Digital Business Model Analysis for Zalando

The assignment is focused on analyzing Zalando's digital business model, including its activities and technologies used. Micro, macro, and meso perspectives are discussed in the context of digital business environments. Porters five force analysis, competitive matrix, and PESTLE analysis are also applied to understand Zalando's business. The report is based on a literature review of various studies related to digital businesses and e-government portals.

Digital Business

Table of Contents
INTRODUCTION...........................................................................................................................1
Business name(Zalando)........................................................................................................1
Traditional Business vs. Digital Business..............................................................................1
Digital Business models.........................................................................................................2
MAIN BODY...................................................................................................................................3
Digital business activities.......................................................................................................3
Mode of operation..................................................................................................................3
Digital business environment.................................................................................................3
Marketplace............................................................................................................................4
Market growth........................................................................................................................5
Market segmentation..............................................................................................................6
Key growth factors for digital business..................................................................................6
External forces impact on business operations.......................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Digital business refers to the business which use technology to generate new value in
business modes, customers experiences and the internal capabilities that support its main and
core operations (Abdulwahid, Mutalib and Ali, 2014). It can be digitalization in the business
when a company start to use technologies in its operations and operate its business with the help
or by using technologies. This assignment related to Zalando, Inc. which is an European e-
commerce based multinational company which is based in Berlin. This assignment will
discussed about digital business, difference between traditional and digital business. Mode of
operation, market segmentation and external forces that may affect on the business's operation
will be defined.
Business name(Zalando)
Zalando is an e-commerce company which is a European e-commerce Multinational
Company which is headquartered in Berlin, Germany. The company is providing their customers
with various services such as Fashion and Lifestyle products in around 17 European Markets.
The company was founded in the year 2008 and is dealing in the Online Retail Industry. The
founder of this company was Rocket Internet, Robert Gentz and David Schneider. The net
revenue of the company in the year 2018 was approx € 5.388 billion. The number of employees
serving the company are 15,619. In addition to this, the company is also having many
subsidiaries such as Zalando Lounge, My Brands Zalando eLogistics, My Brand Zalando
eStudiois, etc. are operated under this name.
Traditional Business vs. Digital Business
Traditional business- It refers to an organisation that can be a store, restaurant and agency. This
business operates to offer its consumers and clients with a product in exchange for
compensation. It can be a local business which offers its goods and services to its local
customers.
Digital business- It is a business which use technologies ton provide products and services to its
all customers worldwide (Akerkar and Sajja, 2016). It can be a creation of new business designs
by blurring the digital and physical worlds.
Similarities between traditional and digital business- To operate their business both use
advertising to provide information about about the products and services of the company. The
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purpose of both is to increase the sells and market share of the company and make positive
impact in economic condition of the firm in term of profit margin.
Differences between traditional and digital business- In traditional business, there are limited
customers but in digital business there are number of audience to the company to sell the
products and services (Berg and Engvik, 2016). In traditional business, the manger of the
company target specific market but in digital business, the management department of the
company target its audience globally.
Digital Business models
SWOT Analysis-
Strengths Weaknesses
 Zalando has a wide range of brands and
which helps it in earning sufficient
profit with high customer satisfaction
level.
 By using good logistics and distribution
systems, this firm has been able to
actualize better customer satisfaction
and it help in enhancing the
productivity of the organisation.
 The company is investing heavily on
customer oriented services which is its
weakness as the cost increases much as
making the services as on the demand
of customers.
 Business Model of Zalando can easily
be imitated by the competitors in the
industry which is a weakness for the
company.
Opportunities Threats
 As the company is having a wide range
of brands, so there is also an
opportunity for the company to take
benefit of the good will and diversify
the business in more segments.
 The firm has strong brand recognition
in the premium segment, customers
have experience with excellent services
provided by Zalando SE Brands in the
 The biggest threat to the company is
the increasing commoditization of the
products in the service industry (Collins
and Halverson, 2018).
 However, the company is still the
leader in the market but it is facing stiff
competition from the international and
local competitors.
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lower segments.
MAIN BODY
Digital business activities
Digital business activities- Business activities refers to any activity which engaged in the
primary purpose of making a profit. When a company use technologies to operate its business
and operation like selling products and advertising, known as digital business technologies
(Deegan and Sutherland, 2016). In Zalando, company use various digital technologies to expand
and run its business and its operations.
