Critical Analysis of Zara's Strategies: SWOT, PESTLE, Porter's Five Forces and Blue Ocean

This report provides a critical analysis of Zara's strategies using SWOT, PESTLE, Porter's Five Forces and Blue Ocean. It includes commenting on the existing strategy, analysing how Zara should improve its strategy, recommending changes and strategies, and evaluating contemporary strategy issues.

Assignment 1 Individual
Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................3
Commenting and sharing pros and cons on the existing strategy of Zara in account to the
external and internal environment by using SWOT and PESTLE analysis.................................3
Critically analysing how Zara should improve its strategy.........................................................6
Recommending changes and strategies that will turn out to be more effective for the brand.....7
Evaluating contemporary strategy issues by using Porters five forces and Blue ocean..............7
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1
INTRODUCTION
Strategies refer to the planning that a business does in order to survive and compete in the
market. For any business to have a strategic plan is very crucial as with the help of strategic
planning, a business can understand the external as well as internal environment properly and
can do the decision-making efficiently (Adıgüzel., 2020). Zara is a UK based company, founded
in 1975. The brand is engaged in selling shoes, clothing, bags and many other accessories that
can be purchased from the brand's stores only. Zara is recognized all around the world and deals
in creative and luxury products that appeals to the youth and high class clientele. The company
no doubt has the biggest fashion name across the globe (Wang., 2018, July). With the help of
some models and tools here is the critical analysis of the strategies that are used by Zara.

MAIN BODY
Commenting and sharing pros and cons on the existing strategy of Zara in account to the external
and internal environment by using SWOT and PESTLE analysis
Strategies turn out to be the backbone of any business, on which it can formulate its
operations. With properly analysing the strategies it can tell a lot about the development and
evaluation of the environment in which the business is operating (Grant., 2021). Sometimes it
may even tell the right opportunities that are available in the environment and threats that a
business must be aware of. By choosing the right models to find out the strategies that are used
by the company, here is the SWOT and PESTLE analysis of Zara to look onto the internal and
external environment of the business and the strategy the business is using.
SWOT ANALYSIS
Strengths-
 The brand strategy involves an already established target market that gives benefit to the
brand as it do not have to waste time on the customers who are not interested (Benzaghta,
And et.al., 2021). This is the best strategy that any brand can have. When the customer
base become evident to the brand, there is no going back.
 Zara is a parent company of many other brands such as Hublot, De beers, Tag Heuer and
many other brands. It started its business in other lines also, such as wines and spirits,
cosmetics and perfumes, leather and fashion goods etc. This strategy of the brand by
manufacturing under so many areas and undertaking other brands, has lead to a beautiful
growth (Vlados. and Chatzinikolaou., 2019). Once the brand start to go good, it should
always plan to expand its operations and reach new heights.
Weaknesses-
 Zara exists in more than 96 countries of the world. It is a good strategy in terms of profits
but due to the large spread existence it can expose itself to risks which are faced by the
economies (Teoli. and et.al., 2019). The environment in outside world is totally uncertain
so any uncertainty in the economy regarding the tax laws, workforce structure,
import/export or any sudden economic crisis such as Covid-19, can easily affect the
profits of the company and may even lead to close its store in the following country.

 The brand strategically always update itself with the new coming trends. Constant
changing of the fashion environment may also lead to huge losses to the brand (Illés.,
2020). In order to avoid such losses it should manufacture less of the seasonality items.
Opportunities-
 The brand strategy only involves focusing on premium products but, in the environment
of the fashion industry there are a lot of chances for the brand to expand its operations
and offer more than just premium products to the people (Shtal And et.al., 2018). Rising
middle class can lead to huge profitability to the brand.
 As the brand is engaged in offering premium products, the demand for these products has
arisen (Kameneva., 2018). It has widened the scope for the brand as now the brand can
make entries to the new market and start making even more profits.
Threats-
 The entire fashion industry is prone to risk because of the continues changing trends.
Previous collection of the brands here, becomes old and the sales get limited (Vlados.,
2019). Zara in order to avoid such threats should always produce less of goods.
 The brand's strategy is to sell exclusively from the stores but as the products are very
costly it has large no. of first copies in the market and many small businesses imitating
the products.
PESTLE ANALYSIS-
Political factor- These factors are engaged with the politics of the particular nation in which the
business is operating. It involves the strictness of the laws, to what extent the corruptions are
going on, risk of military invasion etc. It is important to take care of the politics of the market
before making entry into it (Simões., 2020). As Zara has a presence in 96 countries, it should
take care of the political scenario of these countries. But the focus should be on France as the
brand has its headquarters there.
Economic factor- These factors involve the level of employment, interest rate of the loan,
exchange rates and many other uncertainties that take place in the economy. Zara should
consider the following factors as high interest loan can make it difficult for the company to
operate smoothly but high level of unemployment will facilitate easy workers in the
manufacturing zone for the company. Sudden economic crisis like pandemic can also affect the
business in the worst manner where the business has to close its stores.

