H&M Competitive Advantage - Importance Strategic Management

1. In which areas do H&M have strategic capabilities and what are they?

2.  What are H&M’s threshold and distinctive resources and competences?

3. In what areas and functions do H&M’s strategic capabilities provide for competitive advantage?

4. To what extent can they be sustained?

5. To what extents can other fashion retailers be successful in imitating H&M’ssuccess?

6. Which competitor(s) is/are a real threat to H&M? Why?

7. What should H&M and CEO Karl-Johan Persson do to sustain and further strengthen H&M’s competitive advantage?

8. What should they do about areas with only temporary advantages?

9. Are there areas where H&M need to develop further capabilities and, if so, in which areas/functions?

10. Assess the viability of H&M strategy

11.  the extent to which ‘global strategy’ can successfully be pursued in the long term?

12. Discuss the implications of technology for their business model?

13.  Contributions Dick Smith case study workshop /analyses?

Introduction

The current business market demands for innovativeness that helps the organizations in securing the competitive position. It is necessary to utilize the strategic capabilities to enhance the organizational productivity and sustain in a competitive scenario (Shen 2014). The study will highlight such strategic capabilities that are essential for remaining competitive in this volatile business market. The study discusses the case scenario of H&M, which is a leading fashion and apparel retail brand. The company has been looking forward to implement the effective strategic decisions that can sustain the competitive position of the company in a significant way. The use of theoretical approaches will identify the business potentiality for securing the sustainable position of the business in this changing scenario.

1.Areas where H&M have strategic Capabilities

The strategic capability is widely concerned with the resources as well as competence that an organization could employ to provide values to its customers. Certain areas are such as design, supply chain management and marketing where the strategic capabilities of H&M remain. However, the more potential areas of H&M’s operation where strategies capabilities are highly visible are the competence and resources. Hence, the resources could include the physical facilities such as production officers that hold the responsibilities of coordinating with commissioned as well as approved suppliers and factories across the globe (Shen 2014). The other physical facilities include distribution centre and the warehouses. In the case study, it is mentioned that H&M does not own any sort of outlets as well as the firm tends to outsource its production to approved apparel manufacture. In addition, the resource of H&M where strategic capabilities remains is human resource and finance (Li et al. 2014).

The human resource of H&M include leadership, which is three generation of Persson family, the entire legacy remains as the key to H&M’s culture and highly motivated workforce. At H&M, the personal qualities of the workforce matter much more than the formal qualification as well as credential. In addition to this, the finance could include long-term commitment and a strong financial foundation for H&M. The case study further imply that financial results as well as ratio still look positive though, the shareholders complain regarding a decrease in total shareholders returns. On the contrary, the competencies include the culture, design, store concept, marketing and CSR (Kant Hvass 2014). It is learnt that the business model of H&M is focused at delivering the latest trends at best price in a more effective way building a committed workforce. In order to provide, H&M usually rely on its strong culture where the values and the norms such as employment, experimentation and informality are largely encouraged.

2. H&M’s Threshold and Distinctive Resources and Competence

As discussed above, the resource and the competence are the major areas where strategic capabilities of H&M exist. From this discussion H&M’s threshold, distinctive resource and competences can be categorized. The thresholds of H&M are physical facilities and stable finance and this effectively imply that these resources are highly required to meet the demand of the customers (Taplin 2014). Physical facilities such as skilled workforce that effectively contribute to the organizational productivity, manufacturing capacity of the company, developed stores have high impact on competitive advantages. In addition to this, the financial capabilities also fall under threshold resource. As the firm has been running the operation over a long time, it has gained a large amount of capital and the supplier’s money also strengthen their financial position. Notwithstanding, it can be added that physical facilities are the threshold resource for H&M, as its workforce and manufacturing capacity make the firm capable of providing unique quality of product.

