Rewriting the report

In general, companies in the fashion industry always aims to meet the customers’ expectation by producing modern and trendy products. But in the same time, these products should also suit the customers’ fashion sense (Craik, 2003). H&M as a multinational company should consider that different cultures and countries have different fashion senses. For example, European market prefers the “fast fashion, whereas, the Asian market accepts the trendy fashion in a slower pace than European market (Rocha et al., 2005).H&M's racist ads have faced over the period of time has badly affected the sales of the business. It lapses the misleading marketing structure where the company product design were overlooked. The controversies developed about the product with the “monkey in the jungle” that depicted a black child. It reduced the product sales to the minimum and caused huge losses. So, multinational clothing retail companies (like H&M) usually build a partnership relation with local designers around the world to redesign their products in local ways. Otherwise, producing environmentally and following the basic ethical rules such as racist and human rights represent the main social challenges for every multinational company these days (Banerjee, 2008).

Michael Porter’s Five Forces is a model used to explore the environment in which a product or company operates to generate competitive advantage. The five force framework helps identify the attractiveness of an industry in terms of five forces: (i) threat of entry, (ii) threat of substitutes, (iii) power of buyers, (iv) power of suppliers and (v) extent of rivalry between competitors. These five forces together constitute an industry's `structure`, which is typically fairly stable.

The traditional marketing and management of fast fashion industry is experiencing a revolution because of the emerging of e-commerce. Since the birth of e-commerce, businesses have been able to make use of the Internet in reducing costs associated with purchasing, managing supplier relationships, streamlining logistics and inventory, and developing strategic advantage and successful implementation of business re-engineering. For H&M the ecommerce takeover comes as a huge threat to the pre-existing physical makeup and marketing of the business. The same ‘store atmosphere’ must be created online which is both costly and time worthy for the company. The online shift has broadened the number of H&M's competitors. “Fast pace is vital,” H&M’s chief executive, Karl-Johan Persson, said in June, as he gestured plans to boost the company’s e-commerce growth in the face of mounting online competition. But H&M as an offline retailers, which are may stuck in a much more cumbersome process of layering an online presence on top of existing infrastructure.” therefore, E-commerce is an advantage as well as a threat for the popular brands as E-commerce allows newer brands to be present on the same platform as the popular brands and hence such new entrants could affect the business of brands like H&M.

A key driver to the success and wide profit margins that H&M has attained is through the outsourcing of all production. Through outsourcing activities, on the one hand, H&M can focus more time and effort on designing as this is their core competency. On the other hand, H&M can save money on initial start-up costs of plant, equipment and building. However, outsourcing makes H&M excessively dependent on third party suppliers for its merchandises. H&M outsources product manufacturing to about 900 independent suppliers and hence it means H&M is lack of direct control over the manufacturing processes. It has made H&M vulnerable to the quality issues of products. Over dependence on the third party, vendors can affect company’s order commitments and any bad customer experience can affect the brand image. Besides, rising labor costs also affect the cost of production for H&M. Such increasing costs may affect profitability for the company. Outsourcing is like a time bomb, which can have a negative impact on H&M at any time, so H&M must pay attention to the outsourcing issue.

The fashion industry is a product of the modern age. With the rise of new technologies, the rise of global capitalism and the development of the factory system of production, and the proliferation of retail outlets such as department stores—clothing had increasingly come to be mass-produced in standard sizes and sold at fixed prices. Although an international and global industry in terms of sourcing, production, and sales, the contemporary fashion industry is mainly clustered in Italy (e.g. Gucci, Prada, and Armani) and France (e.g. Chanel). In addition, important players come from adjacent European markets (e.g. Zara, H&M) and the U.S. (Ralph Lauren, Tommy Hilfiger).

Critical success factors are a limited number of key variables or conditions that have a tremendous impact on how successfully and effectively an organization meets its mission or the strategic goals or objectives of a program or project.

The ability to respond to customer requirements on a timely basis has always been a fundamental element of the marketing concept.” Martin Christopher et.al. Hence, it is important being proactive in a market such as the fast-fashion industry time is always a crucial factor. The fast-fashion market, amongst other things, is characterized by short lifecycles, high volatility, low predictability, and high-impulse purchases. Therefore, it is very important for the fashion industry to constantly have their products available to a potential customer in order to sell and earn more profit. Since the fast-fashion market is also constantly shifting and trends can be replaced over a night, there is a low predictability. This makes it a lot more difficult to compose accurate forecasts.

As Fisher et al. (2001) note, the strategic agenda of fast-fashion retailers, and indeed all clothing retailers, is minimizing lead times, whilst optimizing real-time costumer response capabilities. Inventory is seen as incurring costs, or waste, which does not create any value added. Therefore, Just-in-time encourages businesses to eliminate non-value added activities that do not compensate for manufacturing process issues, and it helps to constantly work towards improving those processes to achieve less inventory. In short, the Just-in-Time inventory system focus is having “the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory. Whether it be by using production offices to coordinate the supply chain (H&M,) or utilizing vertical integration via direct ownership (Zara), investment into flexibility in introduction and replenishment [of products] remains industrial CSF (Childs and Jin 2014).

According to Grant’s analysis in strategy, the best way to identify a company’s unique resources is identifying them through three different types of resources. These are tangible, intangible and human resources (Grant, 2010).

The value chain serves as analytical tool in diagnosing, and understanding unique – strategic - capabilities. Undertaking a value chain analysis helps the firm to understand its cost position and to identify its competitive strengths.