Social factor- This factor is associated with the cultures, traditions and different social trends.
For the fashion brands, it becomes very difficult to cope up with needs of the society as it
involves various interests (Gupta. and Gentry., 2018). Zara's strategy is to target high class
people by offering premium products but, it should also keep in mind the interests of the people
and ever-changing trends of the fashion.
Technological factor- This factor is linked with all the updated technologies that take place in
market and make the working of the company advance and easier. Zara is also using these
technological tools in its marketing and manufacturing (Wang. and Fang., 2020). This strategy
of online marketing of the brand is wonderful and appreciated in all the terms.
Legal factor- Legal factors comprise some laws that are made for the companies to follow such
as labour related laws where the working hours are fixed, wages are fixed, equal pay for equal
jobs are fixed etc. Zara believes in doing the same and follow these laws. This step of taking care
of these rules has attracted many candidates towards the company and is enabling the company
to expand even more.
Environmental factor- This factor is associated with being environment conscious. Many
brands just focus on their costs and harm environment. But, Zara believes in environments
saving activities and is very cautious when it comes to its products having a negative impact on
the environment (Wadera. and Kaur., 2019). The brands take steps to save water and other
energies that are required in manufacturings. Such strategies of the brand can exceed it growth as
so many people want to use products of environment friendly brands.
Here are some pros and cons of the strategies that are followed by the brand.
Pros Cons
 Already established customer base can
give the brand immense growth.
 Undertaking many other brands and
coming up with new lines of products
ensures high profitability.
 High desirability because of the high
pricing.
 The brand's strategy focus on selling
the products to premium customers, but
this is leading to many first copies of
the brand by limiting the sales.
 Making high profits by existing in 35
countries can make the brand suffer
losses because of any uncertainties that
takes place

Critically analysing how Zara should improve its strategy
Strategies are both, the decisions taken and the actions that are performed by the
businesses in order to achieve the goals and beat the competition in the outside world. They act
as a backbone and pave way for the business towards success (Otenko. and Parkhomenko.,
2019). But sometimes, when business's planing is done wrong, it can lead to the downfall of the
business. So, an efficient planning is required for both, smooth running of a business and
reaching new heights.
Here, in the above section it became clear how Zara strategically plans its sales. The
brand is involved in segmenting the market and then targeting the customer base. It is targeting
rich class by offering a premium range of products. But here, by doing the above SWOT analysis
it became visible that the brand has the opportunity to expand its operations in more than just 96
countries and also has great opportunities to increase profits by targeting the middle class
markets. The brand in order to improve its strategies should optimize its approach by looking on
the opportunities it has (Budagov, and Molchanova., 2020). By enhancing the visibility of the
brand through simply advertising digitally, the company can enter to the new and large markets.
Many markets demand branded products and being one the most famous brand, Zara is the most
desired one amongst the youth. The company's sales are fixed to a certain extent but in order
break the limit, it should consider the interest of the people and plan to come up with the new
affordable range of products. This way it will turn out to be very effective for both the customers
and the company.
Here are some positive as well as negative impacts of the application for this improved
strategy.
Positive aspects Negative aspects
 Enhancement of sales
 Great profitability
 Good recognition
 Enhanced global reach
 The brand will get a common factor
 Economical risk of different countries
 Surplus stock
 Low desirability

Recommending changes and strategies that will turn out to be more effective for the brand
Strategies are a crucial part for any business but sometimes they turn out to be
inefficient. The present condition of the market is unpredictable and many uncertainties take
place for example, Covid-19. The whole pandemic made the condition of the entire world's
economy worst (Xie. and Youn., 2020). So, in order to recommended strategies for Zara, the
topmost strategy recommended is the hosting of virtual events.
By hosting such events the brand can make it easy for large number of population to
attend the event. It is a good chance for the company here, to connect with good number of
people and keep them engage in the branding (en-Shushan. and et.al., 2022). The company can
promote its new launches on the online event and can even have big influencers and musicians
perform online for the audience. Zara can can take this recommendation to easily attract porch
customers by showing the ramp walks in their events as this will even showcase the clothings
and accessories, live. Having such live interactions with the potential customers can give the
brand a good acknowledgement and will make the brand more effective in current period. Also,
there are other few strategies in which a brand can be more productive and effective. These are-
by simply standing beside the important causes, empowering local communities or by partnering
with other good organizations that are indulged in welfare programmes (Khaleque. and
Krasteva., 2021). This kind of strategic planning can have a good influence over the public and
will make them connect with the brand even more than before.
Evaluating contemporary strategy issues by using Porters five forces and Blue ocean
PORTER'S FIVE FORCES
These are the forces that help to understand the chief competitive forces in the entire
business industry. With the help of this tool a business can analyse the complete market and
determine where it can utilize its strategy to get the best of results (Bruijl. and Gerard., 2018).
Here this is used to analyse Zara's contemporary strategy issues. This tool comprises following
five forces
1. Threats of new entrants (low and weak)- This force is associated with the risk of strong
new entrants who make their entries and dominate the market. When this happens, the
existing businesses tend to sell at low prices and prepare themselves to earn lesser profits
in order reduce this threat (Donzé. and et.al., 2022). Zara being a high fashion brand and
most valued, has mended all its strategies in such a manner that it will take a lot of capital

