Global Strategic Management: Analysis of Zara's Business Strategy

This report evaluates the business strategy of Zara, a global retailer, through external and internal analysis. It examines the impact of political, economic, social, technological, legal, and environmental factors on Zara's operations. The report also analyzes Zara's competitive position using Porter's Five Forces and conducts a VIRO analysis to assess its internal resources. Additionally, it includes a value chain analysis of Zara's primary activities. The report provides valuable insights into Zara's business strategy and its ability to compete in the global market.

Global
Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. External Analysis.....................................................................................................................3
2. Internal analysis.......................................................................................................................7
3. Ethical Assessment of strategy,.............................................................................................10
4. Evaluation of strategy............................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
The global strategic management have its attention on all the factors and elements related
to the environment of all the nations and their interaction with each other. The global strategic
management inspect all the approach and check the reaction of its rivals in various market
condition. Global strategy include global, international and strategy related to world. Zara SA is
a stylized as Zara it's a Spanish retailer in the Galicia. Zara used to offer a fast fashion in the
products like clothing, shoes, swimwear and many more. Zara is the biggest corporation of
Inditex group. Zara is the largest clothes retailer in the globe founded in 1975 by Amancio &
Rosalia. The company produce man, women and kid wear. Zara used to supply their product
according to the trend and fashion of its customers. This report will evaluate the business
strategy with intrinsic analysis of VIRO and value added chain and external analysis with porter's
five force and Pestle analysis which inspect political, economical, social, technological, legal
and environmental factors it will further evaluate the ethical assessment of the Zara and check
weather the company is performing ethical aspects than evaluation of the approach and strategy
that is used in the business strategy.
MAIN BODY
1. External Analysis
It helps the company like Zara to identify and adapt the changes that happens in the external
environment and could impact its operations and keep winning in an industry.
PESTLE Framework
 Political Factors – Zara is brand which has its operations worldwide in many countries.
Company has born out at the time of European Union is the one of the major market for
clothing and textiles. UK has framework is effectively established and has extensive trade
agreement that is helpful for Zara to import and export raw materials & finished goods.
Political Factors impact the business every company like Zara, as it was following all the
rules and regulations related to EU, but now with the rise of Brexit its all the business
activities will be influenced (Perera, 2017). Having the operations globally it needs to
take care of all the political factors tax policy, trade restrictions, political stability of all
the countries in which it is trading. As the political instability in any country directly
affects the supply chain of the company and the adjoining borders as well.

 Economic Factors – Zara is the one of the largest and popular brand in the UK and it
also enjoys the benefit of minimum cost labour. Some countries like UK are facing the
slow growth in the economy in recent times due to several reasons like global pandemic,
Brexit etc. The ability of Zara to cater the needs of shoppers helps the company to build a
loyal customer base. Zara offers its luxurious products in the affordable range in
comparison to its rivals, that provides it a advantage of greater market share. One of the
greatest impact is the exit of EU from the Brexit, has lead to the decline in the value of
pound which has ultimately which has resulted into increase in inflation rates because of
which citizens are left with the less disposable incomes to spend. Therefore, currently the
sales of Zara and clothing industry has reduced.
 Social Factors – Social factors are volatile and have the huge influence on the supply &
demand of the products and on willingness and accessibility of employees to work. Zara
offers the wide variety of products. These factors comprise cultural norms, population
and growth rates, age distribution, health&safety etc. Company provides the products
related to different segments in order to satisfy the all (Christodoulou and Cullinane,
2019). Social culture impacts the buying decision of the customers particularly in the
clothing industry. Before entering into the new market Zara's research & development
team does the complete analysis and research to understand the needs of the markets and
what they can offer in order to attract more customers. Zara have philosophy to make its
products rhyme with the community's culture.
 Technical Factors – Zara has the strong financial resources which helps the company to
grab the opportunities. Company with the help of its resources invests the large amount in
order to collect the data of the users and identify different innovative methods to attract
the customers. Zara interact its customers through both the platforms online and offline.
Company has the great website or online platform and huge customer base their also, it
provides the several innovative features with the help of technology to make the platform
simpler fort its customers. Technology has helped the company and the customers as

