Applied Corporate Strategy

This report discusses the corporate strategy of Zara, a popular clothing brand. It includes a PESTLE analysis, Porter's five forces analysis, and an evaluation of the company's resources and competences. The report also highlights the strengths and weaknesses of Zara and its excellent supply chain management.

APPLIED CORPORATE STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................2
PESTLE analysis for Zara...........................................................................................................2
Porter’s five forces analysis for Zara-.........................................................................................5
Resources and competences........................................................................................................7
Strategy evaluation by using SAFe............................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Corporate strategy is hierarchically the best strategic plan of company, which defined
business overall aims as well as directions and way in which can be achieved within strategic
management activities. The current report is based on Zara, is one of the most popular clothing
brand in the world. This study explain PESTLE and Porter’s five force analysis, it also define 4
strengths and 1 weakness of company. Furthermore, this report justified strategic evaluation by
using SAFe model.
MAIN BODY
PESTLE analysis for Zara
It is one of the best strategic management method or tool specially utilized to determine,
monitor, examine and organize key external factors that can have positive or negative impact of
specific sector or companies. It stands for political, economical, social, technological,
environmental and legal factors that affect overall growth and productivity of particular industry.
Here, this tool is used in context of Zara as one of the most famous and popular brand in the
world. After using this method, companies are able to take better action or strategic decision
because it gives appropriate outcomes that help in further decision making process.
Political factors-
Political stability or instability in overseas markets, government policies, trade
restrictions, foreign trade policy and tax policy are included in this factor which affect might be
negatively or positively on company. Zara is a Spanish brand that was developed out of EU and
has effectively established operations all over the globe. Free trade agreements in nation impact
on organization production and sales operations positively, this can be analyzed as opportunity
(Liaqat, 2019). It helped boost company UK sales and their overall group sales rather than
before. With Free trade agreements of Europe, Zara is able to t move their products freely
between European nations with no border traffic and no restrictions on quantity or quality of
exported and imported goods and a common custom traffic for items exported as well as
imported to other nations. EU being UK’s largest export market for clothing & textiles accounts

for 74 percent of their exports; hence Zara can reach more consumers in more EU countries
without additional border traffic which has boosted their sales.
Economic factors-
Economic growth, inflation rates, disposable income of consumers, interest rates,
exchange rates and unemployment rates are included in economic factors that affect firms and
their businesses performance. Highest unemployment rates within Europe put negative impact on
Zara productivity and profitability (Roos and Shroff, 2017). As mentioned above, this
organization is Spanish brand, since Spain has one of the top unemployment rates in country, it
means that is has a mostly low cost of labor, especially in comparison to other western European
nations such as UK, Germany and France. Organization manufactures a good fraction of their
items in Spain, so their low worker cost permits them to decrease costs and in doing so, improve
profitability. Again, low cost of employees in nation is definitely a positive for this company. It
is an opportunity for organization to hire new applicants from talent pool.
Social factors-
Population growth rate, career attitudes, lifestyle attitudes, health consciousness, safety
emphasis, cultural barriers, income and age distribution are included in social factors. This
dimension of normal environment represents demographic customs, characteristics, values and
customs of population within which company operates. These factors are really very essential for
Zara when targeting target market. Online shopping trend is one of the social factors that impact
on organization operations positively (Bui and Muñoz Martinez, 2019). It gives opportunity to
gain attention of new consumers and increase sales by offering products via online app. There is
no doubt that it is major trend in 21st century. With online strategy, Zara is capable to sustain
within marketplace for longer, they can attract new consumers towards purchasing their best
products collections. People prefer to purchase or order their garments with tap of a button that
means via using online shopping sites where they get range of clothing collections. So, it can be
said that this social factor impact on Zara in positive way.
Technological factors-

It refers to level of innovation, technology incentives; technological change and research
& development are included in this factor. Technology development and advancement put
positive impact on Zara productivity and profitability as it helps to increase sales rather than
before (Vella Bonanno and et.al., 2019). Data analytics is the main supporter of this company,
organization extensively utilize technology especially in their supply chain management, which
enhance their productivity level rather than before. It contributed mainly to company profit
margin and sales. Furthermore, firm can use lean technology in their production procedures that
helps to improve their responsiveness to target consumer’s demands; it is the best for
organization. It helps in connecting logistics and supply chain with production in an effective
manner. Latest technology bring many benefits for this organization as they can utilize in supply
chain wherein tracking or monitoring of inventory as well as consumers order is made easier. As
a outcome, Zara stands as a champion in supply chain management.
Figure 1PESTLE Analysis
(Source: Pestle analysis, 2019)
Environmental factors-

