Applied Corporate Strategy

This report discusses the application of corporate strategy in the fashion retail industry, focusing on Zara. It covers external and internal analysis, including PESTLE analysis and Porter's Five Forces. It also includes a SWOT analysis of Zara and an evaluation of its key resources and competences.

Applied corporate
strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
External and Industrial analysis to identify Opportunities and Threats......................................1
Analysis of Resources and key competences..............................................................................6
SAFe criteria applied to a strategy implemented by organisation ...........................................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Corporate strategy is a highest strategic plan for an organisation that duly defines
organisation overall directions as well goals along with the way in which they can be achieved.
Goals and objectives of company are unique that are mainly formulated as per according to the
current market situations (Davies, 2016). Present report has been conducted on, Zara. Company
conduct their functioning as a leading fashion entity while operating their services in retailing
organisation. In this report formative discussions has been made on Five Force analysis as well
as PESTLE in order to evaluate external environment. While for internal analysis VRIO is being
covered in this report. Lastly, in this report SAFE criteria is being applied which is being applied
as one of the future strategies of entity.
External and Industrial analysis to identify Opportunities and Threats
Zara perform their operations as main brands of Inditex. Company marked themselves as
a leading entity within fashion retailing segment. Company offer offer latest and fast fashion
apparel to customers with of high quality. Zara parent company is a leading and one of the
biggest global brand operating in fashion retailing industry.
Figure 1: Global Fashion Retail Industry Statistics
(Source: Global Fashion Retail Industry Statistics, 2019)
It is important for each and every organisational unit despite of their size and scope to effectively
determine business environment as to decide strategic course of action for company growth and
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welfare. In order to evaluate external environment, Zara manager undertake of Industry and
PESTLE analysis:
PESTLE Analysis
PESTLE analysis, a strategic tool that that aid an organisation to identify its strength,
weaknesses, threats and opportunities in order to gain competitive advancements. Companies
within retailing sector by undertaking advantage of PESTLE analysis with an aim to increase
their consumer base via applied corporate as well as newly designed strategies.
Political: It involves factors like entry mode policies, political stability, taxation regulations and
more. In this it is essential for organisations those perform their functions in retailing segment to
effectively evaluate factors within this factor as to perform operations in a well defined manner.
Elements that are prevailing in political factor impact of functioning of entity in number of ways.
This factor duly involve threat as well as opportunities that are being defined below:
Opportunity: United Kingdom political condition is strong that provide boost to
companies within retailing sector those who come up with speedy innovations.
Threat: Factors like political instability, trade wars, adverse political situations, terrorist
attacks pose threat to organisation on their sustainability. This will lead towards fluctuations in
demand,supply and price of raw material. This significantly affect functioning of organisation.
Economic: Foreign exchange rates, economic growth, interest rates, inflations are involved in
this factor. Thus, it is essential for entities those who conduct their services in fashion retailing
segment to have proper understanding of all these factors and formulate strategies to overcome
negative impact while undertaking advantage of positive one. This will benefit to ensure their
significant growth in respective sector.
Opportunity: United Kingdom is having stable economic growth rate that duly provide
significant opportunities for relating organisation to expand their operations and market share
holding.
Threat: BREXIT impact of performance of organisations within UK in a vulnerable
manner. In order to overcome this, entities within retailing segment are required to undertake use
of pricing strategies which is affordable to every economic section within society.
Social:Constant fluctuations and changes within taste, preferences and trends within customers
lifestyles are covered in this factor. In order to serve society at its best, companies within
retailing segment must ensure that they have effectively evaluated preferences and perceptions of
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individuals within society in best effective manner. With the help of this, they can effectively
able to ensure competitive positioning is respective organisational sector.
Opportunity: As to determine dynamic trends and changes within customer lifestyle,
entities involved in retailing segment are required to conduct effective market research and fulfil
demand of customers as per according to their preferences.
Threat: Retailing segment involves highest threat, as in this it takes a minute for
customers to give a tag of “outdated” to organisational offerings. This lead organisations
involved within this segment towards a pressure in which they are required to constantly involve
in the process of offerings new and unique to their customers.
Technological:It involves rapid change in software and technical tools and techniques. With the
rapid change in technological segment there is constant change in tools and well as technologies
that are required to be duly determined by entities within fashion retailing sector. This will
effectively allow them to save themselves from being get outdated among customers mindset and
marketplace.
