Companies Stratagy: Marketing Analysis of H&M

Background

Hennes was founded in 1964, by Erling Persson in Sweden, for women only clothing, then acquired a men’s clothing brand called Mauritz Widforss in 1968 to become Hennes and Mauritz H&M (Gerber and Saiki, 2010). In the 60’s the company opened its first branch outside its home country and has ever since become and expanding global brand (ibid.) Over time the brand has also started selling home textiles and decorative items under its name.

The Fashion industry is unique in nature where the products have short life-cycles, high volatility in demand and high impulse purchasing where the consumer buys such products at the point of purchase (Christopher et al, 2004).

H&M faces some strong competition in the fashion retailing business from around the world. Recent times have shown that the introduction of technology to the market has brought in more competitors and a serious competition looming over its head (Milne, 2017). SWOT Analysis

Strengths:

Social Media and E-retailing- H&M has a very strong online presence with 34 million fans on facebook, 8.

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6 million followers on twitter and 22.9 million on Instagram (Unmetric, 2018). Furthermore, it has access to 43 countries through online stores (Montgomery Henrick, 2018). Global Market- H&M has 4736 stores in 69 markets all around the globe and has more the 130,000 employees working for it (H&M, 2018). With total worth of $14.2 billion, H&M comes under the list of 100 most valuable brands in the world (Brennan Siofra, 2017). This gives it a leverage in the world as a fashion brand. Brands- The H&M group has as many as 6 brands under its name. Brands like H&M home, Cheap Monday, Monki, Weekday etc are gaining wide popularity on the UK high street, giving hard time to its competitors (H&M, 2017a)

Weaknesses

Unethical practices- There have been numerous occasion when H&M became the headline in media for its unethical practices towards its Asian suppliers in Indonesia, Bangladesh and Cambodia which resulted in more than 20 deaths (Hickman Martin, 2010). The so called ‘Organic cotton fraud’ that hit the headlines in 2010 (Malik. Chua Jasmin, 2010). And the recent racist advert that created outrage amongst the public (Guardian staff and agencies, 2018). H&M’s overdependency on third party independent suppliers results in the lower control of the company in the production of its merchandises (Siegle Lucy, 2012). This could also put the company’s order commitment into jeopardy and affects its brand image.

Opportunities

Improving lifestyle- The lifestyle and purchasing power of people around the globe is improving, thus making people more brand conscious and this opens space for H&M to capitalize on the need generated. Going digital- Internet plays a fundamental role in the fashion industry. John lewis claims that as much as 54% of its total sales are online (Rigby Chloe, 2014). With reports of people spending a lot more time online than ever before, internet is the best place to target customers who can now buy things from their homes (DHL, 2018).

Threats

Competition- The apparel industry is a monopolistic market where companies are competing to appeal clothing to consumers. This makes for catastrophic consequences for small mistakes made by companies as consumers have a lot more choice for a similar product at the same price range. H&M’s main competition comes from Zara, GAP and Topshop. Rising minimum wages due to government policies in Asia means H&M must look elsewhere to produce goods this cheap as majority of its products are manufactured in Asia from about 800 of its suppliers (Keeton-olson Danielle, 2017). This could threaten the business of the company as it could take some while to find alternatives to this production.

Customer Considerations- Segmentation, positioning and buyer behavior

H&M has access to markets in Asia, Middle east, North Africa, North America, and Europe. This means its reach is virtually global as these markets make up the entirety of the fashion market (Lee Andrea, 2016). This means it has to market its brand in many cultures and religions (ibid.). H&M provides clothing for age groups from babies 0-18 months, Women and Men 18-45 years, Teenagers 15-17 years, Youngsters 9-14 years, Children 18-8 years and babies 0-18 months (Johnson Gabriela, 2015). However, their most popular line up is for women from age group of 15-30 years of age (Simconblog, 2015). It offers high fashion at lower prices, targeting working class, low middle class and students living in dorms who do not have the purchasing power to buy to brands (ibid.). People in this segment have to deal with stresses from family, health care and education and other social pressures and with a decline in revenue, the desire to pursue a high-quality and luxurious life is unrealistic for this highly-educated, hence their desire to obtain high quality but low-cost goods became a tendency (Armstrong Gary et al, 2015).

