h&m - strategic management group presentation

Fashion And Quality At The Best Price

By:Haji Mahmud Haji Mohamed, 011774

Fahad Ramzan, 012279Ng Kok Kheing, 012163Murtaza Amin, 012213

Trishakti J.B. Rana, 012016

The Analysis Process

External Analysis

Internal Analysis

Competency &

StrategyConclusion

Reviewing H&M’s strategy to increase market share in the fast

fashion retailing industry

Background

objectives

Background

External Analysis

Internal Analysis

Competency

StrategyConclusionBackground

H&Mkey

milestones

1947

Hennes women clothing started in

Sweden

1968

Acquired Mauritz Widforss

H&M is created

1976

First Overseas Store:

London

Listed in Stockholm Stock Exchange

1974 Global Presence

Continues...

200020062007

United States

Middle East

Asia

1998

eCommerce

H&M

43countries

2,472

stores

94,000

employees

2011

in figures

129billionSales including VAT SEK

15.8billionProfit after tax SEK

7th rankedGlobal Fashion Goods Retailer

H&M

External

Analysis

External Analysis

Internal Analysis

Competency


Porter’s 5 Forces Industrial Analysis

INDUSTRY COMPETITORS[HIGH]

• Many Companies• Global reach – many incumbents• Little product differentiation• Diversity of product range of

competitors• Medium brand loyalty – Fashion

trends and cost based• Matured market knowledge• Matured distribution channels

BUYERS[MODERATE]

• No switching cost• Many customers mitigated with many

companies• Ease of information for trends, pricing• Low product differentiation

POTENTIAL ENTRANTS

[LOW]• Current Manufacturing Supplier

Forward Integration (Know-How, Resource) however branding mitigate threat of market share

• Low barrier of entry for low scale local market however distribution network and economies of scale mitigate global threat

SUBSTITUTES[LOW]

• Custom tailor made alternative• Counterfeits products

SUPPLIERS[MODERATE]

• Many Outsourced Apparel Manufacturers

• Many raw material (cotton, fabrics) suppliers

Competitive

Strategies

External Analysis

Internal Analysis

Competency


Competition Landscape

Revenues

Profits Revenue Per Store

key matrixes

H&MInditexGAP

Legend

2007 2008 2009 2010 2011 -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010 2011 -

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

Number Of Stores

2007 2008 2009 2010 20110

500

1000

1500

2000

2500

3000

2007 2008 2009 2010 20110.00

2.00

4.00

6.00

8.00

10.00

12.00

Reducing Rev Per Store As Store Increases

Reducing Profits And Slowing Revenue Growth

H&M Current StrategyEurope: Focus Market: UK – 213 Stores, SEK 37.2m/Store 81% Stores, 83.5% Total Revenue Dependency On Germany 22.9% Total Revenue

Internet Retailing – 8 Countries

Middle East: Franchise arrangements

United States: Focus Market 233 Stores SEK 39.5m/Store

China: Focus Market 82 Stores SEK40m/Store

South East Asia: Thailand, Indonesia

and Malaysia as a follow up to Singapore’s Success

Globally 10% - 15% New Stores

Annually 90% High Income Profile

Countries Market Segmentation With 5

Brands Work With Famous Fashion

House & Personalities

Relook Market Expansion Plans

Expand e-Commerce Markets

Proposed Competitive Strategy

Gen-Y Focus Marketing

Re-Examine Franchise Model


Less Dependency On Europe – Sovereign Debt

Euro & US MIG Downward Trend

Asia Pacific MIG Doubles

Central South America - Unexplored Market

Shift Regional Focus

Market Expansion Selection US, UK – Low RPS Yield –

Sub SEK 40m

Possible Store Saturation: >200

Suggested Markets: Japan, South Korea and Russia

18%

36%10%

28%

2% 6% 10%

22%

8%

54%

2%5%

2009

2020

Global Middle Income Group Composition By Region

North America

United Kingdom

Japan South Korea

Russia0

20

40

60

80

100

120

0

50

100

150

200

250

Rev Per StoreTotal Stores

Store UnitsRPS SEK (m)


Pioneering Into NZ and Taiwan – No Zara presence

Follow Zara Into Australia

Opening New Markets

Monitor Lower Middle Income

Experiment Indonesia

Other Potential: Philippines

87%urban populationUSD

29,350HI GNI

36%gini co-efficient

New Zealand

15%Gen-Y Population


22,900HI GNI


Taiwan

11%

Gen-Y Population


46,200HI GNI

31%gini co-efficientAustra

lia14%

Gen-Y Population


2,940LMI GNI


Indonesia

18%

Gen-Y Population

E-Commerce & Franchise Models

E-Commerce Contribution: Zara 7% (2014), GAP (8%)