Opportunity: UK is technological advanced nation that give boost to entities to make
significant increase in their sales and performance. By taking advantage of upcoming
innovations and technologies retailing organisation can significant able to gain more competitive
advancements. In addition to this, it is essential for entities to implement newly advanced
software within their departments as to serve customer within marketplace in best effective
manner. It further allow them to gain more effective manner.
Threat: Technology is very dynamic that makes entity to conduct constant research as to
determined new trends within technology that provide formative assistance to organisation to
safe themselves from being get obsolete. Major threat that revolves around this factor is that, as
to implement new technologies on regular basis firm required large amount of funds.
Legal: Laws related to employment safety & health, patent violation, import & export regulation
etc. are covered in this factor. By abiding all legal rules and well as regulations entities
performing their operations in retailing organisational segment can operate their functioning
without facing any legal hindrances from government institutions and authorities.
Opportunity: By abiding all legal obligations and laws organisations within retailing
segment can provide healthy workplace environment to their workers and can further build
positive image among public that maximise their global market share. In addition to this, it has
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been evaluated that by applying all relevant legal laws into consideration organisations can not
only serve customers in best effective manner but can also help them to ensure their strong
marketplace.
Threat: Breach of any law will lead organisation to loose their goodwill and market
positioning that further lead towards hampering loyal customer base of organisation.
Environmental: This factor include organisation attitude towards waste disposal, environmental
concern, energy consumption and more.
Opportunity: By having positive attitude towards environment company can ensure long
term sustainability and good market positioning.
Threat: Negligence of environmental concerns lead organisation to affect their overall
organisational functioning. Thus, it is important for organisations to ensure that they did not
neglect to frame strategies for ensuring environment as it will significantly aid them to gain
better goodwill in marketplace.
Further, company top management is intending to conduct Porter Five Force analysis as
to gain knowledge of the respective sector in which they operate their functioning.
PORTER FIVE FORCES
Porter’s five forces is a analytical tool that aid an organisation to gain formative insight
about industry in which they operate their functioning (Herrmann and Felfe, 2014). Top
management of Zara has planned to undertake use of Porter’s five forces as to make significant
improvement in their market performance by evaluating threat and opportunities in retailing
industry:
Threat of new entrants: In context with retailing industry, this has been evaluated that
Zara is facing low threat of new entrants. As company positioned themselves as leading
organisation an as a well known brand with having bulk of loyal consumers. (Lam and
O'Higgins, 2012) Apart from this, as to enter into retailing sector organisation require large
amount of funding and time to settle down as well known entity. Thus, it has been evaluated that,
there is less threat of new entrant for Zara in respective industry.
Threat of substitutes: Zara operate their functioning in fashion retail industry with
having high threat of substitutes. As number of organisation coming up with alternative services
and products as to lure customers. Thus in order to generate new consumer base and retain loyal
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ones, Zara is required to use innovation and uniqueness of continuous basis as to offer new
clothing range of consumers.
Bargaining power of customers: Within retailing sector, bargaining power of consumers
is high as they are major source for revenue generation of every entity and if they do not get
satisfied by organisational offerings they switch their preferences towards other brand in fashion
retailing sector. In context with Zara, it is essential for organisation to offer qualitative products
to customers at low pricing. This is due to the presence of other entities those who offer their
products and services to customers in an affordable price range. This makes customers to change
their shift from company that depicts presence of high bargaining power of consumers.
Bargaining power of suppliers: Supplier offer raw material to organisation on regular
basis that males company to conduct their functioning of production in well effective manner.
This has been evaluated that, bargaining power of supplier is low in fashion retailing industry.
ZARA continuously give bulk order to their suppliers that automatically benefit suppliers with
long term business functioning (The State of Fashion 2019: A year of awakening, 2019). Thus, as
to maintain this relationship suppliers does not negotiate much upon price and quantity that
signifies low bargaining power of suppliers for ZARA.
Competitive rivalry: It has been analysed that competitive rivalry within retailing
industrial sector is high. Thus, it become essential for entities engaging within retailing sector to
analyse strategies and policies of competitors. In addition, to this it has been evaluated that by
merging with other companies market lead can be duly ensured in best effective manner. It will
not only aid entities to make significant improvement in their market share holding but also
benefit them to attract attention of large base of customers towards organisational products and
services. Further, it also benefit them to make significant increase overall sales ratio of entity.
