Strategic Management Analysis of Zara Clothing: Recommendations

This report conducts a comprehensive strategic management analysis of Zara Clothing, a prominent player in the fashion industry. It begins with an executive summary and table of contents, followed by a critical analysis of Zara's business model, highlighting its customer-centric approach, efficient operating systems, and focus on design and manufacturing. The report examines Zara's organizational structure, emphasizing work specialization and a centralized decision-making process. It then applies Porter's Generic Strategies, focusing on cost leadership and differentiation, and explores Zara's strategic plan, emphasizing customer focus and revenue enhancement. The report also delves into Zara's organizational strategy, emphasizing employee motivation and development. It examines Zara's generic strategy, highlighting its cost leadership and diversification strategies. The analysis includes recommendations for further improvements in Zara's strategic management, organizational structure, and overall business operations. The report concludes with a summary of key findings and references.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student:
Name of the University:
Author’s Note

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Executive Summary
The main purpose of the assessment is to analyse the business of Zara Clothing which is engaged
in fashion industry. The assessment focuses on the strategic management practices which is
followed in the business and also would be showing how improvements can be made in the
business. The assessment would also be considering the organizational structure of the business
and how improvements can be brought about in the same. The assessment would also be
including recommendation as to how the management of the company can bring about more
improvements in the business structure.
Table of Contents

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Introduction......................................................................................................................................3
Critical Analysis..............................................................................................................................3
Development of Organizational Strategy........................................................................................6
Recommendation.............................................................................................................................9
Conclusion.....................................................................................................................................10
Reference.......................................................................................................................................11
Introduction

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The main purpose of the assessment is to analyse the strategic management policies
which are established in a business organization. The company which is considered for analysis
in this respect is Zara Clothing brand which is one of the most popular clothing brands for
women. The assessment would be focusing on the organizational culture of the company and
also on strategic management. The strategic management policies help the business to pursue its
goals and objectives and also enhance the sales of the business (Martin Roll., 2018). The
assessment would also be including recommendations which can help the management to make
further changes in the operational structure of the business.
Zara Fashion clothing company is a Spanish Fashion business which has gained
significant popularity around the world for its quality of women clothes which is offered by the
business. The company was founded in 1975 by Amancio Ortega and Rosalía Mera and the
business at that point was mainly offering branded apparels. Nowadays, the company is regarded
to be the world-famous fashion brand which is quite costly considering the brand value for the
products which is offered by the business. it was from the town of Spain that Zara started off and
at present time, the company has 6500 stores in 88 locations around the world. The company
expanded to United states, Portugal and whole of Europe and also several other parts of the
world. The company is known for the products which are offered by the business and it has
become one of the leading brands for clothing.
Critical Analysis
The business of Zara is considered for the purpose of analysis in terms of strategic
management policies which are followed by the business for making continuous improvements
in the operational structure of the business. The business model which is followed by Zara is

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quite simple as the same aims to link the demands of the customer with manufacturing process
and then the manufactured goods to distribution process. The business model of Zara shows that
the company is dedicated to the needs of the customers and all the products which is introduced
by the business are mainly customer oriented. The company has an effective operating system
both in terms of POS and DOS which supports the operations of the business in an efficient
manner. In addition to this, the business model of the company does not focus on effective
advertisement or promotion. The company does not invest on advertisement but invest heavily
on the design of the stores and generally the stores are located in the best locations in the city.
The company has a strong IT system which supports the operational process of the business all
from ordering of the products to the fulfilment of the order. The company is also known for its
after sales services and also its concentrated focus on needs of the customers. In addition to this,
the management of the company especially focuses on manufacturing and designing process for
the product. The business also provides quality products to the customers as per their demands
and on the basis of the same the prices for the products are set.
The company effectively has developed an appropriate organizational structure in the
business following the basis elements of organizational structure in the business. The business
always focuses on quality and therefore it can be said that work specialization is one of the main
objectives of the business (Hill, Jones & Schilling, 2014). This is evident from the quality of
clothing and accessories which are offered by the business to general public. The company has
also developed a proper top to bottom chain of command for any situation which arises in the
business and also separated different department so that efficiency can be maintained in the
operational process of the business (Rosenbaum-Elliott, Percy & Pervan, 2015). The business
has a centralized approach as all the major decisions are taken by the top management and any

