H & M Case Study Core Competencies

H&amp M Case Study: Core Competencies

H&amp H Case Study: Core Competencies

Valuechain analysis (VCA) is a critical tool for optimizing how anorganization distinctively creates quality services for its clients. In this regards, H&ampM recognizes methodology and core competenciesas the means through which to create value for the customers thus,the development of techniques that maximize the said value, throughgreat services, superb products, or jobs well done. Paying attentionto the case study under review, focus will turn to some of thefactors (either primary or support activities) that greatly influenceactivities structured to increase value of an organization’sproducts or services. As stated, the value chain in H&ampMencompasses support activities (i.e. human resource management,procurement, firm infrastructure, and technology development) andprimary activities (operations, inbound and outbound logistics,sales, service, and marketing)

PrimaryActivities

Primaryactivities of the organization comprise product’s physicaldevelopment, distribution, sales to buyers and after sales service.Actually, they include outbound and inbound logistics, operations,marketing and sales, and servicing.

Inboundlogistics

Inboundlogistics is made up of material management, transportation,communication, storage, testing and information systems about productspecifics. H&ampMdoes not manufacture products but usually work on reselling alreadymanufactured products. In this regards, the company has engaged inoutsourcing designers with main concentration occurring incontracting famous designers to provide quality items for sales.

Thecompany conducts all its logistics internally, although it outsourcesproduction implying that contracted firms have to make the rightarrangements concerning securing inventory and transportation (Regnerand Yildiz 2014, P. 580). This in turn may lead to delays concerningproduct release or reduced quality. Further, the high number ofsuppliers makes it difficult for the company to handle and processinbound logistics. Important to note is the facts that, a change inthe company’s supply chain would demand a review of existingsuppliers, human resource planning, production schedules and customersatisfaction levels. Productionoffices connect with right supplier to place orders at lowest pricewith regard to best quality. Logistics department is made sure thatit is efficient, well-functioning and constant resulting tocomprehensive distribution channels created for all links in supplychain from production factories to stores. Essentially, professionallinkage between customers and H&ampM is providing qualitativeservice in real time.

Outboundlogistics

Outboundlogistics, on the other hand, comprise transportation, communicationand packaging which are controlled internally, although externalcontractors take care of transportation. Subsequently, theorganization realizes cost effectiveness and economies of scalethrough outbound logistics making it one of the key businessprocesses of H&ampM. Theorganization has stores spread across many countries, which act asstorage and distribution centres. In addition, the company has alead-time of 3 weeks to 5 months, delivers high fashion faster, butunfortunately, delivers mass items slowly. In this regards, it hasdeveloped advanced planning structures to meet forecasted customerdemands. Significantly, centralization ensures that theorganization’s stores are replenished daily with garments wherebycontrol over demand and supply shifts occur easily. As such,individual stores have no requirement for buffer stocks as theyreceive shipments daily enabling response to selected market changeswithin a country. In brief, logistics unit ensure that the companyreceives garments of the right quality at the specified time and withleast environmental interferences.

Logisticsweaknesses and strengths

Strengths

Weaknesses

  • The company does not place orders very early, which ensures good buying decisions and increased flexibility (Regner and Yildiz 2014, P. 580)

  • Great control over demand and supply due to the presence of an integrated direct delivery channel

  • The delivery channel helps the company avoid middlemen thus, it can offer best prices

  • Centralized logistics, which allow close coordination thus, reduced lead time and increased logistics (Regner and Yildiz 2014, P. 581)

  • Contracted firms offer transportation thus, lack of control over delivery, which may lead to delays

Operations

H&ampMhas a different operations unit form those utilized by other playersin the industry where H&ampM focuses on design stage and outsourcingrather than manufacturing. The company outsources to around 100- inhouse distinct designers and over 50 designers who work with patent.Branch managers have authorityto make independent decisions (i.e. running business like a soleproprietor) about design patterns, although they have certain limits,which helps increase adaptability and flexibility (Regnerand Yildiz 2014, P.579).The company engages in market analysis and customers’ demandanalysis to provideinformation on new trends.

