Applied Corporate Strategy

Running Head: APPLIED CORPORATE STRATEGY
Applied Corporate Strategy
Name of the Student
Name of the University
Author Note

1APPLIED CORPORATE STRATEGY
Table of Contents
Introduction................................................................................................................................2
1. External analysis....................................................................................................................2
1.1 PESTEL Analysis.............................................................................................................2
1.2 PORTER 5 Forces............................................................................................................5
2. Resources and Key competencies......................................................................................6
2.1 Resources threshold.........................................................................................................6
2.3 Value chain.....................................................................................................................10
2.4 VRIO..............................................................................................................................11
3. Online strategy evaluated using SAF...................................................................................13
3.2 SWOT AND TOWS Analysis.......................................................................................14
Conclusion................................................................................................................................18

2APPLIED CORPORATE STRATEGY
Introduction
This report is based on the critical strategic analysis of the organization Zara online.
Zara is a Spanish brand based on clothing and accessories headquartered in Spain. Amancio
Ortega and Rosalia Mera founded it in the year 1975. It is the world’s largest retailer in
clothing and the main brand of Inditex group. The revenue earned is approximately 18.9$
billion annually. It tends to manage up to 20 collections of clothing a year. It consists of
women’s and men’s clothing as well as children. Its products are supplied based on trends of
the customer. The highly successful supply chain ships its products to the retail stores twice a
week. It manufactures more than 450 million products every year. In the month of November,
it decided to expand further its online business to other countries including Austria, Belgium,
Netherlands and Ireland (Zara.com. 2019). The online strategy by Zara is to enter the new
markets through online for international expansion as it uses technology innovations like
augmented reality. Zara aims for quality over quantity for its customers. It stands out for its
authenticity and transparency. Due to huge competitive pressure from the market of online
shopping, Zara is focused on shifting to online stores and will subsequently open larger stores
in future. This report aims at discussing the detailed business strategy of Zara online.

3APPLIED CORPORATE STRATEGY
1. External analysis
1.1 PESTEL Analysis
PESTEL stands for six essential aspects including Political, Economic, Social,
Technological, Environmental and Legal. It is one of the most powerful tools that helps to
determine the external factors of the organization (Sisodia 2016). These factors can be be
recognized either as threats or opportunities that the organization can use for climbing the
steps of success.
Political
The political factors play several important roles in the global business of Zara online.
The company is based in Italy and present in more than twenty nations around the globe. The
government policies of the different nations have important impacts on the business of the
global premium company. For example, the company has to abide by the laws pertaining to
the taxes which the governments of the respective nations make. Secondly, in order to operate
on a global scale, the company takes advantage of the bilateral ties of its home country, Italy
with several other nations (Ntuli 2018). Similarly, Zara has on entering different countries
around the globe has to compete with several other premium apparel brands resident to its
different host countries around the world.
Economic
Zara online comes under the impacts of several economic factors prevailing in
different countries in the world. The first economic factor which the company takes into
account is rising per capita income. This is because rising per capita income means that
residents in a country have more disposable income to afford expensive and premium
commodities. This statement is evident from the strong presence of Zara in developed
markets like the US and emerging countries like China and India (Burns and Dewhurst 2016).

4APPLIED CORPORATE STRATEGY
The second economic factor which Zara considers while operating in the global market is
dynamic exchange rates. This is because the premium apparel company can acquire raw
materials from countries with currencies with lower currency exchange rates and sell in
countries with high exchange rates. For example, buying raw materials from Thailand and
selling finished products in France. The company also diversifies its investments over
different financial markets to advantage of differential rates of return which different capital
markets provide. Thus, adapting to different economic factors around the globe and
exploiting them enables Zara online to earn huge revenue and ROI (Cadle, Paul and Turner
2014).
Social
The social factors in the world are helpful towards marketing of premium products
which Zara offers. The population of the countries like the EU countries, the US and China
are high with large ratios of young and middle income people (Phau, Teah and Chuah 2015).
This means that Zara Online would be able to gain large customer base to market its products
and generate high revenue.
Technological
Technology plays a vital role when it comes to business or day-to-day life.
Technology is growing rapidly across the world (Sanchez 2017). For example, the
technologically advanced nations around the world like Japan and Germany enable Zara
Online to sell products online due to immense internet penetration. This would enable the
premium retailer market its products online in the world (Cadle, Paul and Turner 2014). This
means that the company would generate high revenue by marketing its products in the global
market to retain its global leadership.
Environmental

5APPLIED CORPORATE STRATEGY
Sustainability has become one of the most vital factors for business across the world.
The governments of different nations have passed stringent environmental laws which
business organisations like Zara have to comply with. For example, Zara has to ensure
compliance with environmental laws pertaining to air pollution and disposal of wastes.
Breach of environmental laws would attract legal actions from the government against the
concerned company (Lindahl 2019).
Legal
The business organisations should abide by the laws formed by the Governments of
different countries around the globe pertaining to areas like taxes and customs duty. For
example, while shipping products ordered online, the company should abide by different
customs laws imposed by different countries. Zara should abide by these laws and policies.
Breach of laws would attract legal actions against the company (Laudon and Traver 2016).
1.2 PORTER 5 Forces
It is a tactical management tool used to analyze the competitive environment of the
organization. Each of the forces help to identify the strengths and potential of success in the
industry.
Threats of new entrants (Low)
The economies scale is difficult to achieve in this industry, which makes production
costs higher for the new entrants and their threats weaker. It makes difficult for the new
entrants as before selling it requires legal requirements and strict licensing (Moorhouse and
Moorhouse 2017). For example, Zara should make strategies like carrying on continuous
innovation in its product line to counteract threats from new entering firms.
Bargaining power of suppliers (Low)