Full Strategic Appraisal: ZARA

This study provides a comprehensive strategic appraisal of ZARA, covering external and internal analysis, corporate strategy, and growth opportunities. It examines the brand's success factors, challenges, and recommendations for future growth.

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Full Strategic Appraisal: ZARA
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1FULL STRATEGIC APPRAISAL: ZARA
Table of Contents
Introduction..........................................................................................................................................2
Company Profile..................................................................................................................................2
External Analysis.................................................................................................................................2
PESTEL Model................................................................................................................................3
Porter’s Five Forces Model..............................................................................................................7
Internal Analysis................................................................................................................................12
Porter’s Value Chain Model..........................................................................................................12
Competency Framework................................................................................................................14
VRIO Framework..........................................................................................................................15
Company’s Corporate & Business Strategy......................................................................................16
Issues and Challenges Facing the Company......................................................................................18
Ansoff Matrix................................................................................................................................19
Evaluation of SOG and Implementation............................................................................................19
SFA Framework.............................................................................................................................19
Conclusion and Recommendation.....................................................................................................20
References..........................................................................................................................................21
Appendix............................................................................................................................................25

2FULL STRATEGIC APPRAISAL: ZARA
Introduction
The study focuses on the full strategic appraisal of the brand ZARA. The company mainly
deals with the fast clothing fashion based on A Coruna in Galicia. The study will give a clear idea
about the external analysis, internal analysis, company corporate and business strategy, issues &
challenges and strategic options for growth. Lastly, it will focus on the evaluation of strategic
option for growth & implementation. It will also provide a concrete conclusion along with the
recommendation so that the company can expand and earn more and more profit in the near future.
Company Profile
In the year 1975, Zara store was first opened by Amancio Ortega. It was established in A
Coruna in Galicia, Spain. It is a part of Inditex Group, one of the largest fashion clothes
distributors. At present, there are 1900 stores of the company around the world (Vu and Medina
2014). In the year 2010, the company introduced online shopping features so that the sales can be
increased accordingly and the brands clothing can be reached to every possible customer around the
globe. In 1983 the company expanded across Spain’s biggest cities. In the year 1988, Zara first
entered the Porto, Portugal. In the next year 1989, Zara’s first store was opened in New York. In
the following years the company expanded to France, Mexico, Greek, Belgium, Sweden, Norway
and Israel. In the year 2000, new headquarters were built in Arteixo. In 2018, the company is
selling around 202 markets around the globe (Zara 2019).
External Analysis
According to Gupta (2013), external environment of any company consists of PESTEL
Model which provide us with macro environmental analysis. On the other hand, Porter’s Five
Forces model give a complete picture of industrial level analysis of the company.
PESTEL Model
Factor Main Impacts Comments

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Political 1. In Europe, free trade
boost the Zara sales in
UK which helped the
movement of the goods
easily between
European countries
without any
boundaries.
2. There is no restriction
in quality as well as in
quantity of the goods.
3. The European Union is
said to be United
Kingdom’s biggest
export market and due
to free trade the brand
Zara can reach to a
large number of
consumers which
ultimately boosts the
sales figure of the
company (Geoghegan
2017).
 It can be said that there
are political
differences around the
world and to satisfy
every government the
company needs to
make a bond with
them.
 As there is no
restriction in the
quality and quantity of
the products, the
company may
compromise a bit in
the quality and also in
terms of price so that it
can attract more and
more consumers.
Economic 1. The fast improving
economic environment
 As the economical
environment is

4FULL STRATEGIC APPRAISAL: ZARA
in Spain helped the
company a lot in terms
of sales in clothing
retail industry.
2. This happens because
Spain consists of high
level of unemployment
along with high
population, which
lower the cost of
labour which helps in
low cost of production
and so the company
can earn large scale of
profit (Goodman
2017).
improving so the
company can make a
sale of large quantity.
 The low labour cost is
another factor which
helps the company a
lot to expand and to
earn more profit.
Social – Cultural 1. The increasing demand
of the brands clothing
within the consumer,
the company took the
advantage and started
online shopping along
with the store.
2. Online sites helped the
consumers to purchase
the product even
 The company is new in
the online system so
there are lots of scope
to improve in that
section.
 The introduction of
app can benefit the
company in terms of
money in the long –
run.

