UNIVERSITY OF FOREIGN TRADE UNIVERSITY

BEDFORDSHIRE HO CHI MINH CITY

SCHOOL OF BUSINESS CAMPUS
----------***---------- ----------***----------

END-MODULE ASSIGNMENT
Module: STRATEGY & INNOVATION
Code: BSS029-2

ASSIGNMENT

Student: Nguyen Do Minh Anh FOREXAMINERS ONLY

Grade (in number):

Student ID: 1805025118
………………..
Class: K58BF-A
Grade (in words):
Semester: I ………………..
Academic year: 2021 - 2022 Examiner 1
(Signature &Fullname)
Headteacher: Lư Thị Thúy Vân
………………..
Submission date: 12 October 2021
Examiner 2
Student’s signature: (Signature &Fullname)
………………..

Ho Chi Minh City, October 2021

1
 UNIVERSITY OF FOREIGN TRADE UNIVERSITY
BEDFORDSHIRE HO CHI MINH CITY
SCHOOL OF BUSINESS CAMPUS
----------***---------- ----------***----------

END-MODULE ASSIGNMENT
Module: STRATEGY & INNOVATION
Code: BSS029-2

ASSIGNMENT

Student: Nguyen Do Minh Anh FOREXAMINERS ONLY

Student ID: 1805025118 Grade (in number):

………………..
Class: K58BF-A
Grade (in words):
Semester: I ………………..
Academic year: 2021 - 2022 Examiner 1
(Signature & Fullname)
Lecturer: PGS TS Trần Quốc Trung
………………..
Submission date: 12 October 2021
Examiner 2
Student’s signature: (Signature & Fullname)
………………..

Ho Chi Minh City, October 2021

2
 PREAMBLE

I would like to start the topic with a question: What are the core values of
Strategy & Innovation in business ?

Everyone has unique creative values, but not everyone can be creative
effectively.

Running a business without a creative strategy is like trying to drive a car

without knowing your destination, travel time, or direction.

Why ?

Developing an effective strategy ensures each member of your creative team

understands their role, resources are used wisely, assets are created to
accomplish your next goals. organization's market.

And the most important thing in strategic planning is to help managers clearly
define their vision and goals.

In this essay, I will discuss Strategic & Creative methods and clarify them
based on the case of H&M company - one of the largest fast fashion in the
world.

Thank you!

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 TABLE OF CONTENTS

Content Page
I. Macro environment analysis:

1.1. External environment analysis 5

1.1.1 P - Political Factor 5

1.1.2 E - Environment Factor 6

1.1.3 S - Socials Factor 10

1.1.4 T - Technological Factor 11

1.1.5 L - Legal Factor 13

1.1.6 E - Environmental Factor 14

1.2. Competitive pressure analysis 15

II. Micro environment analysis:

2.1. The difference of H&M 16

2.1.1 Resources & Capabilities of H&M 17

2.1.2 Competitive advantages within industry 18

2.2. Compare H&M with potential competitors 20

III. Overall assessment of the environment 21

IV. Reference 23

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I. Macro environment analysis:

1.1 External environment analysis

To analyze the macro environment, using the "PESTEL model" tool is suitable
to understand and clarify the "picture" of the environment that H&M is facing.
1.1.1 P - Political factors:

The majority of H&M's production is set up in Turkey, Egypt, and Lebanon

and supplies products worldwide.

 Government policy:

Under pressure from governments and laws in many countries around the
world.

 Political stability:

 Turkey often changes its Constitution and faces a series of challenges.

 Egypt is facing many security threats related to conflicts and crises in

neighboring countries

 Lebanon has always been politically unstable before and after

independence.

 Trade restrictions:

The trade war between the US and

China is also a big concern not only of
H&M but also of the industry as a
whole.

Its impact leads to an increase in the

prices of textile products and the need
for workers.

The event of Brexit (United Kingdom

leaving the EU) also leads to a difficult

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political scenario to operate.

