H&M in Accounting Essay

Content Page suspicions query 1. Using Michael doormans five forces model, evaluate the grandeur of Barriers to Entry to the fast-fashion persistence. Support your arguments with record from the courting study. (20%) interrogate 2. Conduct a value chain epitome to assess H&Ms capabilities and derive its core competencies. (35%) Question 3. establish on these competencies identify the generic competitive dodge which H&M is pursuing. (10%) Question 4. It is suggested in the case study that the fashion fabrication is full of companies that have confidently expanded into international markets but by and by have been forced to retreat. Analyze the international strategy choice being traced by H&M and assess the extent to which this is get for its future development. (25%) AppendixGlobal FactorsLocal FactorsIntegration Responsiveness GridReferencesQuestion 1.Applying Michael porters five forces model, it includes the threat of entrants and substitutes, bargaining power of su ppliers and customers and competitive rivalry. Among all, barriers to incoming could be an essential factor to the fast-fashion industry. Even so, the threat of door is alter by some(prenominal) factors. Different sources of barriers to entry puke act as a determinant on the height of barriers. As mentivirtuosod in the case study, fast-fashion industries doesnt require a life-sized chief city outlay. Entry to the retail industry is so easy that eject be garb up with a group of suppliers being chosen from. Therefore, the level of electrical shock of capital requirement to the barriers to entry is hapless. Secondly, economies of crustal plate is a barrier to entry as its crossway unit address impart be lowered for the businesses which already attained a harvest-timeion volume so that it will be hard for the modern entrants to compete. H&Ms monetary values have been cut by an even cheaper competitor. In this case, economies of scales level of impingement to the fast- fashion industry is amply. For the absolute cost advantage, for incumbent companies who already have economies of scale can have a significant cost advantage over new entrants.Additional costs may includethe learning or experience curve, proprietary engine room and government subsidies. Therefore, the level of impact is high for new entrants. Considering product specialisation, the level of impact is regarded as low as fast-fashion industry has a variety of choices in its suppliers that could be different from some others. Also, it can be overcome by creating in its birth discolouration to avoid this liberal of barrier. There may non be a difficulty in access to channels of supply and dissemination to the fast-fashion industry because these channels argon held by numerous suppliers. New entrants can set up their own like Gap Corporation and Inditex by performing as both manufacturers and retailers which results in low level of impact. The level of impact of the legal and r egulatory barriers will be treated as low either. Various examines may be limited by the governments such as the licensing requirement or limit to access to raw materials.These would not be applied to the fast-fashion industry as it generally has less control by the governments and usually bound by the legal system. Last but not least, the level of impact of the expected retaliation could be high since the sizing and duration of retaliation in fast-fashion industry argon extreme. These may threaten the new entrants including the price cuts. New entrants have less ability to fake retaliation than those incumbents in view of experience and resources. To conclude, the overall height of barriers to entry is low which means a serious threat of entering fast-fashion industry. It implies an intense rivalry and an unattractive environment. Therefore, it is outstanding to consider the barriers to entry in this industry.Question 2.The value chain analysis is mainly divided into both typ es- clog up and primary activities. This analysis is made to let companies determine where value is added to the customers and molding is extendd to the organization. Under live activities, H&Ms substantial infrastructure is easy and simple. Following Erling Perssons basic values and beliefs, H&M intended to offer the fashion and quality at the dress hat price. Also, the managers are given freedom and autonomy in decision- make processes which lead the victory of H&M.For the Human Resources Management, H&M centered on one persons qualities much more than qualifications which implies that opportunities are given to those hatful with lower academic levels. It was noticed that practical skills are more primary(prenominal) to the company instead.Internal promotion and job rotation are the decisive ingredients to sustain H&Ms continuous growth.Regarding technology development, H&M has been adopting the modish IT systems with continuous improvement. Intelligent use of ICT has been an rough-and-ready puppet in assisting H&Ms business which can be applied to the logistics and warehouse system. Moreover, H&M is tightly connected to the customers by means of social network and various phone apps.The fourth support military action is the procurement. As H&M does not own any factories so the manufacturing is outsourced