Internal and External Analysis of Inditex Group

The report is based on the internal and external analysis of the Inditex Group. The external analysis is based on the factors the industry of the organization, the environment where the organization operates and the threats and opportunities. The internal analysis consists of the value chain analysis of the company, the strengths and the weaknesses and the capabilities of the organization as well. The Group operates in the fashion retail industry and further needs to evaluate the industry where it has its operations so that they can gain their revenues.

Running head: INTERNAL AND EXTERNAL ANALYSIS
INTERNAL AND EXTERNAL ANALYSIS
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1INTERNAL AND EXTERNAL ANALYSIS
Executive Summary
The report is based on the internal and external analysis of the Inditex Group. The external
analysis is based on the factors the industry of the organization, the environment where the
organization operates and the threats and opportunities. The internal analysis consists of the
value chain analysis of the company, the strengths and the weaknesses and the capabilities of
the organization as well. The Group operates in the fashion retail industry and further needs
to evaluate the industry where it has its operations so that they can gain their revenues.

2INTERNAL AND EXTERNAL ANALYSIS
Table of Contents
Part A.............................................................................................................................3
Introduction................................................................................................................3
External environment analysis.......................................................................................3
Analysis of general environment...............................................................................3
Analysis of the industry environment........................................................................4
Analysis of the competitive environment..................................................................4
Analysis of the opportunities and threats...................................................................5
Internal environment analysis........................................................................................5
Analysis of the intangible and tangible resources of the group.................................5
Identification of the capabilities of Inditex Group.....................................................5
Value chain analysis...................................................................................................6
Identification of Strengths and the Weaknesses.........................................................6
References......................................................................................................................8

3INTERNAL AND EXTERNAL ANALYSIS
Part A
Introduction
Inditex is a multinational clothing organization of Spanish origin which has its
headquarters in Arteixo, Galicia. Inditex is considered to be the biggest fashion based group
in the entire world and it operates more than 7200 stores in around 93 markets. The flagship
brand of the group is Zara and is owns other chains like, Zara Home, Bershka, Massimo
Dutti, Pull and Bear, Oysho, Stradivarius, Uterque. Majority of the stores of Inditex are
corporate-owned in nature and franchises are operated in the areas or countries where the
corporate properties are not owned ("Home uk - inditex.com", 2018). The unique business
model that is operated by the organization is related to the commitment of the group towards
the production of materials related to the current year rather than focussing on future fashion.
The group started its operations in the year 1975 mainly in the clothing industry with its first
store named Zara in Spain. The organization then opened more stores in the other areas of
Spain as well. The group started its international expansion in the year 1989 and they entered
the market in Portugal. The organization then expanded in the United States and France in the
following years ("Home uk - inditex.com", 2018).
The main focus of this report is to analyse the internal and the external environment
of the Inditex group and the ways the environment of the organization affects its operations
and profitability.
External environment analysis
Analysis of general environment
The external environment of Inditex Group is mainly related to the several economic,
demographical, social, ecological and management related factors. The external forces that
affect the operations of the Inditex Group are mainly related to the economic forces,

4INTERNAL AND EXTERNAL ANALYSIS
technological forces, competitive forces. The changes that occur in the external environment
can affects the profitability of the Inditex Group. The cultural and the social changes have
made major impact on the services, products, customers and markets. The changes in the
political environment have affected the taxes that are paid by the group, the formulation of
the strategies and the implementation of these strategies (Dobscha, Mentzer & Littlefield,
2015).
Analysis of the industry environment
Suppliers – The power of the suppliers of the Inditex Group is low as they have
offered licenses to a huge number of suppliers.
Buyers – The various brands of the Inditex Group have a customer base which ranges
from the middle class to the upper class people. The buyer power related to the Inditex Group
is high.
Threats of the new entrants – The Inditex Group experiences high pressure related
to the entry of new organizations in the fashion retail industry.
Substitutes – The pressure related substitutes of the services and products offered by
Inditex Group is moderate as good alternatives are not always available in the market (E.
Dobbs, 2014).
Analysis of the competitive environment
The Inditex Group and the various that operate under this group need to face stiff
competition from various other fashion retailers like, New Look, John Lewis, New Look,
M&S, Peacocks. The online shopping platforms have provided high levels of competition to
the various brands that operate under the Inditex Group.

