Strategic Issues in International Business

International business refers to the transactions and practices executed between two business entities of different regions, with an objective of a transfer of goods.

The business transactions under this approach are conducted on a global basis; meaning at least two different nations are involved (Huyer and Trouille, 2017). These transactions include a transfer of goods and services technology, managerial knowledge to the employees and capital to other economies. International business plays an empirical role in the organizational and economic development of a country. Furthermore, this concept aids business entities in expanding the market through global transactions, which in turn opens up doors and a varied range of mediums to extend the reach in terms of trade and business. Subsequently, international business is not only these practices, but rather also includes the various strategies a company employs in order to do its operations internationally.

In this assignment, the business strategies taken in order to deal with common hurdles a business may face. A justification for strategic implementation, resources and competitive strategies will also be elaborated on. This report focuses on the clothing retailer H&M (Hennes and Mauritz), with a specific focus on the strategies employed to enhance its business practices. Moreover, the report is focused on the below mentioned strategic issues such as globalization, technological up-gradations and competition. The business entity is dealing and operating on global grounds and hence the business entity is facing number of strategic issues and the same are discussed below.  

Strategic issues are the barriers that are developed or faced by the business corporations while developing the strategies and plans. These are the issues that are held liable in stimulating the business environment of the Cognitive Software Group. For dealing and tackling these issues the entity is required to develop strategies and plans. There are two types of strategic issues, internal and external are the two major types.

Strategies are core functional tools companies utilize to initiate business, in order to reach set goals and standards. Hence, the strategies employed by a retailer such as H&M influence its’ success in the market. Furthermore, there are many associated strategies, which boost the operation of an organization (Castellani et al., 2018). Among these are major core strategies, which are essential for H&M. Whilst managing long term and large operations, companies needs to develop consistently new framework to deal with constant change. It is well known that the business world is dynamic and a business entity has to work hand in hand with the changes. Subsequently, H&M faces several internal and external problems due to the rise in factors such as competition, globalization and technological up-gradation (Dangi et al., 2017). From the very large number of strategies H&M employs, its’ team is working on 3 key strategic issues. The strategies and implications have been listed as follows:

• Competition

Strategies for Dealing with Hurdles

Competition and rivalry in the marketplace are very obvious threats for any business. In order to counteract the effects of such factors, business plans are written and adhered to.

These plans will usually factor in the risk of losing the customer base due to similar products or better substitutes flooding the market, usually for a competitive price.

Therefore, appropriate strategies in order to deal with such scenarios have to be actualized. The clothing retailer, ZARA, is one of H&M’s biggest competitors. ZARA, one of the world’s largest international fashion retailers, is part of the distribution group Intidex, which is subsequently the largest clothing manufacturer in the world. Zara has been considered as one of the leading fashion brand and is operating all over the globe through more than 2000 stores and sis also one of the integral and biggest parts of the Spanish retailers industry. Moreover, the business entity is having minimum expenses in terms of supply chain management system and all these aspects re aiding the business entity to develop a position as a fierce competitor. Vertical integration and rapid product replacement are the two strategies that are used by Zara in the process of supply chain management. Under vertical integration the business entity is controlling several steps in the process of production and distribution for increasing power and hold in the market and thus this strategy will also enable the business corporation in maintain sustainable position in the market region for longer run. Rapid product replacement is another strategy that has been adopted by Zara for managing the product distribution operations. Under this strategy the entity has maintained the procedures and systems in such a manner that they are able of launching the new products and can also make distribution of same in retail outlets within 4 to 6 weeks. And by this it has been observed that the lead time at the firm is comparatively less than that of competing brands. This is another point through which the business entity will be enjoying a sustainable competitive advantage.

In relation to these operational strategies of H&M has been affected as well as changed the way it was operating before. To have a specific path in relation for development of business which might get lost over competitors strategies it also have to be very secure and preserved so as to deal with situations which are long lasting and could impact the profit statement of business. Hence, this is a strategic issue which has a direct relation with strategies of H&M and has to be modified according to time.