5FULL STRATEGIC APPRAISAL: ZARA
during the night time
when the stores are
closed (Skrovan 2017).
3. On the other hand,
Zara operates in
different country so
there is a variety in
their products as well
due to diverse culture.
So, they started
producing cultural
specific products to
satisfy and grab
consumers all around
the world (Hipwell
2017).
Technological 1. Technology has given
the customer options to
view the combination
of the clothes along
with the colour.
2. The technology also
helps them to order
clothes online and help
them to select cloths
within the wide range
 The application of new
technology will
automatically help the
company to expand
and reach to the
consumers where there
is no stores.
 People are more into
online shopping now-
a-days along with

6FULL STRATEGIC APPRAISAL: ZARA
of the cloths collection.
3. The window shopping
help the user to view
the collection without
even physically
visiting the store
(Looveren 2018).
window shopping.
Ecological 1. Inditex, parent
company of Zara has
taken the initiative to
make their stores eco-
friendly by the year
2020.
2. They have invested
more than US$ 7.5
billion to produce
sustainable clothes
which can be
manufactured from
organic material only
to meet the target
(Scarano 2017).
 The investment are
made in the right
direction by the parent
company.
 The initiative of eco-
friendly stores is quite
impressive and
innovative in nature
which will attract the
consumers in large
number.
Legal 1. There should be strong
legal enforce in
copyright so that there
product cannot be
 Legal action should be
taken by the company
in terms of copyrights
as there are companies

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copied by the local
stores in terms of style,
design and so on.
2. If the local stores
started producing same
designed clothes at
cheap price the
company can sue them
if they possess a strong
legal enforcement.
3. Their clothes should be
sold in their brand
name with proper
trademark (Hanbury
2018).
who copy the style or
design which give a
chance fake products.
 The fake products
might turn off the
customer and the
company might lose
their loyal customer.
Fig 1: PESTEL Model
(Source: Created by Author)
Porter’s Five Forces Model
Force Main Impacts Strength
New Entry 1. There is high potential
of new entry in the
business but due to the
brand name and quality
product in reasonable
Medium

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price the brand is
holding large market
shares.
2. The change in the
economical value of
the euro the price
becomes a bit high
which give an
opportunity to the new
firms to enter the
market but the brands
possess huge loyal
customer base which
some extend stop the
new entry (Rao 2014).
Suppliers 1. As the globalization is
increasing gradually
the power of the
suppliers are
decreasing accordingly
due to lowering in the
wage rate.
2. Zara give their supplier
contract after licensing
it which left them with
little space for any
Low

9FULL STRATEGIC APPRAISAL: ZARA
other designs which
generally weakens
their hold in the
market.
3. The bargaining power
of the suppliers is
strong enough as there
is no option for them to
switch brands and they
create a friendly bond
with the brand itself
(KAPUSTINA,
AGABABAEV and
DREVALEV 2018).
Buyers 1. Zara spends
less in
advertising, the
companies
main
advertisement
is prevailing on
word of mouth.
2. The main
investment is
done in R&D
section where
High

10FULL STRATEGIC APPRAISAL: ZARA
consumer needs
are being
viewed and
manufactured
within two
weeks.
3. They provided
full freedom
and power to
the consumers
on their choices
as they
maintain short
sales chain
(Rodrigues and
Reis 2013).
Substitutes 1. H&M is the only
competitor as they also
produce same quality
product in affordable
price. So, there lies a
constant threat of
substitution
(KAPUSTINA,
AGABABAEV and
DREVALEV 2018).
Medium

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Rivalry 1. The biggest
competition of the
brand is H&M which
gives neck to neck
competition to the
company as they also
sale same quality
product in the same
price range like Zara.
2. To compete with
H&M, the company
produce limited stock
for a shorter duration
so that they can grab
80% of the share from
the sales, but H&M
gives competition
compare to the other
competitive brands
(Kim 2013).
High
Fig 2: Porter’s Five Force Model
(Source: Created by Author)
The opportunities are as follows:

