Strategic Analysis of Zara: External, Internal, and SAFe Evaluation

This report provides a comprehensive strategic analysis of Zara, a prominent apparel retailer within the Inditex Group. The analysis begins with an external assessment of Zara's business environment, utilizing frameworks such as PESTLE and Porter's Five Forces to identify opportunities, threats, and industry attractiveness. The report then delves into Zara's internal resources and capabilities, employing VRIO analysis to pinpoint core competencies and competitive advantages. Finally, the report evaluates a recent strategic initiative undertaken by Zara using the SAFe criteria. The report covers Zara's operations in the global market, examining political, economic, social, technological, legal, and environmental factors. It also assesses the bargaining power of suppliers and buyers, industry rivalry, and the threat of substitution. The VRIO analysis evaluates the value, rarity, imitability, and organization of Zara's resources. Overall, the report provides valuable insights into Zara's strategic positioning and future prospects.

APPLIED
CORPORATE
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
External analysis of business environment..................................................................................1
Discuss the prominent resources and capabilities of organisation that links with competitive
advantage.....................................................................................................................................5
Recent strategy that company undertook and evaluate it using SAFe criteria............................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Corporate strategy refers to the strategic plan which depicts the goals and objectives of an
organisation. It is useful in describing suitable values and believes that are based on long term
strategies which influences people to attain strategic goals. It also offer pre determined vision to
organisation in order to develop value of company. It is considered as an ongoing process which
describes Vision and Mission of company (Rugman and Verbeke, 2017). For this report Zara is
considered which is a Spanish apparel retailer based in Artexio, Spain. As company specialises
in in fashion products including accessories, clothes, shoes, swimwear, beauty and perfumes and
considered as the largest company in the Inditex groupwhich is the biggest fashion group in the
world operates over 7200 stores in approx. 93 markets. Its flagship store is Zara but also own its
chain including Massimo Dutti, Bershka, Oysho, Pull and bear and so on. Moreover this report is
based on the prominent information is provided in the case study and in regard of this various
frameworks are used such as PESTLE analysis, porter’s five Force model and safe criteria will
be done to determine the current position, threats and opportunities for company.
MAIN BODY
External analysis of business environment
Business environment is the collection of both macro and micro factors which impacts the
business functioning and activities. For this internal factors include customer’s human resources
suppliers physical Assets and Management meanwhile external factors considered political legal
economical environmental and social factors. Zara relies under the top 10 largest clothing retailer
as it is influenced by the external environmental factors that are discussed as underneath:
 Political factor: This factor include prominent changes in the global Trading regulations
including political stability government strategies trade policies and so on as these are the
factors that are important and keep in mind while executing and launching new product in
the market (Eccles and Youmans, 2016). In the political context the biggest opportunity
for company is the European Union and there are extensive trade agreements which not
only make easy to import raw materials and export finished products but also means that
Zara can trade its Merchandise across the world with Limited efforts for low cost.
Therefore the European Union’s free trade policies are quite beneficial for Zara. Away
with this it is also analysed that whenever company wants to expand its business it
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becomes very long procedure and reason behind is the Government of country and
political instability which impacts the operations of company.
 Economical factor: It includes the inflation rates interest foreign exchange rate and
unemployment which impacts the business functioning of Zara. For this low cost labor
become an opportunity for company as Spain has the highest unemployment rate in
Europe in comparison to other countries like France Germany and UK. For the good
manufacturing fraction of products the low labor cost allows Zara minimize cost that
leads to improve profitability (Samarasinghe, 2016). In addition to this its products are
relative Lee affordable in comparison to other European fashion brands which allows
company to expand its business in poor countries as well. Away with this Zara witnesses
the fluctuations in economy in last many years but because of its revenues Zara does not
affected by the recession which arise in 2011. Moreover because of the various custom
duties and several levels of tariffs in different countries the price of products can fluctuate
according to the custom duties and Taxes of country.
 Social factor: It considered the population growth rate lifestyle believe attitude and
safety of people. In terms of Zara despite of its price factor it is considered as the
fashionable brand in which company is praised by its customers. In relation with this
Zara offer good quality product not only for its profitability but also retaining its
customers for longer period of time by thanking them which is its marketing effort
(Puranam and Vanneste, 2016). This positive brand presents became opportunity for Zara
together prominent profit margin for its shareholders. Moreover Zara also offer online
shopping to its customers as currently many people want their products with the help of
just one click as it becomes convenient for them. Therefore Zara pay close attention
towards the performance of its online outlets in order to offer prominent services.
 Technological factor: It includes level of innovation automation technological awareness
incentives and research and development activities. Zara is the first brand which use
technology for the expansion of its product and reach too many customers. Company
prominently use information technology in order to support its Global logistics system
and online outlets in which exchange and return of commodities are involved for this
Zara give chance to its customers to purchase its product with the help of their
smartphones and in-house apps which can become opportunity for company to hold its
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customers for longer period of time. Moreover start a project named store locator as a
website in which its customers can easily locate nearby store according to their region
and location. Because of this it becomes easier for customers to find stores with the help
of Internet and online maps.