The boycott event in early 2021 in Vietnam and China also significantly
reduced H&M's revenue (~$100 million compared to the same period in 2020).

→ Maybe after the COVID-19 outbreak, the trade war will be stronger and
there will be a chaos or recession in the world economy and large trading
companies like H&M must stand on the balance of choosing one of the two to
continue to trade.

1.1.2 E - Economical factors:

 Economic growth:

H&M's net sales halved in the second quarter, and despite swift measures and
significant cost reductions during the quarter, the loss was reduced. However,
the company was profitable again in the third quarter up to second wave of
pandemic has led to another downturn as tighter social restrictions are once
again imposed in many markets.

 Online sales of the H&M group 50% increase in local currency in Q4

2020 compared with the same period last year and increased by 38%
for fiscal year 2020.

 The group's net sales and post-financial profit of items amounted to

52,549 million SEK (61,694) and 3,665 million SEK (5,403)

respectively for Q4 and up to SEK 187,031 million (232,755) and
2,052 million SEK (17,391) respectively for the financial year.

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 Exchange rate:

Compared to last year, the Swedish exchange rate has increased significantly
since the beginning of 2021.

This proves that:

 Imports are being encouraged in Sweden

 Low inflation, high purchasing power

 Swedish GDP is growing strongly (increase ~3.8%)

 The interest rate policy is kept at zero by the Swedish government

 Sweden's economy recovered relatively quickly (after the impact of the

COVID-19 epidemic)

→ After the COVID-19 pandemic, governments may raise interest rates to

avoid high inflation. European markets will be more potential than ever
because of the possibility that they will focus on low-cost products like H&M
to balance spending.

→ This is a good opportunity for H&M to produce and increase sales in this
market.

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1.1.3 S - Social factors:

H&M has a business strategy that covers the market. With 7 different sub-
brands including COS, Weekday, Monki, H&M HOME, ARKET, Afound and
some online store are Sellpy, Treadler… scattered all over the world.

 In the digital age and 4.0 technology development, the fashion industry
also relies on the development of social networking techniques to
evaluate and collect information or trends.

 In the year 2020-2021, H&M has increased the influence of advertising

and social networks over direct selling to reduce excess costs while still
maintaining revenue.

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  Buyers' attitudes are changing, they prefer branded clothes and
sustainable fashion, so the demand for the same is increasing like never
before.

→ H&M and others fast fashion brands (such as Zara, She-in, UNIQLO, etc.)
are converting production trends to sustainable fashion and Eco-fashion.

→ And in the near future, this trend will become stronger and it is likely that
fashion will no longer be unique but will become simple and enduring items.

1.1.4 T - Technological factors:

The 21st century is the era of technology 4.0 and the Internet of Things.
Fashion and shopping needs also change because of that.

 People are no longer interested in going to a store and buying clothes

when they can do the same thing through a mobile app or web access.

 Discounts, promotions, bonus points, organizing shows, launching

collections... should be posted and updated regularly on social networks
for users to follow.

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  Artificial intelligence, analytics can be used to design merchandise,
observe and study the customer to provide them with suitable
services/products.

This past June (2021) , H&M launched The Billion Dollar Collection, a
collection of 10 fashion ideas that have won and have the potential to create
multidimensional value for the fashion industry. Using the latest in CGI
character design technology, Mackenvision, a professional visual effects
designer, created lifelike virtual models to showcase the collection.

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1.1.5 E - Environment factors:

In addition to the above budgets, fashion companies also have to bear a large
amount for waste treatment. The textile industry in general is the second largest
polluter after the oil and gas industry.

H&M Group is a pioneer in fast fashion, producing 3 billion garments a year

(from 2003 -2017) which means that many of the 100 billion pieces of clothing
purchased each year are thrown away (actually 92 million tons per year).

 In early 2020, H&M has begun to focus more on sustainability, partly

because younger consumers are concerned about the environmental
impact of their apparel purchases.

