Applied Corporate Strategy Report

This report analyzes Zara's corporate strategy, examining its external environment, internal resources, and strategic choices. It uses PESTEL, Porter's Five Forces, VRIO, SWOT, and value chain analysis to assess Zara's competitive advantage in the fast fashion industry.

Applied Corporate Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
1. Discussing the external business environment of ZARA.......................................................1
2. Identifying and discussing the internal analysis in order to evaluate Zara's resources and
unique capabilities.......................................................................................................................6
3. Evaluating a strategy of Zara..................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12
APPENDIX....................................................................................................................................14
Safe criteria...............................................................................................................................14

INTRODUCTION
Corporate strategy can be defined as the process of encompassing a company's corporate
actions with the aim in order to achieve the objectives and goals of the company by gaining
competitive advantage in industry. The present report is based on the corporate strategy which
Inditex has adopted for its biggest brand Zara. It is the Spanish based fast fashion retailing store.
ZARA is well-known brand and a flagship chain of the Inditex group. ZARA is operating in
more than 95 countries with more than 10000 stores. ZARA is now a success story and its fast
fashion business model is now a major hit. The present report will assist in determining the
corporate strategy that is applied by ZARA with the help of different strategic management tool.
The present report will highlight the external business analysis of far and near market. It will
provide a deep insight of internal analysis of the company. Further, report will present the
evaluation regarding the corporate strategies of ZARA.
1. Discussing the external business environment of ZARA.
Corporate strategy consist a long -term vision that a company makes in order to create
corporate values, motivating the employees in order to implement the proper actions to achieve
customer satisfaction. Zara is operating in the retail fashion industry, retail can be terms ad the
sale of goods to the end users for the consumption by the purchaser. Retailing can be termed as
the process of selling consumer goods or services through multiple channel of distribution in
order to earn profit and business growth in industry (Rugman and Verbeke, 2017). Zara is a
Spanish fast fashion in clothing and accessories retailers, headquarter in Arteixo in Galicia. It is
one of the main brand of Inditex Group which the world's largest apparel retailers. In order top
main the competitive advantage and to increase profitability.
It can be said that, in order to evaluate the strategic issues for the company, it is essential
to determine the far and near business environment that can leads to affect the strategic decision
for Zara. The far business environmental factors are also known as macro environmental factors
which can be evaluated with a strategic tool PESTEL analysis.
PESTEL analysis of Zara:
It will assist the company in analysing the six factors which can influence the company's
competitive success and it can be said that the company has no control on such factors.
Political factors:
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The political factors include the role of government policies, taxation changes, foreign
trade regulation, political risk in foreign market, the political instability or the level of
interference and corruption which affects the business operations in the country. It can be said
that the politics is linked to the business world and plays a significance role in structuring the
business (Litov, Moreton and Zenger, 2012). It is very essential for ZARA to evaluate the
politics and political decisions as per their regulation and taxes. In order to determine the
political consequences in the country where the company wants to operate, the management must
know the trade system and make their strategies as per the countries import-export related
regulation and government. This interacts with the goods that come from other countries such as
fabrics and made garments to be sold in a country. As the company had to face the related to fine
in Brazil because of its poor working condition. It is very essential for Zara to make effective
strategic plan in order to enter a country which have more stable political condition.
Opportunities- Political stability of any country for extending the market is one of the political
factor that can act as an opportunity for Zara
Threats- The political factors such as laws and legislation in different countries are leads to have
threat for ZARA, as can affect its operational process in that particular country which affect the
business success and profitability
Economic factors:
This factors are related to the business cycle, interest rate, unemployment rate, personal
disposable income of people, the exchange rate of currency. This factors are very essential to
consider before operating in the country as this could lead to the business growth in that
particular country. As per the current scenario in UK after Brexit referendum leads to the
economic instability in the country, lowering the exchange rate and affecting the business cycle
and the retail industry (Berchicci, Dowell and King, 2012). In global market also, the growth
projection have been revised down for the euro area, Japan and the United Kingdom which are
reflecting negative operations in early 2018. The stable economic condition in many countries
has serves as an opportunity for the ZARA in order to enhance the supply chain and logistics and
leads top increases the market share in particular country.
