Essay H&M in Fast Fashion: Continued Success?

3305 Words Oct 20th, 2014 14 Pages
Case Study:
H&M in fast fashion : continued success? by Patrick Regner & H. Emre Yildiz

Q1) Evaluate the external environment in which H&M operates in.
External environment refers to the challenging and complexity in which the firm operates. It is important to highlight the factors of the external environment because it is very critical to the success of the firm. PESTEL model and Porter’s 5 Forces (P5F) models will be used to evaluate the external environment of H&M. These models will determine how challenging and attractive the environment is for H&M.
1. PESTEL
PESTEL highlights 6 environmental forces namely political, economic, social, technological, ecological and legal (Johnson, et al. 2014). This model
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High
Expected retaliation


Costly to compete with incumbent as they have the economies of scale.
Low
Legislation or government action


Liberalisation of international trade has resulted in the increase of number of suppliers.
High
Differentiation


There is differentiation in style and concept of the apparel industry.
High

High threat of new entries would indicate that the industry is attractive and and could decrease the profit margin of H&M e.g.UNIQLO. However, these competitors must have sufficient financial resources to compete with the current incumbent in the industry. These new entries would have to build up experience over time in order to be on par with existing competitors.

2.2 THREAT OF SUBSTITUTE
Factor
H
L
Case evidence
Effect (High/low)
Price ratio/ performance



Not found in case study.

Low
Extra-industry effects



A substitute is still an effective substitute even if it is much more expensive. The lower the treat of substitute the more attractive the industry is.

2.3 POWER OF BUYERS
Factor
H
L
Case evidence
Effect (High/low)
Concentrated buyers


Large customer base – 2206 H&M stores in 43 countries
High
Low switching cost


Plenty of choices for the customer, they are price-sensitive and have the ability to look for bargains.
High
Buyer competition threat


Customers do not have the ability to supply on their own.
Low

With high

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