• Globalization

Going global is a trend which has been followed for decades. Each and every company wants to globalize its operations. This clearly states the significance of being a part of a world in terms of business. To stand in a recognizable position by earning revenues on a very large scale H&M has to go global with its products. International setup of the entity requires a lot of strategic development. This is need of today’s scenario which can’t be ignored or changed (Puck et al., 2017). Hence, H&M has set up its outlets worldwide in many countries which are clearly a huge strategic issue. As settlement in a new nation requires several kinds of plans, for instance, need to change policies according to legal statements, prices, products etc. Each factor plays the important role which is being changed for settlement in a new nation.

• Technology

Social media is one of the contemporary mechanisms and tools of the technological advancements that aids the business organizations on large basis. And this tool has gained more significance in the past years due to the excessive use of internet and online trends and fashion. The business entity find easy to promote and distribute the products by making use of online platforms. Moreover, the business entity can also aid the customer by replying them on the feedbacks of the customers and the clients. Social media will be proven a better and beneficial option for interacting with the customers as it provides ease of access and usability.

As it is known that how virtual world has taken over people, resources, and business and so on. Everything is available on internet which states the urge of business to go online. As all the other business competitors of H&M is going online with their operations so it was clearly assign to develop it’s as well. Recently a change in this section has been actualized which has made the firm to go online with its website as the main rival ZARA has gone virtual in almost every part of the world. This show the strategic issue which arose and a change in strategies according to it has come up. Change has been bought as it was the demand of the market and to sustain with dynamic trends a company like H&M has to develop new and vulnerable ideas (Pedersen et al., 2017). So, it does make changes in strategies which further leads to development and growth of clothing giant all over the world.

These are 3 key strategic issues which directly impacts the strategies of H&M so as to have a hold over the market for a long period of time. Sustainable development is also necessary for a company so as to have a recognizable position in the market with a proper satisfaction of customers.

After analyzing the above-presented issues it has been concluded that H&M has been facing the number of strategies issues that will stimulate the business environment. The issues have been segmented as per the mentioned categories such as the issues due to globalization will be counted under the PESTEL area, competition will be considered under the 5 forces area and the last is the technical issue that will be considered under the SWOT (Zlatev, 2018). All of the three mentioned issues play a significant role in the influencing the business practices within H&M.

I have re-written the paragraph below and condensed it significantly!! Read!

SWOT model can be used for analyzing the relative strengths, weaknesses, opportunities and threats pertaining to H&M’s corporate strategies. This analysis takes direct internal factors which impact operations and well as crucial external factors which are indirectly related to the business

The framework that can be adopted for identification and analyzing the internal and external factors of that are held liable in stimulating the viability of the product or service of a business organization. A SWOT analysis is best used by the business corporation while they are planning for launching a new business idea or can also be considered as a part of the strategic planning practice. Strength, Weakness, Opportunities and Threats are the main elements on which the business entity will be focusing while executing the operations related to this framework. The below analyzed is the SWOT analysis of H&M:

Strength · H&M is operating on a very big scale and has a recognizable position in the market. The products range of the entity includes apparels, cosmetics, shoes and accessories for wide range of customers and this can be counted as one of the biggest strength of the firm. · The quality of the products offered is high and premium and hence the customers are fully satisfied with the value of money they devote to buying a product. · The company has a hold over a large number of nations. · Moreover, the business entity has developed unique identity for al the products as the entity is selling its product portfolio by making use of various brands such as H&M, COS, weekday and monkey.   · Technological up gradation is used which the usage of latest equipment for operations.

Weaknesses · Competitive strategies in order to have an edge over rivalry have to be ascertained in a better way. · Stress and focus should be given on the implementation of strategies concerning to supply chain management so as to advance the distribution process.    · The business entity has a high dependency on the suppliers and the third parties for its merchandises. The firm is outsourcing product manufacturing to about 800 suppliers and hence has a very less control over manufacturing process.

