strategic creative methods and clarify thembased on the case of hm company

And the most important thing in strategic planning is to help managers clearlydefine their vision and goals.In this essay, I will discuss Strategic & Creative methods and clarify thembas

END-MODULE ASSIGNMENT

Module: STRATEGY & INNOVATION

Code:BSS029-2ASSIGNMENT

UNIVERSITY OF

BEDFORDSHIRE

SCHOOL OF BUSINESS

-*** -FOREIGN TRADE UNIVERSITY

HO CHI MINH CITYCAMPUS

……… Examiner 1(Signature &Fullname)

……… Examiner 2(Signature &Fullname)

………

And the most important thing in strategic planning is to help managers clearlydefine their vision and goals.

In this essay, I will discuss Strategic & Creative methods and clarify thembased on the case of H&M company - one of the largest fast fashion in theworld

Thank you!

TABLE OF CONTENTS

I Macro environment analysis:

II Micro environment analysis:

I Macro environment analysis:

1.1 External environment analysis

To analyze the macro environment, using the "PESTEL model" tool is suitable

to understand and clarify the "picture" of the environment that H&M is facing.1.1.1 P - Political factors:

The majority of H&M's production is set up in Turkey, Egypt, and Lebanonand supplies products worldwide

 Government policy:

Under pressure from governments and laws in many countries around theworld

 Political stability:

 Turkey often changes its Constitution and faces a series of challenges

 Egypt is facing many security threats related to conflicts and crises inneighboring countries

 Lebanon has always been politically unstable before and afterindependence

 Trade restrictions:

The trade war between the US and

China is also a big concern not only of

H&M but also of the industry as a

whole

Its impact leads to an increase in the

prices of textile products and the need

for workers

The event of Brexit (United Kingdom

leaving the EU) also leads to a difficult

political scenario to operate.

The boycott event in early 2021 in Vietnam and China also significantlyreduced H&M's revenue (~$100 million compared to the same period in 2020)

→ Maybe after the COVID-19 outbreak, the trade war will be stronger andthere will be a chaos or recession in the world economy and large tradingcompanies like H&M must stand on the balance of choosing one of the two tocontinue to trade

1.1.2 E - Economical factors:

 Economic growth:

H&M's net sales halved in the second quarter, and despite swift measures andsignificant cost reductions during the quarter, the loss was reduced However,the company was profitable again in the third quarter up to second wave ofpandemic has led to another downturn as tighter social restrictions are onceagain imposed in many markets

 Online sales of the H&M group 50% increase in local currency in Q4

2020 compared with the same period last year and increased by 38%for fiscal year 2020

The group's net sales and post-financial profit of items amounted to52,549 million SEK (61,694) and 3,665 million SEK (5,403)respectively for Q4 and up to SEK 187,031 million (232,755) and2,052 million SEK (17,391) respectively for the financial year

 Exchange rate:

Compared to last year, the Swedish exchange rate has increased significantlysince the beginning of 2021

This proves that:

 Imports are being encouraged in Sweden

 Low inflation, high purchasing power

 Swedish GDP is growing strongly (increase ~3.8%)

 The interest rate policy is kept at zero by the Swedish government

 Sweden's economy recovered relatively quickly (after the impact of theCOVID-19 epidemic)

→ After the COVID-19 pandemic, governments may raise interest rates toavoid high inflation European markets will be more potential than everbecause of the possibility that they will focus on low-cost products like H&M

to balance spending

→ This is a good opportunity for H&M to produce and increase sales in thismarket

1.1.3 S - Social factors:

H&M has a business strategy that covers the market With 7 different brands including COS, Weekday, Monki, H&M HOME, ARKET, Afound andsome online store are Sellpy, Treadler… scattered all over the world

sub- In the digital age and 4.0 technology development, the fashion industryalso relies on the development of social networking techniques toevaluate and collect information or trends

 In the year 2020-2021, H&M has increased the influence of advertisingand social networks over direct selling to reduce excess costs while stillmaintaining revenue

 Buyers' attitudes are changing, they prefer branded clothes andsustainable fashion, so the demand for the same is increasing like neverbefore.

→ H&M and others fast fashion brands (such as Zara, She-in, UNIQLO, etc.)are converting production trends to sustainable fashion and Eco-fashion

→ And in the near future, this trend will become stronger and it is likely thatfashion will no longer be unique but will become simple and enduring items

 Artificial intelligence, analytics can be used to design merchandise,observe and study the customer to provide them with suitableservices/products.

This past June (2021) , H&M launched The Billion Dollar Collection, acollection of 10 fashion ideas that have won and have the potential to createmultidimensional value for the fashion industry Using the latest in CGIcharacter design technology, Mackenvision, a professional visual effectsdesigner, created lifelike virtual models to showcase the collection

1.1.5 E - Environment factors:

In addition to the above budgets, fashion companies also have to bear a largeamount for waste treatment The textile industry in general is the second largestpolluter after the oil and gas industry

H&M Group is a pioneer in fast fashion, producing 3 billion garments a year(from 2003 -2017) which means that many of the 100 billion pieces of clothingpurchased each year are thrown away (actually 92 million tons per year)

 In early 2020, H&M has begun to focus more on sustainability, partlybecause younger consumers are concerned about the environmentalimpact of their apparel purchases

 H&M has set up bins in stores, collecting tens of thousands of tons of oldfabrics, ready to be recycled when the technology becomes available

 They has poured millions of dollars into technologies like the cottonrecovery startup Renewcell and supply chain sharing platform Treadler

1.2 Competitive pressure analysis:

Based on Administration report of H&M, Auditor’s report and Fashionindustry market 2020-2021, the impacting threats are summarized through

