Research Paper on Fashion Industry Growth: Strategies to Compete in Intense Markets

Introduction

The fashion industry has grown tremendously in the past decades and today, the sector is characterized by intense competition from renowned fashion brand designers like the H&M Corporation among others. Today, to promote their success in highly competitive market environments, fashion corporations should promote their value chain and execute a good selection of their production partners. Moreover, companies should have effective management of their supply chain and also assess the risks and opportunities that are evident in all aspects of their business strategies. The following critical analysis will discuss H&M's value chain, selection of production partners, the company's supply chain management and assessment of the risks and opportunities present in the company's business strategy. The stated aspects will be compared and contrasted with those of H&M Company's competitors, particularly Inditex (Zara), Gap and UNIQLO. The report will be employed as a guide to startups in the fashion industry that can benefit from the strategies that have been employed by H&M in becoming among the top players in the sector. Today, H&M has attained a leading position in the global fashion sector, thanks to the company's unique business concept as well as its ability to merge different designs and at affordable prices.

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Factors Influencing the Strategic Choices for H&M

The elevated level of competition in consumer spending for fast-fashion is the core factor that has influenced the strategic choices made by H&M Corporation in all its market operations. Also, the company has realized that there is a large customer base for high-quality fashion items in the market. However, most of the high-quality fashion brands that are retailed by reputable fashion companies in the market are significantly high and they do not favor the low and middle-income demographics in the global market. As a result, H&M has employed its strategic model - 'cheap-and-chic' - to satisfy the elevated need for fashions items in the market (Fletcher & Tham, 2014; Hitt, Ireland, & Hoskisson, 2014). Among the greatest factors that have promoted H&M's success is the market is their ability to sell high-quality fashion products to buyers in all economic segments. Unlike other competitors like Inditex, Gap, and UNIQLO where price defines quality and fashion in products, in H&M, there are products for all types of buyers. Subsequently, this has offered H&M Corporation a unique market advantage over its competitors since the company has been able to enjoy an elevated level of sales and profitability. The two factors can be attributed to a heightened level of consumer spending in the market.

Global expansion is a primary goal for large corporations (Mujtaba & Patel, 2007; Xin, Yuan, & Weiru, 2018). Foreign direct investment (FDI) allows corporate entities to elevate their level of sales by reaching a wide customer base (Diyamett & Mutambla, 2015). Although there are several reasons why most companies expand to other nations, high global demand for products is arguably a fundamental factor that propels a corporation's need to make FDI (Srinivasan, Stank, Dornier, & Petersen, 2014). Based on this consideration, to a large extent, the elevated level of consumer spending and demand for fashion items has made H&M to increase their global expansion by creating new stores in the market. For instance, in 2014, H&M managed to create 379 new outlets around the world (Regner & Yildiz, 2019). The company also started flagship stores in regions that are considered prime in fashion demand like Milan, New York, and Munich and also expanded to new markets situated in the Philippines and Australia. Despite the massive global expansion undertaken by H&M in 2014, the company still managed to have revenue growth of approximately 3.8% (Regner & Yildiz, 2019). Such success can be attributed to the elevated demand for fashion items in the global market and the H&M efforts to meet such demands as one of its core strategic plans.

Impact of Competition on H&M Strategy

An ideal market strategy enables an organization to brand its business and secure loyalty among its targeted customer segment in the market (Cavallone, 2017). Factors such as intense competition from rival competitors can influence the direction of an organization's market strategy (Dagnino, 2012). In 2014, the investors of H&M had come to believe the Corporation's simple model that was centered at retailing high-quality fashion products at prices slightly lower than those of its competitors (Regner & Yildiz, 2019). With the elevated demand for fashion products coupled with the economic challenges of customers in the global market, H&M Corporation could be the most preferred fashion brand by many potential customers. Nevertheless, the success of Zara, a leading competitor to H&M made the investors of the latter corporation to question the sustainability of the entity's market strategy. Zara retailed its products at a higher price than H&M and it was still able to attain a higher revenue rate of growth than the latter corporation. The occurrence was instigated by the elevated level of customers' spending in the global market. Additionally, this indication influenced H&M's need to change its retail strategy as a necessary prerequisite for its continued sustainability in the global fashion market.