Opportunities · There is an availability of a huge market which can be captured by some attractive strategies. · The company can launch it’s more outlet as well as it has been dealing online which is a good strategy to reach the big number of customers in a single go (Sullivan and Robinson, 2017). · H&M can add up to more sections in the product line with adjoining the accessories, etc. segments. · The business entity should develop diversification in the products range such as multi-ethnic wear and should also indulge themselves in producing different products line such as Fashionable handbags for women and accessories.

Threats · A major threat is of competition which is very big (de Carvalho and Kluka, 2017). · Zara is the biggest competitor of H&M which is threat full. · Changes in trends are also a very major threat which has to be encountered from time to time. (Do you mean keeping up with the changing trends in the fashion world, which are affected by high end fashion retailers/ shows/ celebrities) · E-commerce is one of the biggest advantage but is also considered as a threat as it is allowing new entrants and mark their presence on the same platform.

 
Therefore, the above justification clearly states the internal and external factors such as key capabilities of H&M. Moreover, there are other approaches that can be used by the business firm for presenting the strategic resources of the firm. One of the best approaches that can be used by the business firm is the Grant;’s Framework and this can be adopted by H&M for analyzing the suitability of the resources and capabilities that are available with the firm (Wild, Wild, and Han, 2014). According to this framework, the resources and capabilities of the business enterprise are required to be managed in such a manner that they aid in attaining competitive advantage or the firm.

(Source: Grants framework for analyzing resources and capabilities, 2018)

Further, a justification to have a complete knowledge in regards to a company and its strength for competition (Shenkar, Luo and Chi, 2014). Resources that are most significant for H&M are illustrated as follows:

• Financial Resources

These resources are a backbone for each and every operation which has to be initiated in a company. This is just like a heart of an organization which circulates blood to each and every part of a company so as to operate properly (Morschett, Schramm-Klein and Zentes, 2015). H&M’s most important requirement is this resource which will further initiate the process of a company. In the listed requirements for the company, this is the first and foremost need which has to be actualized by various sources. Budgets to have various other divisions so as to bring new segments in the company’s business are also made after ascertainment of finances available with the company.

• Human Resources

People are the most valuable resources for an organization which is operating on a very big scale. Right people at the right job leads to a company to heights of its field. Hence, it is very significant to appoint appropriate personnel at various positions in the company. The operations of H&M are through retail and online according to which vacancies in the company keeps on coming (Buckley, Burton and Mirza, 2016). An appropriate person at a post according to its qualification and experience has to be appointed in order to fulfill the segments with people who can grow with the organization’s development.

• Inventory

As clothing giant H&M has to maintain the proper stock of the clothes which it is selling in a market. Hence, this is also one of major resources which have to be on the store’s slabs from time to time to properly satisfy the customers in a proper manner (Temiz, and Gökmen, 2014). Availability of the products according to demand is a major task for which the company has to make strategies as it operates worldwide for which various channels of distribution has to be followed.

• Fixed assets

For launching new stores in a market there are several requirements of resources and things which are essential for a successful opening (Luthans and Doh, 2018). Likewise in fixed resources such as land, building etc. is also a requirement for a retailing store at various locations other than the home country.

Further includes the discussion regarding competitive advantage which H&M has chosen over to deal with the competition in a market. As it is known that quality is precisely chosen over everything by customers and when they get this quality at a reasonable price it makes a very good impact. Hence, satisfying the consumers in the value they are paying for the product is a major need and goal of a company together with earning the profit. In terms of being different from the competition, H&M tries to maintain its legacy by having the proper quality of product at low prices (Piekkari, Welch and Welch, 2014). Hence this is the major strategy which makes it stand out of the category of fashion industries which are already there in the market. no matter many companies are trying to reach the same quality so as to have an edge over the market by taking over the share of customers which H&M has but the quality of H&M’s products are non-defeat-able and no other company can take this advantage over it (Boddewyn, 2016).

Launching products over and over again in various nations and markets is a major task and competing for the domestic as well as international brands plays a very important role in the change of the strategy which is being already captured by the company. This factor can also be considered under the list of critical success factors. As having wide range of unique products and services is a biggest benefit and it will assist the business corporation on number of aspects such aids in dealing competitive environment, distinct image on global grounds, So, H&M has to be at the top so as to have best outcome of the stores it has been operating worldwide (Burton, Yamin and Young, 2016). Hence, this sums up all the key factors in relation to strategies, capabilities and competitive advantage of the company which it has made to sustain in the market for a long period of time with usage of resources in most optimum manner.

