What do you think is the most critical strategic issue confronting H&M? Explain your answer by drawing on relevant topics in Strategic Management (maximum of 900 words).
According to H&M’s case, I think the most critical strategic issue confronting H&M is to create larger group of loyal customers while holding low cost level. I will explain this opinion by comparing H&M with its strongest competitor Zara and analysing the SWOT of both brands.
H&M opened its first store in Sweden in 1947 by Erling persson. Since then H&M has grown into a fast-fashion empire which has 2,206 stores in 43 countries and 94,000 employees worldwide. The world “fast-fashion” is actually a reward itself that regarding to the fashion business model created by H&M. “’Fast-fashion’ refers to a quick response to neww trends and fashion items that are made available in stores immediately thereafter” (Regner, Patrick). Since 2009, Karl-Johan Persson took over as CEO and H&M became the leader of fast-fashion industry who is famous by its “fashion and quality at the best price”. “There are more than 87,000 employees in this group and its turnover was 25 billion SEK in 2010. Although its central functions are based in Sweden, there is still a national office in most of the sales countries (E-business watch 2011.)”. The data above is just until 2010. What’s better is that the new CEO (K Persson) aimed to sustain H&M’s remarkable annual growth rate of 20% as hestated in the 2011 annual report. And at the same time, H&M opened another 218 stores that year while another 230 the following year. (Regner, Patrick)
H&M is a successful brand in fast fashion industry, while there are also many strong competitors against H&M. for example, Zara from Spain is growing in a very fast speed which gives H&M a strong challenge. In the year of 2012, Zara opened 120 new outlets in China while H&M only open another 35. Zara overtook H&M to become the world’s largest fashion retailer and capital more market rate than H&M for the first time.
Zara is a subsidiary brand of Inditex Group from Spain. Zara established in 1975. Zara has entered the markets of 56 countries and owned large markets rate of young consumers. What in common between Zara and H&M is that they both famous by excellent design and cheap price.
Now Zara has over 2200 women’s apparel chain shops in 27 countries in Europe and 55 countries worldwide. Therefore, both Zara and H&M have achieved great performance in brand globalization. However, these two brand have their own advantages and disadvantages. We can find the strategic issue that H&M is facing by comparing H&M and Zara’s performance.
Firstly, according to their design. H&M has more than 200 in-house designer working with famous designers and deliver the design of the latest fashion to ensure H&M catches the fashion trends. According to Zara, the brand did as good as H&M. Zara also has a group of designers that have unique creativity and enthusiasm for their potential customers. They have often be seen at fashion cities as New York, Paris, Milan and Tokyo to learn the best fashion trends and did excellent job in understanding fashion in different area(e.g. They often have new design on the latest fashion not only in Europe but also in Asia). So at