On the other side, distinctive resources of H&M are found to be intangible assets and human resources that help the firm to gain the competitive advantages over the competitors. The intangible asset of H&M include its brand value, equity as well as IT systems that are consistently enhanced to ensure supply and demand. The enhanced brand name of the firm also helps to monitor the needs and demands of the customers based on the sales pattern (Battaglia et al. 2014). In addition to this, human resource of H&M also comes under distinctive resource. The human resource of H&M includes culture and highly committed workforce. The culture and workplace at H&M influence their performance. Likewise, the competencies of H&M are culture, replication, design, store concept and marketing strategies

3. Areas and the Functions do H&M’s Strategic Capabilities Provide for Competitive Advantages

Although, the strategic capabilities have been considered in respect of resource as well as competence and they are evaluated through the lens of their threshold as well as distinctive character. There are other particular ways such as VRIO framework to make the analysis of the competitive advantages (Fernie and Sparks 2014).

Figure 1: VRIO Framework of H&M to identify the areas holding competitive advantages

(Source: Shen 2014)

The above-mentioned framework clearly indicates that H&M derives a huge amount of its sustained competitive advantages from its unique organizational culture as well as developed human resource management. The firm has the ability to replicate the same store concept across the globe as well as its overall strong brand and market position. All these aspects are intensely embedded in the business model of H&M. For instance, the organizational culture in H&M is highly influenced by the strong personality of founder Erling Persson (Li et al. 2014).  These leaders successfully managed to uniquely place the brand in the market. The uniqueness helps the firms to gain the competitive advantages over the competitors in the market.

4. To the Extents where the Competitive Advantageous can be Sustained

The organization H&M has the ability to sustain the competitive advantages to higher extent, as the firm’s organizational culture and HRM practices have are unique and valuable. The competitors might find it difficult to implement until and unless, they have the large capital and increasing sources of revenue. In addition, the marketing strategies of H&M are quite innovative such as the design of product, the quality of product. However, the workforce of H&M plays a significant role in developing such unique quality of service. The highly developed product at low price in a competitive market creates scope for the firm to gain the profits. On the other side, the brand and the market position of H&M is costly to implement and imitate. This quality differentiates the firm from the competitors. In addition to all these, H&M develops the areas for sustainability commitment such as clearing expectation about fair living wages and increasing expectation regarding the environmental performance (Turker and Altuntas 2014). It has paid the attention to the clear standards concerning animal welfare in H&M’s value chain. This has promoted the brand and eventually helping to sustainable competitive advantages.

5. To what Extent can other Fashion Retailers be Successful in Lmitating H&M’s Success?

The above-mentioned discussion helps to learn that the organization H&M has unique marketing characteristics that differentiate the firm from others. The threshold resources, distinctive resources and competencies help to know some particular areas such as marketing strategies, HRM practices, replication and culture and leadership are unique and difficult to implement. The competitors could find it difficult to imitate these aspects to gain the competitive advantages. Notwithstanding, it is also observed that design, purchasing and store operations implemented by H&M can be implemented by the competitors as well. Moreover, the case study indicates that organization is running the operation in a market where the competitors like ZARA and M&S have acquired a large share of the market. ZARA provides high quality of products and it has always maintained its standards in the market (Huang and Sarigöllü 2014). Conversely, H&M is observed to be enjoying competitive advantages over its rivals; nevertheless, the long-term sustainability of the position is temporary. More specifically, the flexible store layout as well as the unique design collection is valuable as well as rare strategic capabilities. The competitor of H&M such as ZARA has the similar competences for shaping their fashion trends. It has the ability to open up the store in popular location. Therefore, it can be ascertained that the competitors like ZARA has the competences to imitate H&M to large extent.  Alternatively, Entwistle (2015) commented that ZARA itself is one of the leading brand in the clothing industry; thereby it could be a threat for H&M as far as market position is concerned.

6. Competitors of H&M as the Real Threat

The existing studies on H&M and the current market scenario indicate that H&M’s position in the market is poorly secured, due to the presence ZARA, GAP and M&S. Although, H&M provides high quality of products and strengthens its position in the market, the competitors like ZARA have excellent brand management strategies. ZARA divides the products sold within its stores into lower garments as well as upper garments with the increasing price points being higher for the upper garment (Brannon and Divita 2015). ZARA expects to be perceived as a high-end retailer with the affordable price. In addition to this, this is also observed that Zara does not make large investment on advertisement as the part of the business strategy; instead the firm makes the investment on the advertisement of opening new stores to reach the customers with the products they desire.  ZARA’s lightning-fast supply chain permits to implement trends as well as provide products in near real time. The strength of ZARA includes strong style, identity and wide store presence with fewer advertising campaign as well as ownership of its production. This ensures firm has better control of its product quality. Therefore, it can be mentioned that ZARA can be a real threat for H&M in clothing industry.

