In the fashion industry everything is about change and changing trends. It is a fast-paced business with short product life cycles and immediate customer response.
H&M and Zara are well known for delivering the latest designs to customers, partly in collaboration with famous fashion designers, at affordable prices. Both H&M and Zara are famous for their ‘fast fashion’—their ability to respond quickly to changing market trends with new collections—in a manner that appears to be different to the rest of the industry. Their success in this industry can be seen to rest on their strategic positioning and specific strategic and threshold capabilities
4. Identify how H&M and Zara are positioned
High Ability of Design
High Quality of Product
Changing product lines frequently
The latest fashions (trendier) “Zara,
implement the strategy to suggest rational
price while they reflect most recent fashion
trend rather than opting the strategy to gain
competitive superiority by low price simply”
(Mikyung, 2010)
Low Price “These brands like H&M
implements low price strategy in the way
that they develops diverse products with the
capability of swift planning and design by
themselves, and manufactures the products
by outsourcing in third countries, by which
they induce cost reduction, and supply
products in low price without mediating
marginal prof it utilizing well established
distribution networks of themselves” (Mikyung,
2010)
Low cost of sale
E-commercial market
Zara H&M
6. IDENTIFY HOW THIS IS LIKELY TO CHANGE IN THE FUTURE
Expected future changes in the position
Zara
• Attempting to adopt local preference(e.g. America and China)
• Expend E-commercial market
• Adjust the price differences
• Improving the differentiation strategy/avoiding the risk of copycat
• More advertising
H&M
• Improving the quality of product
• More cross-brand selling
• Invest Asian market by generating revenue from EU
• Expand its market no only by opening new stores but also by
upgrading their online shop
7. Customer segmentation
Both Zara and H&M cover two segments within their clothing ranges;
Women, 18-40, middle income
Men, 18-40, middle income
8. Customer segmentation
Zara’s products are more expensive on average and targeted to more
mature customers
H&M’s key segment area is women who want variety of apparels at
affordable price
Both have to change their marketing strategies in different market
areas due to cultural and taste differences
12. PUV Analysis
New Trends
Fit
Quality
Store experience
Appearance
Fit
Quality
Low Price
Celebrity endorsements –
David Beckham underwear
Zara H&M
13. Key Strategic issues
Entering Asia due to sales stalling in Spain (25% of
revenue) (The Economist, 2012)
Struggling in America due to trendy cuts and slim
fits (The Economist, 2012)
Higher price in Asia (likely due to transportation
costs) “Zara’s clothes are far pricier than local
rivals’, where as in Europe they are relatively
cheap’’
Fast fashion is less of an option due to harsh
economic situation in Europe
Singled out for poor quality by Chinese
government. (The Economist, 2012)
Traditional countries- differing styles and
marketing techniques
Entering Asia. “H&M expects to have
opened 275 more Asian stores by the
end of this year” (The Economist, 2013)
Send clothing made in Asia, back to base
in Spain, and then back to Asia (cost
inefficient) (The Economist, 2011)
Traditional countries- differing styles and
marketing techniques
Only 3% of revenue in Asia (The Economist, 2011)
Asia is prone to Long Term Orientation (different
management styles may slow down decision making
and fashion regeneration)
Zara H&M
14. Competitive Strategic Options
STRATEGIC OPTIONS NEEDS/RISKS
Focused differentiation Perceived added value to a particular segment, warranting price
premium
Success depends on:
existence of less price sensitive buyers – prepared to pay more for
added PUV
and whether the added PUV can be easily imitated
Low price Maintaining value and cutting price
Risk of price war and low margins; need to be cost leader
Hybrid Adding value and cutting price.
Low cost base and reinvestment in low price and differentiation.
Successful when volumes can be achieved and when cost reductions
can be found on dimensions not valued by customers
15. Competitive Strategic Options
STRATEGIC OPTIONS NEEDS/RISKS
Differentiation
(a) without price
premium
(b) with price premium
Perceived added value by user, yielding market share benefits
Perceive added value sufficient to bear price premium
16. INTERNAL
EXTERNAL
Strengths Weaknesses
Opportunities
SO STRATEGIC OPTIONS WO STRATEGIC OPTIONS
Threats
ST STRATEGIC OPTIONS WT STRATEGIC OPTIONS
Use famous Asian
people to promote
branding (like in
Europe) for example;
Zhou Xun
Move the rest of
production for Asian
market to Asia to reduce
cost
Use the fact that Chinese
people hold foreign
brands in high esteem to
deter away from local
brands such as IT
By moving all Asian
production to Asia, this
would allow H&M to
speed up fashion
delivery times
TOWS Matrix H&M
18. TOWS Matrix Zara
Emphasise Western roots to
gain advantage over local
competitors
Expand online shopping
opportunities
Sizes and styles match
those of Chinese women’s
(Fleming, 2012)
Always have the
trendiest clothes
available because of
high turnover, this may
eliminate some
Justify the higher price
by presenting their
clothes as luxurious
items
Or
Lower the price
Could move some of the
production to Asia to
lower the cost of products
20. Strategy Evaluation: Lecture 9
ACCEPTIBILITY
Does the proposed strategy address the key opportunities
and constraints the organisation faces?
