H&M B (HEMS) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Apparel)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for H&M B (Germany)
Based on various researches at Oak Spring University , H&M B is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing commodity prices, talent flight as more people leaving formal jobs,
wage bills are increasing, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that H&M B can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the H&M B, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which H&M B operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of H&M B can be done for the following purposes –
1. Strategic planning of H&M B
2. Improving business portfolio management of H&M B
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Apparel) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of H&M B
Strengths of H&M B | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of H&M B are -
Ability to lead change in Retail (Apparel)
– H&M B is one of the leading players in the Retail (Apparel) industry in Germany. Over the years it has not only transformed the business landscape in the Retail (Apparel) industry in Germany but also across the existing markets. The ability to lead change has enabled H&M B in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Retail (Apparel) industry
- digital transformation varies from industry to industry. For H&M B digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. H&M B has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Sustainable margins compare to other players in Retail (Apparel) industry
– H&M B has clearly differentiated products in the market place. This has enabled H&M B to fetch slight price premium compare to the competitors in the Retail (Apparel) industry. The sustainable margins have also helped H&M B to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the H&M B are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Training and development
– H&M B has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– H&M B is one of the leading players in the Retail (Apparel) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Effective Research and Development (R&D)
– H&M B has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – H&M B staying ahead in the Retail (Apparel) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Retail (Apparel) industry
– H&M B is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– H&M B is present in almost all the verticals within the Retail (Apparel) industry. This has provided H&M B a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of H&M B in Retail (Apparel) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– H&M B has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. H&M B has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– H&M B has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Apparel) industry. Secondly the value chain collaborators of H&M B have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of H&M B | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of H&M B are -
Lack of clear differentiation of H&M B products
– To increase the profitability and margins on the products, H&M B needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Germany, H&M B needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on H&M B ‘s star products
– The top 2 products and services of H&M B still accounts for major business revenue. This dependence on star products in Retail (Apparel) industry has resulted into insufficient focus on developing new products, even though H&M B has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, H&M B has high operating costs in the Retail (Apparel) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract H&M B lucrative customers.
Slow to strategic competitive environment developments
– As H&M B is one of the leading players in the Retail (Apparel) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Apparel) industry in last five years.
Employees’ less understanding of H&M B strategy
– From the outside it seems that the employees of H&M B don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– H&M B has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners in Retail (Apparel) industry
– because of the regulatory requirements in Germany, H&M B is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Apparel) industry.
Products dominated business model
– Even though H&M B has some of the most successful models in the Retail (Apparel) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. H&M B should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Retail (Apparel) industry, H&M B needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Compensation and incentives
– The revenue per employee of H&M B is just above the Retail (Apparel) industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
H&M B Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of H&M B are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects H&M B can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– H&M B has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, H&M B can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. H&M B can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, H&M B can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help H&M B to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– H&M B has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Apparel) sector. This continuous investment in analytics has enabled H&M B to build a competitive advantage using analytics. The analytics driven competitive advantage can help H&M B to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– H&M B can improve the customer journey of consumers in the Retail (Apparel) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, H&M B is facing challenges because of the dominance of functional experts in the organization. H&M B can utilize new technology in the field of Retail (Apparel) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, H&M B can use these opportunities to build new business models that can help the communities that H&M B operates in. Secondly it can use opportunities from government spending in Retail (Apparel) sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for H&M B to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for H&M B to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions in Retail (Apparel) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for H&M B in the Retail (Apparel) industry. Now H&M B can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– H&M B can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help H&M B to increase its market reach. H&M B will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats H&M B External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of H&M B are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents H&M B with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) sector.
Environmental challenges
– H&M B needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. H&M B can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.
Shortening product life cycle
– it is one of the major threat that H&M B is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. H&M B needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, H&M B may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Apparel) sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. H&M B will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, H&M B can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate H&M B prominent markets.
Technology acceleration in Forth Industrial Revolution
– H&M B has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, H&M B needs to keep up with the evolution of technology in the Retail (Apparel) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for H&M B in Retail (Apparel) industry. The Retail (Apparel) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for H&M B in the Retail (Apparel) sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Retail (Apparel) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. H&M B can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of H&M B business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of H&M B
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of H&M B.
Weighted SWOT Analysis of H&M B Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at H&M B needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of H&M B is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of H&M B is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of H&M B to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that H&M B needs to make to build a sustainable competitive advantage.