Sustainable development has become essential for any sector to survive in global
environment. Consumers and government concerns towards sustainable environment put high
pressure on organization to make changes in their business practices and reduce carbon footprint.
As it can be said that, this factor impact on Zara negatively, they had to make necessary changes
that consume extra efforts and require investing more on it. It can be defined as threat because
modifications impact on overall business performance.
Legal factors-
Health and safety, advertising standards, customer’s rights & laws, equal opportunities,
product safety and products labeling are included in legal factors. Zara trades globally that
becomes very tricky field to obtain right as each nation has their own set of regulations and rules.
Every organization has to abide by certain laws in every business atmosphere, it impact on Zara
in positive manner, because organization follows sustainability and ethics in all their business.
They follow compliance policies in all their internal system which is quite beneficial for growth
and success of firm. Furthermore, Zara also take care of all local regulations in areas it operates
their business. The main concentrate of this organization is to create and build ethical brand
image within fashion industry or all over the world. It gives an opportunity to organization for
sustaining business within marketplace without facing legal issues.
Porter’s five forces analysis for Zara-
Threat of substitute-
The degree of this force is moderate, because there are few substitutes accessible for
items that are manufactured in sector in which Zara operated their business. The very few
alternatives that are available are also manufactured by low profit earning sectors (Barhouma,
2019). It means that there is no upper limit on increase profit that companies can earn in industry
in which chosen firm operates. All of these elements make threat of substitute goods a weaker or
moderate force within clothing sector. Along with it, few substitutes are available in high quality
which was more expensive. Comparatively, companies manufacturing within sector in which
organization operates sell at lower price than alternative products with adequate quality and
quantity. It means that consumers are less likely to switch to substitute goods as in outcomes it
increase sales of Zara.

Threat of new entrants-
Force of new companies is high, since retail and clothing sector is very attractive owing
to their profitability and uniqueness. Access to distribute networks is easy for new organizations
which can effectively set up their production as well as distribution channels and come into
ventures. With only certain retail shops selling goods, is easy for new firms within apparel
industry. Retaliation by current big organizations such as Zara in their sector such as price war or
initiation also caters advantage to new entrants. As results, it increase competitive level rather
than before within clothing sector that posse’s threat for company (Kim and Park, 2019).
Bargaining power of consumers-
The bargaining power of buyers is high, because they have more options for purchasing
products which Zara produced for them. It impact on profitability and productivity of this
organization negatively. With strong bargaining power, consumers put pressure on company to
lower down their rates and make changes within existing production and pricing structures that
impact negatively. When consumers do not receive the exact items they needed when they want,
customers can switch to another option available within market place which is not suitable for
Zara sales. It fully lies in the hands of customers to what they prefer and buy, regardless of
brand, so it can be said that they have strong and high bargaining power (Teixeira, Marques and
Pontius Jr, 2016).
Bargaining power of suppliers-
Power of suppliers in context of bargaining is moderate because the availability of
suppliers within clothing sector is high. Zara can switch to another supplier for obtaining raw
materials and providing products to consumers, as outcome it lower down the power of suppliers
as they cannot be able to increase cost of each supply. Number of suppliers in apparel sector in
which Zara operates is a lot as compared to buyers, it means that distributors have less control
over pricing structure and this makes their power a moderate force. Furthermore, there are many
reasons that make this force weaker or moderate. For example, suppliers would not be able to
cater a credible threat for forward integration into clothing industry, which makes bargaining
power of them a moderate force.

