Applied Corporate Strategy: An Analysis of Zara's Business Model

This report provides a comprehensive analysis of Zara's applied corporate strategy. It begins with an introduction to corporate strategy and the selection of Zara as a case study, highlighting its position in the retail industry. The main body of the report conducts an external analysis using PESTEL and Porter's Five Forces models to assess the business environment, identify opportunities and threats, and determine industry attractiveness. An internal analysis follows, evaluating Zara's resources, key competencies, and core competencies through VRIO analysis, value chain, and resource analysis. The report also examines the strengths and weaknesses of Zara. Finally, the report evaluates a recent strategy implemented by the company using the SAFe criteria, and concludes with a summary of findings and recommendations. The analysis aims to understand how Zara attracts customers and operates as a responsible fashion brand, providing insights into its customer service quality and strategic decision-making processes.

Applied Corporate
Strategy

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
1) Conduct external analysis of business environment and industry in order to identify a different
opportunities and threats and assess industry attractiveness....................................................................3
2) Analyze an organization’s resources and key competences as well as identify its core competences
(key factors which gives a company competitive advantage)..................................................................6
3) Select one strategy that the company implemented recently and evaluate it using SAFe criteria......10
CONCLUSION.........................................................................................................................................12
REFRENCES............................................................................................................................................13

INTRODUCTION
Corporate strategy is considered as highest strategic plan for a company. Here, corporate
is determined as goals as well as direction which an organization wants to attain and strategy is
action plan or management activities that they conducted to attain that goal successfully (Ben-
Amar, Boujenoui and Zéghal, 2014). It is also seems as long term defined vision which provide
direction to company so they can attain their target. Organization case selected for this
assignment is ZARA which is operating in retail industry; it is founded by Amancio Ortega and
Rosalia Mera in 1975. Its head office is located in Spain and they are services their wide range of
products at worldwide level. The main aim of conducting this report is to understand how ZARA
attract their customer and become responsible fashion brand. It will also define quality of
respective company customer services. These all evaluation will be done through different
models or theories i.e. PESTEL Analysis, Porter’s five forces, VRIO, Value Chain and Resource
analysis. Moreover it will also include strengths and weaknesses of respective retail brand.
MAIN BODY
1) Conduct external analysis of business environment and industry in order to identify a different
opportunities and threats and assess industry attractiveness.
Pestel analysis
 Political factor: Political factor is considered as biggest source of creating uncertain
situation for fashion industry. At United Kingdom several geopolitical events rocked
fashion industry in year 2016 and 2017 as well as it is expected that things could get
changes. Moreover, political condition of UK is stable.
o Opportunity- In respect of ZARA, it is opportunity for them to conduct their
business at UK as their political condition is stable which help them in increase
business and profitability (Bereskin and Hsu, 2016).
o Threat- At United Kingdom there are some hidden corruption situation which
may affect business of respective company while conducting importing and
exporting of merchandise.

 Economical factor: Respective factor highly impacted on the fashion retail industry of
every nation. In respect of United Kingdom their economic condition is strong as
compare to other nations as well as they also high GDP rate.
o Opportunity- United Kingdom also promotes foreign direct investment which
seems as opportunity for ZARA as they can boost their business and profitability
ratio (Churet and Eccles, 2014).
o Threat- In 2008 and 2009 UK face very bad recession situation from which they
are getting recovered slowly but impact on sales of ZARA clothing because it is
considered as luxury brand which can’t be afford by everyone easily.
 Social factor: It is considered as one of the main factors in the growth of fashion retail
industry. United Kingdom has high social standards which lead to effective
circumstances for all.
o Opportunity- United Kingdom population preferred high standard of living which
provide opportunities to ZARA to run or operate their business there as by it they
able to increase their market value and profitability.
o Threat- In respect of fashion industry social preferences get change in small
duration and there are many companies who always come with new design and
trends. This situation is considered as threat for ZARA as they need to design
according to location and its preferences.
 Technological factor: It is considered as one of the essential factor for enhancing
fashion retain industry as through that companies come up new and innovative ideas
(Feizabadi, Singh and Motlagh, 2014). United Kingdom is technology driven country
their people like and attracted toward new as well as advance technology based ideas,
products and services.
o Opportunity- In respect of ZARA it will be opportunity for them that they can use
innovative and new technology for promoting their products as that will help in
attracting more and more customers at United Kingdom market.
o Threat- At United Kingdom there are already numbers of retail companies which
use advance and new technology which may affect business of respective
company.