S.3.CI 1: Inbound Logistics

Inbound logistic forms the very heart of H&M’s change-making programmer, which was expanded in 2013 to cement H&M’s position as forerunner of sustainable fashion; now it encompasses circular economy, renewability, fairness, and equality (H&M 2016). H&M also concentrates more on its supply chain structure with much focus on speed and flexibility. The production and distribution are continuously redefined in response to changing market to ensure improve efficiency of production flow. This process has aided the reduction of lead time for H&M by 15-20% in recent years.

S.3.CI 2: Operations

H&M has 50 production offices that are constantly in contact with suppliers and give feedback to the central procurement office in Stockholm. Through this means, right suppliers are recognized to place orders within a bid to optimize time and cost decisions. H&M has its own 100 designers and 50 designers work by the patent. These designers take their inspiration from the street fashion, the movies, travel and other cultures, the media and trend institutes. Moreover, designers are achieving a huge job to find a way to create fashionable clothes at the best price (H&M, 2012).

S.3.CI 3: Outbound Logistics

As H&M does not own its suppliers, the logistic system has been developed in an efficient way. To transport its production, H&M sends firstly all the merchandise to the distribution center (the main center is in Hamburg, Germany), then the goods are transferred from the distribution center to the allocated stores where they are being unpacked. Moreover, in agreement with its ethical value, H&M tries to minimize the pollution during the transports and favors ocean, rail and road transportation (H&M, 2012).

S.3.CI 4: Market and Sales

Marketing and sales are processes of persuasion, prowess of which is greatly dependent on support activities, and strategic vision contained in aforementioned primary activities (Serfati 2008). H&M established strong social media presence internationally. H&M communicate with their customers through a wide range of social media platform. E.g.: Facebook, Twitter, Instagram, YouTube and Chinese social networks (Johnson et al., 2014). With a well-established social media platform, customers will be more expose to H&M brand. This allows customers to keep coming back and increase the revenue. However, it allows competitors to imitate easily. E.g.: the design of the H&M apparel could be easily copied and resell it by their competitors at a much affordable price and affect the revenue.

S.3.CI 5: Service

H&M’s target market believes that customer service is an incredibly important part of the shopping experience. H&M proposes the same services at its competitors, that is to say that customer can easily exchange their purchases and easily ask advice to the employees in shops. Additionally, In order to engage the target audience H&M will develop a new page on the H&M website that will integrate different social media channels. Consumers can let H&M know about their shopping experiences and how H&M can improve their next experience. This will provide H&M with a channel that can be used to directly communicate with the target audience.

Porter’s three generics provide insight on competitive strategy, highlighting baseline competitive advantage(s) of organisations: cost leadership, differentiation and focus (Johnson et al., 2017).In terms of cost, H&M's cost is minimized through new designs and structures available in the market and the outsourcing of resources. H&M offers fashionable clothing for cheap prices selling to broad markets. This strategy is also very suitable for the current economic situation. H&M with this strategy also set high entry barriers for the competitors. Furthermore, H&M use a business level strategy of differentiation as they offer a diverse range of products to their consumers. H&M sells collections not only for women and men, but also teenagers, children and babies (Pratap, 2017). H&M specifically create diverse collections for their audience that appeal to various consumers’ tastes and lifestyles (Pratap, 2017).

Macro environmental factors has a great impact on the level of success a business will reach and furthermore maintain and grow. It lies in the firm´s ability to effectively recognize and respond to changes out with internal means. Through PESTEL, Five Force and internal analysis knowledge of the market and the surrounding environment can be explored in depth. Where the fashion industry is concerned the macro environment is causation for numerous changes to be made in order to stay relevant and leading in such a quick paced field. The technological advancements have created an easier way to expand a retail brand globally through Ecommerce. H&M were able to adjust the company to make the most of the current social changes which creating a respectable online presence, a key appeal in today´s world of retail.

The long-term vision of current however once achieved, will yield positive interaction with majority of stakeholders, paving strategic profitability (Grankvist 2017). Furthermore, the strategy of the three key issues stated are also acceptable to employees and chief executives as they have been informed and have the necessary resources and skills to efficiently help carry out the business’s strategies.

It is evident that H&M have the relevant unique resources to carry out their strategy effectively, in fact their brand reputation, supplier relationships, participative culture and powerful economy of scale has given them an advantage. This has also contributed to being a crucial success factor to the organisation. Furthermore, in terms of the internal and external operations of H&M’s capabilities, it shows they are financially capable of successfully delivering and achieving their proposed strategy. However, applying these changes may take time to adequately respond to consumer demands in a market that is currently competitive.

Society is being increasingly influenced by growing digitalisation, as a result of which many sectors such as the retail trade are undergoing significant structural changes – a shift in the industry, with rapidly changing customer behaviour. Since more and more shopping is taking place online, mainly via mobiles, the shift is bringing challenges for physical retail stores throughout the sector. The H&M group should therefore integrate its physical stores more and more with its online store, to make shopping as smooth and easy for the customer as possible.

Environmental awareness has taken over every aspect of our everyday life: fashion is the latest target. Therefore the rise of Eco chic makes perfect sense, it was bound to happen. Sustainable fashion is creating a sustainable product with creativity and great innovation. therefore, By bringing together all of the component parts of H&M's strategy, including goals, roadmaps, standards and methods, it integrates sustainability into every part of H&M's business.

It is evident that well-known established organisations are not exempt from the possibilities of facing strategic issues. With adequate knowledge of H&M’s resources, capabilities and advantage. Quite evidently cost leadership has defined H&M’s development and growth phases, yet the market penetration strategy that won H&M its place as the world’s second largest fashion retailer, with its spearhead fast fashion, is no longer enough to sustain its advantage (Mo 2015). According to several analytical frameworks, it’s clear that it shows elements and areas where H&M can be successful in company's development. However, there are still room for improvements to be made in order for them to overcome and rectify their strategic issues.