Description of the assessment, the task/topic
A Group Report that conducts a strategic review analysis of the fast fashion market the report is worth 30%.
Any specific instructions:
People continue to shop for clothes despite an uncertain economic backdrop, and the growing strength of pure plays such as Asos, Boohoo and Missguided, which has sped up the design-to-sale process, suggests a search by young women for newness. This put increasing pressure on the bigger retailers (Mintel 2017).
Produce a group report of up to 3000 words which:
- Identifies the concept of fast fashion and the key trends in fast fashion sales – Links here to PESTEL, 5 Forces and Porter’s competitive positioning, students might also consider including some data on growth of cheaper offerings, including the hard discounters, the influence of the Internet and social media on fashion sales, sustainability concerns, smaller chic fashion outlets…
- Demonstrates an understanding of how the major established brands have responded to the threat from newcomers – Internationalisation of the big brands, linked to the drivers illustrated by Yip (2000), market entry strategies, CAGE, culture, students might also consider some examples of market shares, pricing policies, product quality, availability and product range, use of technology, supply chain efficiencies, global reach and the experience curve…
- Evaluates what you think the main opportunities and threats are in this market sector – an opportunity to examine the capability and resources of the successful big brands, how this links to the strategic plans, students might also wish to consider whether fast fashion is here to stay? Are the big brands responding to concerns about the environment? What is the value proposition offered to customers? Who are the new entrants? Is the High Street under threat?
- Critically comment on the extent to which technology, social media, innovation and creativity allows new entrants to position within the market, with examples drawn from their marketing campaigns – examples here of disruptive innovation in the form of apps and direct delivery to homes, celebrity endorsement, Uniqlo kiosks, newcomers to this market, what is their appeal and what channels are used to attract customers, (if at all?) away from the major players?
To complete this task successfully you will need to undertake secondary research using relevant market data from appropriate sources, journal articles and news stories. You must use this data and market information to justify your points and apply appropriate marketing theories and models. Keep a log of the group activity where appropriate, so that the contribution of the team members can be assessed. This must be included as appendix 1.
Business Strategy of H & M
Introduction
Every business needs an effective business strategy to enable sustainability and get a competitive advantage over its rivals in the competitive market. In the competitive landscape, it is necessary for the management to come up with different business strategies to depict the well-directed business operations. Using strategic analysis tools is a good approach to derive several market and business insights and make decisions accordingly. It is a comprehensive analysis, which covers the different factors from key trends in the fashion industry to the positioning of new entrants in the market. An effective business strategy can help the company to contain a strategic direction.
The fast fashion industry is in the limelight due to the latest industry trends. Based on the latest fashion trends on the fashion week and in autumn and spring, fashion retailers respond to the target market.
The Company (H & M)
Hennes & Mauritz AB (H&M) is a prominent Swedish fashion retailer. This firm exists in the fast fashion industry in many countries. This fashion giant operates in 62 counties with 4500 stores. According to 2015 financial reports, the revenue of the company is US$ 25.191 billion. The main products of this company are Clothing and accessories. H&M was founded by Erling Persson in 1947.
The concept of Fast Fashion & Key Trends in Fast Fashion Sales
The concept of fast fashion is quite visible in the modern fashion industry. Fast fashion is a process to bring inexpensive and new design from catwalks to fashion retail stores to integrate with new fashion trends. People see catwalks and new fashion trends in different fashion magazines. Fashion retailers usually integrate with these trends and enhance sales accordingly (Petro, 2018).
This company has adopted the fast fashion retail trend to enhance both sales and attraction. For Instance, engagement retail is a new trend that helps the company to engage customers effectively. On several tough points, customers are contacted, communicated, and identified about existing and coming arrivals. CRM is the best channel for this company to integrate with this trend. Another prominent trend is social media. Fashion retailers are looking to enhance the customer traffic on different social media channels. Firms have made different social media sites or pages to grab customers. People, talking about fashion or fast fashion of these sites, are a kind of market or customer data, which is to be used in the decision-making process. The fast fashion industry is targeting millennial customers (Kexin, 2018). Due to speed and agility, firms can capture this particular customer demographic. Another fast fashion industry trend is celebrity endorsement. People have associations with different celebrities, and it usually increases the brand appeal in the competitive market. Sustainability and ethics are two prominent trends in the fast fashion industry. The purpose is to reduce the environmental impact and create goodwill in society. H&M came up planet-friendly products for customers, and it justified this trend (Gilliland, 2017).
