Applied Corporate Strategy

This report provides an analysis of the external and internal factors affecting corporate strategy, using the example of Zara, a Spanish multinational clothing company. It covers PESTLE analysis, Porter's Five Forces, SWOT analysis, and VRIO analysis to identify opportunities, threats, strengths, and weaknesses.

APPLIED
CORPORATE
STRATEGY

Table of Contents
EXTERNAL ANALYSIS ...............................................................................................................3
PESTLE Analysis........................................................................................................................3
Porter's Five Force.......................................................................................................................5
INTERNAL ANALYSIS.................................................................................................................7
SWOT Analysis..........................................................................................................................7
VRIO Analysis............................................................................................................................8
STRATEGY EVALUATION..........................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Corporate strategy is the strategic plan which defines the goals and objectives of an
organisation which helps in the achievement of success and growth. This strategy is made with
the purpose of long term success with defined vision and direction of the company. It is a
continuous process which is able to respond in the changing working conditions and market
situations (Rugman and Verbeke, 2017). This strategy develops on the top of business strategy
which is related with the strategic decision making of business. Corporate strategy involves
various elements on which a leader should focus such as allocation of available resources,
organisational design, portfolio management and many more. It is a wide plan which helps in
choosing and developing the particular market in order to improve the units and departments of
business. This report is in the context of Zara which is a Spanish multinational clothing company
headquarter in Arteixo, Spain and founded in 1975. Their aim is to create a link between
demand, distribution and manufacturing by which they can easily react to the changes which
occurs in the market. This report is going to focus on the external analysis which helps in
identifying the opportunities and threats and also analyse the key resources and competences of
an organisation which helps in identifying the internal factors. Moreover, relevant strategy is
evaluated which is suitable for company by using the SAFe criteria.
EXTERNAL ANALYSIS
PESTLE Analysis
It is an assessment of changing world in which business operates in order to identify the
threats and opportunities. A business strategy need to consider the external forces in order to
identify the success factors which leads to navigate the company towards its success by
determining its strengths and opportunities (Geckil and Anderson, 2016). In order to identify the
external factors PESTLE analysis is used which defines the group of companies like its
competitors and its market segments which is separated by geography, demography and
behaviour.
Political: It is an important factor which influences the business in order to change and
modify its regulations. Every country and its government does not have the same view point
regarding the business as not every government allow easy trading to foreign direct investment
(Cooper, 2017). Political disruption impacts the market and its conditions which influences the

economy. As Brexit drastically influences the political conditions of UK as it results in reducing
the British income. For this, Zara started expanding its business into other countries and for this,
company took major step and conduct research in order to expand its business. Reason behind
this step is that government changes its policies frequently which impact its operational
activities. In the terms of expansion, Zara expand its business in EU because of its safe economic
conditions which helps them in order to predict the growth of market because the economic
conditions of Europe rarely change. This expansion becomes the opportunity for Zara as by this
they gain the new market segment, develop its customer base and reputation in the market.
Economical: Fast growing environment of Spain has increases the sale of clothing in the
retail industry. This is because of the high level of unemployment and population as the labour
and production cost is low and qualitative products which reduces the prices as it helps in
attracting more customers (Keyes, 2016). Moreover, impact of Brexit resulted in decreasing the
inflation rates and increases the living cost. Zara witnessing the fluctuation in past few years
which impact its revenues successfully and it becomes an opportunity for it as company deals in
the dollars which helps in evaluating the economic conditions before entering into new market
segment. Moreover, due to various custom duties in countries, the prices of Zara products may
vary in different countries.
Social: Businesses need to run according to the social trends and manages their social
responsibility in order to achieve the sustainability and advantage in business environment.
Moreover, a large number of companies emphasis in social responsibility just to attract more and
more customers. The rapidly increasing urge of consumers increases the online market and
shopping and through this customers are able to compare their prices from their competitors
which influences the sale of their products and this becomes threat for the company. As it
influences the sales and revenues of Zara and also its customer base. Moreover, company try to
improve itself by considering the societal factors such as geographical position, population,
origin of country and many more. Additionally, company also develop its production by
providing its products in various size which is suitable for skinny or heavy weight people.
Furthermore, company does not believe in offering discounts and offers to their customers as
through this their sales got affected as it also become threat because its competitors provide
discounts. In order to overcome this factor, Zara occasionally provide promotional codes and
other deals to its customers which are redeemable on their online site.