By undertaking use of Porter's five force analysis organisation can effectively able to
shape their competition within retailing industrial sector. In addition to this, it has also been
signified that with the help of this, company can effectively able to ensure best effective
planning. Further it has been analysed that, it also benefit company to effectively deal with
suppliers and buyers in a well defined manner. In addition to this, it has been evaluated that by
undertaking advantages of these competitive forces organisation can effectively able to pressure
and can significantly create more competitive advantages. This will not only benefit company to
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expand their organisational growth but can also able to increase overall profitability and
productivity in a significant way.
Figure 2: Porter Five Force Analysis Model
Analysis of Resources and key competences
It is important for an organisation to evaluate its strength, weaknesses, threats and
opportunities as to gain competitive edge. Zara top management undertakes advantage SWOT
and VRIO analysis as to gain knowledge of organisation key resources and competences.
Mentioned below SWOT analysis is being conducted in context with company.
SWOT ANALYSIS
It is a strategic analysis tool with the help of which organisation can gain insight about its
internal environment that further aid them to formulate well defined strategies accordingly.
STRENGTHS WEAKNESSES
 With having 2000 outlets ZARA  Promotional and marketing activities of
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marked themselves as leading business
organisation in retailing sector.
 Company is having large base of loyal
customers those who are fully
committed towards entity (Ocasio and
Radoynovska, 2016).
 Company continuously undertake use
of unique, fashionable and innovative
fashion trends that ensure their strong
market share holding captivity.
 ZARA is also well known for their
handbag section with having vertical
integrated business process.
 Online presence of company is also
very strong.
ZARA is not that much affective as
compared to their competitors. This is
the major weakness for company.
 Company is having low presence in
marketplace like New Zealand,
Malaysia, India and Thailand.
 Labour turnover of this company is
comparatively high.
 Business functioning of ZARA suffers
a lot because of high competition in
fashion retailing market.
OPPORTUNITIES THREATS
 ZARA can gain opportunities by
expanding their business operations in
those marketplace areas where their
services are still untouched (Quader
and Sohel, 2018).
 Company is also having opportunity to
make their entrance into new market
segment such as, accessories. This will
allow entity to enhance their customer
base along with profitability.
 By undertaking use of best effective
marketing strategies ZARA can gain
opportunity to increase their global
market share holding.
 Company is facing threat, owing to
existence of organisations like H & M,
Vero Moda, Mango. This pose threat
upon business profitability of ZARA.
 Due to low investment of company
within its promotional and marketing
programmes, company is facing threat
as to attract customers towards their
offerings.
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Illustration 21: FINANCIAL PERFORMANCE OF INDITEX AND ITS SISTER BRANDS
(Source: FINANCIAL PERFORMANCE OF INDITEX AND ITS SISTER BRANDS, 2019)
VRIO ANALYSIS
V: Value creating potential
R: Rarity
I: Imitability
O: Organization Appropriateness
TYPES OF RESOURCES
Human Resources
ZARA CEO Óscar Pérez Marcote, is considered as one of the most important resource of
organisation as he significantly drive workforce of entity towards more growth. In addition to
this, employees are also termed as essential resource of company as they are major source of
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revenue generation (Klettner, Clarke and Boersma, 2014). In order to manage organisational
workforce in best effective manner company provide them with continuous training as to
increase their skills and efficiency.
Physical Resources
As to conduct their manufacturing process in a well defined manner company undertake
use of equipments, machines and infrastructure. This aid ZARA to effectively fulfil needs and
demands of customers in best effective manner.
Financial Resources
ZARA operate their functioning as large scale fashion retailing organisation, owing to
this company is having adequate funds availability all the time as to operate business operations
in a smooth and effective manner.
Intangible Resources
ZARA is having established online presence because of its e-commerce platforms and
websites (Lawton, 2017). This offer organisation a strength to ensure high sales as well as
profitability in marketplace.
This has been determined that negative publicity of entity act as a threat for company that
can impact upon their market positioning. This is because Zara is an international firm having a
large customer base which can be negatively influenced as a result of adverse publicity.
