Applied Corporate Strategy

This document discusses the corporate strategy of Zara, focusing on external analysis, key competencies, and resources. It includes an analysis of threats and opportunities, as well as an industry analysis using Porter's 5 forces. The document also explores Zara's internal strengths and weaknesses, and how they contribute to the organization's success. Additionally, it examines Zara's recent corporate strategy, particularly its emphasis on online retailing.

APPLIED CORPORATE
STRATEGY

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
CASE STUDY AND COMPANY OVERVIEW............................................................................3
QUESTIONS...................................................................................................................................3
1. External analysis for identifying threats and opportunities.....................................................3
2. Key competencies and resources of organisation through internal analysis...........................6
3. Organisation’s corporate strategy............................................................................................9
CONCLUSION..............................................................................................................................11
REFERNCES.................................................................................................................................12

INTRODUCTION
Corporate strategy is defined as the company wide strategy or plan for growth and
development in particular market segments as well as for improving various functional units of
its business (Cardoni, Kiseleva and Lombardi, 2020). For gaining competitive advantage and to
stay successful for long term it is necessary for the organisations to focus on improving their
corporate strategy. The analysis of industry attractiveness along with internal and external
capabilities play significant role in planning and implementation of corporate strategy of the
organisation. The report evaluates the online strategy of Zara which is leading and successful
name in fashion industry. It also provides an analysis of key competencies of organisation and
industry attractiveness.
CASE STUDY AND COMPANY OVERVIEW
Zara is largest company in Inditex group which deals in fashion products such as
clothing, beauty products, perfumes, shoes and other accessories. The organisation is leading
apparel retailer. With establishment in 1975 in Spain organisation has maintained its core values
which are clarity, sustainability, functionality and beauty in its all stores (Zara, 2020).
Organisation maintains effective relationships with its customers by quickly responding to
changing needs and latest trends in fashion. For increasing market share and customer experience
Zara is emphasising and improving its online strategy so that it can gain competitive advantage
with continuation of its quality services and success.
QUESTIONS
1. External analysis for identifying threats and opportunities
Zara is known to be flagship brand of Inditex group and is popular among its customer
for its new designs. It has resulted in great success for the brand despite having minimum
expenses on promotion and advertisements. For retaining the competitive advantage in global
business environment it is necessary for organisation to analyse its external business factors
which influence its corporate strategy and decision making (Köhler and Zerfass, 2019). These

factors include various opportunities and threats for the organisation along with the industry
attractiveness.
Opportunities:
There are several external environmental factors which gave Zara huge opportunity to
improve its performance. The organisation can have following opportunities.
Globalisation: Due to globalisation shipping and other transportation costs has resulted in
significant decline. It can lower the product costing of organisation so that Zara can increase its
profitability or can enhance its market share (Cardoni, Kiseleva and Lombardi, 2020). The
corporate strategies such as online retailing can help organisation to capture a new and broad
market segment and to develop better understanding of customer needs.
Political and technological advancements: The external environmental factors such as taxation
policies can also provide a new opportunity to organisation to invest in new markets. By using
advanced technology such as social media, mobile application Services Company can boost its
sales.
Retail expansion: The market development is also helpful in dilution of competitor’s advantage
and thus allow organisation to lead the market as compare to its other competitors. The retail
channel expansion of organisation can also result in increased customer segment, especially in
Asian countries which are rapidly developing and have great potential.
Threats:
In addition to the several opportunities changing business environment also imposes
certain threats for the organisation. These threats are as follows:
Regulatory threats: The political and legal regulations related to business are growing with high
pace all over the world. The regulation aspects vary from nation to nation. Thus huge set of
regulations can be a roadblock to quick and sustainable growth of organisation.
Competition: The companies like Mango, H&M and Vero moda are also popular among
customers for their chic designs. However as compare to these brands Zara has more affordable