 Legal factor: This factor includes discrimination laws employment law antitrust
consumer protection copyright and so on and also important for company to avoid
illegality. The Government of India Mexico and Russia has their own corporate policies
and because of this company need to modify its operations according to those policies
which can put pressure on Zara and its product in regard of making sure that the laws and
legislations are properly followed in their business operations and functions (Bereskin
and Hsu, 2016). Moreover branded retailers like Zara has value of the brand equity
because they develop prominent Bond and relation with their customers with their brand
name and trademarks. In regard of this many local retailers can copy the new products
and design of Zara and offer them at low prices and you to this company itself face some
copyright issues which can become threat for company in terms of reputation and
profitability.
 Environmental factor: It includes environmental policies weather conditions and climate
which should be determined by the companies while developing their marketing plans
and products. For this environmental conditions of Japan has negatively impacted the
operations and business functioning of Zara as a series of disaster stuck in Japan which
leads to develop Tsunami which was one of the biggest and devastated in many ways. In
terms of apparel industry and its supply chain it leads to damage the local infrastructure
close ports eruptions and many more problems that are faced by apparel industry during
this time (Pyles, 2016). In addition to this the weather conditions in Asian countries is
quite different from European countries as variations in season leads to who developed
change in fashion depends on the local weather which put pressure on company to
develop more and more products and increase the sale of their current product.
Porter’s Five Force Model
This model is useful in order to determine the business competition takes place in the
environment is it includes suitable five forces which analyse high competition and strength
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weaknesses of the competitive industry. It carries some factors with that that are discussed as
under:
 Threat of entry: It depicts the thread from the existing organisations because of new
entrants. In apparel industry computers are increasing continuously which leads to
develop competition for the existing organisation when new entrants get good response
from customers (Surijah, 2016). In relation with Zara the threat of new entrants is low
because of the several Strategies and innovations of company e that are highly updated
and tech savvy which is not so easy for their competitors to opt these strategies. For this
company already acquire use market area and develop its brand loyalty among customers
it is quite tough for new Rivals to grab that position.
 Bargaining power of suppliers: It depicts the power of suppliers which they hold like in
raw material. It describes the availability of suppliers in the market and their uniqueness.
In relation with Zara this power is moderate is company deals with many suppliers
regarding their raw materials that are useful in their production procedure. In regard with
this if any supplier denies to of a product or increase the profit margin then company can
shift from another supplier and can develop good relations with their effective supply
chain.
 Bargaining power of buyers: It describes the power of buyers to select prominent
product according to them with minimum price as possible. For this there are many
rivalry organizations present in the market that renders the product at low prices (Ledin
and Machin, 2016). In relation with Zara company on a target those customers who can
afford its product or belongs to middle or which class and because of their marketing
strategy the bargaining power of its customers is low as they are quite satisfied from the
offerings design and quality of product. In addition to this with the help of innovation
company can also develop large customer base.
 Industry rivalry: It shows the presence of existing Rivals in business environment who
brings down the prices and tends to decrease the overall profitability. Zara operates it’s
business in Retail Industry in which it deals in many products such as clothing shoes
perfume and so on and because of this its competitors face tough competition because of
its offerings quality and design of products. In addition to this company can sustain itself
by differentiating its offerings from other competitors to enhance its market size.
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 Threat of substitution: It describes that new product has already similar commodity
existing in the market which can develop for the new product of company. In Retail
Industry the threat of substitution is quite high as there are many local retailers and
market that offer qualitative and unique products at low prices which can hinder the
growth of company (Jasimuddin and Maniruzzaman, 2016). In relation with this Zara
need to put emphasis on its services instead of being focusing on its product and by
determining the code needs of Customer Company can handle the threat of substitution.
Discuss the prominent resources and capabilities of organisation that links with competitive
advantage
VRIO analysis is effective tool which is useful in planning and unveil and protect the
resources and capabilities in order to offer long term competitive sustainability. This analysis
include four elements considering valuable rare imitable and organised and in relation with Zara
all these resources are useful in determining the internal resources and capabilities which provide
competitive advantage for company and these are explained as under:
Resources Valuable Rare Imitable Organized
Goodwill Yes No No No
Organizational
culture
Yes No No No
Distribution
channel
Yes Yes No No
Financial resources Yes Yes No No
Technology Yes Yes Yes No
Human resources Yes Yes Yes Yes
 Valuable: This factor put emphasis on the valuable services that are provided by Zara full
stop for this the valuable resources include the goodwill, organisational culture,
distribution channel, financial resources, Technology and human resources that are
offered in wide range by Zara. Because of this factor companies able to enter in new
areas and countries and acquire many people and gain their trust regarding the product
and reason behind this is the quality and image of company. The image culture
Technology quality and so on are developed by human resources and their skills which
are quite prominent and valuable for company in effectively creating its value within the
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business environment (Hong and et. al., 2019). For this technologies used by companies
quite helpful in order to develop its product and financial resources that leads to provide
smooth working and make sure the efficiency of product within the market.
