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Impact of Innovation on the Global Fashion Retail Industry

Discuss About The Innovation Global Fashion Retail Industry.

The term fashion indicates the trending style mainly in apparels, footwear, accessories, lifestyle products, hairstyle products, makeup, etc. Fashion industry is growing rapidly across the globe and the major reason behind is the dynamic behaviour and constant changing demands of consumers. Unlike other industries, whole fashion industry along with some popular brands which are directly linked with fast fashion and direct-to-consumer model are growing at very impressive rate. This is because they are constantly adopting innovative strategies and advanced methodologies in order to fulfil the dynamic needs of consumers. Innovation is simply a new idea to execute the functions in more effective and appropriate manner. Set of effective techniques to resolve the problems as well as to meet new requirements, existing marketing trends or tacit consumer’s needs. Global fashion retail industry is adopting innovative techniques in order to meet with the dynamic needs of target audience as well as to match up with the latest fashion trends along with fulfilling the unarticulated demands of consumers. According to McKinsey’s report of State of Fashion (2018), “sales of the traditional fast fashion industry have grown rapidly, by 20% over the last three years approximately. Major fast fashion brands are Zara, H&M and ASOS and all of these have disrupted the industry by fulfilling the untapped customers’ needs. Along with this, these brands are also popular for providing trending apparels and accessories for lower prices. In 2018, most of the fashion retail companies have prioritised the innovation in order to stay competitive in the industry. This strategy has also helped the companies to meet with the trendy demands of the consumers. The best way to attract apparel and fashion clients, it is necessary to increase efficiency and productivity within the supply chain and inventory management (H&M, 2018).

Primary aim of this essay is to analyse the effect of innovation over H&M which is a significant part of global fashion retail industry, impact of internal and external environmental factors and strategic landscape will also be discussed to analyse the development of fashion industry. PESTLE analysis will be implemented in this essay in order to determine the impact of external environmental factors’ over the growth and success of fashion retail industry along with H&M group.

Strategic planning is the technique of development of plan under which all strategies are discussed to attain organizational long-term objectives and goals. While determining the strategic process model, it has been found that there is not model which describes the procedure of making strategies. In order to execute the strategic planning process, situational analysis should be included with the objective of making strategic planning process effective enough. Under situational analysis, appropriate external and internal environmental factors are considered while executing strategic planning process with the aim of developing an effective strategic plan so that the organizational goals and objectives could easily be attained (De Chernatony, 2010). Under the strategic process model, main steps are:

  • Analysis of current organizational state;
  • Defining the future state;
  • Analysis of organizational objectives and goals; and
  • Implementation and evaluation.

Internal and External Environmental Factors Affecting the Industry

Business of making clothes is the major function of fashion industry but the difference amongst the apparel and fashion cannot be neglected. On one side where apparel could be described as the clothing which is one of the humanity’s basic needs but on the other side, fashion incorporates an individual’s own style, taste and cultural evaluation. Initially, focus of apparel industry was to fulfil consumer’s one of the basic needs which is clothing (Wang & Chan, 2010). Development of fashion retailing is a result of application of information and communication technology (ICT) by the companies engaged in this fashion industry. Fashion industry is a part of clothing industry and under this; different types of cloths are included such as from fashion to uniforms and workwear to textiles. Main aim of fashion industry is to set the fashion trends and then supply relevant cloths to fulfil consumer’s tapped and untapped needs.

Thus, it has been observed that strategic processing model should be implemented by H&M before developing the appropriate strategies for attaining the desired goals and objectives. The primary part of this model is evaluation of external and internal business environmental factors. Under fashion retail industry, primary factors are customer’s demand, taste, preferences and the latest fashion trends. Along with this, H&M should also adopt some crucial strategies through which innovation could take place. With the help of innovation, organization would be able to attract tapped as well as untapped audience (Wang, Chan, Yee & Diaz-Rainey, 2012).


Impact on innovation


Generally, H&M introduce new stocks in regular internal of six weeks and every stock is based over unique fashion designs and trends. In relation to this, political factors are governmental rules, regulations; laws, policies, etc. should be considered.


H&M launches same apparels in every country but to some economic factors such as interest rate, inflation rate, economic conditions of the country, etc., organization is not able to maintain same price of their cloths in all country.


Every country has its own cultures, values, beliefs and preferences. There are some countries which are not yet so modernised and still follow their own cultures. In order to maintain an effective position in those countries, it is required for the organization to introduce apparels as per their choices and demands (Zott & Amit, 2013). This will help the organization to enhance its customer base along with maintaining an effective image of being a crucial part of innovative fashion retail industry.


Technological factors plays crucial role in innovation process. With the help of technological factors such as ICT, organization could analyse its target audience’s demand. This will help the organization to introduce innovative and appropriate apparels to target the articulated and unarticulated demands of its customers (Huizingh, 2011).


Legal factors of every country differs from each other and it majorly impact over the import and export related activities of organization. Thus, it is the duty of the organization to ensure that all the legal aspects have been fulfilled in order to accomplish its tasks.


Organization is required to consider environmental factors in its practices to avoid glitches in its operations.

Adaptation of these factors in its practices will help the H&M to enhance its productivity as well as effectiveness in the international market. In relation with the implementation of these factors, H&M will easily be able to introduce its new apparels category in the international market with the objective of gaining success. Along with this, these factors will also help the organization to uplift its performance in order to attain competitive advantage in the target market (Zhang & Duan, 2010).

In the scenario where these factors will not be given much importance, then it will reduce the efficiency of the organization and it will also lead to increase the chances of glitches in the organizational operations. Impact of external environmental factors will reduce organizational efficiency to introduce new ideas and new style products in the market which will ultimately affect organizational image in the international fashion industry (Mann & Byun, 2011).