Digital technologies that company employ- Zalando employs the a UX designer, UX
researcher, UI designer in its working. The following technology is used by the company in
order to keep and save the records of their customers so that if needed in future they could be
referenced.
Mode of operation
Zalando operate its business online and use various digital technologies to run its
business. Zalando operates in a marketplace model and provides their customers with the best
services by customising the services in accordance with needs and demand of customers.
Zalando, by making use of different ways, provides the services related to fashion items mostly
in clothing, shoes and accessories. The company operating its business at a large scale so the
strategies are also made according to the rules and regulation of the countries in which it is
operating.
Digital business environment
MICRO- Micro environment is that environment of the firm and it include factors or elements in
an organisation's immediate area of operations that affect its performance and decision making
freedom. These factors include customers, distribution channels, competitors, suppliers and
others. In digital business environment, these factors use technologies to operate the business of
the company. In Zalando, customers make use of online services provided by the company such
as the company is providing products in many designs on their website so it becomes easy for the
customers to choose from. (Erdbrügger and et. al., 2017). To search and gather information about
the products or services of the company, the customer also used social media sites.
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MESO- MESO environment refers to the setting between the macro and micro opportunities and
it help in providing a shape to the framework of a business of an organisation that can be
considered as its infrastructure like policies, rules and guide lines etc. For example, in Zalando,
employees are free to work at any time so that they could make their contribution towards the
success of the company by working and making improvement in the company's current
technology or way of working.
MACRO- It refers to an external factors that influence an organisation's decision making,
performance and strategies (Gupta and Karna, 2015). This include economic and demographic
factors such as legal, political, social and others. These all factors affect on the digital business
environment of Zalando. For example, legal, political and environmental factor affect the
business environment of Zalando because in some countries, the rules does not permit the
company to use various technologies like social media as a promotional tool. Social factor also
affect the business of the company. As the continuous changes in the trends and demand of
customers affects the working of an organisation.
Marketplace
MESO- It can be an analysis that refers a population size that falls between the micro and and
macro levels like a community of a company. It may also refers to analyses which is specially
designed to reveal connections between micro and macro environment.
Porters five forces analysis- It is an analytical framework which is developed by Michael porter
in 1979. It is a tool that can be used by the management department of the company to analyse
and understand underlying levers of profitability in a industry and sector. In Zalando, this
analysis can be used by the company to analyse market. The five force analysis of Zalando is as
following:
Threats of new entrants- it is the first force of this analysis and it is important for online
business. The threat level to the company is high as there are less barriers for the new business to
come in this industry. But the already established brand and the diversification of the company in
many other service lines will help the company in dealing with the intense competition faced by
it. There are various new brands entered in this sector and create issues and threats for Zalando
(Ifeanacho, 2016). There are different factors such as time and brand reputation that market
difficult for new entrants to challenge Zalando or attempt to grab market share from it.
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Bargaining power of suppliers- There are number of suppliers at marketplace that
provide raw material to Zalando to manufacture products and services. Zalando ensures that the
suppliers it is purchasing are following ethical working principles at their work locations (Khai,
2017). The switching cost of supplier for Zalando is very negligible because there are number of
suppliers and they are ready supply Zalando with the needed products. In addition to this, the
company is also having diverse brands and operating al large level so the company will not be
much affected by the powers of suppliers as there are many suppliers for the company with
which it can work. So the bargaining power of suppliers is low against this company.
Bargaining power of buyers- Bargaining power of customers is very high in general
because the customers are able to switch when they are not get satisfaction from the needed
products and services. This company operate its business worldwide so it is not easy to fulfil the
needs of all international consumers. Another reason is also because the company is producing
customer oriented products which makes them the services in accordance with the need and
demand of the customers. So this is the reason why the bargaining power of the buyers is high.
Threat of substitutes- The substitutes available to the company are not much and hence
they could not impact upon the working of the company The company is providing customised
services to their customers which is not possible from the hands of all businesses. So this power
has been treated as low for the company.
Competitive rivalry- The growth rate of this industry is very high and also the size of this
industry is very large so the companies are easily entering into the market and on the very basis
the power of competitive rivalry is considered as low.
Market growth
Competition matrix- It is tool and instrument that is used to critically analyse the company
against its competitors. It help the organisation to establish firm's competitive advantages in an
easy to use and read format (Mowlabocus, 2016). For this the company can design a matrix that
can be a simple chart or table and consist evaluation factors that are pertinent to the company.