12FULL STRATEGIC APPRAISAL: ZARA
o There is scope for Zara to expand their market with the help of internet. The
company can expand it over online shopping.
o The company can open more retail store in the market where there is chance of
growth such as India, China and Brazil.
o Like its competitors Zara can launch an app just like Nike, Adidas and H&M to
target the young customer.
o As there are low wage rate in Spain, there is an opportunity to produce better quality
products which will automatically attract the customers.
The threats are as follows:
o There lies a threat of copying the design of the brand as in many countries there is
no copyright policy of the company.
o There is a threat of economic instability as the economy varies from country to
country.
Internal Analysis
This will provide an internal scenario of the company. This will help us to analyse the
strength and weakness as well. This analysis will reflect Porter’s value chain model which will help
to identify resources and competencies of the company. It will also show the distinction between
thresholds and distinctive resources and competencies with the help of VRIO framework.
Porter’s Value Chain Model
Primary Activities Supportive Activities
Inbound Logistics – This section of the
company mainly deals with warehousing of the
products, handling the materials and also stores
Purchasing – Here the company purchase raw
materials from the vendor in the best possible
price so that they can produce quality products

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customer’s information regarding tastes and
preferences which are obtained from the social
media or any digital platform (Moretta
Tartaglione and Antonucci 2013).
in an affordable price. If the cost of production
is high then the price automatically increases.
It also take care of all the financial matter of
the company (Kuei and Lu 2013).
Operation – This section mainly deals with
transformation of raw materials into the
finished products with respect to the data
collection regarding the tastes and preferences
of the customers. Zara is good at this because
the product they manufacture is for shorter
period of time so there lies variation in their
products.
Human Resource Management – They are
important part for the success of the company
as they manage the whole company. They
operates from hiring to training and
development. They also work on both business
unit level to corporate level.
Outbound Logistics – In this section, Zara
distributes their manufactured goods to the
wholesalers as well as the retailers as per their
requirements. It also includes distribution to
the warehouses along with scheduling and
processing (Moretta Tartaglione and Antonucci
2013).
Technological Development – This team
develops the technology further so that
company can achieve more success. They do
field testing, component design as well as
process engineering (Kuei and Lu 2013).
Marketing and Sales – Zara market and sale
their products through different distribution
channels. The pricing and advertising is done
by this team in different media. Promotion is
also a part of their job for those who are
working in this category for the company.
Infrastructure – The main activity of this
section is to keep a check on the quality of the
product, finance and accounting, planning,
legal issues as well as general management.
They play a very vital role in the success of the
company (Kuei and Lu 2013).

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Service – In this section, Zara provide after
sales service, alignment of backend software,
installation services and training as well.
Fig 3: Porter’s
(Source: Created by Author)
Competency Framework
Threshold Resources Threshold Competency
1. Physical Facilities – This is the assets
of the company such as office,
warehouses and distribution centres.
2. Financial – Zara possess long term
financial commitment in its expansion
plan (Hansen 2013).
1. Design – They confirm design
according to customer needs and wants
2. Marketing and CSR – They do not
market their product in any traditional
medium which is somewhat
disadvantage for the company (Breen et
al. 2015).
3. Store Concept – The Company is
building eco-friendly stores which is
good for the ecosystem.
4. Supply Chain Management – They
have a very efficient supply chain
management system (Breen et al.
2015).
Distinctive Resources Distinctive Competency
1. Intangible Assets – The goodwill of the
company is its assets as they provide
1. Culture – Zara has a culture of shuffling
the cloths within two weeks (Hansen

15FULL STRATEGIC APPRAISAL: ZARA
good quality product at low price
(Hansen 2013).
2. Human Resources – Zara possess
creative designer to work with them.
2013).
2. Replication – There is a possibility of
replication due to weak legal issues
(Breen et al. 2015).
Fig 4: Competency Framework
(Source: Created by Author)
VRIO Framework
VRIO
Framework
Valuable Rare Imitate Organize Competitive
Implication
Brand Equity Yes Yes Yes Yes Sustained
Advantage
Effective
Distribution
Yes Yes Yes Yes Sustained
Advantage
Leadership
and
Innovation
Yes No No Yes Competitive
Parity
Plant
Facilities
Yes No No Yes Competitive
Parity
Marketing Yes No No Yes Competitive
Parity
Fig 5: VRIO Framework
(Source: Created by Author)

