ZARA Strategic Analysis Report

The assignment is a strategic analysis report on Zara's performance in the UK fashion market. It involves analyzing the company's strengths, weaknesses, opportunities, and threats (SWOT) using PESTLE analysis. The report also provides recommendations for developing effective strategies to overcome micro-environment challenges and competing with strong competitors.

RETAIL THEORY

Table of Contents
INTRODUCTION TO RETAIL......................................................................................................1
INTRODUCTION TO THE COMPANY.......................................................................................1
KEY RELEVANT CHANGES WITHIN THE UK FASHION RETAIL.......................................1
RELEVANT CHANGES WITHIN THE MICRO ENVIRONMENT............................................2
STRATEGIES AND TACTICS THAT COULD BE USED..........................................................3
RECOMMENDATIONS.................................................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION TO RETAIL
Retail refers to procedure of selling the consumer services and products to customers by
using the several distribution channels in order to earn profit. Retails ale occurs wen business
sells service or product to a person for its use. It consists merchandise sales from single purchase
point directly to consumer that intent to use product (Allmendinger, 2017). The fashion industry
includes four levels such as production of raw materials, production of the fashion goods through
designer or contractors, retail services and different promotion and advertisement forms. In
addition to this, fashion marketing is process of managing merchandise flow from initial
selection of the design which produced to presentation of goods to the retail consumers.
INTRODUCTION TO THE COMPANY
ZARA is Spanish fashion retailer and this firm was founded in year 1975 through Rosalia
Mera and Amancio Ortega. It is main brand of Inditex Group and also the largest apparel retailer
in all over the world. This fashion group owns brands like Bershka, Uterqüe,Massimo Dutti etc.
It launches at least 12000 new design every year. The size of this company is large because it has
more than 2200 stores in around 96 countries. The positioning of Zara is 'affordable fast fashion'
and also positioned to universal customer market. ZARA have the multiple stores and in all order
to world and it has more physical presence as comparison to online. This company plan to launch
its expanded online sales of goods in additional 106 countries, providing sales channels by
physical stores in around 202 countries in all over the world (Deslandes, 2019). ZARA is
flagship brand of Inditex Group and it uses the social media for an instance Facebook, Instagram,
Twitter etc. to develop the relationship with its consumers.
KEY RELEVANT CHANGES WITHIN THE UK FASHION RETAIL
Macro environment refers to condition that exist in an economy as whole rather than in
specific region or sector. The macro environment factor are impacting on clothing sectors. The
PESTLE analysis is helpful analyses the macro environment and relevant changes with in UK
fashion retail. PESTLE analysis mention below as above:
Political: Under this, political factor can be big uncertainty source for UKL fashion
industry. The political instability develop negative impact on fashion industry (Bodie, 2015). In
addition to this terrorism, Geopolitical instability, Brexit etc. will enhance pervasive uncertainty
sense in global economy.
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Economic: The economic factors also develop its impact in fashion retail sector. An
economic volatility can impact on the sales as ell as profit level. In terms of GDP, fashion retail
is consider as one of main key industry. These factors develop the negative impact as well as
positive. At the time of economic boom, income level of people are high and their purchasing
power is also high. On the other hand, at recession time the buying power of consumers are
minimum. At this time retailers are stuck with large stock amount (Gillis, Combs and Ketchen Jr,
2014).
Social: In fashion retail, social factors plays a necessary role. These factors mainly
develop the negative impact on business because of the changing demand of buyers. In this
present time period, the main target of fashion industry is new generation and their preferences
are varied from previous generations. In context to fashion, the taste or preferences of people are
changes with in a short period of time so, firms need to design the attractive products or clothes
and it will enhance cost of production.
Technological: The technological factors impacting clothing sector consisting demand,
availability of resources etc. Internet, Globalization, mobile applications all impacting the sales,
choices of consumers etc. In this modern era, people like to shop online and personalize their
experience of shopping as well as consumer services. The main change in fashion industry by
bringing technology is to provide better experience to consumers as well as it is time saving
method.
Legal: The legal challenges abound in fashion retail. Industry has been impacted through
problems like rights of workers, child labor law etc. For stay legal, it is necessary for industry to
follow export restriction, inflation costs and tax restrictions other wise negative impact will be
developed on fashion retail (Grubel, 2014).
Environmental: Most of the clothes are made from the cotton but first it must picked
then hipped over to sewn as denim. In this, rise of environmentally as well as ethically
conscious, customers leading to the new trends such as use of recyclable materials and organic
cotton.
RELEVANT CHANGES WITHIN THE MICRO ENVIRONMENT
Micro environment refers to factors in firm's immediate operations area which impact on
performance as well as decision making. In context to analyses the relevant change in micro
