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H&m Pl Strategies

Essay by   •  November 14, 2012  •  Essay  •  299 Words (2 Pages)  •  1,645 Views

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H&M sources around 70% of its product assortment from Asia and over one third is purchased from China. It relies heavily on outsourcing production, with over 21 production offices worldwide (10 in Europe, 10 in Asia and 1 in Africa) liaising with over 750 factories. In contrast, Inditexsources the majority of its products from Europe, and most of its production is made in-house in order to cut the time lag between product design and in-store availability.

*Although production in Asia helps H&M undercut Inditexon price, it also makes it more vulnerable to currency fluctuations, with the value of the US dollar strengthening in 2009 against European currencies and making imports from Asia more expensive in its main market, Europe. This reduced at least temporarily the scale of its competitive advantage over Inditex.

Low inventory levels

*H&M's operational efficiency is reflected in the level of inventory being usually low thanks to the frequent renewal of its collection. However, the focus on reducing inventory in order to protect margins has been detrimental to sales in some months in 2009, especially over the summer, when the company had relatively few items available for markdowns. Although H&M generally achieves low inventory costs, it is likely to be often surpassed by Inditexin this respect. As one of the pioneers of the fast fashion business model with new ranges being introduced every two weeks, Inditexis particularly efficient in incorporating feedback from stores daily into the development of new products, thanks to vertical integration and as such, H&M cannot replicate this model.

Private label ranges under various names

*All of H&M's product assortment consists exclusively of private label. Private label ranges have various names to target different genders and customer types. For example, Hennesis targeted at 25-35 year-old women, L.O.G.G. is a casual sportswear label and MAMA is a maternity range.

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