Strategic change and global environment

This report provides a comprehensive analysis of Zara's internal and external environment using SWOT, PESTLE and Porter's Five Forces analysis. It also discusses the strategic change management model used by the company. The report highlights the strengths, weaknesses, opportunities and threats of the company and provides recommendations for improvement. The report also discusses the impact of political, economic, social, technological, environmental and legal factors on the company's operations.

Strategic change and global environment

Strategic environment
Table of Contents
Introduction.................................................................................................................................................1
MICRO environmental framework..............................................................................................................1
SWOT ANALYSIS OF ZARA...............................................................................................................1
STRENGTHS......................................................................................................................................1
Weakness.............................................................................................................................................3
Opportunities.......................................................................................................................................3
Threats.................................................................................................................................................4
Macro environment.....................................................................................................................................5
PESTLE ANALYSIS..............................................................................................................................5
Political factor.....................................................................................................................................5
Economic factor...................................................................................................................................5
Social factor.........................................................................................................................................6
Technological factor............................................................................................................................6
Environmental factor...........................................................................................................................7
PORTER FIVE FORCE MODEL...........................................................................................................7
Drift and Modification in the overall operations..........................................................................................8
Improvement in the operations..................................................................................................................10
How Zara was back to track......................................................................................................................10
Change model ( Lewin Model ).................................................................................................................10
Recommendations.....................................................................................................................................11
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
Appendices................................................................................................................................................15
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Strategic environment
Introduction
Zara is one of the biggest Spanish fast fashion retailer based company in Galicia. The
company was established in 1975 by Amancio Ortega and Rosalia Mera. The company is the
main brand in relation to the inditex group. It is one of the largest apparel retailer companies on
the global platform. So, in this paper the discussion will be made on the overall internal and
external factors which can help to evaluate the overall environment. In the next phase of the
report the discussion will be made on the strategic change by considering the change
management model related to Lewin model. It helps to evaluate the role of the organizational
culture in the overall process. So, the tools which will be used for the report are Pestle analysis,
SWOT Analysis and Porter 5 force model. The main emphasis will be on the improvement and
modification which is considered by the company so that the activities can be on the right track.
MICRO environmental framework
SWOT ANALYSIS OF ZARA
STRENGTHS
a.) Strong control overall the entire supply chain
It is analyzed that company has a strong control overall the supply chain as the stores
of the company are in 88 countries. Like in United States, Europe, Asia and Middle East
(Presley & Meade, 2018). The company emphasizes on in house production in the
factories near headquarter. The company emphasizes on managing the overall supply
chain by considering the factors related to raw material selection, production and
distribution. The picture describes the entire process of the supply chain process of the
company (Caro & Martínez-de-Albéniz, 2015).
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Strategic environment
(Source: randall, Crandall & Chen, 2014).
The supply chain of the company help to attain the competitive advantage as it handles
the overall rivals in the competitive market.
b.) The next strength of the company is related with Adroit design strategy in which
the main focus of the company is to use the media so that it can be easy to promote the
season trend in the market. The company focuses on maintaining the supply chain which
manages the overall fast changing taste of the customers (Hill, Jones & Schilling, 2014).
It introduces the new clothing models within the few weeks. The recent designs are
considered by the company so that demand can be boosted. The company focuses on
delivering the new products twice each week in the store and there are more than 10,000
new designs introduced by the company every year (Christiansen, 2014). Zara offers
latest designs and trends in the market and the maximum time limit is of 2 weeks. So,
after 2 weeks, the products are on the decline stage. After that the company introduces
new designs and styles in the market which are on the introduction stage. Like new
handbag with unique design introduced in the market which will be on the introduction
stage.
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Strategic environment
In context to the Zara Company, it has been observed that company is on maturity stage
because the motive of the manufacturer is to maintain the large market share. Now
company is emphasizing on marketing of the products and also focus is given on
modification technique. The modification technique used for the products help the
company to attain competitive advantage.
c.) Efficient production system is the strength of the company in which it can be
seen that the company introduces more designs as compared to the competitors. There are
12,000 new designs which are launched in the market. The overall cycle in context to
design to stock varies from 4 to 6 weeks if compared with the average of six months in
the traditional industry. This boosts the brand image of the company in the market (de
Jorge Moreno & Carrasco, 2016).
d.) Large distribution channel
It is analyzed that Zara has 2200 in 96 countries and it is the flagship brand of Inditex
group. There are many stores which simply state that the company has the large
distribution network and the large customer base in the competitive market (Xue, 2016).
