Strategic Management: Analysis of Zara's Position in the Market
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This report analyzes Zara's position in the market through internal and external analysis, financial evaluation, SWOT analysis, and strategic recommendations. It discusses the market size and trends, financial and corporate performance, and competitive performance. The report also provides strategic options and recommendations for the company.
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Strategic Management
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STRATEGIC MANAGEMENT1 Executive Summary The main aim of this report is to understand the concept of strategic management. In this report, Zara has been taken into consideration in order to analyse its position in the market. The internal and external analysis has been done in this report. As per the financial evaluation, it is observed that the organisation will face the financial issues in the near future. After that, the internal analysis will be done by using the SWOT Analysis tool. Porter’s generic strategies has been recommended to the company in order to achieve the high success in the market.
STRATEGIC MANAGEMENT2 Contents Introduction...........................................................................................................................................3 Market size and trends...........................................................................................................................3 Financial and corporate performance.....................................................................................................4 SWOT Analysis and Competitive performance.....................................................................................5 Strategic options....................................................................................................................................7 Possible recommendations....................................................................................................................8 Conclusion.............................................................................................................................................8 References.............................................................................................................................................9
STRATEGIC MANAGEMENT3 Introduction Strategic Management is the process of analysing, monitoring and controlling the environment of the organisation. It is essential for the organisation to analyse the environment for the growth. It is beneficial for the company to analyse the environment in order to adopt the effective strategies for the high growth. There are different types of strategic tools which are used to analyse the environment of the organisation such as SWOT Analysis, PESTLE Analysis and many others. It is an important for the company to evaluate its financial position in the market by analysing the financial performances (Rothaermel, 2015).The company can easily adopt the effective strategies after analysing the environment for the growth in the market. In this report, the discussion is made on the fashion retailing industry of Australia by selecting Zara for analyses. At the beginning of the report, the market size and trends will be discussed. After that, financial position of the company will be evaluated by analysing financial and corporate performances. SWOT Analysis and competitive advantage of the company will be analysed in order to analyse the effective strategies. At the end of the report, strategies will be recommended with the appropriate strategies for the organisation. Market size and trends Zara is a Spanish fast fashion retailer which is based in Arteixo in Galicia. It is the main brand of Inditex group which is the world largest apparel retailer. The company manages the 20 clothing collection in a year. Zara’s supplied the products as per the consumer requirement or as per the market trends. The supply chain of the organisation is high responsive and visible in the stores. The strong supply chain helps the company to serve the services at the large number of consumers in order to satisfy their demands. It produces the 450 million
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STRATEGIC MANAGEMENT4 items in a year with the high quality of services. The company has high brand image in the market and in the year 2015, it was ranked 30 in the list of best global brands (Zara’s, 2018a). (Source: IBIS World, 2018) The fashion retailing industry of Australia is growing with the continuous rate as the consumers demand towards the fashion is increasing over the five years. The revenue of the industry is expected to grow at an annualised 11.8% over the five years through 2018-2019 with the amount of $2.1 billion. The increasing demand of consumers to the latest fashion is more and the social media application is contributed in the success of social media. The current year demand of the market is 4.4%. The industry is operating with the continuously success rate and it is estimated that the annual growth of the industry is also growing with the percentage of 11.8%. There are many popular brands in the industry such as Zara, Myer, H & M and many others. Financial and corporate performance It has been seen that the demand of consumers is increases over the five year due to which the sales of product is also increases. It is observed that the sale of the company is increases