 H&M has set up bins in stores, collecting tens of thousands of tons of old
fabrics, ready to be recycled when the technology becomes available.

 They has poured millions of dollars into technologies like the cotton
recovery startup Renewcell and supply chain sharing platform Treadler.

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1.1.6 L - Legal factors:

Each country will have its own rules and companies operating in these
countries must follow the rules to be able to do business successfully.

 Of course, intellectual property rights will be easily stolen if the

company does not register it legally.

 Copyright Law, Antitrust Law and Product Liability Law are also
completely different between European and Asian countries.

 In countries that are too difficult legally, franchising is a wise choice

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1.2. Competitive pressure analysis:

Based on Administration report of H&M, Auditor’s report and Fashion

industry market 2020-2021, the impacting threats are summarized through
“Porter's 5 competitive forces” in the following table:

Analysis of industry pressure factors

Intensity The fashion industry operates under a monopoly regime

Competitors Companies depend on each other to compete for growth

New Entrants Barriers to entry for new entrants into the “fast fashion”
industry are high enough to block potential new entrants

Customer The bargaining power of buyers is also relatively small.

Switching costs are not high for regular customers

Suppliers The company is completely dependent on suppliers located in

countries such as China, India, Turkey where labor to produce
garments is cheap.

Substitutes There are no substitute products offered by other industries

that can perform the same function as clothing

However, there are many alternatives to spending money

(opportunity cost).

→ From the above analysis, it can be concluded that H&M is under most
pressure from suppliers.

H&M procures materials and workmanship from 750 suppliers, has a team of
more than 100 talented designers from all over the world, and is associated
with more than 60 stylists that have forced the H&M organization to offer
many rule.

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H&M has implemented a supplier management program SIPP (Sustainable
Impact Partnership Program), which requires all manufacturers and suppliers to
agree to a "Sustainability Commitment" before becoming H&M's main supplier
or manufacturer.

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II. Micro environment analysis:

2.1. The difference of H&M:

2.1.1 Resources & Capabilities of H&M:

 Price strategy:

 Applying the "Fast fashion" model

 Low price (Cut operating costs to a minimum)

 Use cheap labor in Asian countries

 Focus on customer experience instead of marketing

 Sponsor clothes for actors instead of organizing a luxury fashion show

 Promotion strategy:

 Collaboration with famous designer (H&M collaborates with 100-year-

old fashion star Iris Apfel in 2021)

 Leading fast fashion trends (Impact on the European fashion industry in

the 50s and 60s)

 Capture the market by demographics through each subsidiary

 Has the longest history in the fashion industry (from 1947 )

 High-class and modern facilities system

 Product strategy:

 Offering products through its online store (Treadler, Sellpy,…)

 Launching seasonal collections.

 Place strategy:

 International distribution of products (~ 5000 stores in 2020).

 Each store is connected to the administrative

 Logistics system and the central H&M warehouse. (Top of the best
supply chains in the world 2020)

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2.1.2 Competitive advantages within industry: (based on VRIO framework)

Resource of (V)aluable (R)arity (I)nviolability (O)rganization Competitive

Capability Advantage

Historical     Sustainable
conditions

Brand image     Sustainable

Designer     Sustainable

Product     Sustainable
innovation

Cut-edge    Sustainable
Technology

Supply chain   Temporary

→ In general, H&M is always aiming for sustainable competition and is also

the oldest fashion company.

→ The combination of H&M and fashion influencers is undeniably a clever

tactic that has over the years captured the market and attracted a large number
of customers. And this strategy will still be a strong point of H&M, confirming
the company's coverage.

→ H&M's growth strategy in the coming year is still possible, but the company
should invest in developing its marketing network and promoting products
online instead of customer experience because of COVID 19 pandemic &
Internet of things trend.

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2.2. Compare H&M with potential competitors:

To position the market and understand competitors, it is important to compare

and analyze them.

