Innovation and Sustainability Evaluation of H&M

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11th Jun 2020 Report Reference this

Tags: Business ReportsBusinessZaraH&MInnovationBusiness StrategySustainability

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In the ultra-competitive fashion industry, where fashion trends change multiple times a year with new designs, styles, materials, and colors, a new or current fashion retailer needs to have a multi-level strategy. The strategy needs to incorporate the innovation of store models, a practical marketing strategy to maintain growth, and a strong partnership with clothing designers and manufacturers to deliver the most niche style of clothes at lower prices than competitors. Having a reliable and effective leadership team that embodies the business's vision and mission around the organizational culture can result in the probability of obtaining a competitive advantage within the industry is high. Therefore, having an innovation and sustainability strategy to increase potential growth must be present in the business model.

Assess the effectiveness of your company's leadership

H&M (Hennes &Mauritz) is a Swedish established multinational clothing retailer that focuses on fast fashion strategy, which is geared to taking top designs from worldly known designers that feature top seasonal trends on runway shows around the world (Regner, and Yildiz, 2011). When founder Erling Persson established H&M in 1947, he built a company around a core set of values and beliefs. Persson believed to treat everyone with respect, optimism, and kindness internally and externally. Persson's values and beliefs resulted in achieving the numerous friendly and wholehearted team to be the most cost consciousness, entrepreneurial driven, and people with a positive attitude that consistently strives for excellence in leading and developing a change in the fashion industry (Persson, n.d.). H&M was the leader in the fast-fashion clothing industry, seeing a growth rate of 20% in 2010, but in 2011, H&M competitor Zara branched into the China market with opening 120 stores trying to capitalize on the growing China market (Regner, and Yildiz, 2011). This was a shock for H&M executives and shareholders that a competitor entered into the fast-fashion industry and showed promising growth. H&M stuck to their guns and re-established their mission and vision of being an affordable fashion retailer through investing in developing people, creative ideas, and expanding the culture, internally and externally, of sustainable fashion at a reasonable cost (Regner, and Yildiz, 2011). By establishing a transformational leadership style, H&M created an organizational culture around empowerment for its employees. By giving employees the antimony to be creative thinkers, it fosters them to be empowered to make decisions at store level that aligns with companies' values and beliefs. By having an organizational culture where everyone is excited, creates an environment of happiness for the consumer and fellow employees. My opinion is roles and responsibilities for a retail business needs to be clearly established with consistent follow up from managers and leaders to ensure process and procedures are done correctly to achieve the goals and objectives for the business. Renger and Yildiz (2011) state that H&M limits the focus on positions and the roles and responsibilities that go alongside the job to increase the freedom to take ownership of job duties and activities. According to Johnson, Whittington, Scholes, Angwin, and Regner (2014), transformational leadership is about developing and empowering people to make a decision, and transactional leadership is about following structure processes and procedures to complete activities and decisions are left to managers. My experience has shown me in the retail industry that having a balance of transformational leadership and transactional leadership is optimal for an organization to have fair and consistent leadership for employees.

H&M competitive advantages and the potential challenges to its strategy

The success of any retail business depends on sales, customer awareness, and a strategic marketing plan geared to a targeted audience. H&M has established brand dominance through a diversified global presence in 4,379 stores in 69 countries across six continents (MarketLine, 2018). With that amount of awareness to the retail consumer, H&M can use that to their advantage to create a precise expansion and marketing strategy to ensure that their store model is reached and known within all of their markets. By having a high number of stores, it gives them the consumer traffic to analyze customer shopping habits and trends. H&M store managers use these trends to design and plan out store displays on a weekly and monthly and competitive and profitable pricing strategies to ensure customers are focused on current trends (Regner, and Yildiz, 2011). H&M can keep its expansion strategy so aggressive by not owning the building but leasing space in high traffic malls and shopping centers, which in turn, H&M can use the extra savings into decreasing store operations cost and increasing internal and external manufacturing (Regner, and Yildiz, 2011). Therefore, H&M can deliver a reliable and competitive price point for there products. H&M has nearly two hundred high-end fashion designers dedicated to maintaining and progressing the H&M styles through using runway shows as a baseline to gauge popular fashion trends (Regner, and Yildiz, 2011). Doing so, H&M can maintain a competitive advantage within the retail industry, but with retail shifting to e-commerce, H&M needed to embrace the online retail sector. In August 2013, H&M announced that they would open an online shop with the same collections of items found within stores, as well as additional sizes and exclusive products for apparel and the home (Schmitt, and Christie, 2013). Being able to have a multi-channel shopping experience for the customer increases H&M ability to stay competitive within the industry despite major competitors likes Gap, UNIQLO, and Zara, who focus their strategy on the same cheap and chic consumer that H&M does (Regner, and Yildiz, 2011). H&M's biggest competitor Zara, who was established in Spain in 1975 by owner Inditex, has complete ownership in all steps of the supply chain from sourcing, manufacturing, and logistics to give a competitive within the industry to deliver product faster to consumer (Parietti, 2019). Being able to control a hundred percent of its manufacturing, design, and distribution gives a competitive edge against H&M; because it uses partnerships with well know designers like Versace and Alexander Wang to out way the shortcomings of not owning the full scope of the supply chain process. For a business to remain competitive and remain profitable, they need to have ownership and control of all aspects of their product or service. H&M might be in the hierarchy of apparel notoriety, but it faces a real challenge with Zara focusing on customer wants and needs to brands and styles sold within store verses H&M directs the customer to designs and price based on fashion trends (Kohan and Danziger, 2018). A company like H&M cannot survive with brand recognition alone; they need a multitude of strategies that focus on product innovation, competitive pricing, enticing promotions, ownership of supply chain, and an interactive shopping experience that uses technology within the store and online. Failure to align with competitors, the risk H&M sliding into a strategic drift, and result in losing brand recognition locally and globally.

