Paper Example on Strategic Management and Competitiveness: H&M Company

Introduction

Strategic management is referred to as the continuous planning, monitoring, assessment and analysis of everything that is essential for a company to achieve its goals and objectives (Hitt, Ireland & Hoskisson, 2012). Dynamic innovations, changing technological trends and customer needs force companies to change their ways of decision making if they have to remain strategically successful. Strategic management creates a need for a commitment towards strategic planning that shows an organization's ability to establish both long and short-term goals with an aim of determining the course of action required in order to reach those goals. It is part of a management technique used to plan for future prospects.

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The main focus of this paper is to find out and analyze the significance of Strategic Management and Strategic Competitiveness in a company. The company of interest will be Hennes & Mauritz AB (H&M), a Swedish multinational company. The reason I chose H&M as a case study is because of their exceptional business process strategy as well as huge popularity and reputation all over the world. In order to reach my objectives, I need to make an in-depth analysis of H&M by all the company dimensions.

Hennes & Mauritz is a multi-billion company in Sweden established in 1947 by Erling Persson (Ding, 2011). The company has its headquarters in Stockholm, Sweden and runs its operations in other countries too such as Europe, Asia and North America. It also has a presence in 38 other countries around the world and hires about 87,000 workers in a year (Ding, 2011). The main purpose of H&M is to offer its clientele a wide choice of fashionable and good apparel at affordable prices. The company engages in the continuous development of its collections in a way that customers find something different and unique each time they make a visit to the store. This collection is the result of more than 100 designers and pattern makers located centrally (Petro, 2012). These collections accommodate a range of people of all ages including clothing, cosmetics, accessories, and footwear for men, women, children as well as teenagers. One of the differentiating factors of H&M is the collaboration it has with renowned designers such as Viktor & Rolf and Karl Lagerfeld. This enables them to come up with impeccable new and fashionable collections that acquire huge attention in the fashion scene. This paper is focused on the strategic management and strategic competitiveness of H&M Company. This will involve an in-depth analysis of the company's financials, the effects of globalization, company structures and beliefs as well as the impact of technological advancement. In the end, the results will vividly show an image regarding the strategic management at H&M as well as recommendations that will assist the company to improve on their development goals.

By the end of 2007, the sales made by the H&M group saw an increase by 15 percent to attain SEK 92 billion and consequently, the profit after tax and financial deductions grew by 21 percent to SEK 19million (H&M Company, 2008b). The increase in both sales and profit was attributed to the launch of a new brand named Collection Style (COS) by the group ((H&M Company, 2007a).According to H&M Company. (2010a), the company's balance sheet during the period of 2008 and 2009 indicated a rise in the working capital ratio from 2.89 to 3.25 in the year 2009. The increase demonstrated that H&M was raising its capacity as well as an indication of its ability to easily convert its assets into cash to cover its obligations.

In 2010, H&M acquired a 0.9 percent share of the global market for the apparel retail and this saw the company achieve a turnover of SEK 108,483 million in the same year (H&M Company, 2010a). Subject to the distribution of assets at H&M I 2010, the total fixed assets were worth SEK 12,469 which is estimated to be 26.1 percent of the entire assets(Ding, 2011).To determine the overall performance, an efficiency of operations and investment policies of H&M, a ratio and cash flow analysis were applied. As indicated by H&M Company (2010a), the overall ROE for the company rose from 44.5 percent in 2009 to 46.5 percent in 2010 with an increase in operating ROA attributed the improvement. Petro, (2012) note that data from Bloomberg indicates that the industry average ROE is approximately 17.8 percent. This indicates that H&M significantly outshine the industry and is thus an evidence of a sound business model.

The gains made by H&M are in a great way traced to the effects of technological and globalization. Since the last decade, the issues of technology have substantially developed leading to customers acquiring better knowledge about their buying choices by use of social media and other tools of passing information. In the same way, online shopping by use of apps and websites has become a trend among customers (Petro, 2012). Additionally, with the advancement of internet and online shopping, buyers are now shifting their habits form purchasing products from retail shops to ordering online. This is the reason why H&M has invested heavily in good technological systems that are tailor-made to meet the expectations of their current and potential customers with increased effectiveness. The opening of online stores by H&M has made it possible for consumers to purchase the company's products with so much ease and convenience. Also, the use of the 3D printing is a milestone by the company in their quest to create a better global customer taste and gain a larger share by use of stunning designs digitally made (Ding, 2011).