and efforts to build a brand like Zara. The company has weak or very low threat of the
new entrants in the market.
2. Threat of substitute services and products (weak)- This force is engaged to the factor
when there are high chances of substitutes emerging in the market. When such
happenings start to take place, the current businesses are automatically forced to start
investing in their R&D, or they start to get expose to the risks (Adelakun., 2020). Zara
strategically has made itself an exclusive brand. There is a huge production that takes
place in the same line of Zara but the brand is highly desired by the youth and it is next to
impossible to beat the brand. So there is very less risk of substitutes.
3. Bargaining power of suppliers (moderately weak)- This force is linked with the factor
when suppliers have great bargaining power. When there is a power with suppliers, they
often demand high prices from the brand in order to supply them the products (Cho. and
et.al., 2019). Here, the brand deals in fashion products so there are many suppliers that
deal in providing the same raw materials, making it difficult for the suppliers to bargain.
But, as the brand strategy is to target rich customers with the premium products then it
gives suppliers a slight chance to bargain in the high quality products such as pure leather
for the belts and bags.
4. Bargaining power of buyers (very low)- This means when the buyers have the power of
bargaining in their hands, and they start to negotiate with the brand. Zara strategic
approach by being a highly valued brand and offering its luxury products and expressive
products to the premium customer base, itself comes under the category of high priced
products (Bhattacharyya., 2019). With this brand customer holds a very less power of
bargaining and the customer base do not even focus on bargaining with the brand.
5. Rivalries in the market (moderate)- It means when there are tough rivalries going on in
the market and strong competition is taking place, it becomes very difficult for the
companies to survive and sustain longer in the market (Direction., 2020). Zara's strategy
has always been to establish itself as luxurious brand since day 1, so the competition it
has is with the similar kind of luxurious brand, such as Channel, Gucci, Hermes and
many other such companies. Here the pricing is not at all an issue and does not give any
competition edge. What matters here is the advertising and the marketing that a brand

does by giving its best and making the influencers and models do their working. In this,
Zara has taken quite an advantage and has great distribution and marketing areas.
BLUE OCEAN STRATEGY
This refers to the huge ocean of bare market, where there is very less competition and
many opportunities occur for the innovative businesses. It means an uncontested marketplace or
a market where the competition is irrelevant for the brand who tend to be the originator of their
period (Leavy., 2018). This strategy is compared to the red ocean strategy where the competition
is cut-throat. A company that finds a blue ocean has the advantages of setting a cost without
thinking about the competition and is flexible enough to serve where it wishes. Here, the blue
ocean strategy is used to determine the strategic approach that is used by the company Zara and
identify the strategic issues that takes place in the company. The company in order to have a blue
ocean strategy should focus on the following sequence
1. Buyers utility- By simply acquiring this factor of the doing business a firm can make
itself enter to the blue ocean market as this factor is engaged with the utility of customers.
It means the satisfaction that a customer derives from buying the products of a brand.
Zara is the most desired brand of the fashion industry and the reason behind this is the
strategy of the brand to offer high quality products and services to the premium
customers (Madsen. and Slåtten., 2019). Customers of the brand has no problems
regarding the quality and are always completely satisfied with the services of the brand.
Zara has definitely made its way to the blue ocean market by offering high quality goods.
2. Price- This factor is associated with the pricing of the products along with the
entrepreneurship and innovation. This is basically also linked with the company's
profitability (Nag. and Tran., 2020). Zara being the famous brand strategically focus on
the innovations and the pricing both. The price for the products are very high but because
of the equal quality and innovative products it becomes very easy for the brand to target
its customers. The brand has a complete premium customer base and keeps on developing
its products day to day.
3. Cost- This factor is linked with the costing of the brand. In this the brand can focus both
on offering distinct products and cost effective operations. Zara is also engaged in such
activity by offering its unique and quality products (Chadarava., 2018). With this strategy

of the brand it has made its way in the blue ocean market and is taking the advantages of
the costing and pricing.
4. Adoption- It is associated with the uniqueness and innovation that a company brings in
its products. Zara being a brand with a good recognition, is engaged in offering value
propositions which are very appealing to the customers in the market (Omarova. and
Makisheva., 2021). This factor of adaptation gives a company its own customer base and
the company do not have to fight with the competition in the market and easily makes a
way to the blue market. Hence, Zara has already made its way to the blue ocean market.
CONCLUSION
Form the above report it has been concluded that, the existing strategies that are used by
the brand Zara are paving its way to success. The brand is doing beautifully by setting a
complete different target base for itself and has entered into the blue ocean market. The brand
makes its own pricing without thinking about the competitors as it is indulged in its own
innovative offerings. Also, by existing in more than 96 countries the brand is making huge
profits, but at the same time has a risk of exposing itself to major economic crisis might that take
place in the economy anytime.

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