16FULL STRATEGIC APPRAISAL: ZARA
The strength are as follows:
o Inditex invested huge sum of money along with to Zara and with more number of
stores in 90+ countries so that they can reach a large number of consumers.
o Zara possess a strong supply channel which help them to grab the market share. The
stock of the stores are changed on every 20 days which is quite fast compared to the
other company.
o The company have retail store almost all over the world as well as online website
and application which enable them to reach the customer all over the world, even
where there is no retail stores.
The weakness are as follows:
o The company is not utilizing the digital platform properly unlike the competitive
brand which is a weakness in the part of the organization.
o Zara hardly advertise their product so it can be counted as a weakness because there
are consumer who likes to see advertisements and also the advertisement can grab
more attention of the consumers.
Company’s Corporate & Business Strategy
The company’s corporate and business strategy can be analyse with the help of Bowman’s
Strategy Clock. This will provide the company’s complete picture in two aspects namely product
manufactured and services provided (Matzler et al. 2013).
The Bowman’s strategy clock consists of eight parameters to measure the success of the
company and they are:
o Low Price and Low Added Value – Zara keeps their price to some extend affordable
even for the common people but not that low which will raise a doubt about the quality.

17FULL STRATEGIC APPRAISAL: ZARA
The tag their price comparatively low than the competitive brands but also maintain the
quality in the fabric (Tantalo and Priem 2016).
o Low Price – The Company can produce low priced clothes due to the low wage rate in
Spain. This ultimately helped them to price their product lower than the other
competitive brands.
o Hybrid – The Company use product differentiation so the product is highly valued in
one but on the other the cost of the product is low. So, the customer is convinced about
the added benefits they get by paying less and Zara follows this hybrid concept to some
extent (Tantalo and Priem 2016).
o Differentiation – Zara use this strategy where they provide high quality product at an
average price. They provide customer high value for their money not only in terms of
quality but also in terms of branding and so the customer retention is high.
o Focused Differentiation – In this segment, top brand focus on high quality product at a
high price. The Company use target segmentation, distribution as well as promotion
which ultimately leads to high profit margin (Tantalo and Priem 2016).
o Risky High Margin – In this strategy the company price their product in an average
range which is quite risky but Zara pulled this quite impressively as they usually price
their product in mediocre range, still get high customer attention (Tantalo and Priem
2016).
o Monopoly Pricing – Zara does not follow this method as their products are averaged
priced but still grab high customer attention. They provide high quality product in
comparatively low price. So, even the mediocre can purchase their product.
o Loss of Market Share – The company do not loss any sort of share as they consists of
high shares in the market and gain more and more share with every passing day. So,

18FULL STRATEGIC APPRAISAL: ZARA
there is no scope for loss of share for Zara as compared to the competitive brand
(Tantalo and Priem 2016).
Issues and Challenges Facing the Company
The issues and challenges faced by the company are as follows:
o There is a problem faced by Zara in terms of marketing. They hardly market their
products in the market in any of the traditional media, which is still considered as one of
the effect channel of communication. There is a communication barrier which work
against them in the long-run in terms of customer attention (Fernie and Sparks 2018).
o The political system are very volatile in nature so it can act positively or negatively.
Zara is very sensitive in its labour policy as they are from Europe and there is illiberal
policies in labour law which is a major issue for the organization.
o Zara only use three to four basic colours but there are countries where consumer prefers
bright colours, so the company lacks in retaining the customer over there. This is one of
the major issues faced by the company (Fernie and Sparks 2018).
o There are countries where Zara earn more than what they earn in European market, but
there lies a cultural differences between them. For example: Zara earns more from the
Indian market than that of the European market, but there are certain traditional clothes
for certain occasion in India where Zara lacks due to cultural difference.
o Weather plays an important role in selling of clothes as well. There is a difference in
climatic condition of Europe and other continent so due to this difference Zara only
manufactures normal clothes and not extreme weather clothes (Fernie and Sparks 2018).

