H&M business overview and operations

H & M. Discussion Questions

M clothing retailer is Europe's largest clothing retailer. The secret to their success is fast, fresh, and trendy fashions at incredibly low prices. This paper discusses H & M's product strategy, their sourcing and inventory management strategies, and the challenges they may face with their aggressive international expansion plans.

M Discussion Questions

Outline H & M's product strategy in comparison to its competitors as described in the article. What has made the company's line of fashion so successful?

M's product strategy is quite simple. They strive for high quality fashions at the best possible price, which translates into leading edge clothing (Author, year, p. x). H & M. currently operates in 20 countries and has over 40,000 employees dedicated to this goal ("Facts and History," n.d.). This strategy has worked so well, in fact, it has made H & M. The largest apparel retailer in Europe.

The team of H & M. designers finds inspiration for their clothing lines in multiple places. Movies, fashion on the streets, and even flea markets inspire the talented design staff when developing the next line of clothing that will be introduced into the stores. However, simply copying the catwalk of high fashion is not allowed. This strategy has led to a unique and eclectic line of fashion, for men, women and children, all at extremely attractive price points, with the average price of an item at H & M. being only $18.00 (Author, year, p. x).

When compared with competitors Zara and Gap, one begins to see why H & M. is so successful. Zara too strives to offer "the latest trends in international fashion in an environment of thought-out design" ("Zara," n.d.). and, they do try to offer these fashion trendy clothes at reasonable prices, however, as Zara handles much of their production in house, they simply cannot take advantage of some of the cost advantages of outsourcing their clothing manufacturing to other vendors. This is reflected in their prices.

Gap, on the other hand, has a completely different product strategy. They do not strive to set or meet fashion trends; instead they focus on fashion basics. Denim, khakis and t-shirts are the mainstays of the Gap line up, at reasonable pricing (Author, year, p. x).

Describe H&M's sourcing and inventory management strategies. Outline threats as well as opportunities you perceive.

The cutting-edge fashion designs of H & M, however, would mean little if they did not arrive at the stores in a timely manner. For this reason, H & M. has worked hard to shorten their lead time, the time it takes for a piece to go from the design team to the store floor for sale, to an incredible short three weeks. This is in comparison to Zara's industry leading 2-week turnaround cycle, and the Gap's traditional 9-month turnaround cycle (Author, year, p. x).

This quick turnaround of inventory is paramount to H & M's success. With 3-week lead times, H & M. can keep their inventories fresh and exciting. If a fashion trend emerges that they for some reason did not anticipate, they are able to react quickly enough to still capitalize on it during the season. Traditionally, stores like Gap, have to simply let these opportunities slip by, as they cannot respond fast enough to make mid-season changes to their line-ups.

In addition, H & M. outsources all of their manufacturing as a sourcing strategy. They utilize a huge network of 900 garment shops that are located in 21 different countries, primarily where cost of production is extremely low, to produce their fashions at the lowest costs possible. By shifting their production from one facility to the next, H & M. is able to continuously get the best deal possible for manufacturing (Author, year, p. x).

The opportunities for H & M. are the continued design and manufacture of the hottest fashion trends possible at the lowest prices. They have the ability to meet the changing fashion needs of consumers, quicker than almost any other organization out there. As such, they will even have the opportunity to tailor their designs to the specific markets they are serving.

The primary threat of H & M. lies in the possibility that with continued globalization, production costs in countries such as Turkey and China will continue to rise as more businesses move their operations there or outsource to these countries. Should this happen, this will dramatically increase H & M's cost structure.

H&M has big plans for international expansion. In light of their reliance on other distribution channel partners, what potential problems do you anticipate for their global plans?

One of H & M's goals is to enter a new country every two years. This rapid international expansion is quite aggressive and has not worked well for some other clothing manufacturers. Benetton tried a similarly aggressive international expansion plan in the 1980s, and failed miserably. Even Gap has been unable to be successful outside of their home country (Author, year, p. x).