Weakness
a.) Imitator not creator
It is analyzed that the company cannot be the premium luxury brands in the
fashion sector as it is the imitator as it imitates the fashion then focusing on the
overall styles of the season. It offers its consumers high end designs but the designers
of the company copy the designs of the fashion week and do not focus on creating a
new one (Tete, 2018).
b.) On the advertisement, Zero revenue is spent by the company
The company does not focus spending the money on the advertising. Zara has zero
advertising policy in comparison to the rivalries H&M, Gap and Benetton. It is seen
that the marketing for Zara is done by Kate Middleton when she wore the dress on her
wedding. So, the zero advertisement has given its rivals greater exposure in the
public. So, this strategy can be considered as one of the weakness of the company in
the competitive market.
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Strategic environment
Opportunities
a.) global expansion scope
Zara has a global penetration market. The presence of the company in the market
is large like in four major continents. So, there is a requirement of more expansion in
the area related to Africa and Asia. It can be examined that in Africa, the company
has various stores in Egypt, South Africa and Algeria. The company has various
opportunities like in Asia, countries like china and Japan have many stores if
compared with Singapore and UAE. So, the company has the opportunity to enhance
its market share which can boost the overall sales of the company in the competitive
market (Trehan & Mehta, 2014).
b.) focus on distribution channel
The distribution network in US require to enhance by emphasizing on the basic
elements. It is analyzed that it is important to focus on boosting the distribution
channel and the large population of the US need more stores so that the needs of the
customers can be satisfied in US. It is necessary for the company to focus on
maintaining the distribution channel so that products can be promoted in the
competitive market (Watson IV, Worm, Palmatier & Ganesan, 2015).
Threats
a.) high competition
In the competitive market, the company faced the high competition level. Zara
face competition not on the local platform but also on the global platform. The
company faces the high level of competition from Sweden H&M and from the in-
house brands like Massimo Dutti and Stradivarius but on the global platform the
company faced the threat from the company like GAP. Therefore, it is seen that
company faced the high competition in the market and it is necessary to reduce by
considering effective strategies which can boost the competition level.
b.) no collaboration with the designers on the international platform
It is observed that Zara do not have any collaboration with the international
designers like HRM focused on collaboration with the international designers like
Karl Lagerfeld and lanvin. This is considered as one of the biggest threats for the
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Strategic environment
company and when collaboration is made with international designer it is seen that
young shoppers get attracted towards the designer labels of the company.
So, the threat is from the international designer or with the collaboration process
which is taken into consideration by the other people. Therefore, it is important for
the company to focus on collaboration so that profits can be boosted in the
competitive market. With collaboration it can be simple for the company to maintain
its customer base and the company can beat the high level of competition prevailing
in the market (Gassmann, Frankenberger & Csik, 2016).
Macro environment
PESTLE ANALYSIS
Political factor
It is important for the company to focus on the political factors as it can provide framework to
the company to boost the overall activities of the company.
a.) involvement of the government
The company plans to expand the market share in another country. It is important for
the company to consider the right step according to the policy of the company so that it
can be easy to manage the overall policy implemented by the country. Government
changes the policy which impacts the overall activities of the company in the competitive
market.
b.) British riot situation
The company planned to enhance its roots to the other countries. It is important to
consider the entire system before taking any permanent step. The major reason is related
with the change of the policy which can impact the overall activities of the company in
the competitive market.
c.) Enhancing business in Europe
Zara is focusing on enhancing its business in Europe union due to its safe and
prediction economic circumstances. So, it will assist the company to analyze its market
growth as Europe economy makes the rare changes. So, to enhance the market share it
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Strategic environment
can be seen that company has to consider the rules and regulations so that it can be easy
to boost the market share in the competitive market.
Economic factor
a.) Fluctuating economy
Zara has been witnessing fluctuation in the last few years but it is earning the revenue
from the last few years. The recession in 2011, has affect the overall operations of the
company. The reason is that the company deals in dollars and on the safer currency which
can boost the overall dealing of the company. It can be seen that the company focuses on
the economical fluctuation and on the currency rates of the country at the time of entering
into the new markets.
b.) Differences in the prices of various countries
It can be seen that just because of various customs and duties, the prices of Zara
products vary in different countries. Prices differ from various countries as it is analyzed
that 22% to 24% is higher in France, Italy and Germany (Gassmann, Frankenberger &
Csik, 2014).
