Applied Corporate Strategy-Strategic Analysis Report

This report provides a strategic analysis of Zara, a fashion store, focusing on its external and internal factors. It includes an analysis of the company's value chain and VRIO analysis. The report also discusses the opportunities and threats faced by Zara in the market.

APPLIED CORPORATE
STRATEGY-STRATEGIC
ANALYSIS REPORT
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TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
External analysis..........................................................................................................................3
INTERNAL ANALYSIS.................................................................................................................6
Value Chain Analysis..................................................................................................................6
VRIO Analysis.............................................................................................................................9
Evaluation of the strategy..........................................................................................................10
REFERENCES..............................................................................................................................14
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INTRODUCTION
Analysing the external and internal factors is a very important factor for the companies so
that they can decide their strategies and planning accordingly (Shabana, Buchholtz and Carroll,
2017). Zara is a fashion store which is providing the customers with high quality products and
services and is affordable. The report is going to consist of the internal and external factors of the
organization and the factors which are the strengths of the organization so that improvements and
planning of the company can be done accordingly.
External analysis
It is very essential for the organizations to analyse the external and internal factors of the
organization so that they can have a better understanding of the part and decisions for Zara can
be taken accordingly. To understand the external factors of the company it is very important for
the company to understand the
PESTLE
 Political Factors
Zara is an international organization which is providing the customers with the best of
products which is why the company has a huge scope of expanding themselves (Rothauer, 2018).
The political factors are not a problem for the company because there are free trade policies
which are being followed by most of the countries in the world which can be a great advantage
for the company. The company is a Spanish brand which is why the organization is having a
trade with European Union and that is making the company have a lot of profit.
 Economic Factors
There has a strong economic stability in the organization because the products of the
company are affordable and trendy at the same time which is attracting a lot of customers in the
organization which is a great factor for the company (Grant, 2016). The advantage is that there is
low cost labour which is there in Zara which is why the company is being able to have a high
profit margins and that is good for a long run in market. The products of the company are
relatively affordable for the customers which is a great factor for the company and the customers
which can get easily attracted.
 Social Factors
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The advantage which the organization has is that they have a control on the employees of the
company and the targeted marketing of the company is good because of the experience they hold
in this industry. The company has found comfort for the customers to reach out for Zara by
getting online so that the customers can be satisfied. Zara is innovating and inventing new
designs for the customers so that they can satisfy the customers more and even better so that the
company can have the loyalty of the customers over time.
 Technological Factors
Zara is very innovative in the industry which is a great factor for the company and there is
also a high use of latest technology in the organization so that they can maintain their standards
and the quality of the products (Needles and et.al., 2016). Feedbacks from the customers can be
taken directly and that can help the company to improve and make the products better so that the
customers of the company can be loyal to the company. There is an easier logistics and delivery
processing in the company because of the help of technology in Zara.
 Legal Factors
Zara also has to follow all the rights of the country in which they have expanded so that there
is a balance of the internal with the external factors. The labour and customer laws are
considered very important in the company because they are the backbone of the company and
keeping them satisfied is the most important factor. There are a lot of ideas which come by the
employees of the company as well which is why the employees are given a better environment to
work in and the customers are given all the details about the products so that they can be
satisfied.
 Environmental Factors
Zara is very particular about the resources they are using in the company so that they can use
them wisely which is going to help the company have a better functioning for themselves which
is a very important factor for the company (Strzelczak, 2018). The waste outlet of the company is
being reduced so that the company can have a better functioning and the organization can have a
better functioning for a long run. The garments have to look good and also the trends have to be
followed so that they do not jump from one organization to the other organization.
Conclusion
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The greatest advantage the organization has is that the customers are satisfied with the
quality and the services of the company because of the use of technology which is fulfilling the
standards and demands of the customers from time to time. The environmental factor is a great
threat for the company because the organization is expanded itself in a lot of countries and
meeting the demands on time is one of the threats for the company which can be disturbed by the
environmental factor.
Porters 5 Forces Power of Suppliers (Low)
There are a lot of suppliers which Zara is having in the organization which is why the
company is having a competitive advantage (Rao and Tilt, 2016). To save cost the company
shifts from one supplier to the other and does not compromise on the quality of the products and
raw materials which are coming in the company. It is because of the quality of the products the
organization is having such a strong portfolio for themselves which is a great factor for the
organization. Power of Buyers (Medium)
The company does not spend a lot on advertisement and believe in mouth to mouth
advertisements which the customers do for the company because they are satisfied highly. It is
very important for the company to satisfy the customers so that they can have a high power of
control on the customers of the company. It is due to the experience Zara is having in this
industry the customers are understood and the changes in the company are made accordingly so
that the company can function effectively. Threat of Competitors (High)
The competition in the market for Zara is increasing and the greatest competitors for the
company are H&M, Benton and Gap (Borrero, Acosta and Medina, 2020). The latest collection
is launched by Zara in the market but the other companies in the market are also having a lot of
experience which is a great threat for the organization. Threat of New Entrants (Low)
There is a requirement of a huge investment if any organization wants to get in this industry
and Zara has established a strong base for them the market which is going to be very difficult for
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any new organization to compete with it. Zara is having appealing factors which helps the
company to get in audience and the revenue generation is also high which is making the
company have a good place for themselves in the market. Threat of Substitutes (Medium)
There are not many organizations which can compete with Zara in the market but the
products of the organization can be substituted by the local stores of the countries. There are a lot
of customers which like the culture to be followed therefore they prefer shopping from the local
market which can be a threat for the company therefore Zara is following the trends and cultures
of the countries so that they can attract a large number of customers (Song and Thorén, 2017).