Opportunities- High per capita income in any country is an economic factor that can act
as an opportunity for Zara. Zara needs to evaluate the interest rate and exchange rate in order to
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evaluate the cost of exporting or importing goods. The inflation rate can also lead to affect the
operational cost in a particular country as in high inflation people will not prefer to buy the high
branded products.
Threat- Low market growth can also act as a threat for Zara as if the growth in market is low
then company will not be able to make a sufficient amount of profit for them while extending
market.
Social factors:
It can be said that, the changing culture and demographic, income distribution, life-style
change and change in culture and fashion are the social factors that ZARA needs to consider
while evaluating decisions regarding operating in a particular market. Different country have
their belief and culture regarding the fashion trend. The management of ZARA should determine
each factors like the wants and preferences of the customers regarding the products, the spending
habit on clothing and their preferences regarding prices can leads to effect its growth in market
(Kleinbaum and Stuart, 2014). For example in East- Asian countries, customers prefers bright
colours, more ethnic wear. The new generation have completely new perception of clothing, the
designer of ZARA needs to focus innovating new fashion trends.
Opportunity- Familiarity related to the taste preference and need of consumer can be a social
factor that can act as an opportunity for Zara. The mind blowing and enthusiastic Research and
development of ZARA serves as an opportunity which assist in satisfying the changing needs of
the customer regarding the fashion and clothing.
Threat- Change in the taste and preference of consumers can be a threat for the organization
while growing.
Technological:
These factors include the new discoveries and technology development, for examples
development on the internet and rise of new composite materials. It can be said that with the
adaption of the new technology, company can be able to operate more efficiently. It can also
assist in quality contain and maintain the standard throughout each product (Idowu and et.al.,
2013).
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Opportunity- Zara has a global presence, with the help of its website and social media assist the
company to stay connected with its customers. It serves as an opportunity to the company to
enhance and expand its market share on global level.
Threat- Not making use of advancing g technology can act as a threat for the organization
Environmental:
It is very essential for the company to operates its activity by ensuring the safety and
welfare of the society and environment. As customers of the present era are also well informed
regarding the product and organisation which are socially accepted and engaged in safety and
well-being of environment (Flammer and Luo, 2017). Zara needs to be ensure to adopt the safety
measures of environment as if violated it can lead to face serious consequences includes, can be
banned from several countries. Zara should also need to focus on their products that can be
created through environmental friendly materials. The management should make the policy of
storing the waste material.
Opportunity- Different CSR activities and policy in order to protect and safeguard the
environment by ZARA assist in grasping the opportunity assist in increase its goodwill in market
which adds more value to the business.
Threat- Not following the environmental laws can act as a threat for the organization.
Legal:
The legal factors can be consider as the integral part of any business organisation. Zara
needs to be ensure to compile all the legal requirement in their operations which assist in
stimulating their business operations in that countries (Hickman and Silva, 2018). Such legal
factors include the laws and legislation like employment law, intellectual property etc.
Opportunity- Proper implication of the legal policy and procedure assist in simulating the
business operations can act as an opportunity for the company.
Porter's Five forces model:
Other than this, ZARA also needs to evaluate the near environment analysis with the help
of Porter's 5 forces model.
Competition in the industry: Higher
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It can be said that, threat of competition or rivalry in fashion industry are higher as there
are larger number of brands with similar product offering. However, some companies have
unique from other which assist it more profit and market share in industry without spending
much on advertisement like others competitors. But there are various companies which have
larger loyal customer base in market. Overall, the competition in fashion industry are said to be
higher.
Potential of New entrants into the industry: Weak force
With the fast growing fashion industry and fiscal crisis, people are looking more
economical goods. Industry is densely populated for the new entrants' ion order to find success.