Strengths

Weaknesses

  • Excellent decision-making process

  • H&ampM rents store premises, which increases adaptability and flexibility (Regner and Yildiz 2014, P. 579)

  • A matrix function organization helps delegate functions and improve efficiency.

  • Location of stores in the very best places gives the company an edge

  • The company has limited attention to work descriptions, which provides challenges to the company in terms of growth (Regner and Yildiz 2014, P. 578)

Sales,Marketing, and service delivery

Salesand marketing involves a congruence of several factors such as price,quality, location of stores and commercials.The company attains excellent prices through few intermediaries,purchasing large volumes, cost consciousness, efficient distributionand knowledge of fashion consequently, such an approach helpsmaintain cost friendly prices. Centralized marketing departmentcreates a common advertising technique, which allows the company tosharpen its image and brand name. In fact, celebrity endorsement andbranding have allowed the company to become a global brand. On theother hand, H&ampMhas loyal, kind and skilled employees who all are supportive tocustomers in need of help (Regnerand Yildiz 2014, P. 579).Thecompany has a strong media availability in all social sites likeFacebook, Instagram, Twitter, YouTube and Google+ as a technique toshare opinions and ideas on service delivery and product’s quality.

Strengths

Weaknesses

  • Strong social media presence thus, clients and followers share opinions and ideas

  • Celebrity branding has given the company an edge

  • Great brand name

  • The company outsources the manufacturing process, which may pose several challenges, as the company does not have full control over manufacturing.

Supportactivities

Firminfrastructure and human resource

Theorganization has presence in over 43 nations with 2,206 excluding the218 stores opened in 2011and an employment unit of more than 94,000employees (Regner and Yildiz 2014, P. 575). The organization workswith more than 700 suppliers and contractors with the support of itsproduction office. In addition, the human resource part of thecompany acts as an important attribute in ensuring the motivation ofemployees. Code of conducts, a win-win model, and engagement programshave allowed the company to motivate its employees thus, an increasein productivity.

Strengths

Weaknesses

  • A strong corporate culture with defined values grounded on recruitment procedure and training (Regner and Yildiz 2014, P. 581)

  • H&ampM highly regards loyalty and continuity, which helps improve commitment

  • A highly participative culture that values personal skills and strengths (Regner and Yildiz 2014, P. 581)

  • The company engages with contractors and suppliers, which may inhibit the provision of quality and timely services.

Technology

Thesuccess of H&ampM as a company is dependent it its capability tocapitalize on technology in creating value for its partners andcustomers. The company recognizes the role of technology in achievingits goals and implementation of its long-term strategy. The firmreckons a saving over $40 million through collaborating with ITcompanies thus reducing the overhead cost of maintaining an internalIT system. The In sourced services and processes include technologiesconnected to internal functions of the company. Outsourced activitiesinclude close collaboration with development groups that embrace anopen innovation model.

Strengths

Weaknesses

  • Utilization of latest IT systems, which help improve productivity (Regner and Yildiz 2014, P. 580)

  • Effective communication and information sharing, which allows optimal decisions and provision of information to clients

Procurement

Outsourcingmanufacturing activities continues to create more challenges for theorganization. However, lead-time in holding facilities has gone down,although late delivery is no longer a new concept in the company. Inthis line of argument, the company has been in a constant battle toprevent out-of-stock scenarios. Clearly, there is need for thecompany to rethink its scheduling and to realign this with changes ininventory management and the overall supply chain system. Addressingthe problem of aligning fluctuating demand and productivity does notonly call for improved forecasting but also a well thought-out recordkeeping system. Given the competition being posed by companies suchas Gaps and Zara, it is important that the company rethink itscheduling in a bid to ensure a finite capacity. Automating thescheduling system and training the staffs accordingly will help inensuring a coordinated, relevant, and accurate production database.

Strengths

Weaknesses

  • Efficient and close coordination of procurement employees with the production facilities

  • A centralized function model based on a matrix function allows easier outsourcing

  • The company outsources the manufacturing process, which may pose several challenges, as the company does not have full control over manufacturing.