through this they can easily contact the company in case of any issue, now their issues are
resolved in less time because of the facilities provided by the company.
 Legal Factors – Zara from the initial stage of its success, brand has focused on the
concept of sustainability and ethics for its business. It has emphasized to establish such
principles over the entire line of business and supply chain. Big and famous brands like
Zara has to abide by all the regulations, rules and laws related to country in which they
are operating (Policy, 2018). They consider all the employment laws so that no legal
issues related to payment of wages salaries etc. arise. Whenever the Zara comes up or
introduce with the latest fashion designs for the seasons it takes care that all are patent
and copyrighted because it has faced some issues in the past for stealing the designs of
some other companies.
 Environmental Factors -It can be analysed that in recent times, customers are growing
more conscious towards environment and big companies like Zara has to adopt practices
which contribute towards the environment and sustainable ways. Company is trying its
best to make all its activities eco-efficient, because in the clothing industry changes in the
customers preferences are more frequent which leads to more waste, taking that into
consideration Zara, every time recycle its old leftover stock and convert them into new
designs. It has shown its commitment towards the environment and animals through its
various activities.
Porter's Five forces -
This framework will help in examining the competitive environment to increase its profitability
in the industry. The following are the five forces:
 Power of Buyers – (Low)
In the clothing industry, there are more no. of consumers in comparison to the no. of brands
which means that the buyers have only few brands available in order to purchase the products.
This is the one of the prime reasons that buyers do not have much control over the prices,
because of this reason customers have low negotiating power (Shtal and et.al., 2018). Brand like
Zara takes care of the product differentiation due to which there is no substitute for its design and

leads to less shift of customers. Zara also offers the quality in its products, that attracts the
customers to purchase frequently and which makes them less price sensitive.
 Power of Suppliers – (Moderate Low)
In the fashion clothing industry in which Zara does its business, there are many suppliers as
compare to the customers, which means that manufactures have less control over the price and
this reduces the bargaining power of the manufacturer. Zara acquires the products or the raw
materials from the fairly standardized, that have low switching cost and minimum differentiated
in the products, this also makes the force moderately lower.
 Threat of Newcomer – (Low)
For the newcomer to enter this industry, is the cost is high because it to compete the brands like
Zara, new entrant needs a good amount of investment. The brands in this industry have to
advertise their products and also facilitate their customers with the good services as the
competition is high among the rivals all the factors need the good financial resources which
makes the threat of newcomer low (ÖNEREN and et.al., 2017). Also the new entrants has to do
detailed research and development, develop the efficient supply chain and distribution network,
licensing from the government makes the force weaker.
 Existing rivalry among the competitors (Medium high)-The no. of brands from which
Zara has to compete are very few, and Zara is always alert and keep an eye over its rivals
to know about their moves and give the good competition. The fact that Zara do not
ignore is that few brands in the industry, but they give the good competition to the
company that is why company always focus on providing the good competition through
its diverse marketing strategies and product designs differentiations (Adelakun, 2020). In
the industry in which Zara is operating has the high exit barriers because of huge capital
investments, restrictions and government regulations.
 Threat of substitute – (Low)
There are fewer substitutes available for the Zara products and products are also manufactured
keeping the low profit earning margins. Zara clothing act as the symbol of quality and socio-

economic class and the substitutes that are available that generally the companies in China makes
are rather of low quality and not the exact same design (Moreno, Ramón and Perles, 2016). So
the threat of the substitute is low in this case.
2. Internal analysis
In the internal analysis is an exploration of the Zara ability to perform the task successful
and its cost position and capability of competitive in the market. By the internal analysis Zara
will get to know its strength, weakness, opportunities and threats. The internal analysis can be
conduct with the VIRO analysis that as below:
Valuable Rare Imitable organization
Product Yes No Yes Yes
Human resource Yes Yes No Yes
Finance Yes Yes Yes Yes
Distribution
network
Yes Yes Yes Yes
The VIRO analysis will check each and every internal resources to get whether the
internal factors are providing some advantage to Zara or not. This analysis also suggested the
needs to improve to get better benefits in competitive market to Zara. The analysis over all
inspect the competitive advantage and disadvantages (Singh and et. al., 2019).
Valuable: Viro analysis of Zara explained that the product are as valuable resource because the
products are different from others in the market. The product value make it perceive for its
customer. The customers are also used to give more value to Zara product because this is
different from its rivals products. Human resource are defined as valuable for Zara because the
people in the workforce are mostly highly trained under different situation, so they make high
amount of productivity in Zara, the employees are loyal and have good retention for its potential
customers all these activities make more valuable product of Zara (Vogelmeier and et. al., 2017).
Finance are set to be valuable resources because the finance help Zara to invest in outside
opportunities and help Zara to take required action for different threats. The distribution network