VRIO is being undertaken by entity as to evaluate organisational resources in order to
gain competitive advancements:
Valuable
It include those aspects that duly posses value for organisational unit and further benefit
in accomplishment of objectives in time effective manner. Mentioned below ZARA valuable
elements is being defined:
Sinewy brand image:Organisation is having strong marketing strategies that create
positive brand image within mindset of consumers. Entity undertake use of their effective brand
image and further charge high price range from consumers.
Offerings: Company is having product range of each consumer base and provide high
quality products to their customers. With the help of this company can ensure increase in overall
profitability base of company.
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System software:With the help of their own software system Retalix, company designed
products according to convenience of entity. With the help of this efforts as well as time of
managers and employees can be effectively saved (Naidoo and Gasparatos, 2018).
Personnel:With having skilled and efficient employees organisation can significantly
able to increase overall productivity.
It involve those factors that are considered as extraordinary as well as unusual and render
a strategic and competitive advantage to Zara. Mentioned below rare components of entity
include:-
Offerings: Offerings of organisation is rare as they undertake use of latest and unique
tools and technologies that turn out be bit hard for other entities to copy.
System software: Entity use Retalix Systems to effectively design and develop
specialisations of products as per the suitability of company.
Personnel: Company workforce is having effective competencies and skills with the help
of which organisational operations are conducted in well defined manner.
Inimitable
It involve those resources that are hard for rivals to imitate. Mentioned below these resources in
context with organisation are:
System software: ZARA undertake use of Reatlix in their working structure.
Personnel: Organisation offer training as well as development programmes on quarter
basis as to make significant improvement in their capabilities and skills. This ensure entity to
gain high profitability and productivity (Gnan, Montemerlo and Huse, 2015).
Organized
Resources in this are properly managed as make sure that goals and objectives of
organisations are managed in best effective manner. Mentioned below organized factor of ZARA
is being defined below:
Personnel: Within company employees is having formative skills and job
responsibilities. Structure of company provide employees an environment in which they
effectively operate their task in a well defined manner.
Value Chain
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It has been analysed that, ZARA is undertaking use of Reatlix within their organisational
workplace structure as to effectively perform their operations in a well defined manner. In
addition to this, this system also help company to ensure sustainable growth within retail
industrial sector. Further, this has been evaluated that in order to manage workforce within
organisation in best effective manner company provide efficient training and development
courses to their employees. Along with this, numerous forms of benefits to employees are also
being provided by entity as to make significant increase in work performance of their workers
and increase overall productivity ratio of entity. In addition to this, it has been evaluated that
company effectively undertake use of innovative technologies and tool in their working system
as to offer qualitative products and services to customers. For instance, within procurement of
resources company effectively undertake use of e-commerce web portals for their suppliers.
With this company aim towards satisfying customers at its best. Along with this, company also
maintain customer service by taking advantage of customer relationship management. With this,
company ensure loyalty of customers in best effective manner. While in order to maintain quality
and activities of operations segment ZARA take advantage of computer aided flexible
manufacturing process as to ensure minimum wastage.
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Situational Analysis( TOWS MATRIX)
Weaknesses and Threats (WTH)
Main weakness of Zara is that Zara operate their functioning by being part of Inditex
group that have near about 8 companies. In this failure of any one entity can significantly put
Zara at too risk. In this company is required to take advantage of strategies as to overcome
weakness and further develop them into strength. In this organisation can reduce this threat by
framing market flexible new designs as to fulfil preferences of customers on time.
Weaknesses Opportunities (WO)
Another weakness of Zara is that company is facing high production cost on international
platforms. Thus, as to overcome this weaknesses company by merging their business with local
partner on global platform can significantly keep prices down.
Strength Threats (ST)
One of the major threat that Zara face is strong competition. Thus, in order to lower down
the threat of competition company is required to innovate their products with new design and in
affordable price range.
Strength Opportunities(SO)
As to ensure success in marketplace, Zara is required to build organisational strength and
take advantage of large number of opportunities with the help of their Research & development
department. Further company is required to invest their profit in technologies and expansion.
Internal strengths
 Strong global network
 Qualitative products and services
Internal Weaknesses
Increase in production cost
External Opportunities
 Expansion of business in other geographical locations.
 Low cost production as to overcome competition
SO- Strategies
 Development and production of new designs in cost effective price range
 Expand organisational business operations with the help of Research & development
department.