Social factor
a.) Sizes of the clothes range from 6 -16
By focusing on the societal factor, it is seen that company created its products at the
time of keeping the aspects like geographical position, race and origin in the country
population.
b.) Offers and discounts
The company focuses on offering discounts to the customers so that they get attracted
towards the services and products which are offered by the company. Zara offers codes
and vouchers to the customers and it is seen that company offers various coupon sites
where it can be easy to find the discounts codes which can be redeemed at the time of
online shopping (Kozlenkova, Hult, Lund, Mena & Kekec, 2015).
Technological factor
a.) New application launch
Zara consider the use of information technology which assist in the overall
international logistic system and online store where it can be simple to change and return
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Strategic environment
the products which are there in the company. Zara offers its customers to purchase the
application which are available for the customers through different application.
b.) Maps are used to locate the store
Zara projects a store locator on their website where it can be simple to store by
emphasizing on the desired region and location. It is seen that store locator will help to
showcase the nearest store around the specified location. So, it can be simple for the
customers to discover the store it can be easy through online maps to predict the exact
location of the outlet (Wrigley & Straker, 2016).
c.) IPAD app to boost the experience
It can be seen that company focuses on online shopping so that it can be easy to boost
the online buying experience of the customers. With one click on the IPAD it can be
easy to do online shopping and it will help to do conferencing with the friends by seeing
clothes on the tablets. With the help of this technology it can be easy for the buyer to
give friend the suggestion in reference to purchasing of the products. The options like
video chat, instant messaging and voice chats are available which boost the overall sale
of the company in the market (Viardot & Nylund, 2017).
Environmental factor
a.) Earthquake in JAPAN
It is evaluated that series of disasters struck Japan in 2011 and it impacted the local
infrastructure and power irruptions. There are ports which were closed and the problem
enhanced in context to the apparel industry (Monden, 2017).
b.) Asian Countries Require rapid fashion change
It is analyzed that weather in Asian countries is different as compared with the
European countries. The variation in the season impacts the fashion sector in context to
local weather. So, company focuses on selling clothes of all the seasons so that demand
can be enhanced.
Legal factor
a.) Issues related to copyright
The company value their brand equity as they create a bond with the customers and
through the trademarks or by brand name. But there are many situations in which the
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Strategic environment
company is not able to implement the copyright law. The company has to face the issue
related to copyright issues and the latest one is related with global brand in which brand
fendi stated that Zara has used the photographs which are not lawfully right as they have
taken from the fendi show in 2013 fashion week (Steenkamp, 2017).
PORTER FIVE FORCE MODEL
a.) Purchasing power of buyers
In the recent situation of globalization, the market continues to enhance and the
suppliers are weak just because of the low boundaries of china. Now, the suppliers are
diminishing as they are dependent more on the apparel sector. Zara offers its suppliers the
licensed contracts so that the hold on the market can be lessened. The bargaining power
of the suppliers is strong and it is due to switching cost from one supplier to another. So,
the suppliers set the price for the required material (Mayrhofer & Roederer, 2016).
b.) Purchasing power of the customers
The company spend about 0 to 0.3% on the overall budget of advertising and also
focus is given on research and development to consider the needs and wants of the
customers. it can be easy for the company to retain its customers by maintaining the
quality of the products in the market. The price variation is kept by considering the
overall competitors present in the market (West, Ford & Ibrahim, 2015).
c.) Threat of entry
The threat of entry is low, as it is examined that to enter into the market it is important
for the company to invest huge capital. So, it is not possible for every company to enter
into the competitive market as the requirement of the capital is more in this sector.
d.) Substitution rate
It can be seen that one of the competitors of the company is H&M in relation to the
overall quality and affordability. The company focuses on advertising and consider the
benefit of economic crisis. The supply responsive is not so effective and successful
(Smilansky, 2017).
e.) Rivalries in the market
The largest competitor of the company is H&M, Benton and Gap. In the market Zara
is one of the reasonable brands if comparison is made with H&M and Gap. These
companies are the biggest competitors on the global platform (Gong, 2015).
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Strategic environment
Drift and Modification in the overall operations
It can be observed that drift which took place is due to leadership style. The CEO of Zara
Armancio Ortega, set the vision of the company. He has a unique leadership and management
style. This has changed the corporate culture of the company but there is lack of training in the
workplace. So, company focused on modifying the outlet so that according to the department
training will be given to the employees.