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venture or product which needs to be offered to the customers are also taken by the top
management of the company. The company has been able to maintain its status as the top fashion
brand in the industry because of its ability to make continuous changes in the products which is
offered thereby altering the fashion sense of the industry. In addition to this, the success of Zara
brand is also closely related to the approach of the business to give priority to the needs of the
customers and develop products according to the same criteria.
Porter’s Generic Strategies
The porter generic strategies are formulated for effective strategic management process
of the business and so that the same helps the business for effective strategic management of the
business. The porter generic strategies are formulated by the management of the company for
effective management of the operations of the business and also for gaining competitive
advantage in the operations of the business (Tanwar, 2013). As per the porter’s generic model,
there are four kinds of strategies which can be followed by a business while conducting the
operations of the business which are discussed below in details:
 Cost Leadership Strategy: This strategy focuses on enhancing the profits of the business
by reducing the costs of the business considering the industry average prices. This
strategy also focuses on enhancing the market share of the business by charging
reasonable prices and still making profits for the business due to the cost reduction
technique which is followed by the business (Pulaj, Kume & Cipi, 2015).
 Differentiation Strategies: This is a strategy which allows the company to make the
product which is being offered to the consumers to be different from what is offered by
the competitors (Altuntaş et al., 2014). This process involves making the product unique
in every way. In order to undertake this strategy, the business needs to make continuous

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improvements and invest in innovation so that the business can stay one step ahead of its
competitors. This strategy also helps the business to enhance the quality of the products
which is offered by the business.
 Focus Strategy: This is the strategy which is followed by the companies which want to
develop a niche market for itself considering on one product and also developing
strategies so that the business is able to make most out the sales of that product. This
strategy also considers the needs of the customers and develops a product which is unique
to the needs of the customers and is also cost effective in nature (Ansoff et al., 2018). In
addition to this, the strategy also puts emphasis on reducing the costs which is associated
with the business and thereby keeping the prices of the products as low as possible so that
the demand for the same is appropriate.
The above three strategies which are shown above are the primary strategies which are
followed by a business. In many situation, the companies combine the above strategies so that a
better strategy can be formulated. In most of the companies, focus and differentiation strategies
are combine by the business to develop a new strategy. The strategies which are formulated by
the business generally depends on the nature of the operations of the business. The strategies
which are undertaken by the business depends on the goals and objectives which the business is
pursuing.
Development of Organizational Strategy
The organizational strategy which is formulated by the business considers the role of the
employees to be important and thereby ensures that the employees are satisfied and motivated
with the working conditions (Eden & Ackermann, 2013). Zara has a very entrepreneurial culture

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and therefore has the tendency to employs lots of young talent so that they can develop and also
climb the ladder to top management. It is the policy of the business to motivate the employees
and help them to develop the necessary skills which are required for effective management of the
operations of the business (Moutinho & Vargas-Sanchez, 2018). The company has the policy to
promote 90% of its store managers from within only which makes the employees of the business
satisfied with the management. This is also one of the reasons that the company experiences low
turnover in terms of employee and the business is able to retain most of the young talents of the
business. It is also the culture of the business to provide its store managers full liberty and
control over their operations of the stores and also to ensure that the performance standards are
clearly set out considering cost, profit and growth targets with a fixed and variable compensation
scheme. In addition to this, the management of the company provides serious consideration to
human resource develop as any new employee who is recruited is given proper training as per the
store training program. It is ensured that proper skills are developed for the employee so that he
can contribute to the operational needs of the company. It is also important the employee of the
business is selected for promotion are also provided training so that the operation of the business
is properly supported.
Zara’s Generic Strategy
As per the business strategies which is followed by Zara Company effectively shows that
the business focuses mainly on the needs of the customers. The line of products which is offered
by Zara is wide range and therefore it can be said that the business follows diversification
strategy in terms of product line. The company closely follows the cost leadership strategy for
managing the operations of the business (García-Álvarez, 2015). The business undertakes the
manufacturing process for the product with a view to ensure that the overall costs of the business