“Porter's 5 competitive forces” in the following table:

Analysis of industry pressure factors

Intensity

Competitors

The fashion industry operates under a monopoly regimeCompanies depend on each other to compete for growthNew Entrants Barriers to entry for new entrants into the “fast fashion”

industry are high enough to block potential new entrants

Customer The bargaining power of buyers is also relatively small

Switching costs are not high for regular customers

Suppliers The company is completely dependent on suppliers located in

countries such as China, India, Turkey where labor to producegarments is cheap

Substitutes There are no substitute products offered by other industries

that can perform the same function as clothing

However, there are many alternatives to spending money(opportunity cost)

→ From the above analysis, it can be concluded that H&M is under mostpressure from suppliers

H&M procures materials and workmanship from 750 suppliers, has a team ofmore than 100 talented designers from all over the world, and is associatedwith more than 60 stylists that have forced the H&M organization to offermany rule

H&M has implemented a supplier management program SIPP (SustainableImpact Partnership Program), which requires all manufacturers and suppliers toagree to a "Sustainability Commitment" before becoming H&M's main supplier

or manufacturer

II.Micro environment analysis:

2.1 The difference of H&M:

2.1.1 Resources & Capabilities of H&M:

 Price strategy:

 Applying the "Fast fashion" model

 Low price (Cut operating costs to a minimum)

 Use cheap labor in Asian countries

 Focus on customer experience instead of marketing

 Sponsor clothes for actors instead of organizing a luxury fashion show

 Capture the market by demographics through each subsidiary

 Has the longest history in the fashion industry (from 1947 )

 High-class and modern facilities system

 Product strategy:

 Offering products through its online store (Treadler, Sellpy,…)

 Launching seasonal collections

 Place strategy:

 International distribution of products (~ 5000 stores in 2020)

 Each store is connected to the administrative

 Logistics system and the central H&M warehouse (Top of the bestsupply chains in the world 2020)

2.1.2 Competitive advantages within industry: (based on VRIO framework)Resource of

Capability

(V)aluable (R)arity (I)nviolability (O)rganization Competitive

AdvantageHistorical

→ In general, H&M is always aiming for sustainable competition and is alsothe oldest fashion company

→ The combination of H&M and fashion influencers is undeniably a clevertactic that has over the years captured the market and attracted a large number

of customers And this strategy will still be a strong point of H&M, confirmingthe company's coverage

→ H&M's growth strategy in the coming year is still possible, but the companyshould invest in developing its marketing network and promoting productsonline instead of customer experience because of COVID 19 pandemic &Internet of things trend

2.2 Compare H&M with potential competitors:

To position the market and understand competitors, it is important to compareand analyze them

H&M has two formidable competitors, ZARA (in Spain) and UNIQLO (inJapan)

High prices in Asia

the fashion world

Offer a wide range

→ H&M has a competitive advantage on a large scale with the policy of

"cheap price + big sale = big profit"

→ Market segments and stores are also stronger and older than brands in thesame industry Future development opportunities are possible

→ Maybe in the near future H&M can still be strong, but dominating themarket and owning many sub-brands can lead to loss of control in the long run

III Overall assessment of the environment:

After grasping the competitive environment, the Strengths Weaknesses Opportunities - Threats of the company should also be mentioned through theSWOT model

-Internal

Analysis

Strengths

1 Largest clothing retailer in the world

2 Trendy clothes & Low-price

3 Product production time is very fast (12 weeks)

4 Collaborate with famous designers

5 Well-developed marketing skill

Weaknesses

1 Low-quality clothes

2 Depend on suppliers

3 Lack of control over garment production

4 Spend a lot on investment

5 High inventory and environmental impact

External

Analysis

Opportunities

1 Market for everyone (have many sub-brands)

2 At the forefront of online shopping

3 Emerging economies will support the brand'sexpansion plans

4 H&M is well positioned to tap into the nicheorganic clothing market

Threats

1 Economic recession may take place after thepandemic

2 Market competition (Zara, UNIQLO, Gap )

3 Labor costs may increase in future

To sustain and grow the company, H&M needs to turn weaknesses intostrengths and threats into new opportunities And to do this, H&M needs tobase its strategy on "Playing to Win" with the "cascading choices" framework

by Roger L Martin

Considering the fact that H&M already has prime store locations in manycountries around the world (mostly downtown) and is the most well knownbrand in the fashion industry So the choice of "where to play?" and "must haveorganizational capabilities" is redundant

H&M should focus almost exclusively on “how to play” and “how to win thecompetition” by dividing into 2 separate market segments for tightmanagement and controlled production

 Pricing Strategy:

Converting from purchasing low-quality raw materials for production to usingrecycled and inventory items to sell at cheap prices

→ Focus on pushing inventory and making use of scraps of fabric

→ Create a differentiated market for recycled use

→ Preserving the market and protecting the environment

→ Save material costs, compensate for the cost of hiring labor

 Promotion strategy:

High-quality clothes need to be imported with good materials, designed byfamous people, so H&M should be produced in limited quantitiesandsold athigh prices (can be auctioned to promote brands such as Channel, LouisVuitton)

→ Focus on increasing profits

→ Control tight supply chain

→ Affirming the high quality and fashion brand

→ Expanding the high-end and sustainable fashion market

1 https://www.wider.unu.edu/sites/default/files/News/Documents/Stockholm

2 https://career.hm.com/content/hmcareer/vi_vn.html

3 2020.pdf

https://www.brandsvietnam.com/19541-Vu-khi-ben-vung-cua-hang-thoi-10 https://about.hm.com/content/dam/hm/about/documents

THE END