Though finding unique way for promotion and marketing they can attract customers. But the
loyal customers to the brand will lead the monopoly to the industry. It can be said that the threat
of new entrants is not a significant force in the fashion retail industry. The main barrier to entry
is the government legislation or the trade barriers. Trade barriers, such as tariffs, have been
demonstrated to cause more economic harm than benefit; they raise prices and reduce
availability of goods and services, thus resulting, on net, in lower income, reduced employment,
and lower economic output
Power of Suppliers: Moderate
It can be said that with the increasing in globalisation, the suppliers power is weakened
by low wage boundaries like china. The suppliers power also gets reduced as they also need to
get the supplies for the apparels' industry for their operations (Zara’s Porters five forces
analysis , 2019). Every brand has licensed suppliers which leads them to stuck the requirement
for variation in design which leads to reduce their hold in market. The bargaining power of
suppliers are very high as the cost of switch to other very high and the brand tends to establish its
relationship stable. Low differentiation cost of suppliers can act as a threat for the company.
Power of customers: Higher
Fashion industry has strong customer base and a loyal one, this leads to less investment
on the advertising and marketing. It believes on words that travel from mouth to mouth. It spends
heavily on R&D department to acknowledge the needs and wants of the customers more quickly.
Customers in fashion industry are highly unpredictable. However, considering the hype of the
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quality and prices available at Zara, the loyal customers still wait for the new stock of ZARA. It
depends on buyers low switching cost. Once they liked the product, company has to face the
threat of changing the taste and preference of consumers.
Threat of substitute products:
The fashion industry is very unpredictable with many competitors all wanting to project
the next big trend (Jacoby, 2018). Though Zara still distinct from others by the constant
innovative and creative designs of most up-to-date fashion. The substitutes are benefited from
the innovation that helps in improving the consumer satisfaction. It can act as a threat for the
company as the consumers can shift towards the customers product.
Figure 1 Value chain diagram
Source: (What is Corporate Strategy? . 2019)
Discussion on external factors:
As per analysing the external factors on which it can be said that, there has been impacts of
various factors such as Brexit, taxation, influences of rivalries etc. however, these are the factors
which would be challenging for managing the operational activities of Zara. If remedial actions
or reforms has been undertaken by the government which would be positive in managing the
business operations at right state.
2. Identifying and discussing the internal analysis in order to evaluate Zara's resources and
unique capabilities.
It is essential to evaluate the potential organisation's resources and its unique capabilities
which assist the company in gaining competitive advantage over other competitors in market.
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VRIO analysis of Zara:
It is resource oriented analysis which assist in providing the Zara. Thus resource-based
strategic analysis is based on the assumption which identifies the Zara extraordinarily an
opportunity in order to build a sustainable competitive advantage over its rivals in the industry
(Viscelli, Hermanson and Beasley, 2017). With the help of this analysis, company can identifies
its potential capabilities and unique resources.
Resources Value rare Limitation Organisation Competitive
advantage
Access to cheap
capital
yes No Can be limited
through rivals.
Not been totally
exploited
It has little
significance in
creating
competitive
advantage.
Supply chain
network Flexibility
yes yes Main
competitors also
have effective
supply chain an
do share some of
the suppliers.
Fully utilized
by organisation.
It assist in keep the
smooth business
operations.
Intellectual
property
right,copyrights
and trademarks.
This are
extremely
valuable to
protect from
competitors
Yes, some of
them are like
IPR and other
right which can
not be copied.
Risk of copying
or imitation is
low but given the
margin in the
industry
disruption
chances are high
(Singh and
Delios, 2017).
Zara has not
fully utilised the
full extent of
the intellectual
copyright.
This are very
effective which will
assist in providing
strong competitive
advantage in
industry.
Brand awareness yes Yes, Zara is No Zara has It assist the
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one of the
leading fast-
fashion brand
in around the
world.
extraordinarily
enjoys its
leading brand
position in
various
markets.
company in
achieving the
sustainable
competitive
advantage in
market.
Opportunities in
the E-commerce
space using IT
capabilities.
Yes, the e-
commerce
space is
rapidly
growing
which assist
the firm in
order to gain
the
opportunities.
No, most of the
competitors are
also in the race
of adopting
advanced
technology.
The AI and the
analyst of the
company are
difficult to copy.
It is to start for
the organisation
only.
It is very effective
in the long-run in
providing the
sustainable
competitive
advantage.
Brand positioning
in comparing to
yes no It can be copied
by competitors
but will requires
big marketing
budget.
Yes, the brand
has positioned
its brand based
on customers
wants only.
It will provide the
competitive
advantage
temporarily.