pricing. In long term this fierce competition must be managed and lead to saturation in semi
premium segmentation which can influence margins (Köhler and Zerfass, 2019).
Approach: Zara has very limited presence in Asian countries or to majority of audience. This can
act as one of the threat for organisation as it can limit the reach of organisation to customers
(Andersen and Andersson, 2017).. In long term if organisation will not focus on increasing its
reach by enhanced advertising and increased physical presence.
Industry analysis:
Zara is part of fashion industry and is leading name in global fashion retail sector. The
industry has high competition but is also differentiated by subcategories. The fashion industry
also changes rapidly in terms of trends or customer requirements and thus competition always
remains a major element. The industry attractiveness is one of the crucial factors which affect the
positioning and success probability of organisation. It can be measured by Porter’s 5 force
analysis.
5 force analysis of Zara:
The strength of following forces varies depending upon nature and type of industry and
thus affecting its attractiveness and profitability. These forces are:
Threat of new entrants: In fashion industry economies of scale is difficult to achieve and thus
organisation such as Zara have cost advantage. As a result of this for new entrants production
cost is quite high. Thus there is weaker force of new entrant (Rugman and Verbeke, 2017).
Strong product differentiation need in industry also demands for great advertisements and
consumer satisfaction which also contributes in weakening of this force. In addition to this
industry is also characterised by strict licensing and high capital requirements which makes new
entrant threats a weaker force. Thus Zara can use innovation for product differentiation to retain
its supremacy.
Bargaining power of buyers: In comparison to other fashion industry organisations Zara has
premium pricing strategy and thus its buyers are usually in upper or middle class range. Thus
there is high buying power because they have higher income at disposal. The same line of

products is also distributed by other suppliers in low cost. It affects customer loyalty and high
bargaining power to customers creates fierce battle among existing sellers.
Bargaining power of suppliers: Global trade is liberalising and thus supplier power is low
through intensive rivalry from producers such as China which have low wage boundaries. The
suppliers in industry provides standardised products and thus for Zara it is quite easy to switch its
suppliers. It weakens the force of supplier’s power (Cardoni, Kiseleva and Lombardi, 2020).
Another factor which weakens the supplier’s bargaining power is that in fashion industry profits
are strongly and closely related to suppliers and thus they must keep affordable pricing. It makes
this force weak in industry.
Threat of substitution: Along with basic necessity clothing also symbolises socioeconomic class
which demonstrate the personal identity. The presence of various choices and competition makes
it easy for buyers to substitute the service providers. The duplicate fashion is also one of the
serious threats for Zara which can be harmful for its profit margins and brand value. The high
threat of substitution is also contributed by online shopping which is emerging as unavoidable
challenge for retail stores such as Zara.
Rivalry in existing firms: Rivalry forces in industry in which Zara operates are weak. Industry is
rapidly growing and thus competitors of Zara avoid completive actions as they are not focused to
capture market segment from each other. It also weakens this force. However the pricing can
affect the buyers switching cost as they have options to switch to low cost products (Galpin,
2019). The purchasing in small quantities also gives low power to buyers to bargain. Zara
provides quality products and thus despite high prices buyers do not find any other close option
to choose.
2. Key competencies and resources of organisation through internal analysis
In addition to the external business environment factors, organisational resources are also
critical in success of organisation and quality of services provided to its customers. The key
competencies which act as strengthening factor for Zara are as follows:
Strengths:

Brand value and unique designs: Designing abilities of Zara are its greatest strength which
gives organisation strong customer based and uniqueness. The products of organisation are
elegant, great finishing with impressive variety (Andersen and Andersson, 2017). It also
increases strong value of organisation. Further Zara does not have any controversies and thus its
positive culture is also one of its strength which gives it strong position in the market.
Excellent supply chain: From conception to get design into stores Zara takes only 2 weeks
which is too quick for any other organisation in the industry. This excellent supply network
makes Zara as the trendiest store forcing customers to visit again and again.
Fast fashion cycle: The fast fashion approach of Zara has well established balance between its
supply and demand. Zara does not overstock its products so that every time a customer visits the
store there is something new and tempting for them. It gives a sense of freshness and urgency
among target customers to visit the stores frequently (Köhler and Zerfass, 2019).
Technological investment: Organisation gives priority to artificial intelligence (AI) and other
information technology (IT) services. Organisation uses effective IT solutions to enhance
efficiency of its retail and supply chain network. Along with strong physical presence of stores
organisation is also improving online retailing so that better management and services can be
delivered to its customers.
Weakness:
Limited presence in potential markets: In developing courtiers like Malaysia and India Zara has
very less number of stores as compared to that in US, UK, Russia or any other country. Thus
expansion in potential markets such as India can be beneficial for organisation in terms of
profitability and market share.
Less aggressive marketing: Zara has least emphasis on its promotion or marketing strategies as
compare to its other competitors. Organisation emphasis on quality and customer needs to
promote its services (Puranam and Vanneste, 2016). However limited marketing drives customer
base and sales negatively, in present scenario where global trade is rapidly expanding.
For overcoming the above weaknesses it is also important for organisation to identify its
various resources and to make optimum utilisation of those resources. For analysing the internal