Thanks to globalization, fashion globally has become more homogeneous more than any other time before and thus enabling easiness in company expansion internationally. Today, globalization is more pronounced and it has a lot of effects on the economy and businesses across the world.in the fashion industry many companies are seeking to take over new markets in a bid to expand their business operations. H&M is a perfect example to illustrate the impacts of globalization on corporations. H&M has chosen an expansion strategy aimed at increasing the number of operating stores around the world. This is characterized by the tendencies of the company to look into a market's potentials in terms of purchasing power, outstanding economic growth and political risks before establishing a new branch(Ding, 2011).in this regard, H&M conducted a strategic analysis and its stores are now located in several countries such as Russian, Thailand, Singapore, France and Mexico.

Applying industrial organization models aid businesses to choose the best pricing method as well as the output level for its market. They provide an economic picture of a given form in an industry. The model applies game theory to determine the actions and reactions of a company with regard to competition (Petro, 2012). The resource-based models emphasize how a company's internal capabilities and its internal resources contribute to value-creating strategies (Priem & Butler, 2001). These resources could be in the form of equipment, workforce skills, brand names, patents, and availability of proactive managers. Therefore, according to this model, the resources of a company are critical in establishing a suitable strategic action. H&M is a well-established firm in the clothing industry. With the resource capacity H&M has, it can create a business model that is difficult to be duplicated by others and thus giving it a more competitive advantage. Through the use of in-house and outsourced production, the company can be able to create efficiencies. One example of a key resource at H&M Company is the efficient use of independent suppliers (Ding, 2011). Through the use of best suppliers, the company has the potential of offering high-quality clothes and very low prices. Resource-Based Model holds that a firm needs key resources to achieve success. An illustration of this at H&M is the outsourcing of production, independent suppliers and low costs (Petro, 2012).

Since the company does not operate in a vacuum, the presence of stakeholders has an impact on how the company will achieve its goals. Stakeholders are categorized into internal and external (Ding, 2011). H&M has developed various programs that are tailor-made to meet the interests of different shareholders with the view of achieving its strategies. According to H&M Company (2011a), the company in 2011launced an incentive program for its employees which states that they can be included in the share of its profit after serving for five years. This plays a key role in boosting the morale of the workforce and consequently led to attaining companywide strategies. In addition, H&M has over the years kept regular rapport with other external stakeholder groups such as the suppliers, the government and non-governmental organizations, communities around as well as policymakers (Ding, 2011). As indicated by H&M Company (2014a), the collaboration is done by way of regular meetings, surveys and active involvement in major multi-stakeholder initiatives. The primary reason to doing this is to see an improvement of the company's performance a business entity and as a corporate citizen (H&M Company, 2011a). About the government, H&M has actively exhibited support for various policies such as product, tax and security policies.

Conclusion

In conclusion, the last decade has seen Hennes &Mauritz Company attain its success in the global fashion arena by strategically applying sound leadership structures, and business models. This has enabled it to provide the market with better quality products at low prices and thus enabling it to remain competitive in the global fashion industry.

References

Ding, H. (2011). The importance of strategic management: A case study of H&M.

H&M Company. (2008b) sustainability Report 2008. Available at: http://sustainability.hm.com/content/dam/hm/about/documents/en/CSR/reports/CSR%20Report%202008_en.pdf (Accessed: 23 February 2017).

H&M Company. (2010a) Annual Report 2010. Available at: https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/cision/2010/1277793_en.pdf (Accessed: 23 February 2017).

H&M Company. (2010a) Annual Report 2010. Available at: https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/cision/2010/1277793_en.pdf (Accessed: 23 February 2017).

H&M Company. (2011a) Annual Report 2011. Available at: https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/cision/2011/1573157_en.pdf (Accessed: 23 February 2017).

H&M Company. (2014b) Sustainability Report 2014. Available at: http://sustainability.hm.com/content/dam/hm/about/documents/en/CSR/reports/Conscious%2 0Actions%20Sustainability%20Report%202014_en.pdf (Accessed: 26 February 2017).

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.

Petro, G. (2012). The future of fashion retailing-The H&M approach. Forbes Lifestyle.

Priem, R. L., & Butler, J. E. (2001). Is the resource-based "view" a useful perspective for strategic management research?. Academy of management review, 26(1), 22-40.