After Zara's performance outmatched that of H&M, the latter corporation realized that low prices for high-quality products was not the only sustainable strategy to safeguard the company's continued success in the market. The UNIQLO business strategy in 2014 aimed at creating products that possess a sense of natural authenticity as well as flattering femininity to its customers (Regner & Yildiz, 2019). Contrary, Gap's business strategy in the same period entailed offering exotic, high-priced sporting apparel and footwear products that could be used for a variety of activities (Regner & Yildiz, 2019). On the other hand, Zara's market strategy was targeted at the young fashion conscious clientele with a preference for international fashion with the latest designs. Also, unlike its competitors in the market, Zara's market strategy was centered on promoting only two products - female lingerie and undergarments, which promoted the attainment of specialization and elevated profitability for the international organization (Regner & Yildiz, 2019). Such diverse but effective market strategies by the H&M's competitors brought out the need of the company to modify or improve its market strategy. The adoption of a new but effective strategy to support the traditional H&M's marketing model would enable the corporation to retain its competitive advantage in the global fashion industry.

Comparison of Business Models

In the fashion industry, most corporations strive to develop unique business models that can help them attain a competitive advantage over their rivals in the market (Pahl & Mohring, 2009; Rinaldi & Bandinelli, 2017). Having a good business model helps a business to remain relevant in the market over long periods (Verstraete & Jouison-Laffitte, 2011; Voigt, Buliga, & Michl, 2016). In sectors such as the fashion industry, organizations should create unique business models to promote the appeal of the products they retail to targeted customers (Hill & Jones, 2009). H&M has portrayed uniqueness in its choice of the business model in comparison to those of competitor brands in the market. Although the fashion industry has a large number of key players in the market, the top three rivals of the company are Inditex/Zara, Gap, and UNIQLO. All four entities have different unique models, which were designed to satisfy the fashion demands of different targeted customer demographics. In 2014, H&M model revolved around retailing high-quality products to customers through franchise stores situated in different parts of the world (Regner & Yildiz, 2019). Also, H&M business operated through leased stores and via the internet as well as in the form of catalog sales (Regner & Yildiz, 2019). The stated model was successful and it appealed to fashion-conscious customers with a high demand for high quality and affordable products.

Contrary, Inditex/Zara's model was an in-house design that possessed a highly controlled manufacturing and distribution network. The corporation had a team of professional designers with the capability of designing and creating unique fashion products that could be shelved at the organization's distribution centers. The stated business model was unique because it ensured that the targeted clientele had access to new fashion designs every week. Subsequently, large numbers of customers kept on coming back to Inditex's stores, to check for new fashion designs regular. The model was effective in developing a large number of loyal customers for the company, which arguably the fundamental reason why the company performed better than H&M in the fashion sector. On the other hand, Gap Corporation had a different model, compared to that of Inditex and H&M, which was also effective in promoting the company's success in the fashion industry. The model used by Gap Corporation directed the organization to operate in two fundamental segments -direct and stores (Regner & Yildiz, 2019). In the retail segment, Gap Corporation measured its success in terms of the results of the online business for all its business affiliates - Banana Republic, Athleta as well as Navy (Regner & Yildiz, 2019).

In the direct segment of the model, Gap measured its trading operations from the performance of the corporation's web-based brands. Unlike the models of H&M and Inditex Corporations, Gap model enabled the company to attain a large customers' demographic, both in the virtual (online) and physical fashion markets. The three stated models, however, were entirely different from the UNIQLO's business model. UNIQLO a unique model titled 'Specialty Store Retailer for Private Label Apparel (SPA), which featured all stages of business development from the designing and production of fashion products to the retail of items (Chow, Chiu, Yip, & Tang, 2017; Segers, 2016). In addition, to attain a competitive advantage in the market, UNIQLO kept a constant refinement of its model as a strategy of creating unique fashion products (Regner & Yildiz, 2019). Moreover, the SPA model enabled the UNIQLO Corporation to easily make adjustments to its production process and also made it possible for the company to reduce storage-operation costs like personnel and costs (Regner & Yildiz, 2019). The stated savings made the corporation to be in a position to retail its fashion goods at a fairly competitive price compared to those of rival companies in the market. Subsequently, the corporation was in a position to create a niche for itself in the highly competitive global fashion industry, as a retailer of high-quality affordable fashion products in the market.

Strategies Employed By H&M to Attain Competitive Advantage

H&M's value chain is centered on developing a good relationship with all its stakeholders that drive the success of its operations. In this case, the company strives to promote its reputation as a reliable distributor and retailer of high quality and low-priced fashion products in the market. Also, H&M has developed a good organization culture that supports all efforts by its personnel in creating unique fashion products for the global market (Regner & Yildiz, 2019). Moreover, H&M selects partners in strategic locations and those who ca...