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environment, Porters five forces will be used here. It is framework for evaluating competition of
business. Under this, Porters five forces of Fashion Retail mention below:
Bargaining Power of Buyer- Under this, the bargaining power of consumers arise when
market is to be characterized through presence of many players in large product line. In fashion
retail, bargaining power of customers may high because of high competition level as well as
availability of several options or brands. The fashion brands compete for attract and also sustain
the consumers by spending money on marketing (Rao and et. al., 2018).
Bargaining Power of Suppliers- In the fashion retail, suppliers are not the significant
force. The bargaining power of suppliers are high when raw materials are available in the scare
quality. The fashion retail of United Kingdom is characterized through presence of the few
suppliers due to more cost of the raw materials. The brands have buying power and also can be
switch from one supplier to other in an easy manner.
Competitive Rivalry- For an intense level of the competitive rivalry, fashion retail is
remarkable. In fashion industry, there are many brands with the same product offerings and it
make competitive rivalry intense. In United Kingdom, competitors of ZARA company are
H&M, Next, Marks and Spencer’s, Arcadia etc. The brands with the strong image are able to
charge high cost of its products.
Threat of New Entries- Under this, new entrants do not pose the sufficient threats to
existing players and it is because UK saturated market of fashion with big brands like Next,
ZARA etc. High cost of business establishment deters the new plays from entering in market of
United Kingdom. Some new plays do not have more power to challenge exiting players.
Threat of Substitution- Substitute refers to those products which have the attribute and
same to original products. H&M can be com0pete with ZARA in context to affordability as well
as quality because it spend more on advertising and take benefit of economic crisis (Varley,
2014).
STRATEGIES AND TACTICS THAT COULD BE USED
From the above discussion, there are some strategies mention below to overcome from
the arisen macro-environment challenges:
Customer preferences- It is a main problem because the preferences as well as taste of
consumers are changing within short period of time. It hampers the work of ZARA and in order
to overcome from this issue, company need to develop strategy of adding a new feature in its
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online service like Customization. Under this, people can modify the design or customize on the
basis of their preferences. It will help in attract more customers and provide them better services.
Legal- As the competition is increasing within the market and for maintain their position
rivals are offering job to the experience person who belongs to high goodwill company like
ZARA over higher pay. This has become a major risk for ZARA as employee turnover may
increase, so in order to deal with this issue it can work over implementing CSR activities within
the organisation for providing working benefit to its employees. For this company is required to
formulate new workforce policy which cover all worker rights guideline decided by UK
government and also provide salary hike along with flexible working hour option (Wrigley and
Lowe, 2014).
Strategies to overcome from micro environment challenge mention below:
Product secrecy:- ZARA is a well known and high preferable brand by customer this
high performance leads to increase in substitute practices among local retailers who copy its
design and offer them at low price to customers. So in order to deal with issue ZARA can launch
its product directly and avoiding revealing its design before its commercialisation. For
promotional purpose it can launch its new clothing range through arranging exhibition in stores.
RECOMMENDATIONS
It has been recommended from above mention discussion that ZARA should develop the
effective strategies as well as tactics in order to compete with its strong competitors. On the other
hand, before producing any product, ZARA firm should determine needs of consumers or
conduct research. Through this firm can know about demand of customers and produce goods
according to them. ZARA can make its online presence more strong in fashion market of United
Kingdom to deal with the existing competitors.
CONCLUSION
It has been concluded from the above mention report that fashion industry is a largest
industry and provides the designer and new fashioned clothes to people. PESTLE analysis has
been used to determine the changes macro environment to business. To determine the more
influence if change in ZARA, company develop the strategies or find the effective ways to
overcome from them in an effective or significant manner.
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REFERENCES
Books & Journals
Allmendinger, P., 2017. Planning theory. Macmillan International Higher Education.
Bodie, Z., 2015. Thoughts on the future: Life-cycle investing in theory and practice. Financial
Analysts Journal. 71(1). pp.43-48.
Gillis, W. E., Combs, J. G. and Ketchen Jr, D. J., 2014. Using Resource–Based Theory to Help
Explain Plural Form Franchising. Entrepreneurship Theory and Practice. 38(3).
pp.449-472.
Grubel, H.G., 2014. A theory of multinational banking. PSL Quarterly Review. 30(123).
Rao, S. and et. al., 2018. Return time leniency in online retail: a signaling theory perspective on
buying outcomes. Decision Sciences. 49(2). pp.275-305.
Varley, R., 2014. Retail product management: buying and merchandising. Routledge.
Wrigley, N. and Lowe, M., 2014. Reading retail: A geographical perspective on retailing and
consumption spaces. Routledge.
Online
Deslandes, M., 2019. Zara extends global e-tail presence to 106 new markets. [Online].
Available through: <https://uk.fashionnetwork.com/news/Zara-extends-global-e-tail-
presence-to-106-new-markets,1032751.html#.XHEgAS0zab8>.
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