PESTEL: H&M
· Political
H&M is a global fashion brand, and political risk is increasing for this company. Political stability is important for the management to sustain and expand the business. In various markets such as Turkey, Lebanon, and Egypt, political instability is a major problem, and it also creates an impact on the business process. Due to the business regulations, the firm is intending to integrate or collaborate with several brands to operate in different countries.
· Economical
The firm operates in both developed and developing economies. In the developed economy, people have high buying power, which goes in favor of the business. On the other hand, people in developing countries are also looking to align with modern fashion trends. The growth of gross domestic product lifts business in different countries.
· Social
Particularly in urban areas, people associate with different fashion brands. For Instance, people are living in a culture, which is more transparent and accountable regarding business. When entering a different country, the firm aims to portray the emotional and sentimental attachments to customers through localization. The firm intends to publish online CSR reports and show the association with brands and adhering to the demands of customers.
· Technological
People are becoming tech-savvy in countries. H&M has responded to the tech-savvy business environment and developed new supply chain measures. Tracking in logistics is a key development for this company. Also, the development of apps is another pertinent technological development for the company (RobD, 2018).
· Environmental
In Sweden, businesses are triggered by the regulations to reduce the impact on the environment. Similarly, in the United States, This Company aims to recycle its products. The newest fashion products will be made from the old products of the company, and it seems the best approach to reduce the environmental impact. In Indonesia, H&M indicates less impact on the environment. The environment sustainability has been justified by H&M in Indonesia through using waste plastic to make cloths. Indonesian H&M has taken the recycling initiative and used pet bottles to make cloths for global customer range (Russell, 2017)
· Legal
Business regulations in the United States and many other countries are tough for fashion retailers. The protection of patent rights sometimes leads towards patent disputes. To sustain business in the country, it is important to follow business regulations in the competitive fashion market.
Porter Five Forces: H&M
Bargaining power of Buyers
The bargaining power of customers in the fashion market is quite high. It is a fact that the switching cost for customers is low when compared to other industries. People or customers usually find different substitutes in the market. Fast fashion is trending, and due to substitute, the bargaining power is quite high.
Bargaining Power of Suppliers
The bargaining power of supplier is low. In the United States, Sweden, and many other countries, this company gets fabric or material from the third world manufactures. They contain low-profit margins, and it seems beneficial for the company.
Threats of Substitutes
The threat of substitutes is high due to the availability of different substitutes. It has been revealed that fast fashion retailer and expanding the business in different countries, including Sweden and the United States. Customers in these regions have several options to adapt to the related fast fashion trend.
Threats of New Entrants
The threat of new entrants is high. New arrivals in the market are coming up with the differentiation and imitation capability. New arrivals are talking about benefits due to fewer entry barriers. The company considers this threat in strategic business considerations.
Competitive Rivalry
Main competitors of this company are Fast Retailing, Inditex, Arcadia Group, Abercrombie & Fitch, Boohoo, American eagle Outfitters, Asos, and Missguided. The rivalry in the fast fashion retail industry is high because these competitors are operating globally and grabbing the immense range of customers along with the high-profit margins (Abildstrom, 2017).
For example, to beat competitors in Jakarta, Indonesia, H&M has intended to sustain its quality standards and a come up with the best price for customers. The competition is high due to the emergence of local fashion retailers. However, H&M has maintained its global reputation effectively (Hm.com, 2013)
Competitive Positioning
The competitive positioning has been enhanced by the company through differentiated products for customers. The firm aims to be the first company to streamline the new fashion trends. People in the market perceive that they can integrate the latest fashion trends by this retail giant as compared to other competitors.
Cheaper Offerings & Hard-Discounters
H&M is looking to offer discounts to customers to enhance the visibility of sales and attractions. It has been revealed that 23.9% of the company’s offering is triggered by discounts (Smith, 2015). The purpose of the company is to depict the high rate of discounts each month. Promotion codes are offered to customers to get benefits each month. The company has maintained or managed a healthy inventory, and it is offering fashionable products with new discounts which will be a hard discount for the company.
