Business Strategy of H&M
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Business Strategy: H&M
Clothing industry has been widely successful and for over the years, the trend, fashion, and the prices became the front-running strategies of the competing brand. The clothing industry in both local and domestic market is alive wherein there are imitation and inventions of designs that serves as another strategic action. In this paper, the focus is to analyze the business strategy of H&M and assess the challenges that the brand might face in the next 5-10 years.
Hennes & Mauritz or H&M is a fashion retailer that was based in Sweden. The business is said to be very successful because of the continuous expansion. And with the help f the strategies, several developments are created to work in the organization and control the stores. In addition, the H&M has a price-competitiveness and profitability, through very efficient management of production and logistics. And at a very short lead times which ensure quick response to market trends and reduction of stocks. In addition, H&M was a pioneer in pursuing a strategy of vertical integration with the distribution network. This strategy has allowed the company to directly collect and fully exploit information about sales and consumers in order to improve and accelerate response to the market. H&M is also an example of competitive advantages brought by integrated e-business solutions. Procurement and logistics can track sales and stock status as, owning the stores and they share a common information technology and activities.
The challenges that might affect the Information technology, the company might not react quickly whenever new trends are identified that might affect the procurement of goods which are not appreciated by the market. Because of H&M relying on the efficient and integrated systems for inventory management the management might reduce lead times while ensuring adequate stock management. The activities, such as the buying and production might be slowed because of the limited factories that the organization owned. In addition, there is a challenge that is seen in the organizations, network of external suppliers. The buying function focuses on customers, fashion and composition of the range and the design of clothes are created in Sweden. It is identified that, the company’s clothing collections are created in Sweden by around 100 internal designers, 50 pattern designers and around 100 buyers. H&M’s method of production is customer-driven. There is an additional challenge that the company puts a lot effort into research and prediction of emerging trends, both through traditional research means and innovative ones such as street trends. This activity is carried out by central staff and by national offices which are responsible for detecting new trends. The adding challenge is through observable trend that the company might resist in the industry-wide trend in transferring the fast fashion production to low-cost countries.
In technical terms, H&M operates with two main collections per year - one in spring and one in autumn. Because of the changes in the collection of clothing, the customers can always find new goods in stores. However, if there is an over-production of the clothes there is a great chance the organization might expense too much and realize nothing in return. In the logistics, the H&M is acting as importer and wholesaler, as well as a retailer. If there is continuous practice, the organization might not handle all of the challenges like the demands coming from the domestic and international market. IT might be a crucial tool along the entire value chain. The individual stores are connected with the logistics and procurement departments and the central warehouse. It might be impossible to follow sales of individual items, which might lead to another challenge that plays within the internal system of the organization.
Through observing the reasons behind the success of the H&M, there is a need to analyze the organization’s production; the business can integrate with the existing supply chain. Through the vertical integration, the distribution network allowing direct control of market and customers. In addition through the continuous and efficient collection of information on demand the organization is allowed towards the cost-efficiency and shortening of lead times. IT development provides support to H&M logistics. While the stock management is primarily handled within the H&M organisation, transport is contracted to third parties. Also, the organization might increase the advertising and promotions to provide the success in the organization.
Case Study: Hennes & Mauritz [Online] Available at: http://www.ebusiness-watch.org/studies/case_studies/documents/Case%20Studies%202004/CS_SR01_Textile_2-HM.pdf [Accessed 07 October 2010].
Ghemawat, P., & Nueno, J.L., (2003) Zara: Fast Fashion, Harvard Business School [Online] Available at: http://wehner.tamu.edu/mgmt.www/v-buenger/466/zara.pdf [Accessed 07 October 2010]