to low-cost countries. Procurement is concentrate in Stockholm. A good federation network can be seen between the production offices and the suppliers in determine to reduce the lead times. On the other hand, the primary activities include five elements-inbound logistics, operations, outbound logistics, merchandise and sales and assistance. H&M provided little reading on inbound logistics which should include raw materials control and inventory control of input material. This may become a weakness in the charge of H&M.For the operation of H&M, it opts for renting store premises to increase flexibility and adaptability.In addition to t his, H&M will do the product testing about the quality control. Furthermore, a new interiors design is piddled to catch up with the latest twist.Under outbound logistics, tho transportation is handled by the external contractors. However, H&M deals well with the distribution by crack the better(p) price to avoid middlemen. H&M is cost-conscious and thus can reduce the costs being incurred. Also, daily shipments are available to H&M which implies an effective and efficient shipment scheduling system.Considering the marketing and sales, H&M has been collaborating with 200 in-house designers and several famous ones. In addition to this, it has launched semipermanent advertising campaigns with high-profile celebrities which can indirectly boost the sales and build up its image. Online promotion is to a fault available for customers for the latest updates.The last category is the service. normally it refers to the after-sale service that how well a company can do on the quality con trol. H&M just put little focus on after-sale service such as the customer support.This appears to be a weakness to H&M.Apart from inbound logistics and the service, other activities are considered as H&Ms strengths which makes H&M being world leader. Concerning the two types of the activities, there are three key linkagesbetween them. From support to support activity, Human Resources instruction (HRM) is cogitate to technology development as the searching staffs are employed to assist in IT development and continuously making updates through the IT systems. As the advanced technology requires employees to apply the IT skills they have learnt, so there is an important relationship between HRM and technology development. For example, HRM acts as an important role to reply customers queries efficiently and let them k straight the latest trend of the company through social networks. From primary to primary activity, the outbound logistics is linked to the marketing and sales. When t he products and services are delivered to customers, the next process will be about the packaging and promotion on the products.Whether the customers choose the company depends on the quality of both products and services. It is said to be closely related because marketing and sales has usually become a must-do item for the large incumbents specially for the fast-fashion industry. For the last type of linkage from primary to support activity, it can be linked to five activities. Procurement, outbound logistics, marketing and sales, sympathetic resources oversight and technology development are all connected with each other in H&Ms operation.Although H&M didnt own any factories, its manufacturing is outsourced in ordination to find some fashionable items with the final costs in response to the changing market which results in economies of scale. afterwards the procurement process is done, it will be delivered to the customers from the warehouse. Under outbound logistics, it spe cifies the importance of the order fulfillment and on time delivery. As a large incumbent in retail industry, a budget is spent on the marketing and sales on the products being delivered to the consumers.When doing the marketing and sales, IT skills and applications will be used to assist. In line with the promotion of its products, its brand name is super attentive as well. Regarding the firm size and experience in the framework industry, H&M has been paying much attention on CSR charge the brand name away from the criticisms which is treated as a kind of value driver that manage in its brand and reputation.For example, inventory will be shifted to the more popular regions from those with poorer sales amount in order to boost the sales. From this example, it can be seen that the intranet network is well-developed. From procurement to the technology development, they are all connected between each activity. Based on the 3main linkages, the linkage between primary and support activ ity is the some important among all which is credibly to be a core competence of H&M. To affirm whether it is core, the VRIN test can act as an effective tool.Whether it is valuable depends on the effectiveness of the value-creating activities and its future development. The most significant value-creating activity is Human Resources management. Responsible and skilled staffs are essential to H&M as they can apply their experience and techniques in meeting the latest trend and customer needs.Trainings and duration of experience can definitely create value and be further developed.To define how rare it is, this should be equalize with other similar competitors. Apart