capabilities and resources of organisation various organisational resources can be classified into
categories such as valuable, rare, imitable and organisable.
Resource Valuable Rare Imitable Organised
Financial
resources
Yes Yes No Yes
Employees Yes Yes Yes Yes
Distribution
network
Yes Yes No Yes
Patents Yes Yes No No
Valuable: Financial resources of organisation are highly valuable because they help Zara to
invest in external opportunities and to combat with external threats. The employees and patents
of organisation are also known to be valuable (Foucault and Frésard, 2019). Zara provides
training to its employees so that productive outcomes can be delivered and loyal and talented
employees can be retained. The unique designs and strong brand equity of organisation is due to
its regular innovations and brand symbols. Thus organisational patents are also valuable.
However research and development and cost structure of organisation is not considered to be
valuable because these are costlier as compare to benefit it gives to company. Thus for better
profitability organisation must work and improve them. On the other hand the distribution
network proves to be of great value because it increases sales.
Imitable: Financial resources and strong distribution network cannot be gained by competitors
quickly. It requires several years and excellent customer services. These resources of Zara are
very costly to imitate. On the other hand the employees can be trained and made efficient by
other competitive organisations as well. Thus employees of Zara can be considered as less costly
to imitate. Other competitors of organisation can provide better work culture and compensation
to attract the talented pool of human resources. Similarly acquiring patent requires great effort
and is also very costly (Brewster, 2017). Thus patents are also highly costly to imitate because
legally it is not possible for other companies to imitate the patented products.
Rare: Strong financial resources are rare because these are possessed by only few organisations
and Zara is one among them. As compare to other companies, Zara stores seem to give more

pleasant customer experience. The trained and expertise employees play an important role in this
aspect. Thus employees are also rare resources of organisation which ensure that better work
culture and compensations helps to retain talented employees. For building a better distribution
network and patents a lot of investment and time is required. Thus these resources of Zara can
also be considered as rare.
Organisable: For the long term success it is vital for organisation to organise its resources so that
they can capture the desired value. Financial resources of Zara are effectively organised and are
properly uses in correct strategic directions (Rugman and Verbeke, 2017). Thus it gives
sustainable competitive advantage to Zara. Patents of organisation are well organised because
they are not used to full extent, to gain competitive advantage. The well organised distribution
network of Zara is also helping organisation to ensure that its customers can access its products
and services through all of its outlets.
3. Organisation’s corporate strategy
The recent corporate strategy of Zara of online retailing proves to be highly essential and
profitable. Zara has great relationships with its customers and with 96 stores it has been selling in
202 markets (Zara, 2020). Information technology has been integral part of the services of
organisation and thus company is using radio frequency identification technology so that
garments location can be traced easily. It has helped organisation to successfully implement its
integrated stock management system in both integrated stores and on online platforms. Though at
present Zara has more physical presence as compare to its global presence but organisation is
gradually planning to make its online stores a huge success. Online retailers from local as well as
global competition are creating a critical challenge for Zara to retain its loyal customers.
However the top management of organisation still believes that Inditex Zara has
traditional store expansion plan and thus online sales may not bring any significant difference in
its profitability. Online strategy of Zara will help to make its services available to those areas
which do not have any physical presence of the brand till now. It will be particularly helpful for
development and expansion in Asian countries where physical stores will have high distribution
and supply cost. With increased sustainability and environmental concerns also Zara is giving
strong preference to online retailing because it will be a part of eco efficiency plan of
organisation so that environmental resources can be conserved and company can fulfil its