Competitive rivalry among exiting players-
The degree of this force is high, because in order to gain competitive advantages existing
organizations give tough competition to other firms within same sector. They all want to gain
benefits and seek to become market leader. So, it can be said that this kind of attempt increase
competition level among exiting organizations rather than before which put pressure on Zara to
improve their business practices. In additional with it, clothing sector due to their low obstacles
of entry and declined barriers to trade among countries, is one of the highly competitive sectors
in the whole world.
Resources and competences
Strengths-
 Unique designs- one of the foremost and primary advantages or strength of Zara lied in
their design capabilities. It has a overabundance of designers on board who comprehend
organization and psyche of consumers who visit Zara very well. Products of this brand
such as clothes are superior quality, elegant and have fantastic finishing. They come in
range of varieties including office wear, party wear, for men, kids and especially for
women as well as several others. Accessories are an important part of Zara wear, which
give a complete look to someone.
 Brand value- Zara is a well reputed brand in the world, it is ranked number 53 by Forbes
in their brand rating and it valued at a whopping 10.7 Billion. There are many positive
and effective points leading to excellent brand equity of company (Amarkhil, 2018).
Business performance over years and regular quality company offered has give boost to
their business in recent era. Besides this, organization has stayed away from controversies
and attempt to stay modest even when it came across them. Such as healthy and positive
culture has outcome in brand being loved by their clients over and over again.
 Strong market presence- Organization kept expanding their business presence across
the world, that increase its consumer based and sales ration rather than before. They had
2100 outlets worldwide with an average sale of 15.10 Billion on every year. Company
survives in retail sector since for so long because Zara is capable to keep expanding their
offline and online presence. It is good to evaluate that firm is complying with expansion
process which is quite beneficial for them. With the help of building strong brand

presence in clothing industry, this company sustains for longer and gains competitive
benefits rather than other companies.
 Excellent supply chain- along with the above three strength of Zara, it is one of another
capability which help to increase sales and revenue. Organization is known to obtain their
design from conception to outlets in 2 weeks whereas it takes other competitors
maximum 6 week or more than it. On an average, 451 million products are manufactured
every year by company, this usually pushes buyers to visit outlet again and again to check
out and find the latest designs according to trend. By utilizing information technology
and other model technologies, organization created effective system that facilitated easy
flow of data and communication. It makes their supply chain management smoother than
other firms.
Weakness-
 Lack of advertising- while it may lead to cost and cost benefits is one of the
strengths of chosen organization that is Zara, lack of marketing is a weakness because
it can double their profit and their turnover by promoting products collection. Lack of
promotional activities put negative impact on sales and profitability of this brand as
outcome it decrease consumer base as compare to business competitors. It is
considered to be a trendy fashion presence and it can effectively pull in more
consumers with marketing which will generate a lot of effective or positive word of
mouth for organization (Hila and Mubarak, 2016).
Value chain-
Inbound logistics-
50 percent of Zara products are produced in Spain, and 25 percent comes from Europe
and remaining fraction is manufactured in locations in Africa and Asia. After that, overall
production is obtained and warehoused in logistics places in Spain before being provides to
stores. Furthermore, it also analyzed that Zara face different obstacles in product production
stages, analysis of this activity requires organization to focus on every aspect of renovation from
raw material to end product.

Production operation-
It includes activities that raises when raw materials arrives and organization is ready to
manufacture products and turn it into complete item, then launch it in target market place. It
includes additional activities, such as packing, testing, production and assembling. There
designers work together with market planner and specialists for production and procurement.
Outbound logistics-
Zara manage this activity effectively, at the beginning of each season, entire merchandise
is being supplied to outlets, in quantities required and decided by business. However, when
production reaches outlets, managers are accountable for order replenishments. It is their
accountability to decided how many bunch of each product to order and to do that, managers are
taking into consideration different things such as how many of that goods store had and already
sold out.
Marketing and sales-
At this phase, Zara will highlight differentiation and benefits points of provided products
to persuade consumers that their offering is better than competitors. They utilize very different
marketing strategy. Due to fact, that organization is not outsourcing their production, they can
quickly respond to clients demand in fashion trends. Firm unique marketing proposition is to
created latest trend goods within short term period and at affordable prices. Moreover, items are
on outlets shelves no longer sustain more than one month because Zara is able to restock their
collection as people purchase their products quickly.
Technology development-
Zara puts value on info and data transfer, the whole supply chain of this company is
connected through constant flow of important information. It developed was how to transfer and
convey info easier more than before. Organization is able to invest a lot in IT; they developed
fast response programmes in clothing sector. Company realizes significance of technology

