Business strategy is the organization consists of a number of business operating in provide serving to different customers and distinct markets (Henry Anthony, 2008). Define of market is based on the organization’s customer demand condition in product or services and industry is based on the supply condition on production technology.
Generic competitive strategies are the strategies that can help an organization to establish a competitive advantage over rivals within an industry (Ricky W. Griffin, 2010). This strategies are consists differentiation, cost leadership, and focus. Focus is a strategy in which an organization attempt to either of cost or differentiation strategy but within focus on product line, group of customer or segment of market.
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Differentiation is a strategy of organization produce the unique product or service that can satisfy the customer’s needs and the customers are willing to pay a premium prices (Henry Anthony, 2008). H&M want to achieve the differentiation level of strategy. So, H&M has to create special limited collection are design from famous artist and designer which is Madoma, and Roberto Cavalli. H&M produce the differentiation cloth in order to outperform competitor to attract more customer purchases H&M clothing and also can increase the market share.
Cost leadership is a strategy in which the organizations try to gain competitive advantage by lower the cost of the production or services and without sacrificing the quality of product within the industry (Michael A. Hitt, 2005). H&M selling the lower prices product are suitable for current economic situation. H&M has offer selling the high quality product at the lower price in market to attract more customer purchase and can set high entry barriers for competitor. On the same time also can increase the market share. (Appendix 7)
3.2 Corporate Strategy
Corporate strategy is the organization to gain competitive advantages by management and selection of a mix of different business competing in different industry and market (Michael A. Hitt, 2005). The growth strategy is important to increase profit and sale of organization to expand the business. This concern the organization develop new product to entry an existing and new market (Kazmi, 2007). Growth strategy is including market penetration, product development, market development and diversification.
Market penetration is an organization focus on selling more existing product in existing market to increase the market shares (Kazmi, 2007). Market development is the organization want to attract new customers for selling the existing products to entry in the new market (Nilanjan Sengupta, M.S. Bhattacharya, 2006). Product development is the organization develops the new products and selling new products to the existing market.
Diversification is a strategy occurs when the organization moving away the existing product and market in new markets (Henry Anthony, 2008). Diversification has divided into related diversification and unrelated diversification. Related diversification has involved vertical integration and horizontal integration. Vertical integration exist when the organization goes to backward integrate which is it more on its input, or when the organization goes to forward integrate which is toward its customers (Michael A. Hitt, 2005).
H&M has diversified the new product to attract new customers in the new market. The product of H&M diversify include cosmetic, bag, shoes, accessories and special collections clothing are suitable for all people. This diversify products can target for all level of customer market segment. H&M diversify new product to new markets such as Germany, and Belgium. H&M is vertical integrate which is H&M move toward to its customer. H&M has full control of established distribute products in the right quality in right country at the right time. This is important require good established distribution system for H&M to ensure their brands and new products can move closer to customers. (Appendix 8)
The implementation growth strategy has included mergers and acquisition, internal development, joint ventures and strategic alliances. Joint venture is covering the cooperation of two organization in which agree to joint or share the profit and control to come out made a project. H&M has joint venture with Parisian a famous designer which is Sonia Rykiel. H&M is its collaboration with Parisian designer to creating a style such as “Adapted to each woman’s personality”. H&M made this event at Paris Grand Palaris to introduce “Sonia Rykial for H&M” and with a lingerie fashion show. (Appendix 9)
Portfolio analysis is a method for organization to evaluate portfolio of business, product or service and classify the organization base on some important criteria such as competitive position (Pamela S. Lewis, Stephen Goodman, Patriciam Fandt, Joseph F. Michlitsch, 2007). The aim of portfolio analysis is maximise the return on investment of corporate performance by distribute resources between SBUs to achieve the balance of portfolio (Henry Anthony, 2008). BCG is a one of the portfolio model which can evaluate of different business units. BCG has categories into four strategies.
Star is a business units have faster growing and high market shares (Nilanjan Sengupta, M.S. Bhattacharya, 2006). Question marks have high growth market but have small market shares (Nilanjan Sengupta, M.S. Bhattacharya, 2006). Cash cows have large market share in slow growth or mature industry (Nilanjan Sengupta, M.S. Bhattacharya, 2006). Dogs have a low market share in a low growing industry (Henry Anthony, 2008).
3.3 International Strategy
Globalization is a range of related between the market across to the international and increasing the global independence among national (George, david, 2004). Globalization is related include financial, political, economic or social.
The motives for organization to develop expand business through internationally can be asses on the organization factors and environmental factors. Organization factors have divide into senior management and firm specific factors. Environment factors are include unsolicited proposals, the ‘bandwagon’ effect, attractiveness of the host country. (Appendix 10)
A globalization framework has three type of strategy objectives of global strategy are achieve efficiency in current operation, managing risk and innovation, learning and adaptation to the future (Mariana Mazzucato, 2002). The three different sources for achieving the global competitive advantage are including national differences, economies of scale and economies of scope. (Appendix 11)
The national difference is the competitive advantage come from the observed fact that differences in input and output market in different countries (Henry Anthony, 2008). The economies of scope state the organization produce many volume of output therefore it can easily to reduce cost of production units (Robert. Z. Aliber, 1999). The scope economies arise from the fact that the cost of undertaking two activity or more activities can be less than the cost of undertaking them separately (Robert. Z. Aliber, 1999).
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The type of international strategy has divide into multi-domestic, international, global and transnational. Global strategy is an international strategy which is the organization seeks to offers standardized products for its international markets and produces the centralized location (Michael A. Hitt, 2005). H&M is globalizing their business around the world. H&M has applied global marketing strategy. Every year, H&M has increasing the stores to enter in the numerous new markets such as Hong Kong, Shanghai and Greece. H&M has developed the standardized fashion clothing in the new market to increase market shares. H&M has provided the high quality fashion clothes at lower prices through economies of scale. H&M now already has 250 stores on worldwide. (Appendix 12)
Entry mode strategy is the organization can use different type of strategy to enter international markets such as exporting, licensing, franchising, joint ventures and strategy alliances and wholly owned subsidiaries. Franchising is a contractual agreement between the franchisor allow the franchisees to use business name, business logo or sell products and the franchisees can operate their own of franchisor business (Masaaki Kotabe, kristiaan, 2009). H&M has entered franchising with the biggest retailers in the Middle East which is Alshaya. H&M sell and distribute the product to Alshaya, then Alshaya stocks the product and sell H&M product to the customers.
Wholly owned subsidiary is an organization enables to entirely maintain the operations abroad, it can select this entry mode to enter the market (Michael A. Hitt, 2005). For H&M, it select wholly owned subsidiary in the Asian market, European and North American market. (Appendix 13)
Porter diamond of national advantages is the organization contributes the factors to achieving the competitive advantages in the industry (Michael A. Hitt, 2005). Factors conditions is a country create its factors of production such as skilled labour and technological capability for competitive advantages in an industry (Michael A. Hitt, 2005). Demand conditions is occurs when the size of customers demand in the home country for the industry’s product or services (Mcdaniel, Gitman, 2008). Related the supporting industry is when the supporting industry and other related industry are competitive, the domestic market organization will get cost effective and receive more innovation products (Mcdaniel, Gitman, 2008). Firm strategy, structure and rivalry concern the final country dimension and support the growth of particular industry (Mcdaniel, Gitman, 2008).
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