [online] LinkedIn. Available at: https://www.linkedin.com/pulse/pricing-strategy-hm-naman-pandey [Accessed 4 Dec. 2017].
Shen, B. (2016). Design Outsourcing in the Fashion Supply Chain: OEM Versus ODM. Journal of operational Research Society, 259-268.
Success story. "H&M Story - Profile, History, Founder, CEO | Industry Companies | Success story." Successstory.com. N. p., 2018. Web. 6 Nov. 2018.