Challenges and Strategies for Zara in Fashion Retailing

This report discusses the challenges faced by Zara in the fashion retailing industry and suggests strategies and tactics that can be used to overcome them.

Table of Contents
INTRODUCTION...........................................................................................................................3
Introduction to company.............................................................................................................3
PESTEL analysis of Zara............................................................................................................3
Porter five force of Zara-.............................................................................................................5
Suggest and discuss strategies and tactics that could be used.....................................................6
Recommendations.......................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Retail is the termed out as procedures of selling consumer good and services to customer
with use of multiple channels of distribution in order to earn profit (Phelps, 2020). In addition to
this, retail sales can be called out as purchase of finished goods and service by businesses and
consumers. Retailer has to perform the dual functions of buying and assembling goods within
enterprise. Thus, present report is based on the activities is fashion retailing.
However, fashion retailing can be termed out as section business that act as intermediary
among manufactures and customers. This can be defined as process that work as buying clothes
from the manufactures and to sell them to the customers. However, retail merchandising
inclusive of selling commodities to customers. In addition to this, fashion firms looks over to
design market and sells apparel merchandise.
Introduction to company
The present report of business activities is based on Zara, this is Spanish retailer brand
that engaged in fast fashion product and services. It is entity that is engaged in offering
commodities such as clothing, shoes, accessories, swimwear, beauty and perfumes etc.
Therefore, the chosen entity needs just one week to develop a new product and get it to stores,
compared to the six-month industry average. Therefore, it launches around 12,000 new designs
each year. In addition to this, Zara has zero advertising policy.
Henceforth, this enables the firm to establish business model that allows self containment
throughout the stages that is inclusive of the materials, manufacture, product completion and
distribution to worldwide within few days. Therefore, the chosen entity has also online stores and
this render the better services to customer at online platform.
PESTEL analysis of Zara
PESTEL analysis is basically the framework which is being used by organizations for
analysing the external factors which impacts their operations as well as functions.
Political factors
These factors consists of political stability, tax rate, trade restriction etc.
Positive impact- The restrictions on trade in UK has been relaxed and thus tax rate has been
reduced which has affected company in positive way. It has allowed Zara to trade the fabrics as
well as dresses freely (Alexy, Anklam and Sokull Kluettgen, 2020).

Negative impact- Since the emergence of Brexit, there has been political instability within UK
which has given rise to corruption. This has affected Zara in negative way and it has posed a
challenge for conducting their operations (Phillips and Moutinho, 2018).
Economic factors
These consists of exchange rate, employment rates, interest rates etc.
Positive- The employment rates in UK have increased from around 34.6% to more than 67.5%
from past few years and this has impacted Zara in positive way. This has allowed company to
hire skilled and experienced employees for organization.
Negative- The interest rates in banks and financial institution in UK has increased from 34.8% to
around 59.7%. This has somewhat posed a roadblock for company to take loans and borrow
funds for various activities like expansion (Tasios, 2018).
Social factors
These consists of attitudes, lifestyle, culture etc.
Negative- As people have become highly concern on not wearing clothes made of animal skin as
this is against their cultural values thus this has eventually reduced the sale of belts and fur
winter jackets.
Positive- Nowadays, people in UK have become highly conscious about their personality and
tend to live luxurious life. Thus, this has increased the sale of clothes of Zara which reflect the
great quality and grand personality. As the clothes of Zara are believed to be a mirror of one's
luxury personality thus it has increased their brand image (Mbithi, Muturi and Rambo, 2017).
Technological factors
These encompasses innovation, level of automation, online power etc.
Positive- The new technology of Zara which is augmented reality which allows the customer to
view that how models wear the clothes wherever they approach sensor within their stores. This
has affected company in positive way.
Negative- With the emergence of technology, Zara faces lot of problems regarding the security
and privacy issues. The increased hacking as well as data crimes have affected company in
negative way as people now fear to do online transactions (Glowik, 2017).
Environmental factors
Climate, weather change, environmental policies etc generally encompasses
environmental factors.

Positive- The growing concern of people towards the environment and reducing the wastage
have affected the company in positive way. The parent organization of Zara which is Inditext
have made sustainable goals to streamline manufacturing process and reduce the among of
wastage.
Negative- The frequently changing climatic and weather conditions have somewhat posed an
great challenge for Zara and have affected in negative way. The company generally faces
problems in transporting its goods and services across various countries and locations due to
uncertainty in climate (Phillips and Moutinho, 2018).
Legal factors
These factors consist of discrimination laws, health and safety laws, patents, consumer
protection laws etc.
Positive- The government of UK has reduced the taxes on the trading of fabrics and cottons for
the manufacturing of the clothes. This has affected the company in positive way and thus have
reduced the overall tax on the import and export of the fabric and beads.
Negative- As Zara is generally located in more than 40 countries and has more than 10000
stores, thus it remains exposed to various legal regulations as swell as rules. This has affected
company in negative way as analysis of each country becomes difficult.
Porter five force of Zara-
It is a framework which is used to analyse the competitive analysis in industry. Through
that, it is easy to evaluate business environment.
 Competitive rivalry- It refers to the level of competition within industry. The competition
level is analysed by identifying number of companies in market. So, a greater number of
business means high competition and vice versa. In retail sector there are already many
big brands and large players operating in retail sector. For example- H&M, M&S, etc.
who are tough competitor to Zara.
 New entrants in industry- It refers to the possibility of new entrants within industry. if
more business enter in market it leads to rise in competition. However, if entry and exists
barriers are less then chances of new entrant increases. But in retail sector exist and entry
barriers are strict and it requires huge investment for new business to enter.
 Power of suppliers- It is related to how easily supplier are able to increase prices of
products. this means that more number of supplier they can not easily influence prices