19FULL STRATEGIC APPRAISAL: ZARA
o Zara sometimes face legal issues during setting up their business in other country where
there is already some brands prevails. So, it create a problem for the company to setup
their store in that market (Fernie and Sparks 2018).
o There lies an economical issues between the countries as there is an economical
difference around the world. So, the company face problem because in other countries
for the foreign company there is high rate of taxes that is the reason for the price hike in
other countries especially in third world countries (Fernie and Sparks 2018).
Ansoff Matrix
Present Products New Products
Present Markets Market Penetration Product Development
New Markets Market Extension Diversification
Fig 6: Ansoff Matrix
(Source: Created by Author)
Ansoff matrix gives a clear idea about the Zara’s market extension and product
development. The present product can penetrate the present market easily as the cost is quite low,
the new product can be developed in the present market as they earn more profit.
On the other hand, present product can be sold in the new market which will ultimately
expand their market and new product can diversify in the new market (Medarac 2014).
Evaluation of SOG and Implementation
The strategies can be evaluated with the help of the SFA Framework (Suitability, Feasibility
and Acceptability). The strategies can be evaluated and implemented with the help of this
framework which gives a clear idea about the different strategies taken by Zara (Paraschou 2016).

20FULL STRATEGIC APPRAISAL: ZARA
SFA Framework
Criteria Option 1 Option 2 Option 3 Option 4
Suitability 5 4 3 5
Feasibility 3 5 2 4
Acceptability 4 4 3 5
Total 12 13 8 14
Fig 7: SFA Framework
(Source: Created by Author)
The first option represent existing product in existing market where the product is suitable
and acceptable but not that feasible. The fourth option or new product in new market is effective
among all because there is a scope to penetrate the market by the company as Zara is well
renounced in terms of affordable price and quality product (de Jorge Moreno and Carrasco 2016).
Conclusion and Recommendation
It can be concluded, that Zara is one of the largest selling garment brand which provide
quality product at an affordable price. There are competitors to the brand but Zara holds the
maximum market share due to its price range. Zara is able to grab the customers as the products
which are designed and produced stays in the store for only 2 weeks and not a single day more than
that which gives a clear idea about the efficient supply chain management system of the company.
Zara dispatch their freshly designed product within two weeks and they maintain quality as well as
keep the price comparatively lower than the others.
Lastly, it can be recommended that Zara needs to expand their market as there are countries
where there is a potential to earn more but they need to keep in mind about the diversity in culture

21FULL STRATEGIC APPRAISAL: ZARA
as well as differences in economic status of the country. Zara possess the potential to grow and
expand their market even in third world countries. So, it can be said that Zara sales the best quality
products and services at a comparatively affordable price which will automatically help the
company to grow in the long-run and in different market.

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Appendix
Strengths Weaknesses
 Inditex invest huge sum of money to
Zara for being a parent company.
 Zara possess a strong and fast supply
chain.
 Zara consists of retail store almost all
over the world, which help them to grab
consumer at a large scale.
 The company is not utilizing the digital
platform properly unlike the
competitive brand which is a weakness
in the part of the organization.
 Zara hardly advertise their product so it
can be counted as a weakness because
there are consumer who likes to see
advertisements and also the
advertisement can grab more attention
of the consumers.
Opportunities Threats
 There is scope for Zara to expand their
market with the help of internet.
 The company can open more retail
store in the market where there is
chance of growth such as India, China
and Brazil.
 Like its competitors Zara can launch an
app just like Nike, Adidas and H&M to
target the young customer.
 As there are low wage rate in Spain,
there is an opportunity to produce better
quality products.
 There lies a threat of copying the design
of the brand as in many countries there
is no copyright policy of the company.
 There is a threat of economic instability
as the economy varies from country to
country.

27FULL STRATEGIC APPRAISAL: ZARA