Analysis of the strategy used by
In relation to
Analysis of the strategy used by H&M in relation to Michael Porters five forces.
A fact sheet on H&M the 2nd largest company operating in the clothing and retail sector which is considered a monopolistic market. How its operational strategy of Michael Porters five forces, these being rivalry amongst existing competitors, threats of new entrants, both bargaining powers of buyers and suppliers and the threat of substitutes. Rivalry amongst Competitors:
Naturally as it is a fashion market and there are many firms in this market there is also a lot of rivalry from other competing firms such as ZARA and M&S. H&M try to stay ahead of the competition by using weekly updates and designs of stock. Primark being on the lower end of the quality has recently been growing as it sells products of lower quality at lower prices; this is not in H&M’s favour as consumers can easily switch between the two. Threats of new entrants:
As there is monopolistic competition there are low barriers to entry, a store could easily be leased and opened. To counter this H&M have increased the amount of stores it has and in this year alone is looking to open another 300 stores its profits have dropped this year to pay for these new stores. In the short run H&M enjoy economies of scale as it uses it size to make large orders that reduce its unit cost. Having big name celebrities such as David Beckham endorse its products in its advertising campaigns and collaboration with high end fashion designers creates entry barrier as it costs a lot.
Bargaining powers of suppliers:
H&M use local and domestic suppliers to try and keep its costs low. Being the 2nd largest retailer it can put pressure on suppliers especially foreign ones to lower their prices or they will select other suppliers. Economies of scale help spread its costs over more units. H&M do not own their own supply...
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