 Rare: It describe those key areas that are rarely available and exist within the market and
prominent for company because these resources are rare. In relation with Zara it includes
distribution channels, financial resources, technology and HR as these are the resources
which each organisation does not have and leads to develop growth and image of
company within the dynamic business environment (Rao and Tilt, 2016). For this the
financial resources and qualitative products are the prominent rare products which are
offered by Zara and also determine meaning its Technology and skilled workforce are
considered as the significant asset and method of generating income for organisation.
 Imitable: It describes those products which cannot easily imitate by others as it includes
Technology and skilled workforce. In relation with Zara it has global and local presents
which cannot be copied by its competitors and it is possible because of its technological
advancement and skilled workforce that are patient and polite enough to deal with their
potential customers and concerning queries. Technology is the factor which cannot be
easily copied by other company as it is confidentially kept by Zara.
 Organized: It is quite clear from the performance of company as the functioning and its
presents are quite organized which becomes possible because of its human resources as
they offer company with the separate identity and place in the market (Viscelli,
Hermanson and Beasley, 2017). Human resources are quite efficient and autonomy in
decision making and also contribute towards the success of Zara and leads to develop the
brand image of company in effective manner by giving the trust of customers.
Recent strategy that company undertook and evaluate it using SAFe criteria
When company formulate it strategy then it is quite difficult for them to determine which
is quite better for them. In relation with this Zara has implemented a strategy of qualitative
customer service that leads to develop sustainability and clarity among customers and market. In
relation with this qualitative customer service is termed as the prominent business strategy which
is useful in retaining customers for longer period of time by determining their preferences and
requirements for making suitable position in the market. Following strategy is obtained by Zara
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will be criticized with the help of SAFe criteria that is useful and effective which is discussed as
under:
 Suitability: It is termed as the most significant factor in the safe strategy model as its
implementation is judged by others. In this context when Zara apply its new strategy of
qualitative customer service then it is quite important to check the suitability of strategy.
This strategy is considered as environment friendly and capable enough to attract more
customers (Chatterji and et. al., 2016). The strategy is suitable enough to develop clarity
and prominent functionality of the stores regarding the design and development of
product. In relation with this the designers of Zara immediately respond to the changing
requirements of customers and also react towards the current trends and feedback
received across the world. For this company has strong sales cash flow and earnings
growth which leads to develop the brand based on their innovation and sustainable cost
synergies.
 Acceptability: It is related with the implementation and making sure about the strategy as
it offer the sufficient returns to stakeholders and also analyze their prominent reaction.
The acceptability is all about measuring the risk factor and reaction of stakeholders
regarding the concerning strategy. The implemented strategy is also acceptable for all the
people as it leads to enhance the quality of customer service including radio frequency
identification Technology by cutting edge system to track the probable location of
garments immediately and making those products in demand that increases the customer
base in Rapid manner (Frandsen and Johansen, 2018). This strategy allowed Zara to
finish its implementation regarding the management of stock of market in which it
operates it stores and online platform which is now acceptable for customers. The
respective strategy is quite beneficial as the cost is increased by 25% and intended to
enhance the business functioning and operations by considering Innovation and other
growth opportunities. Away with this it also offer an angel benefits as this strategy offer
increment in goodwill and brand image of company in the market which is clear
regarding the execution of strategy and also offers sufficient returns that are expected in
return. The reaction of stakeholders is quite positive and environment friendly which is
appreciated by society and results in increasing the product Awareness of company.
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Therefore this strategy directly influences the positive profitability and sustainability for
Zara.
 Feasibility: Under this factor the financial feasibility of company is executed with the
help of strategy and criticized by other people full stop in this context it include the
prominent amount of Finance to the customer service team which is required to execute
the following strategy. Therefore for the implementation of policy and developing
sustainability company must have proper amount of resources and skilled employees that
are polite and patient enough to deal with customers and their queries these are the
factors which tends to execute strategy successfully.
CONCLUSION
By considering the above discussion it is described so that corporate strategy plays
significant role in developing short and long term strategies to eliminate the complexities of
Companies. Away with this it is also determined that political, environmental, legal, economical
and social factors are quite beneficial to evaluate the competition in the business and market and
the crucial factors which can become risk for company and impact its functioning. Moreover
SAFe criteria provide the prominent position in terms of enhancement and improvement of
company. As these criteria effectively work to determine the suitability, acceptability and
feasibility of strategies and before applying new strategy in the company they use SAFe model
by which companies can find best strategy for them.
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REFERENCES
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responsibility. Available at SSRN 2492202.
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