Strategic Audit of Zara

Running Head: Strategic Management 1
Strategic Audit of Zara

Strategic Management 2
Contents
Part A...............................................................................................................................................3
Introduction......................................................................................................................................3
External analysis..............................................................................................................................3
Industry and competitive environment........................................................................................3
Porter’s five forces...................................................................................................................3
Threats......................................................................................................................................4
Opportunities............................................................................................................................5
Internal analysis...............................................................................................................................5
Strengths.......................................................................................................................................5
Weakness.....................................................................................................................................5
Part B...............................................................................................................................................6
Summary of SWOT.........................................................................................................................6
Strategy evaluation..........................................................................................................................6
Strategic issues.................................................................................................................................8
Recommendations............................................................................................................................9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

Strategic Management 3
Part A
Introduction
Effective strategies are important for the growth and success of a company while it is
going to operate in the new market. This report focuses on the strategic evaluation of the famous
fashion retail company Zara. The report analyzes the environmental impact on the business
operations of Zara. For this manner, report focuses on the internal and external analysis of the
company in its operating market. Zara is considered as the big global fashion company in all
over the world. The company was founded in 1975 by Amancio Ortega Gaona. The company is
famous for manufacturing fashionable fabric products that suit the trends of the customers. Main
objective of the company is to provide best quality of clothing products with proper supply chain
management. Zara produces and launches around 10,000 new designs yearly. This report focuses
on the strategies adopted by the company in the operating market. Report also elaborates the
strategic issues faced by the company and provides effective recommendations to deal with those
issues (Pearson, 2011).
External analysis
Industry and competitive environment
It is well known that Zara is operating in almost every country of the world and now it is
trying to expand the business in those areas where it does not have its presence. For this manner,
it is important to analyze impact of the market environment in which the company is operating.
By the internal and external analysis, Zara would be able to identify the threats and opportunities
in the market.
Porter’s five forces
Threats of new entry-
 Difficult to gather workforce,
 Uniqueness and profitability in the industry,
 Easy to enter in the industry,
 Need sufficient time to prepare
Competitive Rivalry-

Strategic Management 4
 Many fashion companies,
 Mango, the Gap and H&M, and
 Large sums of advertisements to gain market share
Bargaining power of buyers-
 Power of the customers is moderate,
 Customers are free to buy the clothing products,
 Loyal customers wait for every fashion frenzy, and
 Customers are active due to limited stock availability
Braining power of suppliers-
 Low supplier power,
 Suppliers are dependent on the fashion companies, and
 Suppliers have licensed contracts
Threats of substitute-
 Major threat of substitute,
 H&M competing in terms of quality and affordability, and
 Effective supply chain management creating big threat
Threats
For the company Zara, there are three main competitors of the company which are the
cause of biggest threat. Those companies are Mango, H&M and the Gap. Almost every retailer in
the industry can be the big threat for company because of the wide range of merchandise
catagories. The Gap is considered as the big competitor of Zara because it has same product as at
the affordable price and trendy styles. Along with this, company has its presence in all over the
world. Further, H&M (Hennes and Mauritz) is one of the big competitors of Zara in retail
industry (Moore & Pareek, 2010). The company is very attentive while entering in the global
markets and enters in one country at a time. On the other hand, Zara enters many countries at a
time. Another threat for Zara is that H&M is providing trendy clothes based on the taste and
preferences of the consumers in the international market. Next, Mango is the famous for its
supply chain management and excellent business model. Being a Spanish company, company
has many stores in various countries for achieving high level of success. Similar as Zara, Mango
has all the stores at the prime positions (Easey, 2009).