Value Chain of H&M Essay

I believe that H&M’s future growth depends a lot on how they will expand online and their sustainability. H&M launched their online store in the US in 2013, but has had some negative response. They offer free shipping, but the costs for the returns will be deducted from the credit of the returned merchandise. Costumers believe that returns should be free or that they should have the possibility to return in stores, which at the moment is not possible. For H&M this is an issue because of the high volume and costs of returns. To stay true to their sustainable image,

A&F’s unique value chain distinguishes itself from other fashion retailers. In terms of sourcing and

The company H&M is a Swedish multinational corporation which lies in the fast-fashion industry which operates in 3900 stores in 61 different markets around the world. In 2015, it was ranked 21st in the best global brands with its next closest rival Zara ranked 30th and Gap is not even placed in the top 100 brands (Best Global Brands, 2015). In the past fiscal year, H&M has generated high profits and its revenue reach $22.3bn (H&M, n.d.). In terms of profitability, Zara is considered its closest rival with revenue of $23.7bn in the past fiscal year (Global 2000-Forbes, 2015) H&M’s vision is to provide fashion and quality at the best price in a sustainable way in order to attract young, modern and cost-conscious customers.

Global sourcing is a technique of strategic sourcing in the global strategy, which is an effective approach as a part of organization’s procurement section. The objective of global sourcing is to develop global efficiencies in the delivery of a product or service for the firms achieving a sustainable competitive advantage and this is an important weapon have been focused in the 21st Century. The well-known organization, Hennes and Mauritz (H&M) is one of the largest international fashion retail and production house with the great deal of businesses all over the world. In the today’s competitive market and

The value chain is mean a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The value chain of Michael Porter is a model helps to analyze the specific activities through which firms can create value and competitive advantage. According to this value chain, a value chain typically consists of inbound logistics, operations, outbound logistics, marketing and sales, and service.

Starting a business implies to perform value-creating activities. All these activities are connected to the different stakeholders, such as suppliers, consumers or even marketing channels. Michael Porter defined the value chain as a combination of all support and primary activities that take part into the creation of the product or service. (See appendix to have a deeper description of all the activities). Creating value comes with the discovery of an opportunity and the exploitation of it. Michael Porter “created value chain analysis as a means to organize and understand the customer-value-creating activities and processes within a company” (Price, 2011). The company focuses on its internal business activities that affect its costs and that

The concept of Value Chain was introduced by Michael Porter which involves a process of adding value to a product or service at every stage. A value chain may exist within one firm or may extend over an expanded supply chain that includes various firms. It enables to identify the Primary and Secondary activities which can increase the value to end customers and thus facilitate business organisations to gain a margin over input cost.

A firm's value chain links to the value chains of the upstream suppliers and downstream buyers. The result is a larger stream of activities known as the value system. The development of a firm specific competitive advantage not only depends on the firms value chain but also on the value system of which the firm is a part. In most industries, it is rather unusual that a single company performs all activities from product design, production of components, and final assembly to delivery to the final user by itself. Most often, organisations are elements of a value system or supply chain. Hence, value chain analysis should cover the whole value system in which the organization operates.

Michael Porter is the person who first raised the idea of value chain. He claimed that there are two main parts for value chain: Primary Activities and Support Activities (Michael E, 1985). Primary activity includes inbound, operation, outbound logistics, sales marketing, and serving. A company or an organization needs procurement, human resource management, technological

A value chain may defined as network of companies which work hand in hand towards a common goal of meeting the customer demands and the stakeholder demands. The idea of value chain first came into existence after Michael Porter coined it. He basically said that the various activities which the organisations carry out to create and give value to its customers. He said that it basically consists of two main activities which are basically known as the primary activities and secondary activities. The events which take place in converting the inputs to outputs followed up by the delivery and after sales support are known as the primary activities which may include inbound logistics, operations, and outbound logistics, marketing, service. The support activities generally support the primary activities which are handled by the organisations staffs. The support activities involves procurement, technology development, human resource development, firm infrastructure. For example value can be created when a manufacture converts a raw material into a finished product or when a retail stores outlet provide the goods in a way which is convenient to the customers, sometimes supported by a fitting room or personal shopping advise. (Accountants, San Miguel, Canada, & Systems, 1996).

The idea of a value chain was first proposed by Michael Porter (1985) who identified that the more value an organization creates, the more profitable it is likely to be. Porter describes the value chain as the internal processes or series of activities a company performs “to design, produce, market, deliver and support its product” (Porter, 1985). John Shank and V. Govindarajan (1993) describe the value chain in broader terms than does Porter, affirming “the value chain for any firm is the value-creating activities all the way from basic raw material sources from component suppliers through to the ultimate end-use product delivered into the final consumers hands.”

The value chain works to uncover processes within processes so that the management team can identify which processes are linked together and which processes are not needed at all (Gertner, 2013). When Porter originally developed the concept of the value chain, he identified five activities that are primary within any company and four activities that support the primary activities. The five activities that are primary are operations, inbound and out bound logistics, service, and marketing and sales (Pivoda, 2014). The four support activities are, human resource management, firm infrastructure, procurement and technology development (Pivoda, 2014). All of these activities pulled together are the independent activities that are actually interdependent on one another to a company’s success (Pivoda, 2014). The value chain evaluates each of these to determine how they can be improved to better prepare the company’s future.

H&M builds its relations with suppliers on long term co-operation and partnership, that enables implementing collective initiative for improving working conditions and environment protection within its supply chain.

It can be perceived that values, therefore, are any contribution added at each stage of this value chain’s primary activities via boosting support activities. Harrison (2009) abets this perception by adding that “the work involved in each major activity along the chain can also become a sub system for learning experiment that lead to continuous improvement and to innovation through new knowledge acquisition, sharing or utilization at different points in the chain”. HR policies and practices definitely make impacts on the value chain. As a result, L&D as a subordinate of HRM can add values to an organization.

As a multinational, the local managers need to have a good insight with the competition around their business physical environment. A department store needs to be clear on who are having similar business concept around the area especially if it depends on the buyers within the area. Within the golden triangle of Kuala Lumpur alone there are a few shipping complexes and department stores. Buyers will ultimately buy from the stores that give them the maximum benefit and utility.