H&M’s Sustainable Competitive Advantage
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Published: Wed, 13 Sep 2017
The H&M sustainable competitive advantage started on 1947, being a pioneer of fast-fashion business. They explored a blue ocean foccusing on fast-fashion, the cheap and chic business model had been launched that year. Start in the fast fashion market, gave H&M the advantage to be the innovative in the apparel market, attracting the whole public, without competitors.
Although, any blue ocean become a red ocean with competitors in the same segment. Specially in 2011, when Zara(Inditex) overtook the H&M first position. Also caused by the rise on cotton prices and rising productions costs in Asia. H&M had a challenge to elaborate an strategy to eliminate those threats. The company opted for long term strategy. Deciding for invest to the future, not raising the prices to the costumers, even with the economic climate, the chief executive Karl-ohan Persson calmed the shareholders. Opting for keep the fundamental principle being, since the company, keep offering the best combination of fashion and quality for the best price.
According to Alfred D. Chandler, strategy is “The determination of the long-run goals and objectives of an enterprise and the adoption of courses of action and the allocation of resource necessary for carry out these goals”(1977). From that analyse, we can sustain the strategy adopted for H&M CEO, even without sharehoulders approval. According to VRIO framework, to umplified the competitive advantages of the company:
Value: The codified core values of the company are:
1) keep it simple: The company have a strong culture in simplicity, the value in humble, democatisation of fashion; the management is more informal and the style is non-hierarchical.
2) straight forward and open-minded: The company is open minded to try anything new things, and new mistakes is aceptable for the company. Experimentation is part of the company. Not afraid of take risks. although the idea is learn with the mistakes and not repeat them. In the end is how the company grow on the market.;
3) constant improvement: is possible to maintain due to company network with customers from strong social media relationship what keep possible the company to respond the updated threats or opportunities on the market;
4) enterpreuerial spirit: Adopting descentralised decision making, giving the store managers autonomy, like running he own business like an enterpreneur, give to the employees a great motivator, increasing loyalty and commitment;
5) cost conscious: The value is notable by the fundamental principle being of H&M since they started in the market. “Fast fashion at the best price”. It’s valuable the fact that H&M philosophy is make fast fashion with lower costs and consecutivelly generate revenues for the company. Also the project H&M cost conscious collection, with adopt ethical practices, improving work conditions and using natural resources responsibly;
6) Team work: The design team work in direct contact with the productions offices around the globe, what allows rapid response-manufacturing process. The focus of people involvement is a philosophy that H&M adopt. Encourage the team take risks, trying new things which is the pillar of the oganisation;
7) Belief in People: Delegation of responsability is a carachteristic of H&M, based one of CEO Earling Person’s values. Everyone opinion and ideas inside the company is relevant. Regardless position, evreyone is open to use give suggestions, trying new ideas and experiment them inside the company. Also in each store, the managers are open to create their own style based on their knowledge of public, market
Rarity: Is identified by the companybeing the pioneer of fast-fashion gave H&M the distinctive business difficulted the approach for most competitors in 2009;
Inimitability: The strong brand image associated with value and stylish collection. In-house designer collaboration wih famous designer, is a unique approach tha has been employed by the company; Even after so much effort in research and predict the new trends in different ways, H&M awas put it’s own touch to the design, creating collections that strick a good balance between the latest trends and the basics. The company philosophy is not copy. Keep its own personality in eacha country
Organisational Support: The long term advertising campaigns with high light celebrities, in order to enhance the value of H&M’sbrand name; the H&M focus on employee involvement; the design is centralised at the Stockholm headquaters, allowing minimal time-to-market, allowing minimal time response to the market. Design inspiration
The sustained competitive advantage H&M can be defined by design centralised, add H&M unique style.The others fashion retailers to be success in imitate H&M in terms of store management they could stabilish the store in the best locations offices, by renting a place, instead of acquire. What give flexiility to adapt change demands patterns and location attraction.
The key competitor of H&M is Zara (Inditex) They started in emergent markets, opening 120 stores in China. Zara had a big advantage as they manufacture their own products lowing their costs and gain in supply chain products control. Due to the fact that Zara is a manufacture and retailer. The marketing strategy is based upon different of H&M which make higher costs for the company in reseaching and big fashionists.
Zara promotion is more foccused on word-of-mouth advertising, making clothes for public between 18-40 whose is happy to talk about Zara for their friends. Which nowadays is more effective than advetisements sometimes. Also have the support of some considerable fashion experts. Zara repair all customer complains very fast in order to guarantee their satisfaction.
The image of Zara has been building since 1975, coping the most actual fashion designs and put at the stores in few days in order to not waste sales time. The positioning is create a unique design and the customer acquire in delayed, cannot find anymore. The product is attract by price as its made with cheap materials, every month the shop have new tendences that give them rapid process and competitive by new trends on quick time at stores.
In terms of Supply chain Management, H&M outsource the products in low-cost countries, focusing in economy of scale, with high-volume and low-cost. The company idea is maintain low imputs costs and have the more inovative fashion trend in H&M stores with a fast output between a month of the initial design. H&M always changes production in order to reduce lead time and improve the efficiency. The fact the production offices are in constant contact with suppliers, keep the company updated to identify the right suppliers.
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