The case study on ‘H&M in fast fashion: continued success?’ analyses the function of strategic abilities to bring up competitive advantage and the primary issues can be considered in explaining the competitive sustainability. The clothing company H&M has always been in the leading position in the international fashion market because of its special concept, unique business model and the ability to mix the amazing designs at an affordable price. But the company has been threatened by its competitors so it should start considering the fact and examine the continuity of competitiveness in the strategic capabilities. This study found out that the areas of function in which the company has always had an advantage via the competitors and the benefits can be enjoyed in the long run.
Fig: Porter’s five forces
Sources: Foucault and Frésard 2016
The total size of H&M’s market was around $3049.5 billion which increased by 3.7% in a period of four years. Since there is a slow growth, the competition increased which again got affected because of several smaller players. The most important competitors of H&M are Zara and GAP. Another new and comparatively smaller competitor is a Japanese company UNIQLO which has just began to expand. The problem in fashion industry is that the changes are very sharp and sudden. The trends are applicable to uncertain and unpredictable changes. The customers who are at the end of the supply chain get the opportunity to select and purchase from a wide range of variety. The fast fashion category also looks into the fact of cutting cost and bargains. With the increase in international trade, there is a growth in the global suppliers which increases the competition among the local manufacturers. To enter into the retail sector, there is not much need of a high capital. There are many suppliers who help an individual to set up their own retail store within an affordable range. But, in the international market there are some big corporations who hold a major part of the industrial revenue. The scale economies and size of those corporations help in building brands in several retail outlets and they have a greater potential in buying when it comes to negotiate with the suppliers.
H&M had 218 outlets with the most attractive one in Paris and another 230 new stores with 35 stores in China. Zara increased the competition by opening 120 new stores in China but later Inditex took hold of H&M and became the biggest fashion retailer in the world in terms of market capitalization. This rapid increase of Zara had threatened the existence of H&M. Increase in competency and rise in the cost of production, the business started to suffer. Poor economic condition resulted in the increase in competition for the customers who invested in fast- fashion business. The Japanese company UNIQLO is a retail chain operator which has specialization in designing casual garments for men and women. Its sales and profits are the highest among other companies in Japan. It also has special retailer store or SPA model which takes care of the design, production and sale. They keep on modifying the SPA model which helps in distinguishing them from the competitors. Their products remain unique and different from others (Barney and Peteraf 2014). They are quick in making changes in the production to portray the latest sales environment and reduce the cost of operating store which includes rent and personnel cost. Thus UNIQLO provides high quality clothing at an affordable price. They used to operate a range of 848 and 275 stores in 2012. Their 135 stores are present in China, 16 in Hong Kong, 75 in South Korea, 17 in Taiwan, 5 in Malaysia, 6 in Singapore, 10 in UK, 4 in Thailand, 2 in Russia, 2 in France and 3 in USA. They have almost 70 partners and approximately 75% of their products are made in China. UNIQLO had revenue of $7835 million in 2011 with an increase of 0.6% from 2010. Their net income became $688 million in the financial year which was %787 million in the previous year. H&M, the retailer of fashion apparel, on the other hand, provides the customers with a combination of unique trends and timelessness for both men and women. Their innovative collection and an amazing fashion experience along with a colorful graphic and playful design attract all the customers. Another category sells their own individual brands and collaborate design with independent fashion tags. There is a combination of street fashion and subculture with the effect of catwalk. Their business is operated from their leased store outlets by means of internet, sale of catalogue and some franchise stores. The do not have their own factory. The production is outsourced to other independent suppliers to work for them. H&M has a growth target to increase their number of outlets by 10-15% each year as well as increase the sales in the comparable units (Grinblatt and Titman 2016). They have a self- financed system of their growth and development. By the end of the year 2010, H&M had around 2206 outlets including 50 franchise stores, 35 COS stores, 18 Weekday stores, 48 Monki stores and 1 Cheap Monday store. The group H&M outsource their product manufacturing to 700 different and independent suppliers through their 16 domestic production offices in the continents of Asia and Europe. The strength of employee in the company H&M is 94000. They have recorded their revenue as $16137 million in the financial year of 2011, with an increase of 1.4% from the year 2010. So, their net income became $2321 million in 2011 in comparison to a net income of $2880 million in the previous year. Their strong brand image is associated with the value and collection of style. Their association with 200 in- house designers and other famous designers has a unique approach that has been carried out by the retailer company for a long time (Johnson 2017).