There are a lot of companies which follows the trends of Zara so that they can become like this
company which is going to be very helpful but for Zara this can be a threat which is why the
company has their own touch to the products which are produced by the company so that they
can function effectively.
Conclusion
The opportunity for the Zara is that the suppliers they have are many and the cost saving
is being done by the company when required so that the company can maintain their standards
and the revenue generation is maintained. Zara is having a strong market base which is why the
company will be able to have a better market for themselves. The threat for the company is that
there are a lot of local companies which is taking the customer base away from the organization
which is why the organization has to make better strategies and take the right measures so that
they can have a competitive advantage and they have loyal customers in the organization.
INTERNAL ANALYSIS
Value Chain Analysis
Value chain analysis is the process which helps to analyse all the activities which are
used in the business organisation to develop effective strategies and increase its potential in the
market. This analysis also is very important for ZARA as it helps to determine the value of its
final products after all the activities to evaluate its prices for customers (Kaukiainen, 2019). This
also helps the organisation to become more effective in competing in the market and increasing
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the efficiency of specific activities which increases the value of the final products to gain higher
profits effectively.
Primary Activities
Inbound logistics
Inbound services ae those which helps the company to receive input material through the
help of different activities and decrease the cost of production of ZARA effectively (Daniels,
2020). As Zara is able to develop effective store chain in UK market to gain higher profit
margins effectively. Zara is also very effective in providing different types of warehousing
techniques to reduce the cost of raw material to increase profit margins effectively.
Operations
This is to increase the efficacy of all the activities to gain better proficiency to of the
company and increase the profit margins. it is very essential for Zara to determine the quality of
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operation. reduce the cost as Zara is using different types innovation which also increases the
potential of the company effectively.as the company also helps the company to ensure better
profit margins and grow.
Outbound Logistics
This is the activities which includes product and service distribution and increase the
distribution channel in the market effectively (Heikkilä, Bouwman and Heikkilä, 2018). This
activity helps Zara to develop effective services to customers which increases their satisfaction
and increase their customer base effectively. it also helps the company to become effective
understanding about all the market trends to reduce the delivery cost effectively. This is the
most impo0rtnt stage which helps company to attract more customers and grow effectively.
Marketing and Sales
Marketing and sales are the activities which increases the sales of products of Zara and it
is also provides better opportunities to increase the potential to gain higher profit margins. Zara
uses digital marketing activities to increase its sales in social media and attract more customer
effectively. company is very aggressive in providing its better marketing approaches to increase
brand value and brand equity to gain higher profit margins effectively.
Services
Services are the primary activities which helps to increase the value of company by
resolving any issue which their customer have and provide better and effective opportunities to
increase customer satisfaction and make them loyal in the company (Girella, Tizzano and
Ferrari, 2019). Zara is not effective in providing better customer services which is also impacting
the brand value in the market and reducing its market share gradually.
Support Activities
Infrastructure
Organisation structure helps the company to support all the activities to grow and
increase its performance to achieve its objectives effective. This also helps to increase the
efficiency achieve all the activities very fluently with better innovative and positive thinking,
Better infrastructure helps the company to gain higher margin. Zara also develop high quality
organisational structure to assign clear roles and responsibilities and increase the communication
between all the department and develop effective strategies which helps to improve financial
position of the company effectively.
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Human Resource Management
Human resource management of Zara provides better motivation to their employees and
retain them to reduce cost of recruitment(Mascarenhas and Mascarenhas, 2019). They also
increase the potential of exiting employees by training and developing their skills and knowledge
effectively. Human resource management also provides effective understanding of all the factors
to become more efficient in the market to increase customer satisfaction.
Technology Development
Technology research and development is very important activities which help Zara to
increase the productivity of all the other activities and value of final products to gain higher
profit effectively. Company has adopted effective software which reduces the errors in
information and improves decision-making process of Zara to compete in market effectively.
Procurement
Zara needs to analyse all the purchasing activities of all the department to understand the
cost benefits of the company and formulate effective budget to each department. This helps to
increase the potential of the company and gain higher revenue generations effectively.
VRIO Analysis
VRIO frame work is the tool used to examine or evaluate firms’ internal resources and
the power or ability to do something to find out if they can be obtained by sustained competition
and ambitious advantages.
