Value Chain Analysis is an important concept in business management introduced by Michael Porter in his book of “Competitive Advantage” in 1985. It can help H & M group to create value for its consumers and to analyze all of their activities. It consists of two parts: primary activities and support activities to develop the value of that company. Primaries activities are included in the physical creation, marketing, sales, maintenance and support or servicing of their product. Each of these primary activities is provided by support activities to improve to be more effective or efficient.
1 Primary Activities
1.1 As inbound logistics processes, H & M does not own manufacturing factories but buys garments from their loyal suppliers and relies on outsources. They are trying not to receive negative responses by making agreements with its suppliers to maintain the quality of its products and using sustainable raw materials such as cotton and organic wool. Using a high range of durable fabric and sustainable raw materials ensures smooth cooperation with its suppliers to reach its goal. As for transports, they usually use ships and trains to reach their warehouses from the suppliers. Since they always want to show the friendly side of theirs, it tries to choose the right standard decisions for its transporting goods.
1.2 Operations which transform the inputs into their finished products or services. For H & M, the things H & M makes is design and communication. From its headquarters in Stockholm, H & M group quickly responds with its 200 designers and 100 pattern makers to create various fashionable clothes in the latest fashion trends with market analysis. They emphasize customers’ preference to have more options. While making patterns for the garments, understanding customers’ needs and wants help H & M to get consumers’ awareness. To go further than this, it has more chances to attract customers with reasonable price at the best quality. It handles their productions mostly in developing countries to reduce their costs. Moreover, the workers in those countries could get fair wages and garment production can be a way out of poverty for them. H;M represents its clothes in a sustainable way and to recycle if the products aren’t wanted anymore.
1.3 Outbound logistics is to restore and distribute their products and services to reach the consumers. H & M utilizes to distribute directly their products to customers from warehouses through stores or online markets. During the delivery stage, H&M always ensure to control and monitor the standard and quality of the clothes till the retail stores, and all the clothing designs have to be consistent at all the retail and online store across the world, to maintain the standard of H&M brand.
1.4 Marketing and Sales are activities to help the company to persuade users and clients to purchase products from it rather than its competitors. The more it can communicate with its suppliers in a beneficial way, the more it could have advantages by getting enormous discounts. So, they could reach their goal that “fashion and quality at the best price” by selling these products at reasonable price. H & M is already in successful position through marketing which means collaborating with famous designers and being in advertising contract with famous celebrities to feed fashion trends and style advices. Moreover, it also has a strong potential presence on online sales and social media in fact posting the pictures on Instagram or Twitter wearing H & M clothes has been automatically expanded brand name. To achieve improvement in sales, it updates all of their stores across 71 markets to be within reach in trend to having an attachment with its customers and it also has clearance sales depending on seasonal fashion.
1.5 Services are involved to maintain or enhance the value of the product or service to its customers. The company can have values for its customers by listening their feedbacks or voices. Servicing is acknowledged by H & M as a priority in their business and one of the best way to favor its customers. As a fashion retailor company, employees’ capabilities are preceded to have better customers’ services in dealing with them. If customers need helps or any assistances, skillful employees and consultants are available to give the prompt responses and efficient services. Sharing its conscious messages or opinions in communication with customers is a kind of way to increase their service impacts. Sustainability of products for customers’ expectation is also an important part that they should have target to reach as a service. It evens practices product mending in case you can bring the garment back to shop if there is any factory error.
2 Support activities
2.1 Firm infrastructure
H;M has 4,831 stores in 71 markets and operates in over 50 countries with 171,000 employees globally. Since it doesn’t have own factory, it has to handle with 800 loyal suppliers. The activities such as financial performance, buying, making design, advertising problem, logistics, etc are mainly organized in its head office which is based in Stockholm, Sweden. If the company makes decisions for corporation, it is mostly utilized by the Persson Family as they are holding 73.8% of voting shares.
2.2 Human Resource Management
H&M believes that teamwork is necessary to create values and accesses to archive its goal, and basically, the results are reflected by employees’ satisfactions. In this system, leaders always has to be the role models and leave great inspirations and motivations for his followers to energize in their work. The company committed to have safe workplaces for its people, keep respects and humbleness when interacting with each other. Opportunities are provided to learn new skills and have work rotation. Employees are formally trained brief decision making, instant responses and new ideas for customers’ problem. Workers are encouraged to take responsibilities for their mistakes and sometimes, minor mistakes are tolerated as long as they are not repeated. To have social responsibility, H&M hires local stuffs in its new stores, ensure safety and good treatments of its employees and encourage them to inform their working problems to their relevant managers.
2.3 Technology Development
H&M adopts advance technologies to develop its logistics and quality controls managements in its business. As it operates in online market, investing in online stores help attracting to consumers. The company targets to use recycling technologies for fiber fabric and cotton which are used in producing garments. For example, 59% of cotton are currently used to be sustainable for their products and its goal is to reach using 100% cotton by 2020 and raw materials, to be recycled by 2030 at the latest.
H&M does not own manufacturing factories, so it completely depends on its suppliers’ power. Even minor changes in prices of raw materials can have effects the company’s profits. For example, if the cotton’s price has increased, making H;M clothing costs also will change. The company can significantly conduct the business with its suppliers in bargaining power to obtain discounts over finished goods and delivery costs. Anyway, H;M is able to switch its suppliers to get lowers costs and better quality.