of Zara is highly valuable because with the help of this Zara reach its potential and fresh
customers which will ultimately increase the revenue of company.
Rare: The local product of Zara are found to be not rare because the products are easily available
by the rival hence the rivals can also use its resource in a way that Zara is using. The local
products are a big point to introduce competition for Zara (Yudiono, Wilopo and Iqbal, 2019).
The human resource are rarer of Zara because they are well-trained and having skill and that
cannot be same in rivals firms. Zara provide better environment and salary to the employees so
that they will stay for a long time in organization. Finance is not found rare in Zara because
companies having finance like Zara are very less. The distribution network is rare in Zara yet any
rivals of Zara needed a lot of time and money to build network like Zara.
Imitable: The local products are not expensive to imitate which as discovered by Zara VIRO
analysis because the product pricing can be acquired by competitors with investing in the
research and developing program, the process not needed long time experience. The human
resource are not that much costly to imitate because the competitors can also trained their
customers to get better skill, competitors also have option to recruit people of Zara by providing
better salary, work environment to them (Indartono and Wibowo, 2017). The finance is basically
costly to imitate because Zara have to acquire the resources through prolong earning over past
years and any fresh competitors need to collect lots of profit to accumulate finance like Zara.
Distribution network is costly to imitate by Zara because any other brand need a lot of money to
build distribution like Zara.
Organization: The product are generally organized in the Zara because company used to place
their product nicely in the required stores and make available to the customers as well. Human
resource are also better organized as they know what they have to perform and it gives a
competitive advantage for the company. Finance is basically organized in Zara because firms
know where they have to invest for better grow and profit. The distribution network is also
organise in Zara. The company used different ways to reach its potential customers as well as
fresh customers and make its product available at every point so this will make a competitive
benefit for ZARA.

Value Chain Analysis of Zara -
This analysis is helpful for evaluating the Zara's internal activities and helps in identifying the
most valuable sources which can help company in improving the competitive advantage. The
value chain is divided into two activities; Primary and Secondary.
Primary Activities – This activities adds value directly in the process of production, it consists
of various sub activities discussed below: Inbound Logistics – Zara builds the strong relationship with the manufacturers to revieve
the good products and support in distribution. The functions of inbound logistics are to
retrieve raw products, storing and internally distributing the materials for the production
(Zamora, 2016). It focuses on all the aspects of transformation of the product from raw
material to finished products. Operations – Zara follows the appropriate steps of the operational activities from
acquiring the raw materials to its launch in the market some of these activities are
machining, gathering and testing the quality, repairs of the equipments also falls in the
category of operations. These operational activities help Zara to maximize its efficiency
and increase its overall productivity. Outbound Logistics – These activities consist of to deliver the products passing through
the diverse intermediaries to handling it to the customers. Some activities in the outbound
logistics include warehousing, handling, scheduling, processing of the orders,
transportation and delivery of the products to its destination. Company examines and
optimize these activities to gain the competitive advantage and attain its growth
objective. Marketing & Sales – Zara manufactures only the high quality products and offer them at
the affordable prices and its differentiation in the products gives the added advantage to
the company (Fernandez and Gereffi, 2019). The marketing professionals and sales
agents play an important role in the success of its products. Zara always comes up with
such great marketing strategy and customer support which gives the company a
competitive edge over its rivals.
 Services – Zara's services pre and post sales plays a crucial role in the development of
customer loyalty. It takes the good advantage of the technological advancement and

provide such services which helps in solving the issues immediately and makes its brand
image even stronger and instead customers do word of mouth which helps in promoting
the brand and develops value for the company.
Secondary Activities – These activities play an auxiliary role in supporting the primary
activities and consist of various activities described below: Firm Infrastructure – Zara has the effective infrastructure management which allows the
company to optimize its value chain. These infrastructure activities include quality
management, financing, strategic management and legal matters handling etc. uses these
activities efficiently to improve its position in the market. Human Resources Management -Zara examines all the aspects of HR and works on
making its HR motivated and increase their efficiency to benefit itself. It has the best HR
professionals which helps the company to hire the best talent who adds value in its
company and makes the workforce active, skilled, trained and efficient but the only
pitfall is that Zara is very much dependent on its workforce for its success. Technology Development – In this modern era, technological advancement is very
essential for competing in such great competition (Aftab and et.al., 2018). The
technology has helps Zara in its almost all the activities from production to the
distribution and in the understanding the need ODF the market and offering them what
they need. For instance, it uses technology in automation, customer support, product
design, analytics etc.
 Procurement – This step in the value chain refers to the process involved in buying the
inputs that may vary from equipments, raw materials machinery and several other items
that are essential for completely developing the finished product. Company should
consciously consider its procurement related activities to enhance its all activities in the
value chain. Implementation all the activities in the value chain are very essential for the
success of the product and the company.
3. Ethical Assessment of strategy,
Businesses have an aim to make some ethical strategy so that they can create an ethical
organization by following rules and regulations. As ethics is a system that helps an individual to
decide what is good and bad. Zara which is having parent company Inditex group, has occurred a
good reputation in European fashion with 3000 stores in 96 countries (Sitaro, 2020). Zara having