V R I O
Brand equity Yes No No Yes
High Assets Yes No No No
Human
Resource
Yes No Yes Yes
Intellectual
Property
Yes Yes Yes Yes
Technology No No No No
Valuable
This factors which helps to identify the resources increases the value of products and
services to increase the efficiency of company to compete in market effectively(Nikolaeva,
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2018). As the brand equity of Zara is very high which also helps the company to charge extra
premium of its products to increase profit margins. As the company it having high number of
stores chain all over the world which increases the assets of company to generate higher profits
in long run effectively. Employees of Zara are also effective in increasing the value of products
by increasing engagement level of customers to satisfy them. As Zara also has patents on their
clothing material which increase their competitiveness in the market to gain higher profit
margins. However, the technology resource of company is not effective and also reduces the
efficiency of the company to make decision.
Rarity
This factors helps the company to analyse the resources which are rare and are available
with only few market players. As Xara has the effective material which is combination of
sportswear and winter wear this helps to increase the competitive advantage of company
effectively.
Inimitable
This resources are those which cannot be duplicated which increases the monopoly of Zara
to gain higher profit margins as patents and employees of Zara are very effective with intensive
training and cannot be copied to increase the potential of company in market effectively.
Organisation
This resources helps to analyse all the resource to fully utilize them and increase the
potential of the company(Graham and Hede, 2016). As technology is very ineffective resources
of Zara to become competitive in market and increase revenue.
Evaluation of the strategy
Zara has ventured into the online business recently where they have opened ne online sore
for every region and all the stores collectively are maintained through one single location.
Venture into the online markets as well was the much needed expansion for Zara because it was
necessary for them to utilise the huge opportunities that this online market segment presents to
the company where their investment is lesser and the returns are comparatively larger. The entire
strategy can be evaluated using the SAF methodology:
Suitability: The online market strategy can be categorised as opportunity for the company where
they can explore the wide opportunities that this expansion provides to the company (Olson and
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et.al., 2018). the internal issues that the company might face are the resistance from the
employees where they might think that their jobs are threatened and additionally, there is a large
section of public that likes to feel the cloth in their hands before buying it online. The external
issues that can arise are that the customers might not trust the online purchasing of the clothes
because of the easy chances of getting cheaper qualities. However, it can also be said that such
quality issues are least likely to occur with Zara where the customers trust the brand in that
aspect. It can therefore be said that the venture of the online platform was much needed for the
organisation and is perfectly in sync with the objectives that Zara has developed for continuous
growth.
Acceptability: The acceptability aspect can be analysed in context of the expectations that
shareholders have with the company (Kingsnorth, 2019). it is necessary to take approval of the
stakeholders before implementing any strategy. For Zara, the five key stakeholders of the
company are customers, designers, government, investors and employees. These can be
segregated into the different categories on the basis of power interest matrix:
Investors Designers
Government Customers
Employees
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Keep Satisfied
Power
High
Manage Closely
Monitor
(Minimum Effort)
Lo
w
Keep Informed
Lo
w
Interest High

There are three major categories of stakeholder that can be particularly evaluated:
 Designers: The designers of the company are the ones who are working for the company
tirelessly and giving such exclusive designs. Online marketing poses the risk of easily
copying the dress designs and that too at a much wider scale. Therefore, it is necessary to
obtain their approval and they can be made to understand that the copyrights will still
remain with the company and the increase in the target market will be highlighted before
them where they will be told about the massive increase in the customers where they can
further develop exclusive designs for customers all over the world (Wood and Jobber,
2016).
 Customers: The customers might also not be comfortable with the online venture where
they might prefer personal selling or store shopping over the online selling mechanism. If
they do not buy from online websites, then the entire purpose of developing a website can
fail. Therefore their approval is necessary in order to succeed and they can be made
understand the need for venturing online where they will be able to review at home the
latest designs that store has to offer and thus increase the support of customers.
Therefore, customers can be made comfortable around this strategy of online expansions.
 Employees: The employees are the ones who will be working on the maintenance and
regulation of such online platforms that have been developed and there support is of
critical importance therefore for the company (Hult and Ketchen, 2017). There can be
resistance from these employees who are not flexible regarding the maintenance f the
online websites and do not understand the exact mechanisms. Such employees can be
regularly trained where they can learn the new skills and become flexible with the change
that has been implemented realising the importance of this step. Therefore, customers can
be gained in favour of the company regarding its decision to develop online selling
platforms.
Feasibility: Under this aspect, the financial and human skills that will be require for the strategic
implementation is evaluated. Here the feasibility i.e. the fact that whether the company has
adequate resources of the implementation of the desired strategy or not is evaluated (Magalhães
and et.al., 2020.). Presently, the company has enough financial funds that can be used for the
implementation of this online expansions strategy and there is a team of expert personnel who
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regularly manage the websites and executes the different orders or queries that are being placed o
the website. The development of website dies not requires much financial expenditure but the
maintenance is the key behind ensuring its success and therefore, Zara needs to hire a specialist
if they don’t have one and this can increase costs. However, n the long run, this strategy can be
said to be extremely profitable and innovative thus increasing its applicability and
implementation.
Therefore, it can be said that the strategy of online expansion has proven to be successful for
Zara.
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REFERENCES
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Strzelczak, S., 2018. Integrated assessment of operations strategy. Zeszyty Naukowe.
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