H&m Competitive Advantages Strategy … Case Study
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H&M Competitive Advantage
H&M has a number of resources that allow it to excel in the fast fashion business. The fast fashion industry requires that a company has the capability to design and produce fashions very quickly, and sell high volumes of those fashions at low margins. H&M's business model specifically is to sell at relatively low prices, which in turn will enable the company to be able to compete with the fashion industry by offering similar fashions, but at lower prices, saving money on the design process.
What this means is that this is a difficult business in which to succeed with a small company -- size matters. H&M is a large international company with over 2200 stores, in 43 countries. This size makes H&M one of the largest apparel merchandisers in the world, providing it with the size needed to succeed as a fast fashion retailer. This size allows H&M to cultivate the other competencies that allow for it to excel in fast fashion. The size basically allows it to spread out the costs associated with knocking off designs quickly over a large volume of apparel sales.
The fast fashion business works a little bit differently than the regular fashion in business is that the companies in fast fashion will typically knock off the most recent styles, quickly, shortened the time to get a new design to market. This requires a particularly efficient design team -- H&M has the ability to afford such a team. It also has a considerable amount of institutional knowledge with respect to how to execute the knock off strategy. This is because the CEO is the grandson of the founder, and thus has grown up in the business, and an experienced head of the fashion department. All designs are centralized in Stockholm, so this is not a low-cost function, but one that is based on high levels of training and knowledge. The people who work in this department have a budget for traveling to fashion shows around the world to look for the latest styles to crib. This is one of the biggest expense areas for the company, but its high level efficiency and the company's ability to spread these fixed costs over a very large retail store network allow it to execute this effectively.
Marketing is another major strength/competency of H&M. The company has to sell a high volume of merchandise, and with its current size it must do so in a large number of countries. Further, it needs to turn over inventory quickly, as the entire point of fast fashion is to offer modern fashions, but at cheap prices so customers can use them for just a season or two at most, to remain as fashionable as possible at a low price. This means that the company needs a lot of customers, but that they also need to attract the sort of fashion-forward customers whose fashions can influence others in their circle. To that end, H&M has demonstrated that it is skilled both with conventional marketing and with social media marketing. This helps the company keep a youthful customer base, but also to cultivate a large global customer base that allows it to sell a high volume of clothes and turn over collections quickly.
The other "fast" aspect of fast fashion, after design, is manufacturing. The fast fashion business relies on shortening the time from design to customer, and manufacturing is a key element in this. H&M does not own any manufacturing facilities, but uses contractors around the world, and in order to maintain the high quality of its contractors it has local offices in the countries of production in order to monitor existing suppliers and to seek out new ones as well. This manufacturing competence is combined with logistics experience to get the goods to H&M outlets all over the world. Typically, when H&M enters a country, it wants to saturate a given city with multiple stores in order to make its warehousing and importing costs as efficient as possible.
All of this excellence is only possible with great people, in particular on the management side, since much of this what makes H&M excellent is the behind-the-scenes management. The company has, through virtue of its reputation and through virtue of its growth, been able to facilitate a strong talent pipeline that brings in good people, trains them in H&M's systems, and… [END OF PREVIEW]
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