Technological: These factors are changes frequently for faster growth in terms of
communication, transport and many more in day to day business activities (Oriesek and
Schwarz, 2016). It impacts the development of new technology which is adopted by Zara which
allows their customers to see the specific prices of clothes when they use smartphone sensor in
their stores. This technology is helpful as customers can click on the products and purchase it if
they want. Zara strategically use its technological information in the support of its online store
where the easily exchange and return of product is involved. Moreover, its website can easily
locate the location of store by entering the region or area. Therefore, it is an opportunity for
company as through this it becomes easier for the customers to find the exact location of the
store.
Legal: These are the factors which affect the ethics and sustainability of business and its
supply chain. Zara emphasis on creating its ethical image which is important in order to comply
with legal activities. Zara need to focus on enforcing the copyright laws which helps in
protecting its products and services from being copied. As without copyright, local businesses
can easily copy their products and provide it to customers at lower prices which can decreases
the craze of original products (Eccles and Youmans, 2016). As different countries has various
legislations and provide their own version of corporate policies which can alter their operations
according to the set of policies. As per this, Zara feels the pressure which is a threat for it
because nowadays first copy of products are also available in the market which can ruin its
market value. In order to overcome from this, Zara need to follow proper litigation in its business
operations.
Environmental: Green factor is more important in order to attract the customers and
develop the faithful customer base. For this, Zara has also get engaged in the sustainability and
make its store 100% eco-friendly. This decision of Zara helps it in achieving the success and
growth of the competitive environment. But currently, it becomes a threat for the company as a
series of disasters in Japan impact its market in many ways. In terms of apparel industry and its
supply chain impact the organisation for the purpose of long term. Moreover, its infrastructure of
Japanese market also influenced because of natural calamities. In addition to this, Asian
countries also require rapid change in fashion industry because Asian countries are different
from the EU countries as their culture, language and religion are very different (Barker and
Kasim, 2016).

Porter's Five Force
Threat of new entrants (Low): To achieve the economic scale is difficult as by this it
becomes tough for new entrants to acquire the market of Zara. As company uses product
differentiation strategy while launching its products which becomes easy for them to be unique
and different in this industry as customers also want different products which becomes an
opportunity for company to eliminate the chances of new entry.
Threat of substitute products (Moderate): In clothing industry substitute of products are
always available on low prices which means that there is no control on the profits of its
competitors as they are the one who provide substitute products (Viscelli, Hermanson and
Beasley, 2017). Competitors of Zara becomes its threat as they provide products with weak
forces in the industry. For this, company focus on providing good quality products for its buyers
at suitable prices as company emphasis on the differentiation strategy.
Threat from rivalry (Moderate): It is a threat for the company as in order to be
competitive in the business market a healthy competition is required which means that company
should engage itself in competitive market in order to gain the suitability and become the leader
of market. It is moderate in nature because of the company's differentiation strategy but
sometimes it become threat because of its competitors as they introduce new and unique product
in the market.
Bargaining power of suppliers (Low): There are number of suppliers present in clothing
industry which means that suppliers have less control on prices and they cannot become
monopolistic in market. Presence of lot of suppliers makes easier for buyers like Zara to switch
from other supplier (Frandsen and Johansen, 2018). In current era, there are number of clothing
industry whether they are branded or local, they all need suppliers and because of this factor
suppliers get increases which can weak their bargaining power.
Bargaining power of buyers (High): There are lot of suppliers present in clothing
industry which means that buyers have many options in order to choose from which means that
the company does not have much control on prices. But despite from this, company's
differentiation strategy make its image in the market. Currently, company offer discounts and
offers to its customers occasionally in order to retain their customers.