7. Strengthening the Sustainable Business of H&M

Each of the organizations takes the beneficial initiatives in order to strengthen the sustainable business position in this volatile market. Similarly, Karl-Johan Persson, the CEO of H&M requires concentrating on the preferable initiatives to strengthen the organizational position in this competitive business market (Crane and Matten 2016). M&S has already paid attention towards some of the specific initiatives that are effective enough in achieving the competitive advantage. Apart from these initiatives, it is much essential for the company to keep the concentration on more initiatives that will sustain the competitive position for the future prospects. These initiatives are discussed further:

Business Expansion

The strategic development is one of the key methods of achieving the competitive advantage. It is essential to keep the focus on the beneficial strategies that will sustain the competitive position in the volatile business market. Accordingly, the CEO of H&M requires concentrating on the business expansion process in different countries. It is noticed that the company has been expanding the business in the major cities of India (Sfu.ca 2015). It will be much beneficial for the company if the business can be expanded in other countries as well. However, it is essential for the company to derive the ideas about the traditional and cultural trends that inspire the customers to purchase the products or services. The company will be benefitted if it can generate the supports from varieties of customers (Sabnis  2015). Business expansion process helps in gathering the customers’ attentions towards the offered products.  Moreover, it will be much helpful in sustaining the competitive position of the business worldwide.

Technological Development

The current business environment is frequently changing. Business companies are driven by the technological improvements and business innovations. Undertaking the innovative business functionalities is necessary for sustaining in this changing business scenario (McDonagh and Prothero 2014). Similarly, the CEO of the company requires focusing on more technological development to bring more innovations in the business functionalities. For instance, the company can develop the informative websites from where the customers can receive the necessary information. Moreover, the development of the online shopping sites will also be much preferable for the company to create the customer buzz.

8. Areas with the Temporary Advantages

The CEO of HRM has been focusing on several temporary advantages, such as branding & market position, HRM, and Replication & Internationalisation. However, it is noted that these are the areas which indicates the temporary advantages for the business. it is necessary to undertake the long-term initiatives that can be beneficial enough for the longer sustainability of the company in this volatile business market. The major legacy of Persson’s Family is to influence the organizational culture. Achieving this temporary competitive advantage is specifically concentrating on the financial foundation (Yamada, Ling, and Nakatsuka 2014). A strengthened financial base is much important for strengthening the competitive position. However, it is necessary for the company to implement the risk mitigation plans. One of the major risks is the inefficient HRM practices can affect these temporary advantages (Seo and Kim 2015). The associated human resource management needs to improvise the organizational functionalities much frequently. The total quality improvement would be one of the most significant strategies to sustain these temporary advantages.

9. Development of Further Capabilities

The company has implemented the strategic decisions that can bring the temporary advantages for the company. It is noted that the continuous improvement in the organizational functionalities will be helpful for sustaining the competitive position. The company needs to develop the further capabilities in order to strengthen the competitive position in this changing business market (Sandybayev and Nicosia 2015). Firstly, the company needs to apply the unique leadership style that can promote the long term commitments. Secondly, the company can work on improvising the human resource and culture methods. The effective human resource practices will be beneficial enough in motivating the associated employees and increasing the organizational productivity (Finster and Hernke 2014). Thirdly, the remarkable capabilities of replication and internationalization are the major weapons for sustaining the competitive advantage (Peirson-Smith 2014). Fourth, the company can pay attention towards sustaining the leading position in the high fashion and the strong brand presentation. Focusing on frequent improvements in these areas would be much beneficial for the company to sustain the organizational position in this competitive environment.