Potential growth strategies for H&M

For a business to grow, such as H&M, they need to review and analyze all strategies and business models to align with the original vision and mission. The overall success will be conducing to maintain growth within the sub-brands such as Monki, H&M Home, COS, and Weekday with growing awareness will result in higher returns and profitability. H&M can see potential growth through consistent alignment of the business model within the stores by hiring locals that embrace the values, vision, and mission of H&M. By hiring, training, and developing employees to keep a simple and straightforward open-mind, with a constant improvement, through an entrepreneurial spirit, delivering cost due diligence, building teamwork, and the ability to believe in people H&M can maintain and grow the most useful asset, their culture and brand awareness (Regner, and Yildiz, 2011).

Conclusion

In conclusions, H&M has used its values, vision, and mission of whole hearted entrepreneurial spirited team members over the years to develop a business with one of the most recognized brands within retail. They have successfully developed the brand through seventy two years of innovation with sub-branded companies, a cult following of consumers that loves the quality for fair price, embracing the online in store shopping experience, and upholding a competitive advantage with competitors success and losses before entering into similar emerging markets.

References

  • Johnson, G., Whittington, R., Scholes, K. Angwin, D., Regner, P. (2014). Exploring strategy text & cases, (10th ed). Harlow, U.K.: Pearson.
  • Kohan, S. E., & Danziger, P. (2018, October 31). Why Zara Wins, H&M Loses in Fast Fashion. Retrieved from https://www.therobinreport.com/why-zara-wins-hm-loses-in-fast-fashion/.
  • MarketLine. (21, Aug. 2018).  H & M Hennes & Mauritz AB SWOT Analysis. Datamonitor Plc. Retrieved from http://web.a.ebscohost.com.ezproxy1.apus.edu/ehost/pdfviewer/pdfviewer?vid=11&sid=2c253acf-e9ba-4b5d-8299-e2ac97ce735e%40sessionmgr4006
  • Parietti, M. (2019, June 25). H&M vs. Zara vs. Uniqlo: What's the Difference? Retrieved from https://www.investopedia.com/articles/markets/120215/hm-vs-zara-vs-uniqlo-comparing-business-models.asp.
  • Persson, K. J. (n.d.). The H&M Way. Retrieved from https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/hm-way/HM Way_en.pdf.
  • Regner, P.& Yildiz, E. (2011) H&M in fast fashion; continued success?  In Johnson, G.,               Whittington, R., Scholes, K. Angwin, D., Regner, P. (2014). Exploring Strategy Text &               Cases (10th ed) pp. 575-582. Harlow, U.K.: Pearson
  • Schmitt, M., & Christie, N. (2013, August 1). H&M To Launch Shop Online In The U.S. on August 1; GLOBAL FASHION RETAILER ANNOUNCES DEBUT OF E-COMMERCE AND BRINGS HOME COLLECTION STATESIDE. PR Newswire. Retrieved from https://advance-lexis-com.ezproxy2.apus.edu/document/?pdmfid=1516831&crid=53641463-1fad-4701-872d-fac349ada7f3&pddocfullpath=/shared/document/news/urn:contentItem:591M-2DK1-DXKS-J0C5-00000-00&pddocid=urn:contentItem:591M-2DK1-DXKS-J0C5-00000-00&pdcontentcomponentid=8054&pdteaserkey=sr0&pditab=allpods&ecomp=xp79k&earg=sr0&prid=ea6dda41-62f0-4f48-b18d-622e14e48e24.

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