fast fashion traits such as regular new reaching and on-trend style and having an impact on
planet, people and animals. In case of planet, Zara gets a rating “Not good enough” and the
parent company started repairing the program which is Closing the loop. Zara has studies the
ethical strategies with internal and external aspects.
Internal Factors-
Working Condition- Zara focusing towards the development and growth of their firm and
provide training to their staff so that they can perform effectively. The working status of Zara is
well managed, and they focus on the quality of the products, on-trend style on daily basis. The
company follow the plan to move towards sustainability so that they can protect the rights of
workers.
Job Design- Zara design a document which include the methodology, content regarding the
different profile, qualification, target, duties. It's a core function of human resource to manage
the profile as per the need. The moral of the firm is to hire a right person with job statement.
Intellectual property- Zara focusing towards the creativity so, that they can attract customers.
They invest more in mobile technology and information technology to earn the maximum market
share since the technologies are improving and phones app (online website) are modifying while
adopting those techniques Zara will improve their workflow and work ethically.
Employee Welfare- Zara providing Facilities to their employees by insurance benefits, vacation
policy, provide benefits to their employees at the time of retirement (Liu and Zhang, 2019). They
are following the philosophy that everything should be improved, intellectual and comfort for the
employees.
External Factors-
Market and Marketers-This factor defines the Zara promoting their goods by advertising and
providing on-trend lifestyle of goods so that more customers will aware about their brand, and
they will increase their market share. By adopting the strategy of digital marketing Zara will run
their business ethically in different marketplace.
Products- Zara providing good quality of products and following the strategy to supply the good
products and build their brand name towards customers (Ozuem and Azemi, 2017). They will
arrange some fashion programmes in which they promote their in trends cloths. This plan well
ethically great for Zara to perform so that they will get good reputation in the marketplace.

Human rights- As the human having a right to get good facilities by the brand in which they are
investing. Zara chooses this scheme and focuses towards the customers and their employees and
maintain their image in the market. A satisfied employee will effectively perform and a happy
customer will give positive feedback to the company.
4. Evaluation of strategy
The strategy or approach are the particular plan to do actions towards the achievement of
long-term or total objective of the task. Zara stand 29 in the list of the best international brands.
With Short lead period strategy of Zara lead to assure that stores of Zara are kept the clothes
which are required by their customer's. With the help of this strategy Zara will improve its sell as
well as the revenue of the company. Another approach of Zara is to lower the Quantities as by
minimizing the quantity of product of a respective style, Zara reduce its quantity of supply to
lesser its exposure of any particular product (Kalbfell and et. al., 2020). With the fewer quantities
of products Zara also get advantage if the product not able to attract customer and get less sales,
so this will not create a high loss to the company. Zara uses the strategy of making the
experience of customer more valuable because the company understand the experience matters
more than the product so the company is performing various efforts to make customer more
satisfied when they visit to the store. The company is using digital marketing to reach its
customer with the help of this they reach more and more customers fast and there stock get clear
easily (Aqeel, Hanif and Malik, 2017). Zara is using eco-friendly techniques to produce and also
using recycled things in their product it will attract more customer's as well. The company is
continuously having mind set to exchange their goods to build value in the mind of customer's so
that they will buy again from Zara. The Zara have brand as communication approach the
company is not giving a single advertisement or any promotional activities and try to invest that
amount in opening a fresh store. Zara is having lesser and lesser advertisement expense as
compared to its rivals(Oseledchyk and et. al., 2020). With the mainly offline shopping got
stopped in the COVID so Zara got affected globally and its sales got drop with 45% in first
quarter than company has more focused on online selling of its product with this digital
techniques Zara got increase its sell with better percentage.

CONCLUSION
This file concluded that the global strategy management used to check all the elements who are
interrelated with global environment. Strategy include setting a particular goal and user
priorities, make the action in achievement of the following goal and help to mobilize the
resources to perform the action. Global management uses to check each nations environment and
their respective relationship with others. With the external analysis of porter's five force Zara
came to know its impact which were caused by outside the business and Zara have no control on
it but with the certain steps Zara can get market knowledge as well as get to know its future
opportunities that can be avail by Zara and with intrinsic analysis of VIRO Zara got that the
things like finance, product, human resources and other things value, rareness, imitation and
organized way the report further explained that Zara is being ethical with its work because its
working style includes eco- friendly techniques in production. Zara is using effective approach
by which Zara stand out in the market. Zara is using strategy which are unique in style and Zara
is using shorter leading time in which Zara only carry the seasonal cloths according to the
preference of the customer's. Company uses scarcity of is product it attracts fresher buyer.

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