H&M is an established brand in the global fast fashion industry. Thus, it could be considered that the impact of this factor is bit weak over the performance of H&M. New entrants will try to set up its position in the market by introducing lower rates apparels and in order to neglect their competition; H&M should constantly introduce new products as per the customer’s demands. Maintaining quality would also help the organization to enhance its efficiency along with maintaining the acquired position in the target market (Parida, Westerberg & Frishammar, 2012).

Strategic Landscape and Planning

Initially, cloths were used to fulfil the humanity’s basic needs but with the introduction of fashion in apparel industry, apparel, accessories and other products involved in this industry are apparels are known for style, and for matching with the latest trends. There are not much substitutes are available in the market in relation with apparels, thus, this factor has also weak impact over innovation in fast fashion retail industry (Wirtz, Schilke & Ullrich, 2010).

Due to low switching costs and intense competition amongst the companies involved in the fashion industry, purchasing power of consumers is bit high. In relevance with gaining competitive advantage in the market, it is necessary for the organization to fulfil its customer’s demands along with introducing new and innovative apparels in regular time intervals. This will help the organization to uplift its image, reliability, and goodwill amongst the target audience. With this effect, consumer will only switch H&M only in uncertain conditions (Jiménez-Jiménez & Sanz-Valle, 2011).

Suppliers have relatively weak power in comparison to other factors of internal environment. This is because there are lot of suppliers available in the international fast fashion industry. Switching cost for suppliers is also less. In order to perform in an effective manner as well as to maintain the quality of products, H&M is required maintain effective relations with its suppliers. Suppliers have the capability to enhance an organizational efficiency and they could also decrease the same organizational efficiency, thus, it is necessary to maintain effective relationship with the suppliers (Walker, Damanpour & Devece, 2010).

Rivalry amongst the fashion industry is intense, major players of fast fashion industry are Zara, H&M, ASOS, etc. With this effect, every organization performs its operations with the objective of enhancing the effectiveness of organization in order to gain competitive advantage. This is the major reason behind launching of new apparels in regular time intervals. This helps the organization to gain competitive advantage as well as to enlarge its customer base along with the market share (De Marchi, 2012).

Internal environmental factors have huge impact over the organizational performance and this is the major reason they should be considered positively in order to achieve desired goals and objectives. Apart from this, it is bit difficult for new entrants to develop an effective position in the dynamic business environment. Existing companies should also adopt and implemented certain strategies so that the acquired position could be maintained. Customer’s preferences should be considered as the priority as it plays crucial role in order to develop reliability amongst them which is a positive indicator for sustainable growth and development (Hung & Chou, 2013).

PESTLE Analysis

There are certain aspects which plays crucial role in influencing the innovation in the fashion retail industry. Strategic landscape consists of strategic processing model which plays significant role in terms of making strategies for organization. With the help of these factors, organization could determine its position in the market. This analysis helps to understand the effect of the factors such as organizational current state, future state, current organizational goals and objectives and the strategies which should be adopted to enhance organizational efficiency (Hakansson, 2015). These factors influence H&M to move towards innovation so that the desired goals could be acquired along with enhancing its market share in the target market. Main aim of strategic processing model is to identify the past and present development made in the industry. In terms of fashion retail industry, this model analyses the current demand of the target audiences through which relevant products could be produced. H&M is known for fulfilling its customer’s articulated as well as unarticulated needs. This has majorly influenced the organization towards innovation in terms of gaining competitive advantage along with reaching to the desired destination (McCann, 2011).

Impacts of external and internal factors are another crucial segment which influences H&M to move towards innovation. Innovation is the primary segment of fashion industry because with the same type of products and services, none organization will be able to survive for longer time period in the dynamic and competitive business environment (Chan, Kot & Tang, 2013). Innovation is the powerful weapon for organizations to survive for longer time period along with the attainment of desired goals and objectives. As per S&P 500 index, average lifecycle of an organization were 67 years in 1920s which is reduced to just 15 years today. The major reason behind the reduction in lifecycle of an organization is innovation, globalisation and liberalisation (Vozlyublennaia, 2014). Until and unless, an organization is not adopting innovative measures to make its products and services unique and distinct from competitors, failure of the same increases (Sutherland, 2014). Apart from this, globalisation and liberalisation has also played vital role in reducing the lifecycle of an organization. Foreign companies are expanding their businesses in the international market which is affecting the local company’s market share. In terms of fashion industry, people’s tastes, preferences and fashion trends is continuously changing and to fulfil these requirements, companies engaged in the fashion industry like Zara, H&M, etc. have adopted the innovative strategy in their practices so that their goals could be accomplished. This strategy also act as the defensive strategy to maintain the acquired position in the target market and also leads to generate new ways to gain competitive advantage as well as for the fulfilment of target demographics’ unique needs and expectations (Rothaermel, 2015).



It has been recommended to the H&M that for regular innovation, a separate team such as Research and Development team should be developed so that organizational desired goals could be fulfilled. Main aim of R&D team is to analyse the current trends, preferences of target demographics, scope of enhancing the customer base of organization as well as to determine the impact of competitors’ strategies. With this analysis, appropriate and effective strategies could easily be developed so that the continuous innovations could be introduced in the target market along with the attainment of desired goals and objectives.

From the aforesaid information, it can be concluded that innovation plays vital role in enhancing an organization lifecycle in the competitive and dynamic business environment. With regards to the fashion industry which is quite different from other manufacturing units, it is necessary for the organizations adopt innovation with consideration to all external, internal as well as strategy landscape models to make an effective image in the competitive business environment.


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