Further, the business entity is required to make analysis over the unique strategic capabilities by making use of value chain analysis (Chidlow, Plakoyiannaki and Welch, 2014). The main objective of this approach is to get aware of the business practices that will be aiding the business entity in enhancing the value of its products. Under this process, H&M will be identifying the primary and the supportive activities that add value to their products and services. This method is a business tool adopted for analyzing the internal activities of the firm. Recognizing the business practices that are most valuable for the firm is the main objective of this approach. Porter’s value chain model is the best tool for analyzing and determining the activities in which the business entity can be made involved for attaining best outcomes. And the below presented is the diagram for the same:

 

Figure 2Value Chain Analysis

(Source: Value chain analysis, 2018)

Strategic evaluation is one of the major processes that is required to be executed by the business entity for throwing light over the efficiency and effectiveness of the plans for attaining desired goals (Kolk, 2015). And for this various approaches can be adopted or the entity can also develop specific criteria. SAFe criteria that can be used by H&M for evaluating the strategies and the same have been presented as follows:

Suitability: This one of the significant factor of SAF strategy model and under this evaluation is done of the suitability of the strategy, whether the strategy is suitable in attaining desired targets (Eicher, 2016).

Acceptability: Measuring the returns, reactions of the stakeholders and the risk of a particular strategy are the major components considered under this factor.

Feasibility: Under this factor, the evaluation is done over the availability of the resources and capabilities of the firm for managing the strategy adopted.

Operating in a dynamic environment where changes keep on coming from time to time. These changes have to be cooped up in order to reach the best result for the company so as to excel the market with potential growth and development (Hovhannisyan and Keller, 2015). Competitive strategy is made in order to stand out from the rivalries which are present in the market. So, did H&M have made its advantage strategy to attract more and more customers to its products? Focusing on the results which have been positive in regards to the strategy which company has made to deal with competition. It is necessary to have a change in it because the business world is very much dynamic (Villamayor-Tomas et al., 2015). Coping up with the problems H&M is precisely performing well in its operations as compared to the rivalries. The strategic issues which were actualized such as competition, globalization, and technology have been precisely going with the strategy of best pricing with the value it is being delivered continuously. A further justification with suggestions has been listed as follows:

• Competition has been met as it is pricing its products at a very nominal price and providing better quality for the same. Hence, it possesses an advantage over the competition through this high-quality strategy.  Also in order to develop better position, it has to definitely cope up with the situations, which again and again over time keeps on rising. Like- H&M has gone online with its products is a very good and sustaining decision for the operations of a company.
• Globalization is one such factor, which can’t be ignored and has to be taken into account with operations of H&M. The company is already doing in settling up the business all over the world. It has been a successful player in launching its stores in various nations where there is a huge market for its products. Further, it can reach various more markets with its products, which are very much acceptable and attracting. A company sets prices according to the nation, which is coming up with competition, and quality is same as it is all over the world.
• Technology has been taken as an acceptance by H&M by which it is positioning its products online where it is available for a huge number of people he wants to buy its products. Nut further it can develop this all over the section of nations where it is retailing so that more and more customers can be connected with the business (Simatupang, Piboonrungroj and Williams, 2017). Hence, this issue is not addressed by this competitive strategy so the company has to make more convenient moves for these sections.

There is a huge ground available upon which improvements can be done which not only confined to operations but also with the functioning of the company. A company has several diverse segments upon which it makes its business work with people who are working on it.

Conclusion

It has been concluded by the above report that it is very significant for every organization to have the best result from the strategies it has been developing. Each and every person moves on the same path, which has been made by the management. Hence, strategies play a very important role in the upliftment of business. Various factors such as resources, capabilities of business etc. play a vital role in processing the whole plan, which is being made to achieve goals and objectives.

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