Target France, Japan and South Korea

Mechanism to enter new market

Mobile Payment Increasing in APAC

Expand e-Commerce

Markets

Franchise Model Review

Lowest RPS @ SEK 17m compared mean of SEK 44.50

1.1% of Total Revenue 0.0

20.0

40.0

60.0

80.0

100.0

120.0104.0

17.6

Mean SEK 44.50m


Gen-Y More Resilient To Economic Situation

Marketing & Branding With Celebrities Collaboration For Gen-Y


9%

26%

36%

29%

5%

20%

38%

37%

8%

20%

38%

36%

9%

19%

47%

25%

7%

21%

38%

34%

SeniorsAllShoppers

Gen Y Gen X Baby Boomers

How much shopping behaviour has changed due to economy

Significantly

Somewhat

Not very much

Not at all

Gen Y: Shoppers born 1982 to 2000Gen X: Shoppers born 1965 to 1981Baby Boomers: Shoppers born 1946 to 1964Seniors: Shoppers born prior to 1946

Source: Retail Forward ShopperScape TM, October 2009

Supplier

Strategies

External Analysis

Internal Analysis

Competency


H&M Current Supply Chain >700 Outsources Suppliers

Asia & Europe Quality Control: Training &

Audit CSR Activities

Largest organic cotton

customers

Finished clothing shipped to central storage in Germany

Mostly via Sea

Goods shipped to Regional centres for distribution

Internal Designers and collaborations

Self Owned or Franchise Stores

Proposed Supplier Strategies

Production Cost Controls

Raw Material Alternatives

Enhanced Distribution

Routing

Enhanced Distribution Routing

Speed To Market Currently Takes 15 Weeks To

Deliver (vs. Zara@4 weeks)

Enhanced Distribution Routing

Speed To Market Create Multiple Regional

Distribution Centres – China and North America

Reduce Distribution Time Frame A Few Weeks

Shipping Cost Reduction Possible


China’s Cost Of Production Getting Higher

Look For

Alternative LocationProposed: Vietnam

Distribution Costs Reduction With Regional Distribution – In Line With Asia Pacific Strategy

Increasing Cost Of Production

Textile Cluster

established

developed

Infrastructure

heavyFDI investment

Vietnam

Portsproximity

Labour

cheap and experienced

Labour Costs

Rental Costs

Fixed Costs

2007 2008 2009 2010 20110%

5%

10%

15%

20%

25% 23.5%22.7%

21.3%

22.7%

18.5%

H&M Operating Margin

Raw Material Efficiency & Alternatives

H&M Highest Organic Cotton Customer

Look At Production Efficiency At Outsources Partners – Reduce Wastage

Look At Alternatives Such As Organic Hemp

Increasing Cost Of Raw Materials

2006 2007 2008 2009 2010 2011Year

0

50

100

150

200

250Cotton Price(USD)

Organic Hemp

Sustainable

material

costs lower by

80%

Extreme Rise in Cotton Prices

Internal

Analysis

External Analysis

Internal Analysis

Competency


H&M Resource Based Viewresources

Financial Resources

Profitable CompanyROE 35.8% vs Zara 28%

ROCE 47.1% vs Zara 37%

Organisational Resources

Large Distribution Network

20-30 Distribution Offices Regionally

Physical Resources

750 Outsourced Manufacturer

Central Distribution Warehouse In Germany

Technological Resources

Online Shopping System

IT System For Logistics, Sales Tracking and Stocks

Human Resources

94,000 Employees

Work Rotation To Share Working Culture

Innovation Resources

50 Pattern Designers

100 Designers 100 Buyers External Fashion House Collaboration

Reputational Resources

Strong Brand Value – 60% Higher Than Industrial Average

Rated 23 (vs Zara 37) Global Brand Ranking

H&M

Tan

gib

le

Resou

rces

Inta

ng

ible

R

esou

rces

H&M Resource Based Viewcompetencies

Valuable Rare

Costly To Imitate

Properly Organisation

Financial

Organisational

Physical

Technological

Human

InnovationReputational

Competitive ParityCompetitive Parity

Competitive Parity

RESOURCES

Sustained Competitive Advantage



Temporary Advantage

External Analysis

Internal Analysis

Competency


Competency

Strategy

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational

External Strategies Internal Resources Internal Strategies

Existing: Strong Financial Ability To Support Required Strategies

No Specific Action Required

Financial

Competency Strategy



Routing



1Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: Structure to support multiple warehouse sites

Existing: Franchise model structure

Organisational

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: Building Of More Plants, Properties and equipment

Physical

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: Social Networking Sites Capabilities And Support

m-Commerce capabilities

Existing: e-Commerce currently running

Technological

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: Personal Clothing Labels For Internal Designers

Recruitment Of Young Talents From Design Competition

Existing: Successful HR Management With Increased By 7,000

Human

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: R&D Into Design Using Alternative Materials

Innovation

Competency Strategy



Routing



Review Market

Expansion Plans

Review Franchise

Model

Increase e-Commerce

& m-Commerce

Innovation

Financial

Organisational

Technological

Physical

Human

Reputational


New: Using Local Celebrities

Existing: Using Famous Fashion House & Celebrities

Reputational

Analysis Objective: Reviewing H&M’s strategy to increase market

share in the fast fashion retailing industry

Conclusion

Competitive

Strategies

Supply Chain

Strategies

Internal Resource

s Strategi

es

The END

h&m - strategic management group presentation

Business

increase market

enhanced distribution

ms strategy

focus marketing

efficient

commerce amp

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amp