Strategic Management in a Global Context

Edinburgh Napier University

BA(Hons) Marketing Management(Hong Kong)

Strategic Management In A Global Context

Module:SOE09901

Assessment 1:Written Report

Topic: H&M

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Student Name: Wu Kwok Sum

Napier No:40186913

Tutorial Class:1

Q1: Using Micheal Porter’s 5 forces model, evaluate the importance of Barriers to Entry to the fast fashion industry. Support your arguments with evidence form the case study.

There are several Threat of New Entrants, Capital Requirements, Economics of scale, Product differentiation, Access to channels of supply & distribution, Legal and regulatory barriers, Expected Retaliation.

Capital requirement is an important factor considering the fast fashion industry, the trend is easily change and unpredictable, the firm should prepare for the uncertainly, if there is any changes, brand should quickly prepare for the new trends. The capital requirement is high for the firms against trend uncertainly. Since the capital requirement is relatively high in this industry, there are many entrepreneurs and supplier to choose for. To conclude, the factor- capital requirement is medium.

Second Barrier of entry is the economies of scale, in the fast fashion industry, it will take high volume production, the economics scale become very important with considering the profit margin. With the higher economies of scale, the higher profit margin. In the fast fashion industry, firms need to cooperate with the supplier to manufacture the latest trend product, the transportation system and lead time is main consideration in order to increase economies of scale, it can be increased by control over supply chain. This barrier of entry is high since, the new competitor is difficult to well manage the hold supply chains and reduce lead times; new competitor must communicate with different supplier and shipments.

Then, the product differentiation

As product differentiation is an important issue for a long term development in the industry. For example, H&M develop a new brand Monki provide innovative collection and colorful design. Zara has also develop a new brand Kiddy which target on the junior fashion. Those examples show that the product differentiation is a long term development to obtain revenue from different target group. But for the new potential entrant, the entry barrier is relatively low since it is target on the firm long term development. New potential should focus on the fashion trend in order to enter the industry.