Influence of social media and Internet on Fashion Sales
The influence of social media on fashion sales is positive. Concerning the target market and segmentation, it seems a great opportunity for the company to increase the rand appeal on different social media channels. The impact is positive due to better customer interactions and valuable feedback, which provides a lead towards improvements.
Sustainability Concerns
The management of the company is leading the sustainable future. In the apparel industry, sustainability concerns can be seen, especially in the United States. Even in Sweden, this fast fashion retailer has depicted these concerns. For Instance, the use of sustainable cotton and man-made cellulosic are some sustainable production concerns to reduce the environmental impact. The collaboration with UNICEF to provide baby take is a great social contribution by the company.
Smaller Chic Fashion Outlets
Smaller Chic fashion outlets of H&M need renovation. Fluorescent lights along with the wide windows are included in stores to improve the environment. Fashion Outlets have been changed through nicely displayed clothes.
Brand’s Response to Threat of New newcomers
Brands have responded to the newcomer in the competitive market. In different ways, firms responded to reduce the impact of other companies. Asos, Boohoo and Missguided, established brands, have responded to the threat of new arrivals through creating several entry barriers. For Instance, differentiation is a key threat to new arrivals because it seems tough to make the difference early in the market. Also, the threat of new entrants has been tackled through increasing the switching cost for customers. Access to the distribution channels of these brands in different countries is remarkable. Higher capital requirements trigger fast fashion, and it also looks like a prominent entry barrier for new arrivals.
Internationalization of the Big Brands
Asos, Boohoo, and Missguided have effectively internationalized the business. The internationalization of these established brands is triggered by business expansion, localization, and cultural integration. This process can be aligned with the drivers illustrated by yip (2000).
Linked to the Drivers Illustrated by Yip (2000)
Asos contained the internationalization through getting the competitive advantage over other competitors in the United Kingdom, United States, and many other countries. It is the prominent global driver for this brand to make the difference. On the other hand, Boohoo has internationalized its business by depicting the favorable logistics. Access to the best distribution channel has made it possible for this fashion brand to spread around the globe. Missguided, a prominent retail chain of United Kingdom, has internationalized through integrating with the common consumer needs. This company is serving women aged 15 to 35. Thus, the business expansion is done through meeting the needs of this particular target market segment.
An example of internationalization is the H&M expansion in Paris. Paris contains a competitive fashion market, and the firm has taken different initiatives to make the difference. For Instance, H&M Haussmann flagship in Paris depicts the success story. People love fashion in this market, and the management has targeted addicted people through selling attractive pieces at best prices (Sortiraparis.com, 2018).
Market Entry Strategies: H&M
The prominent market entry strategies are merger and acquisition, strategic alliance, franchising, and import/exports. The wholly owned subsidiary can be costly for these international brands including H&M. Mergers & Acquisition and franchising are suitable strategies to start business in the new country.
CAGE
Cultural, administrative, geographic and economic factors have been considered by the company to expand the business. Similarly, international brands also considered these factors to gain success. Cultural integration to integrate with local fashion trends and administrative interaction to manage and maintain the local workforce are top considerations in the internationalization process. Geographical consideration is depicted to meet needs of customers in a particular area or region
Examples of Market Shares, Pricing Policies, Product Quality
Source: https://edited.com/blog/2017/10/asos-fast-fashion/
Source: https://edited.com/blog/2017/10/asos-fast-fashion/
Examples of Availability and Product Range, Use of Technology, and supply chain
The fast fashion retail has continued the transition. It seems like a journey of traditional fashion retail to fast fashion retail. The example of misguided in terms of technology is in the limelight. Misguided has created the app to make the product available in the region for all customer segments. In the draper digital festival, the company is awarded as best app designer and best digital market leader (Abildstrom, 2017). Boohoo, on the other hand, has initiated celebrity endorsement on Instagram to target 16 to 24 customers. The product range is wide, and the firm is looking to enhance the brand appeal. The supply chain efficiency of Asos is quite prominent. For Instance, based on effective logistics, the company has started the same day delivery services in Leeds. Same intentions are to be carried in the United States of America (Snowdon, 2017).