Value chain analysis is the process where the firms tend to analyze the primary activities and support activities that add extra value to its final product thus analyzing the activities in order to reduce the cost of production and operations. It constitutes of all the activities that the firms include from output to input. It is, in fact, a strategic tool that would help a firm to analyze its internal activities with its special reference to the external activities. It also comprises of the understanding of competitive advantage. Following the case study it can be identified the current state of output and input competitive advantage of the firm. It also forecasts the status of the firm. Thus by taking value chain analysis as the significant tool for the identification of competitive advantage the analysis process would be helpful in understanding the process of the basic concept. Following concepts are to be taken into consideration while identifying the elements of value chain:
With the execution of these elements the value chain of the company is analyzed with the proper comprehension of the policies. In terms of considering internal analysis in relation with the external analysis, both the effective changes are to be taken into consideration. Having read the case study it can be considered as serious concern that most of the external contractors of the company have been integrated with core business policies and performances. Such professional integrity has been has been empowered with the effective changes. C the following diagram succinctly demonstrates the VCA (Value Chain Analysis) of H&M. Being the second largest apparel company in Europe, H&M has potential value chain process. The logistics performance of the company has maintained a certain standard of its own. Though the company does not own all the factories, it acts as the advantage of the same. The reason of such advantage is that the company can easily change its suppliers in need. On the other hand, due to the size of the business, the suppliers can easily be manipulated in terms of logistics management. The company indeed aims to be maintaining lowest production or supply cost however maintaining higher profit margin. In terms of inbound logistic, H&M definitely follows the process of sustainability. This is how the basic understanding of the entire case has to be taken into certain understanding on the entire understanding of the basic understanding of the entire case. The aim of the company is to provide better quality and tend of fashion goods in the market. Due to effective market competition from the companies like Uniqlo that offers cheaper clothing with trendy fashion to the market, like H&M, the case company is bound to eradicate certain setbacks in its logistics process. These setbacks have been the greater number of wastes thus accumulating higher amount of cost. In order to get rid of such hindrances, H&M needs to ensure the negation of waste thus ensuring lower range of waste management cost.
One of the major values of the company is the sustainability in business process and sustainability in production. As a matter of fact, this has been taken into certain consideration pertaining to the effective business chances, the major concern pertaining to sustainable operations needs to be strengthened within the company. Through business integrity with the contractors the company also ensures the process of different understanding of the cases pertaining to the effective understanding of the entire understanding of the entire case. As a matter of fact, this has been taken into certain process pertaining to the effective understanding of the entire case. The company also ensures waste management system in manufacturing, transport and other sources. As a matter of fact, this has been taken into certain consideration pertaining to the effective understanding of the process.
Since the company is only concerned about the operations of designing the clothes, it also maintains effective transparency. The company is highly concerned about the environment of the shops it is locate in. As a matter of fact, this has also projected cozy, simple and well maintained working ambience within the shops. According to Haberberg and Rieple (2017), the company has always been locating the stores quite nearer to the customer’s congested areas. It also proposes similar service to the competitors.
The company has also provided itself with effective information technology system. As a matter of fact, this has to be taken into certain consideration pertaining to the effective understanding of the fact, in terms of creating the issues with basic procurement from the suppliers. Since the most effective swift has been the efficient information technology sharing, this has helped the suppliers to comprehend how the company wants them to execute the logistics process. This is how the company has ensured inbound consideration into the core business process.
As a matter of fact, outbound logistics would be denoting the fact of accepting the consideration of the suppliers. As a matter of fact, this has to be taken into certain consideration pertaining to the basic understanding of the issues. This has to be taken into certain consideration pertaining to the consideration of the entire understanding of the entire vision and mission of the company. As a matter of fact, this has to be taken into certain consideration pertaining to the effective issues to respond to the market.
From the aforementioned case study it has been taken in to consideration the transportation process of the entire understanding of the fact. Transportation process of the company has been associated with effective socialization of the contractors. Though the company keeps a proper professional rule, this has to be taken into certain consideration pertaining to the effective understanding of the issues. As a matter of fact, most important factors have been the procedure of experimental learning. The following diagram helps understand the core value chain analysis process of the company:
VRIN stands for Valuable, Rare, Inimitable and non- substitutable. These are the paradigms for the company that links it to the consideration of unique characteristics of the company. Since VRIN provides best practices as a source of competitive advantage. As a matter of fact, following analysis would be taken into consideration:
Conclusion:
From the aforementioned analysis, it can be stated that most of the business process characteristic traits have been detected so as to find out how this has been taken into certain consideration. In fact, the process needs to be taken into certain consideration pertaining to the generation of professional excellence. From the frameworks and the outlines of VRIN and Porter’s five forces model, it can be stated that this has to be taken into certain consideration pertaining to the effective process of the entire culture.
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