and if less suppliers than prices are changed. as Zara is having large supplier but they are
all on contract basis so the cost to switch from one supplier to other is high. Thus,
company have to maintain strong relation with them.
 Power of customers- It is related to bargaining power of customers. this means that how
easily customer are able to influence prices of products. So, if there is large customers
then prices can not be changed and is less customer prices is changed easily. here, Zara
customer is large so they possess moderate power to influence the price of products.
 Threat of substitution -It means the chance of customer to switch from one product to
another or substitute it. in fashion retail sector there are many companies providing high
quality goods at low cost. thus, customers can easily switch it from one company to
another and substitute product.
Suggest and discuss strategies and tactics that could be used.
Marketing plays effective role in business enterprise. This can be used to create brand
awareness, nurture prospectus that leads to turn customers and build brand loyalty. In addition to
this, there are number of marketing theories that can be used to implement to create the plan of
actions. Thus, entity needs to undertake the following approach and these as are-:
Examining external factor with macro marketing- It is component that impacts external
working of the enterprise in the huge context (Glowik, 2017). Therefore, the entities that uses the
macro environment examine some of the elements such as are manufacturing, production process
etc. In addition to this, the goal of macro marketing is to understand that how marketing and
society needs to interact in terms to learn that how business activities needs to be grown.
Creating comprehensive marketing strategies- Successful marketing strategies inclusive of
micro and macro-environment tactics. In order to conduct the business activities effectively, the
entity needs to frame out plan of action as are-:
Product expansion strategy- It can be undertake effectively with use of Ansoff matrix. Thus, it
can be outlined in following context as are-:
Market penetration strategy- This is defined as plan of action that termed out as when
commodities in an existing marketing needs to be developed to earn maximum profitability. In
addition to this, there are main tactics that can be chosen by an entity to execute to enhance
market penetration. It is also defined as plan of action that helps to expand the business activities
in effective manner.

Market development strategy- This is defined as plan of action in which the product is new but
market is new. In the new market, the firm can face the tough situation as they may have tough
competitors (Mbithi, Muturi and Rambo, 2017). In order to cope up with it, they needs to bring
development within commodities so that entity can able to undertake their business activities in
streamlined and effective mode. These are the tactics that can be used to enhance brand image
within enterprise.
Product innovation- This is termed out as theory that defined to bring development within
existing commodities. With help of bringing change in the design of the established commodities
and by the use of new materials the entity can offer quality commodities to customers (Tasios,
2018). Innovation is one of the significant process that can add value to enterprise. In addition to
this, product innovation aids to bring new commodities, helps to enhance quality and improve
overall working of enterprise.
Diversification strategy- This is termed out as plan of action that can be used to when firm
enters into new markets with new commodities and services. In addition to this, the entity must
bring new commodities within new market as the competition is rapidly enhancing (Phillips and
Moutinho, 2018). Thus is strategy that can aids to Zara and this also allows business to grow.
With help of adding new designs to commodities the entity can able to attract the customers
within market.
Recommendations
There are some recommendations which can be followed by Zara. they are as follows-:
 The company can invest in R&D which will help in developing new products and
innovating changes in operational process, procedure, etc. with help of it, they will be
able to reduce the price of products and maintain quality as well. this will lead to
attracting large number of people.
 Another recommendation that can be followed is doing market research in order to find
out market trends and changes in customer taste and preference. So, accordingly they will
be able to identify needs of people and bring changes in features of products. through
that, it will be easy to compete in market for long term and sustain.
 Besides that, Zara can focus on increasing its online sales and profits. for this they can
use social and digital marketing to attract customers. Moreover, they can expand online

business in many countries so that high revenue is generated. thus, focusing on online
will help in building and maintaining strong brand image as well.
 The organisation must promote and advertise themselves in attractive and effective way.
for this they can use AI and IOT in technology and analyse digital data and information.
By this they will be able to analyse customer behaviour and how they interact with
company.
CONCLUSION
It can be summarised from report that Zara is a fashion brand that offer high quality and
latest fashionable clothes. However, retail sector is growing rapidly in recent times. it provides
variety of products to people. moreover, there are many external factors due to which Zara is
affecting. for instance- political factor like Brexit which will affect its growth. also, social factor
like change in trends, will also impact on Zara growth. Furthermore, power of supplier is high in
this. the threat of new entrant is low as there are strict entry and exist barriers. thus, the strategies
that can be used by Zara is to develop new products, expand in new countries, and others.

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