Applied Corporate Strategy Evaluation Through SAF Test

Running head: MANAGEMENT
Applied Corporate Strategy
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction:....................................................................................................................................2
Question 1: External Analysis.........................................................................................................2
PESTEL Analysis:.......................................................................................................................2
Porter’s Five Forces.....................................................................................................................5
Question 2: Internal Analysis..........................................................................................................6
Resources and Capabilities:.........................................................................................................6
Unique Capabilities Linking to Competitive Advantage through VRIO Framework.................9
Question 3: Strategy Evaluation through SAF Test......................................................................10
References:....................................................................................................................................14

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Introduction:
The objective of the report is to evaluate the online strategy of Zara. It represents an
apparel retailer located in Arteixo, Galicia that believes in fast fashion and specializes in
accessories, clothing, shoes, beauty, perfumes and swimwear (zara.com 2020). It is not only the
one of the largest retailer of apparel but it is also one of the biggest company within Inditex
Group. Zara had an overarching strategy of achieving its growth via diversification and vertical
integration. It adapts the couture designs and undertake manufacturing and retailing in just about
two after its appearance on the catwalks. Zara remains faithful to the core values which are
clarity, beauty, sustainability and functionality (inditex.com 2020). The fashion retailer also
maintains a close relationship with the customers and the designers instinctively responds to
changing needs of the clients. The report evaluates the external analysis by focusing on the
PESTEL and the five forces. The report also undertakes an internal analysis focusing on the
resources and competencies through VRIO framework and a strategic evaluation through SAF
test.
Question 1: External Analysis
PESTEL Analysis:
Political Factors: European Union (EU) represents one of the biggest export market of
UK in terms of clothing and textile (Eckhardt and Poletti 2016). The industry has been found to
acquire close to 74 percent of the overall exports which acted as opportunity (O) in providing
Zara with an access to the broader client base within most of the European countries without
payment of additional border tariff and boosting the sales. However, the financial regulations of

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EU also poses an impact on smooth running of the business. The political disruptions acts as
major threat to Zara as it not only disrupts economy but also the supply chain.
Economic Factors: Spain has the highest unemployment rate and hence Zara can enjoy
benefits of the low cost labor particularly when compared to the countries of Western Europe
which includes Germany, France and United Kingdom (Agudelo-Suárez et al. 2013). Although
Spain represents an economy with slower growth but Zara is considered a popular brand. The
nature of brand in catering to needs of major portion of clients has enabled it in establishing loyal
base of customers. Besides, the brand is considered to be lesser expensive compared to other
brands that provides Zara with a larger share of the market compared to the competitors.
Nevertheless, a complicated web of lower economic activities worldwide can result in
deterioration of the financial health of an organization. A rise in the overall production or labor
cost can place the company under tremendous financial distress. The exit of Britain from EU,
commonly known as Brexit, led to the decline in value of the pound that resulted in higher rate
of inflation leaving the consumer with lower disposable income for spending on the clothing
(Breinlich et al. 2017) This also acted as a threat (T) since it reduced the overall sales of Zara.
Social Factors: The volatile nature of the social trends have a major impact on the
supply and demand for Zara’s product. This also have a major impact on the willingness and
availability of individuals towards work. As, Zara have a large market that makes the puts across
various products therefore there will hardly be any change with respect to the social factors. In
fact, the company does not focus on niche market but it cater the products to the various
segments. The company however do not enter a new market without preliminary research.
Nevertheless culture has an influence on the buying decisions of the consumers particularly the
clothing sector (Ramya and Ali 2016). This acts as an opportunity (O) for Zara to design the