Main Opportunities and Threats: H&M
Capability and Resources of the Successful big Brands
The big fashion brands have different capabilities and sources. Based on these capabilities and resources, these brands can gain a competitive advantage. In this competitive market, the biggest opportunity is to come up with unique or creative fashion products for customers. Customers are willing to pay high prices for unique products, and it can create a positive impact on the company’s revenue streams. Business expansion is also necessary. The business expansion is also a great opportunity for Asos, boohoo, H&M and misguided. They can reach these areas, which are undone and grab customers, especially in Asian regions. The financial capability of the firm is strong, and it can justify the expansion. The biggest threats are sluggish economic conditions, differentiation of competitors, new arrivals, and increasing online fashion platforms.
The road to Strategic Plan
It links to the strategic plan because the business expansion and competitive advantage are included in the key strategic considerations. The strategic plan of these brands, such as H&M, is to increase its production capacity and become a top leader in the fast fashion industry. Evolvement with time is one of the key strategic considerations.
Fast Fashion Sustainability
The fast fashion is to be sustained by these brands. People are aware of the fashion market, products, and the latest trends. The millennial and new generation like to be recognized by wearing fashion products. People’s awareness and assertiveness are increasing, and it is the major factor regarding fast fashion sustainability.
Value Proposition Offered to Customers
The value has been created for customers through quality, uniqueness, and availability. In the competitive market, H&M established an international brand, has depicted its value chain process regarding design, raw material, yarn production, garment production, sales, customers, and recycling. Combining all these elements, broad differentiation is possible, and it attracts customers to make buying decisions.
New Entrants
Some new arrivals are in the limelight due to their uniqueness and possible market entry in different regions. These new entrants are Carolina Santo Domingo, Attico, lee pfayfer, Rejina Pyo, and kitri. These are new brands, and these are to be expanded in different fashion markets. H&M has to consider the expansion and differentiation capability of these new entrants in the United States, United Kingdom, Sweden, and many other potential markets.
Is the High Street under Threat?
The high street is not under any threat. In the United Kingdom, new entrant wants to start the business from the high street fashion. Brands, especially new brands, have to create hype by integrating the latest fashion trends in the high street. With new entrants, booming high street fashion can be observed along with intense competition.
The positioning of New Entrants through Technology, social media, and creativity
H&M, being a new entrant in the United States and the United Kingdom, has used technology, social media, and creativity to position better in the minds of customers. H&M has used social media channels to visualize and simulate products to customers. The management has created its page to visualize products. Websites or social media is the key marketing platform for this company. However, the use of technology, social media and creativity can be depicted through some key examples.
Examples from Marketing Campaigns
· Apps and Direct Delivery to Homes
The new website and mobile app of H&M have justified the disruptive innovation in the competitive fashion market. Traditional order booking and visualizing process are eliminated to streamline new methods. New application features include payment by Pay pal, searching for out-of-stock items, and reviews and rate of products. The option of live chat is a prominent change in the mobile application, which changes the customer interaction experience. The same day delivery is another example of the disruptive innovation in the fast fashion market. With trackable logistics, the firm has tested this same day delivery in Berlin and intended to start operating in other countries. The form charges 5.99 Euros for the same day delivery (Ecommercenews.eu, 2018)
· Celebrity Endorsement
Celebrity and designer collaboration is a key marketing approach for the company. The association with David Beckham, Kylie Minogue, Lana Del Rey, and Miss Paradise seems worthy on the different digital media channels. The firm is promoting its new fashion products or launching through celebrities. Creativity is a key trait that the company has shown when containing celebrity endorsement. These celebrities streamline the creativity of the fashion appeal through relative look, and it fascinates customers (Beyondcelebrity.com, 2013).
For example, Paris H&M is triggered by the French Charm. Female celebrities are used by the company management to enhance the positioning. The most important thing is to make the H&M flagship important in Paris, and the management is quite up to it (En.vogue.fr, 2018).
· Newcomers to this Market
Again, in the context of these marketing campaigns, newcomers also intend to grab customer attention. These newcomers are looking to streamline the broad range of products. H&M’s latest association is Miss Paradis. Other companies in the fast fashion retail intend to change celebrities to target multiple aspects. Tthey want to differentiate the marketing process as well to increase the impact.