  • Contracted firms offer transportation thus, lack of control over delivery, which may lead to delays

Corecompetencies

Corecompetencies provide a scenario based approach for companies tounderstand factors that contribute to its business success factors.Consequently, this gives competitive advantage to a company hence,to maintain a long run competitive advantage, several factorsanalysed below helps to demonstrate the core competencies of thecompany

  • Valuable: To achieve economies of scale in connection with low wage and high amount production, H&ampM maintains low cost inputs and latest fashion trends within few weeks of initial design ((Regner and Yildiz 2014, P. 580). H&ampM provides fashionable clothes at low prices thus, total concern for all types of consumer preferences and tastes act as the main drivers to the company’s success. In reality, H&ampM business is to provide services of bringing the goods at reach at a low price with regard to maximum quality. The company does not place orders very early, which ensures good buying decisions and increased flexibility (Regner and Yildiz 2014, P. 580). In addition, the company’s brand has a high level of awareness thus, valued services and brand act as core competencies for the firm.

  • Rare: H&ampM prides itself as having its own touch in design and establishing collections that provide a balance between basics and latest trends. Inspiration is on global reference and, more distinctively making products in their own design and outsourcing from famous celebrities ((Regner and Yildiz 2014, P. 577). Clearly, high advertising, especially celebrity endorsement and branding has developed as a unique and substantial factor at their helm of the company, which has allowed H&ampM achieve substantial business success factors. In addition, the firm offers colourful graphic designs, which has allowed the company to replicate the same enterprise spirit and concept across space and time. In this regards, the provision of distinctive and timelessness trends with strong brand has acted as core competency for H&ampM, as it allows the company to identify with celebrities for celebrity branding and appealing to the new generation with trendy fashion.

  • Inimitable

  • History Dependent: H&ampM has a long history of providing quality service to clients and ensuring great interaction across all areas of production and marketing. The history of a company contributes greatly to its success and this has acted effectively for H&ampM as it has used its position to appeal to a great number of clients.

  • Causal ambiguity: H&ampM applies a simple business technique, globally making few modifications and adjustments according to local market trends. In this regards, the company approaches markets differently according to the preferences and tastes of clients as well as identifying with celebrities.

  • Social complexity: A company’s brand helps a company to compete favourably in the market especially if clients identify with the brand. The company has developed a brand that clients identify with and perceive as a brand that caters for their tastes. Constant interaction between customers and employees’ especially as evidenced by the service feedback employed in the social media outlets demonstrates the loyalty that clients have developed to the brands of H&ampM. On the other hand, advertisement campaigns carried out makes the products more acceptable by customers as celebrities too embrace H&ampM products. Formal training and on job training creates a platform where employees are suited to core values of the company and feel infused with initial starting spirit. As such, the company has utilized social complexities to its advantage and in fact managed to create an identifiable brand that appeals to clients.

  • Non-Substitutability: H&ampM produces unique and highly differentiated products that one cannot find in other stores. In fact, the company provides some products according to clients’ specifications, which gives it an edge over its main competitors. As such, clients find it hard to obtain substitutes for the products they get from H&ampM.

Asdemonstrated, H&ampM has paired with high fashion designers to offerits products, which has appealed to clients who seek to buy high-endor designer products. In addition, the company has launched newcollection and celebrity branding with vast distribution channels,which have allowed the company to increase its sales as well asprofitability. In fact, these core competencies have given thecompany sustainable competitive edge over its main competitors thus,the progression of a strong image and brand name. As demonstrated inthe activities of the company, H&ampM undertakes a verticaldistribution channel, which means that it controls or stages ofdelivery. In addition, the company has segmented its market andgrouped clients according to their tastes, which has given thecompany a competitive edge. The company’s core business continuesto be the improvement of customer satisfaction and convergence of itsstrategic planning across all distribution facilities.

Bibliography

RegnerP. and Yildiz E., (2014) “H &ampM in fast fashion: continuedsuccess in Johnson, G”, ExploringStrategy:575-582, London: Pearson.