INTERNAL ANALYSIS
SWOT Analysis
Strength: One of the great advantage of Zara is its unique designs as its designers made
products by considering various factors such as taste, need and requirement of customers. The
quality of their clothes are elegant and also have good finishing (Lloret, 2016). Moreover,
company not only offer party wear clothes but also formal, kids wear, men and women, casual
and other related products. In addition to this, its presence across the global market as it acquire
most of the customers which helps them in their expansion. As in order to survive in the market,
Zara need to expand its business in order to be visible in the market. Its brand value is also its
strength as company has good reputation in the market which helps them to gain competitive
edge.
Weaknesses: Zara has general collection as it is not specialised in specific product and it
is the main reason which shift their customers to its competitors as they are specialised in
specific product which helps them in attracting the customers. It can be shirts, dresses and other
related products. Moreover, Zara does not advertise its products as they have their potential
customer base and good brand image. But in order to attract more and more customers they need
to advertise its products as it helps in spreading awareness about the trends, fashion and to
increase the knowledge of customers. Moreover, company does not store more products for
future purpose which can affect its sales and revenues. Zara thinks that customers easily move
from one product to another by which there store products get waste.
Opportunities: Zara take advantage of its social and online buying as it helps in analysing
the views and demand of customers and its online market make available its products on E-
commerce sites as it bring major hike in their sale (Rao and Tilt, 2016). Currently, the brand is
becoming more and more famous which results in developing the market. Zara is a status symbol
in clothing industry and customers feel comfortable and relaxed while wearing its clothes.
Therefore, company need to invest more capital in its potential market. Its market expansion also
becomes an opportunity for it because through this company acquire more market which is
profitable for it.
Threats: Its low advertising become threat for it because promotion is the key factor
which helps in attracting more and more customers (Ocasio and Radoynovska, 2016). As they
company launch new products and design by considering them they need to advertise their

products in order to occupy more market. Moreover, its competitors such as H&M, Mango etc.
become its threat as they are specialised in specific products but Zara deals in general collection.
In addition to this, company need to increase its market as they sell its products through its stores
by displaying them as competition is increase in online market tremendously and in order to
acquire market, Zara also need to show its visibility on online sites.
VRIO Analysis
Resources Valuable Rare Imitable Organised
Distribution
Channel
Distribution
Channel
- - -
Innovation Innovation Innovation - -
Organisational
Structure
Organisational
Structure
Organisational
Structure
Organisational
Structure
-
Human Resource Human Resource Human Resource Human Resource Human Resource
Valuable: Distribution Channel: It is valuable for company because it helps in meeting the needs
and requirement of products and also make sure the profitability is achieved for company. Innovation: It is valuable because innovative and creative skills are not always in every
person and company value them because it is unique. Organisational Structure: It helps in achieving success and growth of company and also
helps in eliminating the exploitation of available resources. Human Resource: They are valuable because it helps in achieving the productivity of an
organisation.
Rare: Innovation: It is rare because it not every person has this skill and companies should
value them which is beneficial in future. Organisational Structure: The organisational structure of Zara is rare because it has
different norms and regulations which is helpful for company. Human Resource: It is analysed that workforce is rare in an organisation as they are
highly skilled and competence of performing various functions at a time.

Imitable: Organisational Structure: It is quiet tough to imitate the structure of an organisation as it
is quiet complex and need lot of time in order to get adjust. Human Resource: It cannot be imitate because it is quiet tough to copy it and exact
substitute of it.
Organised:
 Human Resource: To operate the organisation in smooth manner it is important to
organise and manage it for the betterment for the company.
STRATEGY EVALUATION
It is a process which helps in identifying the effectiveness of using strategy in order to
achieve the objectives of organisation and take corrective actions if required. It is the last step of
strategy management process which helps in analysing the base of companies, comparing the
results or standards and taking corrective action for it. This ensures that strategy of organisation
and its execution meet its objectives properly (Bereskin and Hsu, 2016). It is the way which
helps in finding the best way to achieve the strategic objectives. Moreover, the success of Zara is
its culture and technology which they adopt in order to achieve the success and growth of
market. There are many factors which contribute towards the success of company but all of the
above its new strategy is they manufacture limited product as because of this their demand
increases (The Secret of Zara’s Success: A Culture of Customer Co-creation, 2019). This
strategy is based on a principle which is lesser the availability, the more coveted products
become. As a result, this strategy becomes beneficial for company because by producing limited
or lower quantity products their sales does not get affect. Moreover, they also produce more
styles in their products which means chances of getting customers are become high. In addition
to this, Zara keep their products in its store for three to four weeks as it induces the customers to
visit regularly to the store and it helps in increasing their sales and profitability in the market. In
order to critically evaluate the relevancy of its strategy, SAFe criteria is used: Suitability: It is related with the explanation of strategy and how it fit in the mission of an
organisation. It express that how much the used technology is suitable and capable in
order to acquire the market conditions (Sari and et. al., 2018). In order to determine the
suitability of used strategy various questions are asked such as Is the strategy is helpful in
an effective manner?, Does the strategy overcome the various problems? and useful in