H&M has two formidable competitors, ZARA (in Spain) and UNIQLO (in
Japan).

H&M ZARA UNIQLO

Pricing Low-average prices Low prices in Lowest price

Strategy in all markets Europe

High prices in Asia

Marketing Collaborate with Offer a wide range Minimalist style

strategy valuable figures in of products
the fashion world

Product Production hire Fully active Collaborated with

strategy Kaihara Denim.

Market scale Around the world European market Local market

Audience Attracting all Divide into high - Build loyal

segmentation segments through low segments customers
many sub-brands

→ H&M has a competitive advantage on a large scale with the policy of

"cheap price + big sale = big profit"

→ Market segments and stores are also stronger and older than brands in the
same industry. Future development opportunities are possible.

→ Maybe in the near future H&M can still be strong, but dominating the
market and owning many sub-brands can lead to loss of control in the long run.

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III. Overall assessment of the environment:

After grasping the competitive environment, the Strengths - Weaknesses -

Opportunities - Threats of the company should also be mentioned through the
SWOT model.

1. Largest clothing retailer in the world

2. Trendy clothes & Low-price

Strengths 3. Product production time is very fast (12 weeks)

4. Collaborate with famous designers

Internal 5. Well-developed marketing skill

Analysis
1. Low-quality clothes

2. Depend on suppliers

Weaknesses 3. Lack of control over garment production

4. Spend a lot on investment

5. High inventory and environmental impact

1. Market for everyone (have many sub-brands)

2. At the forefront of online shopping

Opportunities 3. Emerging economies will support the brand's

expansion plans

External 4. H&M is well positioned to tap into the niche

organic clothing market
Analysis
1. Economic recession may take place after the

Threats pandemic

2. Market competition (Zara, UNIQLO, Gap...)

3. Labor costs may increase in future.

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To sustain and grow the company, H&M needs to turn weaknesses into
strengths and threats into new opportunities. And to do this, H&M needs to
base its strategy on "Playing to Win" with the "cascading choices" framework
by Roger L. Martin.

Considering the fact that H&M already has prime store locations in many
countries around the world (mostly downtown) and is the most well known
brand in the fashion industry. So the choice of "where to play?" and "must have
organizational capabilities" is redundant

H&M should focus almost exclusively on “how to play” and “how to win the
competition” by dividing into 2 separate market segments for tight
management and controlled production.

 Pricing Strategy:

Converting from purchasing low-quality raw materials for production to using

recycled and inventory items to sell at cheap prices.

→ Focus on pushing inventory and making use of scraps of fabric

→ Create a differentiated market for recycled use

→ Preserving the market and protecting the environment.

→ Save material costs, compensate for the cost of hiring labor

 Promotion strategy:

High-quality clothes need to be imported with good materials, designed by

famous people, so H&M should be produced in limited quantities and sold at
high prices (can be auctioned to promote brands such as Channel, Louis
Vuitton)

→ Focus on increasing profits

→ Control tight supply chain

→ Affirming the high quality and fashion brand

→ Expanding the high-end and sustainable fashion market

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 REFERENCE:

1. https://www.wider.unu.edu/sites/default/files/News/Documents/Stockholm

2. https://career.hm.com/content/hmcareer/vi_vn.html

3. https://hmgroup.com/wp-content/uploads/2021/04/HM-Annual-Report-
2020.pdf

4. http://thuvien.hlu.edu.vn/TaiLieuDuAnMuTrap/BaoCaoNghienCuu/

5. https://hmgroup.com/about-us/markets-and-expansion/market-overview/

6. https://www.renewcell.com/en/

7. https://journals.sagepub.com/doi/pdf/10.1177/0974910119896642

8. https://www.ft.com/content/6124beb8-5724-11ea-abe5-8e03987b7b20

9. https://www.brandsvietnam.com/19541-Vu-khi-ben-vung-cua-hang-thoi-
trang-HM

10. https://about.hm.com/content/dam/hm/about/documents

THE END

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