Factor Zalando Bestseller
Low price 7 4
Superior quality 5 2
Onboard controls Yes No
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Installations Yes No
Training of operators Yes Yes
Customizable Products 6 4
Unique features 8 5
Rapid delivery 7 3
From the above competitive matrix, the rank are given to both organisation out of 10 and
on the basis of the features of the products and services. Now from this matrix, it can be analyse
that company has a good position in the market and competitor can not highly affected the
business and profit of the firm (Naslund, and et. al., 2017). In some cases, there are need to
make improvement to Zalando such as develop new ways to easily customize the products and
also to look upon and make improvement in the quality of products and services so as to meet the
differing needs of customers and make differentiation in its products from its competitors by
making innovation.
Market segmentation
Segmentation refers to a process which dividing population into parts and groups on the
basis of certain characteristics and targeting a particular group to sell or purchase products and
services. Zalando market segmentation on the basis of geographic, demographic and behavioural
approach. The main focus on the company is on different companies who are dealing retail
apparel industry and also on those customers who wants to have their products designed in
accordance ow their own demands.
Key growth factors for digital business
USP- It refers to unique selling proposition which is a factor that differentiate a product and
service from its competitors. It can be the lowest cost of the goods and services and the high
quality of them. The USP of Zalando is innovation in their designs which they provide in the
fashion items and this help in the growth of the business of this company.
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External forces impact on business operations
USP(Unique Selling proposition)- It refers to the specific and particular quality and fracture of
goods, services and a business (Rice and et. al., 2016). For example, the USP of Zalando is that
this company provide the uniqueness in the designs of their products and services.
PESTEL analysis of Zalando
Political factor- This factor include political stability, tax rates, wage legislation, pricing
regulations and others. It determine the extent to which government and government policy may
affect on the company or a particular industry. In context of Zalando, the government of
Germany has come under increasing global pressures to implement the WTO's regulations in
Retail Indutry. Expansion to some nations is tough cause of their policies that are related to
online purchases (Selwyn, 2016). So the difference in rules and regulations of different countries
from one another is the main issue confronted by the company.
Economical factor- It include economic growth rate, discretionary income,
unemployment rate and others. These factors create impact on the economy and the performance
of the company which is directly and indirectly affect the company in terms of profitability.
Fluctuations can be an issue that affect the business of Zalando as the fluctuation in the exchange
rates of Germany impacts upon the investment plans of the company.
Social factor- This factor include the social environment of the market and involve
determinants like cultural trends, population, life style, beliefs of customers, demographics,
population analytics and others. Zalando makes use of digital technology in its business which is
restricted in some areas of the world cause of religious and ethical factors. Further, the impact is
also because of increasing liberalisation attitude towards health and safety are getting lax. In
these areas the sales of the company will be prevent.
Technological factor- This factor consider the rate of technological innovation and
development that could affect a market or industry. Zalando is an online retailer and more
technologies to operate it business internationally. For example, the company can keep close eye
on the development and enhancement of user experience with increasing speed and access to the
internet. The following action could help the company in transforming the customer user
experience in the Retail Apparel Industry.
Environmental factor- This factor include environmental laws and legislations to provide
protection to the environment form the pollution of the business of the company. Because a
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company is established in a society so it is important to follow these rules and regulations so that
they can not harm the environment (Abdulwahid, Mutalib and Ali, 2014). For example, the Paris
Climate Agreement has put real targets for the National Government of the Germany to
implement those targets. The following can result in greater scrutiny of environmental standards
to the company in Germany.
Legal factor- It involve certain laws and rules that affect the business environment and
the policies and business of the company. This company properly follow all the laws such as
equality law, discrimination act, diversity act and others (Akerkar and Sajja, 2016). For example,
the legal protection of intellectual property, patent, copyrights and other IPR rights in Germany.
CONCLUSION
From the above information, it can be concluded that when a company operate its
business with the help of various technologies, it can make increment in its profit and
productivity of the business. This assignment is explained about digital business, the digital
business model is defined and traditional business is also. Digital business activities and the
various technologies that are used by Zalando in its business are also described. Micro, macro
and meso is explained in context of digital business environment. Porters five force analysis,
competitive matrix and Pestle analysis is defined in the report.
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