10. Viability of H&M Strategy

The major strategies of H&M are mainly implemented for sustaining the competitive position in current business scenario. As per the VRIO Framework, it is noted that the undertaken initiatives are justified for strengthening the organizational position in this competitive market. The strategies undertaken by H&M are somewhat viable enough to achieve the determined goals. For example, the application of the unique leadership style can bring the efficient performance outcome of the employees that can improve the organizational productivity (Mo 2015). On the other hand, the effective HRM practices would ensure the proper decision making process for achieving the competitive advantage. Furthermore, the company can even gain the competitive advantage by gathering more customer support. Hence, the brand promotion is the most helpful platform to make the customers aware of the product features and quality. Comparing the business strategies with the competitors suggests that the implemented strategies are viable for the company to sustain the competitive position.

11. Global Strategy for long term

It is essential to recognize the impacts of the global strategy that can establish a long-term sustainability for the company. H&M has been implementing the fruitful strategies that are helpful enough in gaining the competitive position that can beat the other competitors in the market. As per the global strategy, the company adopts the participative culture, which is the spirit of the company. The leadership approaches undertaken by the company is emphasizing the direct and straightforward relationship with the employees (Li et al. 2014). On the other hand, it is noted that the H&M is much concerned about providing values to the personal qualities much more than the formal qualifications. The company looks for the people with right personality and qualified with proper skills. This strategy is beneficial for establishing a long term employee orientation (Huiru 2011). The constant growth strategy is much commendable. The implementation of the frequent growth strategies has secured the strengthened and leading position for the company in this competitive scenario (Shen 2014). Therefore, the global strategies are useful for pursuing the global strategy for long term.

12. Implication of Technology for the Business Model

The business model structured by H&M specifies the establishment of e-commerce business. In this era of the globalised business, e-commerce stores have become much profitable and popular. The different search engines available in the internet sources are making the customers search for their preferred clothes much easily. Moreover, development of such informative websites is also helpful in reducing costs by applying e-commerce stores. In spite of such opportunities, it is noticed that the technological development opportunities are much less for the company (Sfu.ca 2015). However, if the company can pay attention towards improving and developing the communication technologies, it will be easier for the company to understand the basic demands of the customers (Manrique 2016). Moreover, it will be more convenient in capturing the markets and build a strengthened brand identity. Eventually, the company can avail the opportunity to gather more customers’ supports (Sfu.ca 2015). Therefore, it can be inferred that the technological development has the greater impacts on achieving the competitive advantage.

13. Contributions Dick Smith Case Study Analysis

The implosion of the Dick Smith Case study provides the insightful ideas about the avoidable circumstances for running a retail business. Dick Smith was the fastest growing consumer electronic retailer in Australian market. The efficient business functionalities helped the company to earn profit of almost $37.9 million (Abc.net.au 2016). However, soon the company collapsed from the profit level due to the disregard for all the stakeholders. The company was accused for not operated by the efficient executive director. Therefore, the company failed to manage the proper investments for the business. The inefficient management decision became the major hindrance in developing the organizational functionalities. In order to establish the long term sustainability, it is necessary for the leaders to look beyond the existing situation. Furthermore, it is even essential to undertake the innovative business procedure that can sustain the competitive position. However, the wrong executive operational process was the major reason behind the business failure of Dick Smith (Abc.net.au 2016).

Therefore, it becomes clear that H&M needs to be cautious enough in taking any management decisions. Especially, in case of making decision with the capital investment, it is necessary to understand the concerns of the stakeholders at the initial stage. The company should recognize the preferences and demands of the associated stakeholders and organize the business functionalities accordingly (Saeidi et al. 2015). Similarly, it will be much helpful in gathering the supports from both the internal and external stakeholders. In fact, the company will be able to implement more relevant strategic decisions that are beneficial enough in sustaining the competitive position. In addition to this, the company can establish the long term business benefits in a significant way.

Conclusion

The ideas derived from this study depict that H&M requires focusing on several suitable strategies that can secure and sustain the competitive position of the business. The company faces direct competition with Zara. Therefore, it becomes necessary for the company to modify the business functionalities by adopting the suitable technicalities. Furthermore, adopting the innovative business process will also be helpful enough in sustaining the competitive position of the business. It is noted that the failure of the business decision making process can decrease the profitability level. However, it is thus essential for the company to keep the concentration on the fruitful business procedure to survive successfully in this unstable business environment.

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