· Appeal and Channels to Attract Customers
In the fast fashion market, the management of H&M comes up with cheaply manufactured clothes for customers. However, the use of celebrity endorsement is good for this company to upgrade its brand image. The most important thing is to streamline or spread values through different celebrities, which are defended by the company. The brand appeal in Sweden, the United Kingdom, and the United States are increased through the frequent celebrity change. It is due to cultural integration and a different promotional message. For example, H&M uses Lana Del Rey to promote vintage and romantic brands. On the other hand, association with Karl Lagerfeld is triggered by Chic and creative designs. To attract customers to potential markets, the firm used celebrities to promote limited edition clothes. The purpose is to enhance the attraction and sales (Mauranedanlos, 2016).
Conclusion
In the end, it is to conclude that H&M has used several business and marketing traits to become a well-recognized brand in the fast fashion industry. Despite facing tough competition, the firm has stuck to its core competencies to provide value to customers. Fast fashion trends and internationalization, opportunities, threats, and marketing campaign examples have been elaborated along with several insights. Business sustainability is possible through strategic considerations, and H&M has done it effectively in different countries. The expansion in the United States and many other potential markets is based on the current business situation.
References
Abildstrom, (2017). 5 Things Fast Fashion Brands Are Doing Well. https://www.launchmetrics.com/resources/blog/
5_things_fast_fashion_brands_are_doing_well
Beyondcelebrity.com. (2013, January 29). Best H&M Celebrities and Designers Collaborations Over the Years. Retrieved November 2, 2018, from https://beyondcelebrity.com/2013/01/29/best-hm-celebrities-and-designers-collaborations-over-the-years/
Ecommercenews.eu. (2018, July 16). H&M tests same day delivery. Retrieved November 2, 2018, from https://ecommercenews.eu/hm-tests-same-day-delivery/
En.vogue.fr. (2018, May 16). H&M are creating the perfect Parisienne’s wardrobe. Retrieved from https://en.vogue.fr/fashion/fashion-news/story/hm-are-creating-the-perfect-parisiennes-wardrobe/2213#1-1
Gilliland, N. (2017, June 28). Four factors fuelling the growth of fast fashion retailers. Retrieved November 2, 2018, from https://econsultancy.com/four-factors-fuelling-the-growth-of-fast-fashion-retailers/
Hm.com. (2013, October 5). H&M’S FIRST STORE IN INDONESIA OPENS ITS DOORS. Retrieved from http://about.hm.com/en/media/news/hm-opens-in-indonesia.html
Kexin. (2018, June 11). Is Uniqlo Overshadowed By Trendy Fast Fashion Brands? Retrieved November 2, 2018, from https://omnilytics.co/blog/uniqlo-outshine-fast-fashion
Mauranedanlos. (2016, March 6). H&M: How to use celebrity endorsement? Retrieved November 2, 2018, from https://modernbuyerbehaviour.wordpress.com
/2016/03/06/hm-when-cheap-turns-into-chic/
Petro, G. (2018, August 12). All Fashion Is Fast Fashion. Retrieved November 2, 2018, from https://www.forbes.com/sites/gregpetro/2018
/08/12/all-fashion-is-fast-fashion/#545a3e3e62f6
RobD. (2018, February 1). H&M – Nowhere to Turn. Retrieved November 2, 2018, from https://digit.hbs.org/submission/hm-nowhere-to-turn/
Russell, M. (2017, September 7). H&M indonesia turning plastic waste into cloths. Retrieved from https://www.just-style.com/news/hm-indonesia-turning-plastic-waste-into-clothes_id131601.aspx
Smith, K. (2015). The 5 things making Zara and H&M successful. Retrieved November 2, 2018, from https://edited.com/blog/2015/03/5-things-making-zara-and-hm-successful/
Snowdon, R. (2017, November 20). Asos to launch its Same Day Delivery service in Leeds today. Retrieved November 2, 2018, from https://www.yorkshirepost.co.uk/news/asos-to-launch-its-same-day-delivery-service-in-leeds-today-1-8867843
Sortiraparis.com. (2018, June 13). Opening of H&M Haussmann flagship in Paris. Retrieved from https://www.sortiraparis.com/interests/
shopping-fashion/articles/169998-opening-of-h-m-haussmann-flagship-in-paris/lang/en
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