corporate social responsibility (Annual report, 2018). From the long term organisation is
successful in logistics and production by means of its supply chain innovation.
Thus it will not be much difficult for the organisation to introduce in e-commerce
business. For instance Zara is planning that to stay competitive its online stores will provide
same day delivery in specific cities where physical stores are also present while in others it will
deliver next day shipping. There are people who are fond of quality services of organisation and
its unique designs. However with absent from online platforms such potential customers are not
able to maintain their loyalty towards organisation. Thus online strategy of the organisation will
be a great step to approach all those customers who are not aware of the brand or who have made
themselves distant from the brand due to time limitations.
In the last few years there has been significant growth and increase in apparel sales on
online platform which gives low cost and quality products. Thus if Zara will not utilise this vast
opportunity then it may fail to expand its market share and will soon be replaced by other
organisations. In terms of successful implementation of this strategy Zara may not face any
difficulties. Organisation has been effectively using technological advancements in its logistics
and supply chain network thus it will not be difficult for Zara to manage online retailing. The
organisation is using its physical stores to meet the demands and needs of online orders so that
quick delivery of services can be accomplished (Chen and et.al., 2019). However with this move
company may face some operational challenges such as over stocking or pricing issues which are
great threat for the success. For example online retailing platforms used to face fierce pricing
competition and it is common trend for shoppers to return the products. Thus it can increase the
risk of over stocking and company may damage its brand.
On the other hand online corporate strategy is also exploring new potential market on the
basis of technological innovations. From years it has been strategy of Zara to pull customers
towards it instead of pushing its products out. However with nature of online retailing it can be
difficult for Zara to retain this strategy with same level of success and efficiency. With the huge
benefits of online retailing it is required that Zara must also focus on loophole of online retailing.
For instance the easy return policies, try and then purchase policy, pricing competitions and
retention of brand among high income customer group only can result challenges to achieve
desired profitability (Milosevic, 2017). In addition to this company will also be require to

strengthen its security and privacy issues associated with online retailing so that it can maintain
its legacy and success with this new corporate strategy as well.
CONCLUSION
From the above report it can be concluded that for success in business it is necessary for
the organisations to identify their opportunities and threats so that their position in the industry
can be strengthened. It has been also analysed from the study that internal and external analysis
of the business plays significant role in corporate strategy planning. Thus organisations must
strictly emphasis on evaluation and improvement of their capabilities and strategies. It assists in
enhancing the quality of services and long term retention of customers. It can also be concluded
that with time corporate strategies must be changed and improved so that they can meet the
customer and business requirements. In order to expand the business and grab market
opportunities service providers must also conduct various strategic analyses which reflect their
strengths and weaknesses.

REFERNCES
Books and Journals
Andersen, T.J. and Andersson, U., 2017. Multinational corporate strategy-making: Integrating
international business and strategic management. The Responsive Global Organization:
New Insights from Global Strategy and International Business, p.13.
Brewster, C., 2017. The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35). Routledge.
Cardoni, A., Kiseleva, E. and Lombardi, R., 2020. A sustainable governance model to prevent
corporate corruption: Integrating anticorruption practices, corporate strategy and business
processes. Business Strategy and the Environment.
Chen, H. and et.al., 2019. Complementarity in open innovation and corporate strategy: The
moderating effect of ownership and location strategies. IEEE Transactions on
Engineering Management.
Foucault, T. and Frésard, L., 2019. Corporate strategy, conformism, and the stock market. The
Review of Financial Studies, 32(3), pp.905-950.
Galpin, T., 2019. Strategy beyond the business unit level: corporate parenting in focus. Journal
of Business Strategy.
Köhler, K. and Zerfass, A., 2019. Communicating the corporate strategy. Journal of
Communication Management.
Milosevic, D., 2017. Resource based view, Corporate strategy and firm diversification. The
Economic and Management of Natural Resources, 10.
Puranam, P. and Vanneste, B., 2016. Corporate strategy: Tools for analysis and decision-
making. Cambridge University Press.
Rugman, A.M. and Verbeke, A., 2017. Global corporate strategy and trade policy (Vol. 12).
Routledge.
Online
Annual report. 2018. [Online]. Accessed through
<https://www.inditex.com/documents/10279/619384/Inditex+Annual+Report+2018.pdf/
25145dd4-74db-2355-03f3-a3b86bc980a7 >.
Zara. 2020. [Online]. Accessed through <https://www.inditex.com/about-us/our-brands/zara>.