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H&M

case study
Q1. In which areas does H&M have
strategic capabilities and what are
they ?what are H&Ms threshold and
distinctive recourses and
competences?
Resources of H&M:

Physical
leases a lot of stores in different countries (43)
Retailer of fashion apparel, cosmetic, accessories and shoes for
women, men, teenager and children.
Own apps customers can explore the latest collection and
campaign
have buyers and production offices (50) centralised in Stockholm
dealing with large amount of supplier, work with the qualified
suppliers in producing and distributing the merchandises on time

Financial
have a cash flow of 2,799,654, more than its competitors like GAP.
intangible asset like strong brand name associated with its value
and stylish collection
Ranking 21st among the top 100 most valuable global brand from
Interbrand, brand value $16.5 billion.
Human
Production is outsourced to independent suppliers and
some of them is long term strategic partners
Employed more than 94,000 employees worldwide.
Good management which are experimentation, trail-and
error learning, fast decision making and willingness to take
initiatives and try new ideas.
has a team of almost 200 in house designer collaborations
and 100 pattern maker.
Mix of Supply chain management , logistics and IT system
High employee loyalty and great motivator.
Provide internal promotion and job rotation
Competences of H&M:
Physical
End of 2010, H&M already had 2206 stores which include 5o
franchise stores, 35 COS stores, 48 Monki stores, 18 Weekday
stores, One Cheap Monday store.
Business is operated from leased store premises in increasing
flexibility and adaptability on the changing demand patterns
and location attraction in its key market.
through catalogue sales
Window display, important as this is where the customer meets
needs.
Strong social media presence
Control virtually all logistics internally by using integrated direct
distribution as to support the shift and efficient flow of goods
avoiding middlemen.
Receive new shipment daily , store keeping merchandise is
minimized.
Logistics depend on effective information sharing and the latest
systems.
Financial

Company recorded revenue of $16,137million in the fiscal year

ending Nov 2011 which increase 1.4% compare to 2010.

Net income was $2,321 million in fiscal year 2011, compare to a

net income of $2,880 million in the preceding year.

Profitability ratios of Profit margin is highest among others retailer.

Improve the efficiency of the production flow.

Emphasizes on economic of scale including low wage and high

volume production to maintain low input cost.


Human
The group outsources product manufacturing to 700
independent suppliers through its 16 local production
offices in Asia and Europe.
Decentralizing decision making
Ability to establish a strong corporate culture with well
defined value and make sure employees understand and
internalize in the job.
Provide ample opportunity for employees as to take on new
challenges.
Believe in employees, granting all employees the right and
possibility to discuss any work related issue directly with
the management.
Value more in employees personal quality than formal
qualification.
Accquire employees who are self-driven, who like
responsibility and decision making and who are cable of
leading.
H&Ms Threshold and Distinctive
Recourses and Competences
Resources Competence

Threshold Physical & finance Physical

Distinctive Human Finance & Human


Q2: In what areas and functions do
H&Ms strategic capabilities provide
for competitive advantage? To what
extent can they be sustained? To
what extent can other fashion
retailers be successful in imitating
H&Ms success? Which competitor(s)
is/are a real threat to H&M? Why?
The VRIO frameworks will helps
H&M to form strategic capabilities
that provides competitive
advantages to the company.
H&M able to extent and sustain their:
- Unique organisational culture
- Human Resource Management
- Ability to replicate the same store
worldwide
- Strong brand and market position
It is difficult for other fashion
retailer be successful in imitating
H&Ms success.
- H&M brand as being equal to high
fashion with quality at low prices.
- H&Ms spirit and values on well
trained employees around the world,
which enables the company to grow
at steady rate.
-There are clear linkages between
culture and leadership and human
resource management
- H&Ms strong brand and market
position and replication

With all these capabilities that are


rare, it is difficult for other
companies to imitate.
Zara is one of the biggest competitor
and threat to H&M because both of
them are similar :
- Their store layout is flexible
- They have similar competences for
catching/ shaping fashion trends
- They open up stores in popular
locations and designing window
displays and interior layouts in a way
which provide convenient and appealing
shopping experience to customers.
- Purchasing is also an area of thread for
H&M as H&M has the buying power by
huge size of it purchases, it is also same
benefits received by the competitors.
- Some claim that Zaras SCM system is
in fact superior to H&M.
Q3:What should H&M and CEO
Karl-Johan Persson do to sustain
and further strengthen H&M's
competitive advantage?
H&Ms Competitive
Advantage
The distinctive business model 'high
fashion at low price' provides the
company with a sustained position in the
apparel market.
With the focus on economic of scale,
with low wage and high volume
production, the company maintains low
input cost and often has the latest trends
in its stores within a month of the initial
design.
H&Ms Competitive
Advantage
Properly identified and configured
resource and competencies form a
base for a competitive advantage
(Porter, 1998)
H&Ms competitive advantage
brand & trust
human capital
financial & other physical assets
Brand & Trust
Strong brand awareness
Ethical practices
Improving working conditions
Emphasis on using natural resources
responsibly
Other projects include community
investments (H&M Conscious
Actions)
Human Capital
The spirit of H&M (7 ingredients)
Keep it simple
Straightforward and open-minded
Constant improvement
Entrepreneurial spirit
Cost conscious
Team work
Belief work
Participative culture
Financial & other
physical assets
Revenue at $16 million (2011)
2,206 stores in 43 countries
Employs 94,000 people
Sustained Competitive
Design Adavantage
Centralised
High responsiveness to trends
Minimal time-to-market
Supply Chain Management
Centralised
Highly innovative infrastructure
Purchasing flexibility
Turnaround speed of 20 days
Marketing
Collaboration with famous designers
Long-term advertising campaigns
Strong social media presence
Is the H&Ms Competitive
Advantage Sustainable?

Given the effectively configured


resources and capabilities and
strong corporate culture
developed through decades on which
the new H&M's leader aims to
capitalise, there is every indication
that the company will be able to
sustain its competitive
advantage and keep up with Zara
Q3:What should they do about areas
with only temporary advantages? Are
there areas where H&M need to develop
further capabilities and, if so, in which
areas/functions?
Purchasing/Production
The area of purchasing/production
is considered as the temporary
advantage.
H&M does not own any factory, its
manufacturing is primarily outsourced
to the low-cost countries.
Based on the analysis of VRIO, it is not
costly to imitate which many
competitors are using this approach.
H&M can use vertical integration with
outsourcing model.
Own in-house production to produce primarily
products.
Provides it flexibility and freedom in its
manufacturing capabilities.
H&M may also outsource some of its
production such as accessories to low-cost
countries which stick to its initial model.
Thus, purchasing/production is the area where
H&M may consider to develop further
capabilities in order to compete with its
competitors such as Zara.
Reference List
Porter, M.E. (1998) Competitive
Strategy: Techniques for Analysing
Industries and Competitors. 1ed.