 Environmental factor: In fashion retail industry environment as well as sustainability is
very important. Government of United Kingdom are also very strict and focused toward
care of environment, they also develop numbers of legislation which are essential to
followed by companies.
o Opportunity- In respect of ZARA they must adopt strategies for minimizing
carbon footprint as that will help in attracting more and more audiences at the
United Kingdom marketplace (Gazzola and Colombo, 2014).
o Threat- At United Kingdom weather can change anytime which may impact on
the transportation of respective company.
 Legal factor: In retain fashion industry legal factor consideration is also important
because by adopting it companies can avoid legal issues or challenges. In respect of
United Kingdom there are also several legislations for retail industry which essential to
follow by all.
o Opportunity- For ZARA it wills opportunity that they can operate their business
effectively by adopting each and every employment as well as retail laws of
United Kingdom.
o Threat- It is threat for respective company that if they not follow legal rules and
regulations then it will impact on the ethical image of company which directly
affect their profitability and market shares.
Porter’s Five Forces
 Bargaining power of buyers: In respect of ZARA bargaining power of buyers is
moderate because there company has both loyal as well as non loyal customers range
(McManners, 2014). So non loyal customers can switch brand when they not fine their
expected products whereas ZARA has numbers of loyal customers which ensure sales.
 Bargaining power of suppliers: The bargaining power of ZARA suppliers are low
because they are operating in fashion industry and there are numbers of vendors who
provide similar types of material. Along with this, it is strategy of respective company as
they develop and maintain quality partnership with suppliers which help them in
conducting business.

 Competitive rivalry: In respect of ZARA competitive rivalry is high because there are
numbers of competitive companies who are performing their business at the same sector
such as H&M, Marks and Spencer, Gap and many more. Along with this, these
companies conduct business at worldwide level similar like ZARA which impact on their
business and profit.
 Threat of substitutes: Threat of substitutes is moderate for ZARA because they have
numbers of loyal customers who only preferred their cloths and other products. On the
other hand there several competitive company who offers similar variety of products such
as GAP, H&M and so on.
 Threat of new entry/ exit: In respect of ZARA threat of new entry and exit is low
because there is high entry and exit barriers as well as industry also required high fixed
cost (Porter's five forces model applied to Zara, 2020). So it will be opportunity for
respective company to boost their business at the potential marketplace.
2) Analyze an organization’s resources and key competences as well as identify its core
competences (key factors which gives a company competitive advantage).
In order to analyze a company resources and competences there are several models which
can be used, from which some are used by ZARA which are explained below:-
Strengths Weaknesses
 ZARA offer unique design which
attract customers and make them loyal.
 Respective company has strong
presence in global market which helps
in gaining high profit.
 ZARA has high brand value in retail
industry which attracts audiences.
 Respective company has effective
supply chain which help them in up-
date their new collection in two weeks
whereas competitors take 6 weeks.
 ZARA launch 1000s of design every
 ZARA is not specialized in one section
they has everything’s for everyone like
other competitors.
 Respective company couldn’t conduct
advertisement due to which they not
attract all audiences (Minár, 2016).
 Respective company has low safety
stock which impact on customer’s
expectation.
 ZARA has low presence some fast
growing market such as Malaysia,
Thailand, Newzealand and so on.