STRATEGIC MANAGEMENT5 every year as compare to previous year. In the year 2017, the sales climbed 10% with the amount of $22B. The Net sale of the company in the year 2017 is 25,336 in millions and it is increases with the amount of 26,145 million. The demand of products of Zara is high up to holiday season and due to which the company has to produce more products to attract the consumers. The Gross profit margin of the company is also increases with increasing sale of the products (Zara’s, 2018b). The gross profit of the company is also increases with the amount of 556 million. In the year 2017, the gross profit of the company is 14260 but it is increases with the increasing sale with the amount of 14816. In the year 2018, net profit of the company is 4428 in millions of euros. As per the analysis of annual report, it is observed that the company is growing continuously by earning the high profit amount. It has been evaluated that the liabilities of the company is also increases and due to which the current amount of 21,684 which and it was 20231 in the year 2017. The liability of the company is increases with the profit. It is estimated that the organisation will face the financial crisis in the near future due to high debts. SWOT Analysis and Competitive performance Strength The company has high brand image in the market especially in terms of quality of product and services. It was ranked on 30thnumber in the global market of fashion retailing. Weaknesses It is observed that the organisation advertise its products in the less number due to which it faces the issues of attracting new consumers. The quality of product is high but the product of the company is generalised. It does not
STRATEGIC MANAGEMENT6 The organisation has strong presence across the globe as it has the strong supply chain network in the market(Ansoff, et. al, 2018). specialise in anything. Opportunity The company has high brand images in the market due to which it has the opportunity to grab the online market. The company can grab the high market share in the fashion retailing industry by producing the new designs. Threat The company has high level of threat of competitors who provides the similar services to consumers in the low prices or with the high quality such as H&M, Uniqlo and American Apparel (Owler, 2018). It has their own stores to display their products but it does not display its clothes in small or big shops. It is difficult to reach at the large number of shops of services. Competitive performance There are many companies in the fashion retailing industry that beat the Zara with their quality of services and cost leadership strategy. H& M, American Apparel, Burberry and many others are the main competitors of the company. H&M opened the latest stores in London’s Regent streets and it also have high brand image. It is evaluated that the revenue of H&M was $ 25.191 billion which is high as compare to Zara as it has 18.9 billion (H&M,
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STRATEGIC MANAGEMENT7 2018). The revenue of American Apparel was $608.89 in million which is also high as compare to Zara (American Apparel®, 2018). It can be said that the company have high competition with its competitors as they also have high brand image. Strategic options As per the above discussion, the company has the option to adopt the porter’s generic strategies to overcome the challenges. Cost leadership strategies The company offers the products on high prices to consumers. It is difficult for the middle and lower class to buy the product. It is recommended that the company has to adopt the cost leadership strategy. Differentiation strategies As discussed above, the company does not have any specialisation in any products and services. It offers the generalised products with the high quality and high prices. It has the option to adopt the differentiation strategy by developing new design(Lasserre, 2017). Focus strategies This strategies state that the company has to focuses on the existing products and increases their sales by promoting it in the market. It does not advertise its product that is why, it has the option to advertise the product and attracts the large number of consumers or new consumers(Salavou, 2015).
STRATEGIC MANAGEMENT8 Possible recommendations All the above strategies are appropriated for the company to achieve the high growth in the market. It is recommended that the company has to adopt these strategies to operate in the market. As the company has high competition with their competitors that is why, it is recommended that the organisation has to analyse the environment on the regular basis. Analysis the company environment helps to beat the competitor easily by adopting the effective strategies and by satisfying the consumer needs (Bell, Dyck, & Neubert, 2017). It has been seen that the financial position of the company is not good and appropriate. It is evaluated that the company will face the challenge in the near future that is why; it is recommended that the company has to maintain the relations with its stakeholders and shareholder. Building relation helps to increase the investment of the organisation in the market(Salavou, 2015). Conclusion From the limelight discussion, it is concluded that the increasing demand of consumers directly affects the growth of Fashion retail industry. The industry is also growing with the continuous rate. The sale of Zara product is also increases and it earned the high revenue but it has been evaluated that the liability is also increases. The company will face the challenges due to financial condition. The company has many opportunities to grab and it is observed that the company can easily grab it by adopting the strategies. Porter’s generic strategies are the appropriate recommendation for the company.
STRATEGIC MANAGEMENT9 References American Apparel®. (2018).About us.Retrieved from: https://www.americanapparel.com/en/aboutus/privacypolicy.jsp;jsessionid=A10174FE497B6 1E07C5073F6B036F70E.aap-prd-dal-app-03-p-app2 Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018).Implanting strategic management. Springer. Bell, G. G., Dyck, B., & Neubert, M. J. (2017). Ethical Leadership, Virtue Theory, And Generic Strategies.Radical Thoughts on Ethical Leadership,113. H&M. (2018).Full-yearreport. Retrieved from: https://about.hm.com/content/dam/hmgroup/groupsite/documents/masterlanguage/cision/ 2019/01/2371044.pdf IBIS World. (2018)Fast Fashion - Australia Market Research Report.Retrieved from: https://www.ibisworld.com.au/industry-trends/specialised-market-research-reports/consumer- goods-services/fast-fashion.html Lasserre, P. (2017).Global strategic management. Macmillan International Higher Education. Owler. (2018).ZARA's Competitors, Revenue, Number of Employees, Funding and Acquisitions. Retrieved from: https://www.owler.com/company/zara Rothaermel, F. T. (2015).Strategic management. McGraw-Hill Education. Salavou, H. E. (2015). Competitive strategies and their shift to the future.European Business Review,27(1), 80-99. Zara’s. (2018a).Zara SuccessStory. Retrieved from: https://successstory.com/companies/zara
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