5INTERNAL AND EXTERNAL ANALYSIS
Analysis of the opportunities and threats
Opportunities – The search related to new market area of Inditex Group can provide
the organization with great opportunities of growth. The organization can innovate the
services and products that it offers and improve the quality of these products. The Group can
also aim at adopting the new technologies that are available in the market. The customer
services need to be more improved and dedicated.
Threats – The entry of new competitors in the retail industry has been a major threat
towards the profitability of the Group. The increased price of the raw materials can also be a
major drawback for the revenues of Inditex Group (Jackson, Schuler & Jiang, 2014).
Internal environment analysis
Analysis of the intangible and tangible resources of the group
The major resource that is owned by the Inditex Group are the loyal customers of its
various brands. The organization has operated one of the most successful brands of fashion
retail which is Zara. The products and the services have always been designed according to
the preferences and choice of the consumers. The huge number of stores of the Inditex Group
are the major tangible resources of the Group.
Identification of the capabilities of Inditex Group
The core strategy related to the operations of Inditex Group are the quick turnover
their inventory, lead time, low volume of remaining inventory of each of the styles. The
organization has been able to prove its core competencies and strategies by designing the
products and services according to the latest trends and the preference of the customers
(Sheehan & Bruni-Bossio, 2015).

6INTERNAL AND EXTERNAL ANALYSIS
Value chain analysis
Raw Materials – The fabric is sourced in various colours and the cuts and designs of
the products take place within the factory premises.
Suppliers – The suppliers of the organization are located close to the factories where
the products of Inditex Group are manufactured and it helps in the easy sourcing on a need
basis.
Manufacturing – More than 50% of the entire product range are manufactured in
Spain and 25% comes from Europe as well.
Warehousing – The entire production of the organization is received from the
warehouses in logistics centres in Spain.
Distribution – The products that are manufactured are distributed in small batches.
The main categorization of the products is done in Spain.
Stores – The stores of the various brands under Inditex are all owned by the company.
Consumers – The customer feedback is communicated by the managers related to the
likes and the dislikes of the consumers (Koc & Bozdag, 2017).
Identification of Strengths and the Weaknesses
Strengths – The market image of the various brands that operate under Inditex Group
like, Zara is quite strong due to the style, quality and the availability of the products. The
financial strength of the Group has helped them in investing in the various activities which
can provide results. The diverse network of the organization and the strategic store location is
another major strength of the Inditex Group.

7INTERNAL AND EXTERNAL ANALYSIS
Weaknesses – The high price of the products is major weakness of the organization
as they do not compromise on their quality. The lack of proper marketing strategy is also a
major weakness of the Inditex Group which can affect the operations in the market (Monteiro
& Birkinshaw, 2017).

8INTERNAL AND EXTERNAL ANALYSIS
References
Dobscha, S., Mentzer, J. T., & Littlefield, J. E. (2015). Do external factors play an antecedent
role to market orientation?. In Proceedings of the 1994 Academy of Marketing
Science (AMS) Annual Conference (pp. 333-337). Springer, Cham.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), 32-45.
Home uk - inditex.com. (2018). Inditex.com. Retrieved 2 April 2018, from
https://www.inditex.com/
Jackson, S. E., Schuler, R. S., & Jiang, K. (2014). An aspirational framework for strategic
human resource management. The Academy of Management Annals, 8(1), 1-56.
Koc, T., & Bozdag, E. (2017). Measuring the degree of novelty of innovation based on
Porter's value chain approach. European Journal of Operational Research, 257(2),
559-567.
Monteiro, F., & Birkinshaw, J. (2017). The external knowledge sourcing process in
multinational corporations. Strategic Management Journal, 38(2), 342-362.
Sheehan, N. T., & Bruni-Bossio, V. (2015). Strategic value curve analysis: Diagnosing and
improving customer value propositions. Business Horizons, 58(3), 317-324.

9INTERNAL AND EXTERNAL ANALYSIS