SUITABILITY
Does the proposed
strategy meet the
expectations of
stakeholders?
FEASIBILITY
Would the proposed
strategy work in
practice?
Do the strategic options you have defined
address the key strategic issues & industry
success factors?
(Johnson et al., 2007)
SUITABILITY
21. Critical Reflection
Hard to arrange meetings for such a big group
Difficulties finding information on H&M, most the of
the information is from comparison reports
Very marketing based, hard to find sufficient
background information
23. References
• Anon., 2007. H&M Annual Report 2007. [Online]
Available at:
http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual_Report_20
07_en.pdf
• Anon., 2012. Global stretch; Fashion for the masses. The Economist, p. 76.
• Anon., 2013. China Average Yearly Wages in Manufacturing. [Online]
Available at: http://www.tradingeconomics.com/china/wages-in-manufacturing
• Mikyung, K., 2010. Marketing strategy and the current status of Global SPA Brands. Journal of Fashion
Business, 14(3), pp. 35-51.
• The Economist, 2011. Global stretch; Fashion for the masses. The Economist.
• The Economist, 2012. Fashion forward; Inditex. The Economist, 402(8777), pp. 63-64.
• The Economist, 2013. Asia/world: Fast fashion firms look for global domination. The Economist.
Notas del editor
Evidence for cost leadership : 1. These brands like H&M implements low price strategy in the way that they develops diverse products with the capability of swift planning and design by themselves, and manufactures the products by outsourcing in third countries, by which they induce cost reduction, and supply products in low price without mediating marginal profit utilizing well established distribution networks of themselves.
2. H&M 65% of tis product is made in lower-cost countries in Asia >> by outsourcing, they reduced the cost of product, so they can charge the lower price rather than competitors charged with economise of scale producting large scale of product.
Zara’s differentiation >>1. more trendy products, reacting the new trend with their own policy(Shared situation awareness).
2.branding
3.Advertising >> shop windows
Zara’s positioning: differentiation advantage
1. Affordable, copycat versions of the latest fashions >> quick reaction to the new trend. >> “ZARA, implement the strategy to suggest rational price while they reflect most recent fashion trend rather than opting the strategy to gain competitive superiority by low price simply”
2. Low levels of discounting
4. A strong multi-brand repertoire
5. Speed of editing displaying of fashion >> 4 weeks for a new fashion idea to hit the shops
6. Shared situation awareness >> non-stop flow of information
7. Consistence of quality
H&M’ positioning: cost advantage
1. Low price >> made in lower-cost countries in Asia >> “These brands like H&M implements low price strategy in the way that they develops diverse products with the capability of swift planning and design by themselves, and manufactures the products by outsourcing in third countries, by which they induce cost reduction, and supply products in low price without mediating marginal profit utilizing well established distribution networks of themselves”
2. Expand e-commercial market H&M owns more than 2.000 products than zara on its online shop
3. About range of product >> “What sold well last season is combined with the coming season’s big trends, colours and models. The aim is that the range should reflect what customers want at all times.”
As it can be seen from the Bowman’s strategy clock an H&M more prioritize their business strategy on differentiation, that implies that H&M offers for their customers high perceived value, to be able to afford to do this they keep their prices at a low level, but they attain greater market share
When it comes to Zara, they also have the same business strategy as HH&M, however in the case of Zara they offer high perceived value but with higher prices for its products, so Zara can sustain themselves through higher margins
'Chinese office ladies like Zara's slim fits more [than Americans]', the Economist writes. 'Iria Campos, a Zara designer, says Chinese women choose pastels to flatter their pale skin rather than the stronger colours Europeans prefer; but otherwise they have surprisingly similar tastes.'
From Daily Mail, Olivia Fleming, 15 August 2012