Track records of
project execution.
Yes, specially
in the
company
with frequent
cost overrun.
Yes, especially
in the segments
where Zara's
extraordinarily
operates in.
No, the
competitors so
far has able to
imitate this
expertise.
Yes, company
is successfully
doing it.
It is efficiently
assist in providing
competitive
advantage to the
company.
As per the Vrio analysis of Zara, it can be analysed the potential resources and
capabilities which Zara have that cans assist it in providing comparative advantage over other
competitors in industry. There are very potential resources Zara have which includes, intellectual
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property right like IPR and other rights can be copied by competitors which will assist the
company to fully utilised the advantage. The intellectual right is very effective in providing the
advantage in the market (Crowther and Seifi, 2018). It can be said that, Zara has an unique
resource of effective supply chain and retail network which has assist the company in attaining
its smooth operations all over the world. However, the firm has the capability of IT and other
model technologies which can assist in creating a unique system. Higher interconnectedness also
means faster flow of raw materials and ideas as well as greater flexibility. Higher flexibility is a
core feature of ZARA’s supply chain. Its high level of integration and flow of communication
helps bring new designs to the market in as less as 15 days it assist the company having intense
customer base and assist in achieving competitive advantage.
Brand awarenesses yet another powerful capability of Zara that assist it in differentiating
from others rivals. The pricing strategy adopted by ZARA and its affordable designs are targeted
at the youth (Brandtner and et.al., 2017).
3. Evaluating a strategy of Zara.
SWOT analysis
Strength
Strong online presence through their own
website and other ecommerce platforms makes
Zara a popular brand name
Clothes are produced at a competitive price
with the most innovative and fashionable
designs
Weakness
Limited marketing and advertising as
compared to some other brands
High competition for Zara means limited
market share and high brand switching
Opportunity
There are more global markets which Zara can
explore
Threat
Competitors
Zara is making use of Porters five forces to expand their market share. One of the most
effective strategy of Zara is its highly responsive supply chain which assist it in placing at the
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forefront of fast fashion brand. It is the uniqueness of its strategy which find the competitors
difficult to replicate its success (Schmidt and Fahlenbrach, 2017). Apart from other competitors,
Zara is the best in fast-fashion which can be because of its effective supply chain and logistic and
great R&D department and the capabilities of the company. The economical and political
opportunists plays a huge role in making the supply chain strategies more effective. Brand
awarenesses yet another powerful strength of Zara that assist it in differentiating from others
rivals.
Fast fashion asks that certain trends make it from ready-to-wear fashion showcases to
customers the ephemeral nature of fashion trends mandates that this be achieved as quickly as
possible. This is where Zara, with its highly responsive supply chain, excels. It is very effective
for the core competences which includes efficiently delivering the customer value, assist in
attaining the competitive advantage in fashion industry. It can be said that, with the help of tree 3
key testes, the competences of the business strategy of Zara can be efficiently evaluated. It can
be said that with the effective supply chain and logistics management, Zara has successfully
access to wider market (Hardy, 2018). The effective supply chain strategy of business and E-
Commerce outsourcing has successfully assist the business to be presented in global level. Zara's
fast fashion model and its outstanding success is the most effective strategy which makes it the
leading one in industry (Rozman, 2017). ZARA is making large investments in information
technology, AI and other modern technologies to bring greater efficiency in its supply chain and
retail network. Apart from the RFID technology which will enable better inventory management
inside the stores, it has invested in IT.
The technological factors and its effectiveness is very effective for the strategies, other
than this the company has strength and capabilities of IT space assist the company in effectively
uses its strategies.
Zara’s design, manufacturing, and supply chain capabilities assist it to produce in small
lots. The supply chain is designed to support just-in-time capabilities with small production lots
and frequent shipments to stores (Villarón-Peramat, Martínez-Ferrero and García-Sánchez,
2018). This reduces instances of waste created by large lots of designs that do not catch on and
have to be sold for large discounts.
Value chain analysis:
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It is the process through which it can be adequate for the business and company to manage
the operational activities which would see the company to create a competitive advantage.