accomplishing the goals and objectives of an organisation. The used strategy is suitable
for Zara as it helps in attracting more customers and reducing the wastage of resources
because if the demand is fulfilled in available stock then remaining products get waste. It
is also helpful because the taste and demand of customers get change very frequently and
it helps in prevention of available resources. Acceptability: This element is used to measure the income, risk and reactions of investors
from the particular strategy. The returns of company is measured by various ways such as
cost-benefit and profitability analysis (Minár, 2016). The used strategy is useful in order
to create new competitive strength and competence of facilities which reduces the cost
and also diverse the risk factor. Moreover, it is helpful in achieving the geographical
areas which enables the company to acquire the market by utilising the production
capacity. Moreover, this strategy also reduces the risk factor of Zara of getting the
products waste.
 Feasibility: This element defines that how feasible the strategy as it includes the financial
feasibility which needs to be assess by analysing the cash flow, financial statement and
break even analysis. It is related with analysing the capacity of an organisation in order to
implement the strategy and also focus on the availability of resources. It is helpful for
Zara as it defines the significant key area which helps in enhancing and achieving the
success for company.
CONCLUSION
From the preceding discussion, it is concluded that corporate strategy is useful in order to
achieve the success and growth of market. As making or applying the strategy is beneficial for
company because it helps in designing the objectives of an organisation and achieving the
mission and vision of company. In order to make or apply strategy, conducting the research of
external and internal environment is beneficial because it helps in evaluating the various key
factors which is useful in its expansion. In the context of Zara, PESTLE, SWOT and VRIO
analysis is done as it determines the competitive edge of marketplace.

REFERENCES
Books and Journals
(Rugman and Verbeke, 2017)(Geckil and Anderson, 2016)(Cooper, 2017)(Keyes, 2016)(Oriesek
and Schwarz, 2016)(Eccles and Youmans, 2016)(Barker and Kasim, 2016)(Viscelli,
Hermanson and Beasley, 2017)(Frandsen and Johansen, 2018)(Lloret, 2016)(Rao and
Tilt, 2016)(Ocasio and Radoynovska, 2016)(Bereskin and Hsu, 2016)(Sari and et. al.,
2018)(Minár, 2016)
Barker, R. and Kasim, T., 2016. Integrated Reporting: Precursor of a Paradigm Shift in
Corporate Reporting?. In Integrated reporting. (pp. 81-108). Palgrave Macmillan,
London.
Bereskin, F.L. and Hsu, P.H., 2016. Corporate philanthropy and innovation: The case of the
pharmaceutical industry. Journal of Applied Corporate Finance. 28(2). pp.80-86.
Cooper, S., 2017. Corporate social performance: A stakeholder approach. Routledge.
Eccles, R.G. and Youmans, T., 2016. Materiality in corporate governance: the statement of
significant audiences and materiality. Journal of Applied Corporate Finance. 28(2).
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Frandsen, F. and Johansen, W., 2018. Corporate communication. The International Encyclopedia
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and Hall/CRC.
Keyes, J., 2016. Implementing the IT balanced scorecard: Aligning IT with corporate strategy.
Auerbach Publications.
Lloret, A., 2016. Modeling corporate sustainability strategy. Journal of Business Research.
69(2). pp.418-425.
Minár, P., 2016. Goodvertising as a paradigmatic change in contemporary advertising and
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Ocasio, W. and Radoynovska, N., 2016. Strategy and commitments to institutional logics:
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Organization. 14(4). pp.287-309.
Oriesek, D.F. and Schwarz, J.O., 2016. Business wargaming: securing corporate value.
Routledge.
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diversity, gender, strategy and decision making. Journal of Business Ethics. 138(2).
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Rugman, A.M. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Sari, M., and et. al., 2018. The Influence of Organization's Culture and Internal Control to
Corporate Governance and Its Impact on State-Owned Enterprises Corporate. Journal of
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Viscelli, T.R., Hermanson, D.R. and Beasley, M.S., 2017. The integration of ERM and strategy:
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