Targeting Strategy

H&M adopts a mixture of targeting strategies. Firstly, it has positioned itself in such a way to especially target women of age from 18-35 years who as mentioned above are from lower middle class, working class or students (Johnson Gabriela, 2015). This can be analyzed by noting the fact that almost 57% of their current offering is womenswear (Smith Katie, 2015). This falls under concentrated marketing where H&M has targeted one segment but has a large share in its market. Moreover, due to the presence of the fast-fashion target market, H&M also provides clothing for people from all age groups as mentioned above. This is differentiated global marketing where H&M has decided to target several market segments in the fashion industry around the world. Marketing Mix

Product

The H&M group owns 6 other apparel brands in addition to H&M brand (H&M, 2018). However, this essay will only focus on the product strategy of the H&M brand only. H&M offers minimum of 300 merchandises under its portfolio (H&M, 2018). The core fashion range includes clothing and accessories like jeans for women and men, basics, underwear, jewelry etc. H&M’s focus is to provide high quality fashion for a very cheap price.

Place

To understand the distribution strategy of any company, it is necessary to look at its product strategy. H&M as mentioned above follows the philosophy of “fashion and quality at the best price” and seeks to provide the latest trendy fashion available (H&M, 2018). To maintain its low prices, H&M and its competitors that sell in the low to mid-range market adopt the direct distribution model (Capell, 2002). This means they want to sell their merchandise directly to the customer without any intermediaries involved. Furthermore, H&M has also reduced the costs by outsourcing its production to countries like Bangladesh, Pakistan and China where labor costs are low (H&M suppliers, 2018). To keep up with the latest trends and avoid delay which is crucial in fast-fashion, H&M has deployed designers to its 22 production offices located worldwide that work to forecast fashion trends and find inspiration in clothing designs (H&M, 2018). Consumers generally find H&M outlets very convenient as they are most often located on the highstreets and can shop for different products at the same store (Samotin Perrie, 2013). The E-commerce website for H&M is very modernistic and is extremely easy to use (ibid.)

Ansoff’s Analysis

Product Existing Product New Product Existing Market H&M’s key strategy for market penetration in the fashion industry is selling high quality fashionable clothing at a cheap price compared to its competitors like Zara. As Kerry (2002) argues that the very foundational aspect of a successful fashion company is quality. H&M has used a new strategy for product development, strategic alliances with celebrities and designers such as David Beckham, Versace, Roberto Cavalli or Madonna (Elodiebrd, 2013). This keeps the excitement of the public coming in with limited editions being launched with these designers.

Market

New Market H&M’s strategy to globalize its brands works by targeting one market at a time. Although H&M provides standardized products to its markets, it does provide slight variations to the new market culture that its targeting (Ditcham Robert, 2006).

H&M has pretty much restricted itself to fashion items like clothing, shoes, bags etc. However, like many of its competitors it has tried to implement a diversification strategy in household items by introducing brands such as H&M home. Interestingly, H&M also developed a stuff pack in the game “The Sims 2” in 2007 with the developers Maxis game (H&M press release, 2007)

Recommendation

Maximize opportunities

H&M is in dire need of capitalizing the online market as statistics show that the number of store closures will surge to the highest level in the last two decades (Magnusson Niklas, 2018). This has also resulted in the biggest drop in quarterly sales (ibid.). All of this can be blamed on the quick digital shift of the fashion industry and the rise of the competitors as was admitted by the company’s CEO Karl-Johan Persson (Cheng Andria, 2018).

Reduce weaknesses

One of the weaknesses pointed out by Hanbury (2018) is outsourcing the production of merchandise away from its core markets. This has also contributed to the slump in the sales report, Hanbury reported that there was a significant drop in buyers found in H&M’s outlets as compared to its competitors such as Zara (ibid.). The reason was that Zara for example has 65% of its products made close to its core market that is Europe compared to 80% of H&M’s suppliers that are based in Asia. This leads a slow supply chain where Weinswig (2017) reports that the time taken to get a product from concept to sale for H&M can be as much as 6 months compared to Zara that can get it done in 5 weeks.

Another weakness is the controversy that surrounds H&M. Recently a racist advert on H&M’s website led to protests and angry mobs that damaged some of its outlets (Guardian staff and agencies, 2018). Some angry customers even vowed on social media to never buy merchandise from the brand (ibid.) H&M has also been slammed for unethical practices done by its suppliers. The most leading one is the fake organic cotton range that later turned out to be cotton that was genetically modified. H&M has to be very careful with regards to its public image as it will not be able to sustain any further damage to its reputation.