H&M case study

2950 Words Oct 5th, 2014 12 Pages
BUS 488 Strategy

Question 1
Evaluate the external environment in which H & M operates in.

PESTEL Analysis

PESTEL Analysis

Positive
Negative
Politics factors:

Economic factors
Poor economic situation in 2011 further intensified by increased competition

X

Margins started to erode due to increased cotton prices and rising production costs in Asia

X
Social factors.
H&M 's strategy recruit local people wherever it opens a new store.
X

Technological
Company aims to become part of its customers ' daily lives through its pages on Facebook, Twitter, Instagram, Google+ and YouTube, Youku and
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The risks involved are that choosing low-cost suppliers may not be able to coup with the increased demand in the retail industry and risks of low-cost suppliers do not have the quality standards.

Intensity of rivalry
High
Low
Number of competitors is
X

Industry growth rate is

X
Fixed costs are

X
Storage costs are

X
Product differentiation is

X
Switching costs are

X
Exit barriers are

X
Strategic stakes are

X

The intensity of rivalry is high. The industry 's compound annual growth rate was only 3.7% for the period 2007 to 2011. This slow growth rate and the large number of small players have intensified the rivalry in the industry. With the financials given in table 1 (page 577 in Exploring Strategy, Johnson, Gerry et al, 10th edition, Pearson Education Limited, 2014, by Patrick Regner & H. Emre Yildiz). H&M and its multinational competitors ' revenue for 2011 only adds up to $55.795 billion which is only 1.83% of the total market worth of $3049.5 billion in global textiles, apparel and luxury goods market, thus implying that there are much more players involved in the market and not limited to only these 4 multinational apparel companies.

Threat of substitute products
High
Low
The differentiation of the substitute product is

Rate of improvement in price performance relationship of substitute product is

There is no threat in substitute

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