year which attract customer and
encourage them to visit store.
 Physical appearance of ZARA store is
very attractive (Pantano, 2014).
 Respective company is lacking in
demand forecasting which impact on
their business as they not able to grab
opportunities.
 ZARA website contain very limited
information which impact negatively
on customers decision making.
VRIO analysis
Resources Valuable Rare Inimitable Organized
Products design
and quality
Yes - - -
Quality
customers
services
Yes - - -
Strong market
presence Yes Yes Yes -
Financial
condition
Yes Yes Yes Yes
Valuable – It refers to those resources which are valuable for a company because through that
they able to gain competitive advantage at marketplace (Parawansa, 2015). In respect of ZARA
there valuable resource are:-
 Products design and quality: It is valuable because through it company able to attract
wide range of customers at market place.
 Quality customers services: It is valuable because through it ZAR able to develop and
maintain effective relationship with customers.
 Strong market presence: This resource is valuable as they not do promotion activities but
able to increase their customer’s base.
 Financial condition: It is valuable because through it respective company able to operate
effectively.

Rare- It refers to those resources which are rare at the marketplace and no other company has
same resource. In respect of ZARA their few resource are not rare i.e. products design and
quality because there are some other company who offer similar variety (Park, 2014). But there
are several resources which are rare:-
 Quality customer’s services: ZARA offer special customers services which help them in
maintaining effective customer relation as well as it also help in retaining them.
 Strong market presence: It is rare because even if respective company not conducts
promotion activities they able to attract wide range of audiences.
 Financial condition: This resource is rare because not every company is financial strong
like ZARA.
Inimitable- It refers to that resource which can’t be copied by any other companies. In respect of
ZARA their some resource can be imitate such as products quality and design as well as quality
customer’s services. But there are some resources which are inimitable:-
 Strong market presence: Respective Company has very strong presence in market as
without conducting advertisement they able to attract wide range of audiences (Puranam
and Vanneste, 2016).
 Financial condition: The financial conduction of ZAR is strong which cannot be copied
by any other firm.
Organized- It refer to those resource which not need to be organized after some time duration.
In respect of ZARA their some resources need to organize i.e. products design and quality,
customer’s service and market position. But they have few resources which are effective:-
 Financial condition: ZARA financial condition is effective it didn’t require any type of
organized practices.
By conducting VRIO analysis ZARA able to determine its capabilities as well as it also
help in conducting resources analysis according to which management can develop effective
corporate strategy.
Value chain

Primary Activities
 Logistics: It refers to the warehouse or distribution centre of a company from which they
store finished products in order to fulfill demand of customers at the time of requirement
(Purce, 2014). In respect of ZARA their distribution centre are at Brazil and Mexico from
where they fulfill requirements at store. Along with this respective company use mobile
tracking system which are fast handling because through it they can effectively estimate
demand at marketplace. This also makes possibility of twice weekly delivery at every
ZARA store as well as their distribution centre are interconnected which make fast
moving of merchandises.
 Marketing: It is considered as strategy which is adopted by a company in order to
promote their products or services so that more and more audiences know about it. That
will help them in encourage purchasing products quickly. In respect of ZARA they spend
very less in their promotion and advertisement practices as compare to their competitive
companies. This is so because they belief in word of mouth advertisement.
 Operations/ Sourcing: It refers to that factors which is related to supply chain and
sourcing of a company. Suppliers as well as headquarter are linked together through
which supply coordination along with ZARA’s projections is real or possible. Moreover
they so postponement of finalized design so that they can update new products or design
at the time of season. They also pull strategies so that they can quickly satisfy need and
demand of customers in effective manner.
 Products design: This factor show products or services which are offered by a company
to its potential customers so that they can sustain in market. In respect of ZARA they
offer attracting fashion products which are based on customer’s feedbacks, latest fashion
trends as well as by tracking market event (Zara - Value Chain, 2020). Respective
company have approx 300 designer who design more than 11000 designs per year so that
their potential customers get best products.
Support Activities
 Firm infrastructure: According to this factor it is essential for every company to ensure
that their legal structure, finances and structure of management are working effectively
as well as it help in driving firm forward(Rugman and Verbeke, 2017). In respect of