However, in relation with this case it can be said that, Zara must have strong management
regarding the operational supplies such as managing its product line most appropriately
CONCLUSION
By summing up the above report, it can be analysed that corporate strategic is the highest
plan of the business organisation which assist in identifying the goals and objectives of the
company. It will help the company in order to increase its market share by attaining competitive
advantage in market. The present report has concluded the corporate strategic plan of Zara. It is
the Spanish based fast fashion retailing store. ZARA is well-known brand and a flagship chain of
the Inditex group. ZARA is operating in more than 95 countries with more than 10000 stores.
From the above report has analysed the strategical issues of Zara with the help of evaluating
PESTLE and Porter's five forces model. It can also be analysed that Zara has potential and
unique resources and capabilities through which can achieve the competitive advantage in
market. Further, it can analyse from the report the strategy which Zara has chooses.
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REFERENCES
Books and Journals
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Brandtner, C. and et.al., 2017. Enacting governance through strategy: A comparative study of
governance configurations in Sydney and Vienna. Urban Studies. 54(5). pp.1075-1091.
Crowther, D. and Seifi, S. eds., 2018. Redefining Corporate Social Responsibility. Emerald
Group Publishing.
Flammer, C. and Luo, J., 2017. Corporate social responsibility as an employee governance tool:
Evidence from a quasi‐experiment. Strategic Management Journal. 38(2). pp.163-183.
Hardy, J., 2018. 15 Cultural Embeddedness, Corporate Strategy and Foreign Investment in
Poland: A Tale of Two Firms. Knowledge, Industry and Environment: Institutions and
Innovation in Territorial Perspective: Institutions and Innovation in Territorial
Perspective.
Hickman, C. R. and Silva, M. A., 2018. Creating excellence: Managing corporate culture,
strategy, and change in the new age. Routledge.
Idowu, S. O. and et.al., 2013. Encyclopedia of corporate social responsibility (Vol. 21). New
York: Springer.
Jacoby, S. M., 2018. The embedded corporation: Corporate governance and employment
relations in Japan and the United States. Princeton University Press.
Kleinbaum, A. M. and Stuart, T. E., 2014. Inside the black box of the corporate staff: Social
networks and the implementation of corporate strategy. Strategic management
journal.35(1). pp.24-47.
Litov, L. P., Moreton, P. and Zenger, T. R., 2012. Corporate strategy, analyst coverage, and the
uniqueness paradox. Management Science. 58(10). pp.1797-1815.
Rozman, R., 2017. The organizational function of governance: Development, problems, and
possible changes. Management: journal of contemporary management issues. 5(2). pp.94-
110.
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Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Schmidt, C. and Fahlenbrach, R., 2017. Do exogenous changes in passive institutional ownership
affect corporate governance and firm value?. Journal of Financial Economics.124(2).
pp.285-306.
Singh, D. and Delios, A., 2017. Corporate governance, board networks and growth in domestic
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627.
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Viscelli, T. R., Hermanson, D. R. and Beasley, M. S., 2017. The integration of ERM and
strategy: Implications for corporate governance. Accounting Horizons. 31(2). pp.69-82.
Wang, Z. and Sarkis, J., 2017. Corporate social responsibility governance, outcomes, and
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Online
What is Corporate Strategy? . 2019 [ONLINE] Available
Through:<https://www.myaccountingcourse.com/accounting-dictionary/corporate-
strategy>.
Zara’s Porters five forces analysis . 2019 [ONLINE] Available
Through:<https://www.qessays.com/zaras-porters-five-forces-analysis/>.
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APPENDIX
Safe criteria
Suitability- the company’s flexible supply chain means its price points are slightly higher than its
competitors, it allows it to be the most responsive to changing fashion trends. The low threat
from the competitors in industry plays a significance for the ZARA. The social factors and
strength of project execution assist in making ZARA the leading fast fashion brand.
Acceptability- This strategy delivers the best customer value as the product of ZARA are at
reasonable cost, of very high quality and on the hand, the stock are always new and fresh.
Feasibility- It can be said that this strategy is more effective which has helped the company in
order to achieve the sustainable competitive advantage in market. Other than this, project
execution is the capabilities which is rare and are very valuable for the company. Its marketing
strategy has assisted the company in getting ahead from other competitors and enjoying the
competitive advantage in market.
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