development and adds in distribution, production as well as HR activities. It will be divided into
procedure and product technological development activities.
VRIO analysis-
Value-
Zara is utilizing vertical integration, which joint with most valuable and beneficial
resources. Organization manages their supply chain activities by themselves more than relying
on third party. From, production, design and cater new clothing to China, company only used 15
Days, speed that is unheard of in sector. Vertical integral benefits could reduce operating cost of
Zara because it has great conceived organizational structure and value that all workers should
respect. The core competence of this company is to create a unique customer experience.
Rarity-
Zara recruited 400 different nationalities and young fashion designers to catch modern
fashion around the world. It is because various nations, trend of fashion cannot be same.
Organization achieved rarity, only rare assets and valuable resources as well as abilities have
potential to cater temporary competitive benefits.
Imitability-
Organization applied vertical integral business model that make its competitors hard to
copy their model, it define Imitability of Zara.
Organization-
Zara is managed and organized to exploit full competitive potential of their capabilities
and resources. Organization has proof this point by maximizing sales revenues in China.
Strategy evaluation by using SAFe
Suitability
TWOS matrix-
SO- using strength to grab opportunities

WO- minimize weakness by using chances
ST- using strength to decrease threats
WT- decreasing weakness and avoiding threats
Zara presence will help to gain the opportunity such as increasing consumer base rather
than before, it also helps to success their online strategy. Furthermore, it can be defined that
brand value is strength of organization that combine with specific opportunity like sustain in
market place by complying with all legal laws.
Acceptability
Stakeholder mapping-
Keep satisfied-
Zara keep satisfied their consumers by offering
products according to their needs.
Manage closely-
Organization manages their workers more
closely because they are able to produce their
goods.
Minimal effort-
Company put less effort with suppliers because
they can chose among available ones.
Keep informed-
Zara keep informed government and national
authority regarding their activities and business
practices.
Government-
They get affected by online strategy of Zara because they give access to implement it in
ethical and effective manner.
Consumers-
Because the online strategy is created for customers, they get affected the most. It helps
to gain their attention rather than its competitors.
Employees-

Workers also affected because they need to work according to new online strategy in
term of increasing profit.
Feasibility-
Zara implement their online strategy effectively in systematic manner. Communication,
interpersonal and decision making skills are required for implementing this strategy as result it
increase consumer base rather than before. In order to implement plan in effective manner, firm
required to hire new and skilled applicants as financial resources who are capable to contribute in
implementing created online strategy.
CONCLUSION
From above analysis it has been concluded that Zara manufacture their products in
effective manner, with the help of it they build strong brand image in market place where a lot of
consumers seek to purchase their rare collection with affordable prices. Furthermore, it has been
summarized that organization is able to implement their new online selling strategy which
support to gain attention of new customers.

REFERENCES
Book and Journals
Amarkhil, H., 2018. Brand management that creates value to customer: the case of Zara brand.
Barhouma, M., 2019. Financial Analysis and Valuation of Christopher and Banks Corp.
Bui, A.Q. and Muñoz Martinez, V., 2019. The impact of product promotion on customer
loyalty: A quantitative study on Zara.
Hilal, M.I.M. and Mubarak, K.M., 2016. International tea marketing and need for reviving Sri
Lankan tea industry. Journal of Management. 9(1).
Kim, Y.J. and Park, J., 2019. A sustainable development strategy for the Uzbekistan textile
industry: The results of a SWOT-AHP analysis. Sustainability. 11(17). p.4613.
Liaqat, Z., 2019. Providing a Safe Working Environment: Do Firm Ownership and Exporting
Status Matter?. Asian Development Review. 36(2). pp.215-247.
Roos, G. and Shroff, Z., 2017. What will happen to the jobs? Technology-enabled productivity
improvement–good for some, bad for others. Labour & Industry: a journal of the social
and economic relations of work. 27(3). pp.165-192.
Teixeira, Z., Marques, J.C. and Pontius Jr, R.G., 2016. Evidence for deviations from uniform
changes in a Portuguese watershed illustrated by CORINE maps: An Intensity Analysis
approach. Ecological indicators. 66. pp.382-390.
Vella Bonanno, P and et.al., 2019. Proposal for a regulation on health technology assessment in
Europe–opinions of policy makers, payers and academics from the field of HTA. Expert
review of pharmacoeconomics & outcomes research. 19(3). pp.251-261.
Wang, Y., 2018, July. An Exploratory Study of Brand Strategy in Fast Fashion Brand--Using
Zara as an Example. In 3rd International Conference on Contemporary Education, Social
Sciences and Humanities (ICCESSH 2018). Atlantis Press.
Online
PESTLE analysis. 2019. [Online]. Available through: <https://pestleanalysis.com/pestle-
analysis-of-zara/>

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