Strategic Management for Zara: Opportunities, Threats, and Competitive Advantage

Running head: STRATEGIC MANAGEMENT
Strategic Management
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1STRATEGIC MANAGEMENT
Answer 1.
Inditex is a Spanish multinational company that operates in the lifestyle and retail
industry. Zara is owned by Inditex and is regarded as the largest brand under the banner. Zara
was established in the year 1974 and is headquartered in Arteixo, Spain. The company not only
has several retail outlets all over the world, it also has a widely operated online platform which
has gained popularity in the past decade.
This industry is characterized by short product life cycles and immense product
differentiation possibility. The lifestyle sector has a momentum for demand change
complemented with long and rigid supply chain. In order to understand the industry and to
determine the growth prospective of the company an analysis of the external business
environment is necessary.
Opportunity
The company has expanded over the years exponentially, but it still has opportunities to expand in Asia
furthermore. The organisation has gained popularity and the expansion in Asia will ensure growth
prospect for the company.
The company has a plethora of choice when it comes to clothing and accessory which are more popular
than the home décor the company can channelize resources to promote the home products as well. As a
lifestyle brand there are other products also the company can diversify into.
The company though has an online e-commerce official website, but it lacks in performance compared to
the competitors in the industry, thus Zara has an opportunity to tap that sector and develop logistics and
skills in the e-commerce department.
As a brand that is known for being creative innovative in designs the company can come up with a patent
design which will add to the brand image.

2STRATEGIC MANAGEMENT
Threat
The company operates in the industry that has moderate rivalry and threat from other players in the
market. Owing to the moderate rivalry situation the switching power of the buyers are also moderate
which erodes the profitability of the company.
When there is an economic crisis in the location of operation the lifestyle sector is the one that is mostly
affected because the products in this segment are largely optional purchase compared to other consumer
goods. For example situations like depression, inflation etc.
The reach of the company is low as the products of Zara are available only in the retail stores or the e-
commerce website; the website is not user friendly hence the sale of the organisation is also limited.
Benetton, H&M, Nike and GAP are the biggest competitor of the company.
Trends of the industry: One of the biggest trends in the industry that has been observed is the
emphasis on the e-commerce platform as it has been proven to be a much cost effective method
of expansion.
Low emphasis on promotion, the competitors as well as Zara has low key advertising strategy.
Current position of Zara in the industry:
 Zara has recorded the annual revenue for the year 2016 at US$15,900 million.
 The company is ranked fourth in the apparel industry according to the FY 2016.
 The growth rate of the company is approximately 19 percent