Strategic Appraisal of Zara Company | Assignment
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Added on 2019-10-18
Strategic Appraisal of Zara Company | Assignment
Added on 2019-10-18
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Strategic Appraisal of Zara Part-2
Table of ContentsIntroduction................................................................................................................................1Company Background................................................................................................................1Part-1..........................................................................................................................................2External Analysis....................................................................................................................2PESTEL Analysis...................................................................................................................2Porter Five Forces Analysis....................................................................................................5Opportunities and Threats present in the Zara Environment..................................................7Part- 2.........................................................................................................................................7Internal Analysis.....................................................................................................................7Value chain model..................................................................................................................8Competency framework.........................................................................................................9VRIO Framework...................................................................................................................9Strengths and Weaknesses of Zara.......................................................................................10Part- 3.......................................................................................................................................11Corporate and Business Strategy..........................................................................................11Generic Strategy Model........................................................................................................11Strategy Clock Model...........................................................................................................11Part- 4.......................................................................................................................................12Issues....................................................................................................................................12Challenges............................................................................................................................12Part- 5.......................................................................................................................................13Strategic options for Growth................................................................................................13Ansoff Matrix.......................................................................................................................13Tows Matrix.........................................................................................................................13SFA Framework...................................................................................................................14Implementation.....................................................................................................................14Part- 6.......................................................................................................................................14Recommendations................................................................................................................14Conclusion............................................................................................................................15References................................................................................................................................16Appendices...............................................................................................................................181
IntroductionStrategic management plays an effective role in today's competitive environment. Generally,the strategic management comes from the word strategy which means the art and science ofthe marshalling and planning resources for their effective and efficient use. In this paper, wewill study the strategic appraisal of the Zara which is a famous Spanish brand of clothes andaccessories products. Strategic appraisal of Zara can give us a significant glimpse about itssuccess and failure factors and existing working environment.Company BackgroundZara is considered as a Spanish accessories and clothing brand. Furthermore, it alsoconsidered as a flagship brand of the Inditex group. It is known for its better quality ofproducts. Zara mainly engaged in the business of selling both women’s and men’s clothes.Apart of this Zara also sells cosmetics, shoes, and a large number of accessories. Now a day,it also starts its operations in children’s clothes as well. It mainly focuses on creating itsbrand image in its existing countries. This makes them famous which ultimately enhance thesales of their products. Zara mainly operates in the global fashion retail industry which is a growing industry of therecent time. Retail industry had revenue of US$ 1.323 trillion in 2013. It mainly serves morethan seventy-two million people. The geographical market of Zara is wide. It is a Spanishorganization and its style of clothes may not be so popular in any place in the world. So, itmainly has its stores in Europe, like Greece, Spain, France, and Italy. A large number oftourists buy Zara products because it is a famous European brand of the Spain. Zarasegmented its market on the basis of population. Furthermore, it segments its customers onthe basis of their sex. It mainly serves young male and female who belongs between the agesof 20 to 35. On the other hand, target market segment for Zara is the market of Asia. It is2
because Asian market has a huge demand of fashion apparels. About 60% of the Asianpopulation prefer trendy and fashionable products.Furthermore, mission and vision of the Zara encourage it to best in its target market. Itsmission and vision are to offer the customer an efficient and exclusive fashion choice byoffering a quicker turnover of new stock than other fashion apparel retailers. It mainlyestablishes for accomplishing its value of using shops actively, follow the principle of smallproduction, and using the benefits of geographical situations. It mainly follows the genericstrategy of product differentiation. This strategy of Zara makes it popular and famous amongAsian and European countries.Part-1External AnalysisGenerally, it can be said that the business environment of nowadays is surrounding with alarge number of difficulties. In that situation, it is necessary for every business house toconduct the study of its internal or external environment. Zara external environment isstudied with the help of a large number of strategic tools known as PESTEL analysis andPorter Five Forces Analysis. It is following:PESTEL AnalysisPESTEL Analysis stands for political, environmental, social, technological, economic, andlegal competitive forces and strategic issues. PESTEL environment of the Retail fashionindustry is a combination of different factors which are following:PESTELFactorsPoliticalLiberalization of Import quotasEconomicCurrency ExchangeSensitivity of Price3
Functioning in different countriesSocialHuge growth in AsiaLimited in North and EuropeLegalChanges in Laws of taxSize of Government budgets (Weaver,2014)Antitrust LegislationTechnologicalConcentration on existingtechnologiesImplementation of innovative andattractive technologies.EnvironmentSocial responsibilityPoliticalIt can be said that fundamental political factors of managing the overall country and politicalstability may affect the fashion retail industry in a greater manner. It is said that theliberalization of import quotas influence the overall industry in a positive manner. But this ishighly beneficial for the euro zone. Offering aid in poor areas and building a large number ofsocial relationships in different developed and developing countries has offered Zara andother fashion organizations a positive image in the international political environment.EconomicCortez (2014) pointed out that the disposable income, GDP, and income of people in the UKhighly influenced by the financial debt and global recession. Due to this situation, a largenumber of UK citizens are sensitive towards price and want to purchase the low pricedproducts and services. More particularly, the citizen who belongs from the middle familylikes to avoid expensive goods. On the other hand, international diversification can become a4
risk factor for the fashion retail industry. It may because of changes in socio-culturalbackgrounds of people. Furthermore, fashion organizations can earn a large number ofbenefits by operating in the US market. It is because of the value of the dollar, whichweakened against the euro after the global financial recession of 2008 (Sun, 2014). LegalIt can be said that foreign governments, local and state legislations play an important role insuccess and failure of an organization. Therefore, it can be said that legal factors may showkey threats and opportunities for both large and small level organizations. For the retailfashion industry-government subsidies and contacts can be the most important part of anexternal audit. Thus, changes in the tax rates, laws, regulations, lobbying activities, andpatent laws can influence the retail fashion organizations in a significant manner.EnvironmentGenerally, it is said that government plays an important role in managing and regulation ofthe environment. Therefore, it can be said that the fast fashion industry mainly shows a bigproblem because organizations change designs of clothing and standard lines on a quickbasis. All this generates a large amount of waste.TechnologicalIn the form of globalization, it can be said that every organization tries to capitalize theprevailing benefits of latest and innovative technology. With the help of all this, they able toconduct online shopping, manage an efficient inventory and supply chain system, quickdistribution of finished goods, and raw material distributions effectively. Therefore, it can besaid that fashion retailers need to focus more on the implementation of prevailing and latesttechnology. A large number of organizations currently utilizing advanced technology in5
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