from the collaboration with in-house designers, H&M unambiguously co-operated with different famous designers over the years from various countries.The essential idea that has already been embedded in the employees. It was said to be unbreakable possession devotion to a goal by the journalists. This in fact is a competitive advantage which H&M can stick to the fundamental principle by offering fashion and quality at the outdo price and this will be difficult for others to imitate.For the last aspect, the category of the human resources management and the procurement may be vulnerable to substitution. The staffs mobility is relatively high in this industry as it varies with the times. This theory also applies to the sources of supplies. But the staff trainings can increase their loyalty to the company which becomes non-substitutable. all told in all the competency mentioned is sufficient to meet the criteria of the VRIN test. Therefore, human resources management in the linkage between the primary and support activities can be treated as core competency that confer competitive advantage.Question 3.Based on the competencies stated in question 2, H&M is pursuing the Hybrid strategy which is the integration of both cost and differentiation strategies. H&M has been applying economies of scale that is achieving cost leadership. H&Ms core principle is to offer the fashion and quality at the best price. One of its core value is to be cost conscious. H&M is alert to the costs which aim to provide the most worthy price for customers. Bargaining power is particularly important in this industry as fast-fashion changes in a speedy mode. At the analogous time, H&M has alsoput a focus on differentiation. In construction its reputation and image, H&M has spent a budget peculiarly for advertising. Besides, working with different types of fashion designers creating innovative collections can lead product differentiation. To compete with others in this industry, cutting cost is not the only way to survive. To become a stable yet significant actor, product differentiation is more effective. Based on the analysis in question 2, H&M has already built core competencies in cost drivers and value drivers which generate efficiency and differentiation. Also, H&M can resolve quickly to the changing environment to fulfill customers needs and technology level. So Hybrid strategy is adopted in H&M.Question 4.Based on the Integration Responsiveness Grid, H&M is likely to pursue ball-shapedization strategy. Globalization is the transition of industries from a multinational to a globose competitive structure. From the global factors, H&M scores higher than that in local factors. There are different arguments that support H&M pursuing globalization. For the most significant factors, H&M is obviously buying centrally in Stockholm. Stockholm becomes the central purchasing office of H&M. Gaining economies of scale is one of its goal of H&M either. To fast-fashion industry, speed of introducing new products to changing environment is very important to meet the latest trends. As mentioned before, advanced technology is applied in H&M which can improve the quality of products and service. Customers around the world behave in the same way as H&M has been opening over 2,000 store s in 2010 which implies customers in different countries accept the products and services H&M delivered. These factors globalizes H&M. On the other hand, pricing strategy being adopted by H&M has been coherent across borders as it focused on offering the best price to all customers in different countries sticky with the spirit of itself.There is no big difference in the distribution channels as it follows its own practice by distributing from distribution centers to warehouses to the stores. business concern regulations and contexts also does not differ much from place to place. Customers contact and after-sale service are less focused by H&M which suggests low customization. Transportation is controlled by the external contractors which means localoperations are not that essential. Concluded from the local factors, H&M is not likely to pursue localization. Furthermore, decision-making like buying and logistics are centralized at the mentality Office which confirms its position u sing a global strategy. Global strategy also has another characteristic which offers standardized products to different countries. In my signalize of view, global strategy is very suitable for H&M in future development. In fast-fashion industry. H&M belongs to a vibrant player which should aim to be a global leader.Also, it has already been achieving few maneuver like economies of scale and increasing its bargaining power. However, there are several benefits and risks associated with the global strategy. By applying this strategy, H&M can achieve global economies of scale and brand consistency. Expanding the target customers as the whole world, independent management is also treated as its strength. For the risks that H&M might be facing, standardized products may not meet all customers needs as it might be lack of sufficient innovative ideas to suit everyone. Moreover, centralized decisions will be lack of innovation and creativity, though decentralization is now encouraged in H&M .