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can be minimized while at the same time offer quality products and such products which are in
constant demand in the business. Cost leadership Strategy which is followed by Zara involves
acquiring competitive advantage as a result of being able to produce commodities at the lowest
cost. This has been a trade secret for the business and the same helps the business to combat
excessive competition in the fashion industry (Holweg & Helo, 2014). One of the features of the
company is that the business has an effective distribution and supply chain line which supports
the operational process of the business. The distribution and supply chain system of Zara is the
best which helps the business to follow the Cost leadership strategy.
Strategic Plan
The strategic plan which is followed by the business should be such that the customer
still remains the primary focus but the business needs to think about further expansion of the
business thereby ensuring that the revenue which is generated by the business is further
enhanced. The level of competition in the market has increased significantly over the years
which is the major factor that can affect the revenue generation process of the business. It is
therefore required that the management should also differentiate the products which are being
offered to the consumers so that competitive advantage can be developed (Tidd & Bessant,
2018). It can therefore be said that the management of the company needs to make changes in the
strategic process as continuous improvement needs to be made in the operation process and also
in the products in order to bring about a uniqueness. The strategy which is followed by the
business effectively shows the focus of the business is on the customers.

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In addition to this, the management of the company also needs to consider the
sustainability practices in the business is also appropriate as the business considers the impact of
the activities of the business on the environment. In addition to this, the business effectively
focuses on providing the best of products to the customers and at the same time also focuses on
the sustainability practices in the business (Frynas & Mellahi, 2015).
Recommendation
The recommendation which can be suggested to the management of Zara Company for
further improving the business structure and also ensure the revenue of the business is further
enhanced. Some of the recommendation which can be suggested for making improvements in the
business structure are discussed below in details:
 The management of the company needs to change its approach to differentiation strategy
so that a uniqueness can be brought to the products which is being offered by the
business. This is to be done so that the business is able to combat competitive pressure in
the business. The level of competition in the market can affect the revenue generation
process and therefore differentiation strategy is considered to be most appropriate in
nature.
 The management of the company needs to control the costs of the business further so that
the prices of the product is not affected in any manner. The costs can be controlled by
proper monitoring of the activities (Kim, 2013). This would enhance the revenue of the
business as the demand for the product would also increase significantly.
 The management of the company also needs to focus on employee satisfaction in order to
encourage them to enhance their productivity and contribute to the needs of the business.

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 The management of the company needs to further expand the operations of the business
so that more revenue can be generated and the business can establish itself as the
prominent brand in the fashion industry (Mo, 2015). In addition to this, the business also
needs to focus on bringing about continuous improvements in the work process for
ensuring that the customers are hooked to the products which is offered by the business.
Conclusion
The above discussion effectively shows that the business of Zara is in a prominent place
in the market and has an efficient organizational structure which helps the business to
appropriately manage the operations of the business. In addition to this, the discussion also
shows that the strategic management framework for the business is one of the best but still
certain improvements can be made to the same. The key factors due to which the business of
Zara is so successful is due to the IT system and distribution system. In addition to this, the
business model of the company is also appropriate focusing solely on the needs of the customers
and taking every steps to deliver what is required by the customers.

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Reference
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting
strategic management. Springer.
Eden, C., & Ackermann, F. (2013). Making strategy: The journey of strategic management.
Sage.
Frynas, J. G., & Mellahi, K. (2015). Global strategic management. Oxford University Press,
USA.
García-Álvarez, M. T. (2015). Analysis of the effects of ICTs in knowledge management and
innovation: The case of Zara Group. Computers in Human Behavior, 51, 994-1002.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Holweg, M., & Helo, P. (2014). Defining value chain architectures: Linking strategic value
creation to operational supply chain design. International Journal of Production
Economics, 147, 230-238.
Kim, B. (2013). Competitive priorities and supply chain strategy in the fashion
industry. Qualitative Market Research: An International Journal, 16(2), 214-242.