ZARA, their infrastructure support ideas or thoughts of freshness of their offerings.
Along with this, they have attractive stores around the world as well as they have
positive word of mouth.
 Human resource management: Every company need to conduct recruitment, training
and development activities so that they get best employees who will help them in
boosting business impressively. In respect of respective retail store there are approx
14000 employees in ZARA fully owned several factories that are near La Coruna.
Moreover company also provides training and development to their staffs in order to
enhance their skills, abilities and knowledge.
 Systems: It refers to process which is adopted by a company in order to conduct their
work in effective as well as successful manner so that they can fulfill need, demand and
expectation of customers. In respect of ZARA their manager conduct coordination on
regular basis in order ensure that all activities are conduct properly so that they can
attract customers through new designs.
3) Select one strategy that the company implemented recently and evaluate it using SAFe
criteria.
ZARA is one of the leading and famous fashion retail companies and they have numbers
of strengths which help them in boosting their business but they also have some weakness which
affects their operation (Samarasinghe, 2016). Strengths and weakness of ZARA are given
below:-
Strengths
 ZARA is highly intimate relationship with its potential customers which help them in
retaining customer by making them loyal.
 ZARA’s professionals or designers develop products according to customer’s needs by
taking feedback and considering it along with latest trends.
 ZARA store have RFID (Radio Frequency Identification Technology) by which they can
track location of garment instantly as well as it also help them in fulfill demand of
customers rapidly.
 ZARA’s conduct several practices for sustainability and enhancing customers
experiences for example eco store as well as joint life collection (Spear and Roper, 2016).

Weakness
 The main weakness of ZARA is that they didn’t conduct advertisement and promotion
activities due to which they not able to attract as much as audiences which can by these
activities.
So it is essential for ZARA management to develop strategies related to implementation of
new as well as advance medium of advertisement and promotion as through that they able to
attract wide range of audiences towards their store. Moreover it will also help in enhancing
market value, sales and profitability ratio by which company can gain competitive advantages at
the marketplace. In order to understand effectiveness of strategy ZARA management may use
model such as SAFe criteria, which is explained below:-
 Suitability: According to Factor Company management will determine opportunity and
suitability of the strategy which they are going to adopt. In respect of ZARA strategy to
adopt new and advance promotional as well as advertisement techniques will be effective
because through that they able to attract more and more audiences towards. This increase
footfall, sales, profitability and market value.
 Acceptability: In this management will determine where new strategy will fulfill
expectation of company’s stakeholders and what are risks included in strategy. In respect
of respective company stakeholders expectation will get fulfill because sales and market
value of ZARA will include which help them in gaining more profit (Zhu and Chen,
2015). Along with this, in respective strategy risk factor is low because through it firm
can attract more customers which enhance their publicity.
 Feasibility: It is the last factor of SAFe analysis in which company management will
determined whether the proposed strategy is real or practical or not. In respect of ZARA
adaptation of new and advance promotion as well as advertisement medium is practical
because that directly leads to enhancement in profitability and market shares by increase
customers bases and sales.
By conducting SAFe analysis ZARA management able to understand that adaptation of
new and advance promotions as well as advertisement techniques will be effective for them
because through that they able to attract more and more customer. Moreover it will also help in

increasing footfall at the store which directly linked to increase in sales as well as profitability
ratio at potential marketplace.
CONCLUSION
By conducting analysis of above discussed point it can be evaluated and summarize that
for being a successful brand in marketplace a company need to conduct effective corporate
strategies as that will help in developing decision according to situation. For this an organization
need to conduct analysis of macro and micro environment which can be done through several
models such as PESTEL analysis for external factor and Porter’s five forces analysis for
evaluating competitive market situation. Along with this, company also conduct other models
like VRIO analysis, Value chain analysis and Resource analysis as these model help in
determining internal capabilities and effectiveness according to which decision can be made
effectively. Along with this company management also need to determine their strengths as well
as weaknesses because according to that they can develop decision for gaining competitive
advantage at marketplace. So it is essential for all companies to conduct these analyses before
making corporative strategies for business operations and functions.