The company focused on various modifications as it can help in boosting the overall sales of
the company. Zara emphasized on strategic change to smoothen the overall activities. It is
observed that in the head office of Zara in Spain, the company maintained its stores and brought
change in the overall structure of the outlet. The logistic department is created in which high tech
in- store innovation is there. The products of the company are shown in the LCD and also touch
screens are available in the changing rooms so that the customers can easily find out different
sizes without searching for the free store assistant. The changes are made so that direction can be
given to the employees by the different leaders and also according to that the employees are
divided according to the departments. By dividing the employees in different departments they
are able to give training to their employees. By changing the structure of the company, the focus
is also given on the supply chain which helps to offer products and services to the clients on
time.
One the best feature introduced in the store is related to self-checkout stations that can help
the customers to skip the queues and to purchase the products before the mind changes of the
customers (Edward, 2016).
The change is introduced by the company in the overall process of production in relation to
the supply chain management. They considered a fashion model where supply chain is flexible
and it satisfies the needs of the customers. The last 3 years drift is related with strategic
realignment which is considered in relation to supply chain management. The correction
considered by the company is related with creating a logistic department to boost sales
(Madhani, 2016).
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Strategic environment
This is one of the drift changes and modification in Zara and it can be seen that the changes
are made in context to factors related to customer satisfaction and overall sales of the company in
the highly competitive market.
(Source: Mhugos, 2015).
Improvement in the operations
By changing the overall change model, it is seen that improvement has been seen in the
overall activities of the company. Due to the changes, it can be easy to for the company to
enhance the sale by showcasing the products in a proper manner. By considering this change, it
can be seen that it saves time of the customers and of the employees in the workplace. It is one of
the best strategies to redesign the store considered by the company. This has given positive
impact on the customers and induced them to purchase the products from the company.
How Zara was back to track
Zara was back to the track as company focused on bringing out or changing the outlet into the
unique one. The company emphasized on boosting the overall satisfaction level by providing
them self service which saves the time of the customers. In Spain the market was reduced so the
company considered this effective strategy to boost the sales. To stand in the line or the que is
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Strategic environment
one of the issues faced by the problems as it consumes more time of the customers. So, by
focusing on self-checkout stations the company boost the overall satisfaction level of the
employees (Filieri, 2015).
The company focused on managing the overall quality of the products by keeping the prices
low. This strategy helps to attract the customers towards the products and services offered by the
company in the competitive market. This maintained the culture of the company and helped to
achieve the objectives which are set by the company. The objective of the company for the next
3 to 6 years is to enhance the brand awareness so that it can be easy to accomplish the set goals
and objectives in the competitive market (Edward, 2016).
Change model ( Lewin Model )
In context to Zara, one of the best models considered by the company in relation to change is
Kurt lewin three step model in which there are three steps. The first is related with unfreeze, then
move and last one of refreeze. In the unfreeze model, the change is introduced and the company
convince about the change that it is necessary at the workplace. Company evaluated the need of
the department and self-checkout stations. At the time of supply chain the employees were
worried about the changes which they will have to face at the time of marketing the products.
The company convinced the need of the change in the stores or the outlets. Then the second step
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Strategic environment
is related with move or transition in which the employees have to accept the change and consider
the benefits of the company. In this step the employees accepted that there should be change in
the stores and there should be self-service in the workplace. The company accepted and done
their job with efficiency without compromising with the quality and service offered in the
market. The last stage is related with refreeze in which the change is accepted and implemented
like in the workplace the self-billing system and LCD are considered so that customers can avail
the services on their own and after implementation the company become stable and then
refreeze. So, now the operations are managed in an effective manner (Edward, 2016).
Recommendations
So, it can be recommended that these changes should be considered by the company so that it
can be easy to boost the overall efficiency of the employees. The focus should be given by
considering the factors so that at the time of implementing the change issues does not arise. So,
training should be given to the employees at the time of implementing the change so that it can
be easy for the employees to accept the change which is implemented in the workplace.
Conclusion
Therefore, it can be concluded that it is important for the company to focus on overall factors
before making any decisions in the workplace. It can be seen that implementing the change is
not effortless and it is not accepted by the employees in the workplace easily but it is the
responsibility of the mangers to plan for the resistance and focus on proper communication with
the employees. It will help to boost the overall productivity and help to attain positive outcome.
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Strategic environment
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news-store-updates-self-service/
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Appendices
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Strategic environment
(Source: Mhugos, 2015).
(Source: Mhugos, 2015).
18