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 Undertake use of innovative technology
WO- Strategies
 Company can increase their work efficiency by staying in touch with new technology.
 Develop already existing products at different price model.
Threats-T
 Risk of exchange rate
 High competition from Mango, H&M Gucci.
ST-Strategies
 Launch new designs in marketplace with low price base
 Ensure high competitive advancements with advanced designs.
WT- Strategies
 Overcome weaknesses by transforming them into strengths
 Operate business with local business entities.
SAFe criteria applied to a strategy implemented by organisation
Over the years, it has been evaluated that Zara is mainly popular for regular innovation
implementation in organisational workplace structure. In addition to this company is also tend
toward creativity with their services as well as products. With their uniqueness and innovation in
products and services company is having capabilities to significantly disrupt retailing industry
along with global marketplace. In relation to this, formative strategy of entity to make expand
their business operation services in Asian countries. By taking advantage of excellent form of
intelligent strategic choice company perform their operations in best effective manner. By
brining new product with uniqueness company strives towards gaining more competitive
advantages. In relation to this, manager of Zara is undertaking use of SAFe criteria in order to
effectively evaluate acceptability, feasibility as well as suitability of this generic strategy of
entity in order to undertake use of effective innovation.
Suitability:
This has been determined that retail market segment is having high threat variants along
with high profitability. Thus, by undertaking advantage of best effective strategies ZARA can
operate their business functioning in a well defined manner. In addition to this, it has been
identified that innovation is consider as a strategy which is mainly belongs to SO quadrant of
TOWS matrix. This indicate that respective company is continuously engaging in the process of
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innovation and constantly bring up with new innovative products. Along with this, it has been
evaluated that entity further posses capabilities to bring new innovation in upcoming future. In
this effective resources, innovative technologies, motivated employees offer significant
assistance to company to accomplish their objectives and goals in best effective manner. This
will lead entity to ensure more market share holding. Along with this, with the help of present
strategy entity can effectively able to satisfy customers with best offerings while ensuring their
satisfaction. With the help of this company make significant increase in overall probability and
sales along with strong market share captivity.
Acceptability:
By taking advantage of respective strategy entity can ensure high competencies. In this, it
is essential for entity to undertake approval from firm and individuals as to make reduction in
prices. This will ensure company to provide comfort to consumers. By offering high quality
products ZARA can effectively able to fulfil expectations as well as demand of customers in a
well defined manner. It has been identified that, generic strategy of entity is to duly take
advantage of innovation in order to make entry into new segment of markets such as organic
clothing. With the help of this company can not only able to satisfy their customers at its best but
can also gain more competitive advancements by offering unique offerings to customers. In
addition to this, it has been evaluated that numerous stakeholders of ZARA is their shareholders,
government, employees, community and customers. Mentioned below there power as well as
interest in context with proposed strategy is being duly defined below:
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Feasibility: ZARA merger with respective entity initiate effectively integration of
networking system, capital and resources (Engert and Baumgartner, 2016). As to ensure this
integration success, entity is required to low down price range of their commodities. In addition
to this, organisation is required to bring new products within marketplace as to gain large base of
opportunities. Employees with the help of training and development courses that are being
provided by entity to their workforce can effectively able to increase their technical skills as well
as competencies that automatically stimulate organisation towards rapid increase in their
production process. In addition to this, by taking advantage of strategy related to undertaking use
of innovative practices and make significant entry into new product segment render feasible
opportunity to organisation to expand their business growth in global marketplace. This will not
only benefit company to increase their profitability but also can significantly able to ensure long
term sustainability.
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CONCLUSION
As per the above mentioned report, it has been concluded that corporate strategy is one of
the most essential aspect of an organisation that aid them to ensure long term sustainability.
Along with this, PESTLE analysis benefit organisation to evaluate factors prevailing in external
environment and identify threats, weaknesses, opportunities and weaknesses. In addition to this,
VRIO and porter's five forces also benefit entity to evaluate resources and competencies in best
effective manner while ensuring high probability. Further it has been evaluated that with the help
of TOWS analysis help organisation to identify strategic options by kinking external as well as
internal factor in a significant manner. It later help entity to generate best effective strategies that
automatically aid company to increase their overall profitability and productivity in a significant
manner.
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