Business Strategy Report: Zara's Macro and Internal Analysis

This report provides a comprehensive analysis of Zara's business strategy, examining its macro-environment using PESTLE analysis, and its internal capabilities through SWOT and VRIO models. It also applies Porter's Five Forces to assess the competitive landscape and utilizes the Ansoff matrix for strategic planning. The report delves into political, economic, social, technological, legal, and environmental factors influencing Zara, along with its strengths, weaknesses, opportunities, and threats. Furthermore, the VRIO model assesses Zara's resources and capabilities, and Porter's Five Forces evaluates market competition. The analysis culminates in strategic recommendations for Zara, offering insights into its market position and future direction. The report emphasizes Zara's global presence, innovative software use, product quality, and employee skills as key factors in its success.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
P1. Applying particular frameworks identifying the impact and influence of the macro
environment as per the selected organisation and its strategies. ...........................................1
P2. Examine the internal environment and capabilities of a chosen organisation by using
appropriate frameworks..........................................................................................................3
P3. Applying Porter’s Five Forces model measure the competitive forces of a selected market
sector for an organisation.......................................................................................................6
P4. Applying a range of theories, concepts and models, interpret and devise strategic planning
for a given company...............................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategies can be identified as the combination of all decision making processes
which is generally performed by the business in order to fulfil the business goals effectively. On
the other side this can be said that it is the backbone of business which generally leads to the
goals in an desirable manner. The main purpose of business strategy is that it always achieving
the effectiveness and securing the advantageous position in an effective manner (Brewster,
2017). On the other side business strategy is the competitive set of action and moves that
business uses in order to attract customer efficiently. This present report is based on ZARA
which is a Spain based retailer company and dealing in clothes, cosmetics, accessories and so on.
Along with this report emphasis on PESTLE analysis in order to gain knowledge to affect the
macro environment. SWOT as well as VRIO to attain inside the organisational capabilities.
Moreover, Porter five forces and Ansoff matrix has been analysed for the strategic management
plan and strategic options as well.
P1.
In order to conduct the business operation in an effective manner company is required to
measure their macro environment which will assess them in order to measure the external factors
that has a good impact on the company. PESTLE analysis of ZARA is given below in order to
analyse factors from the macro.
PESTLE Analysis:
It can be explain as the strategic tools and technique which analyse the external factors
that influencing the company in order to create good strategies for running business operation in
a proper way (Cavusgil and et. al., 2014). Whereas, PESTLE stands for Political, Economical,
Social, Technological, Environmental and Legal. Now this analysis is given below in context of
ZARA.
Political factor: It is very well known factor which influence the business and their
financial regulations of country. This is because every nation have different government rule and
legislation. According to the local laws of the nation that can be create some difficulties in order
to entry in the new market. Political issues also gives the results in an negative manner because it
influence the economy significantly. That's why political factor is the very much difficult part of
every organisation. Due to these circumstances ZARA has to overcome this difficulties by their
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supply chain operations and neighbouring nations effectively. Through this concept free trade
agreement in Europe that help ZARA in order to boost their sales and future growth in an
appropriate manner. For the expansion of this company in new country they can approach lot of
customers without any political issues which also enhance the company sales and their market at
higher level. Along with this company also can achieve their target in a particular time frame.
Economical factor: Economic culture of any country also has a huge influence on the
business activities because economy always a tough factor for any kind of business. In reference
to ZARA that has the good strategy at affordable pricing. For this if economic operation people
are cost cutting and decline than people have the choice in order to switch away from the another
brand. That's why affordable pricing always helps to fight with other competitors in order to
create low effects on the activities of economy (Chang, 2016). Maximization of labour and
production can also lead the economies activity which can minimize the buying power of the
consumers who take initiate in the cutting cost. For all this ZARA has to adopt few strategies in
order to enhance their sales of clothes retail industry effectively, so that company can target
higher population in a better way.
Social factor: These are the essential factor of business because any business has to run
their business according to the society needs and demand. As per the present scenario, mostly
companies are investing in the social responsibilities which is not to attract customers but
investing in the social work is a good thing to do. On this basis if company will not follow the
social culture then they can lose their customers negatively. In reference to ZARA increasing
their customers day by day through the online shopping and store as well. Therefore, ZARA is
operates in lot of several countries globally because this company develop the diverse culture in
order to gain their goals effectively.
Technological factor: This factor influenced the growth and development of an
organisation because it changing the things globally. For this changing scenario ZARA always
used several kind of latest technologies in order to make their customer feel free. At the present
this company uses lot of approach like sensor with a smartphone in their stores. By this
technology customer can easily communicate with retailer efficiently (Chen and Jermias, 2014).
Legal factor: For this ZARA needs to develop their strongly enforce copyright laws
whenever they want to launch their product in the market. But they can not be resale their item
with affordable price at any shop because this against the laws of countries. That's why in order
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to keep maintain their brand reputation it is essential to make different product and launch them
accordingly.
Environmental factor: By this factor ZARA can get affected by their parent companies
because for the business is very much essentials to become more important than ever. For this
ZARA apply different things in their stores like water facility, sitting facility which helps in
increase the company's goodwill in front of the customers effectively.
P2.
In order to identify the internal environment of ZARA has also performed VRIO AND
SWOT analysis. This will measure the capabilities of this organisation in a specific way.
SWOT Analysis:
Strength Weakness
 ZARA is the world's famous retailer
organisation with the huge capital
investment over the 2200 stores in the
93 countries effectively. So that it can
easily meet customer demands as per
their marketing sales and shares.
 Main important thing is that this
company can easily make or design lot
of stock a new outfits in their
international stores within the 20 days
as compare to the other retail stores
(Goffee and Scase, 2015).
 It has the quick evolution of electronic
commerce so that their customer can
get new product instantly.
 This company can effectively enhance
their sales in several countries by the
customers demand appropriately.
 As per the weak point company has to
face their lot of competitors like
Adidas, Nike, Levis and so on.
 Due to the changing environment of
technologies customers likely to see
the adverts online rather then the
leading of digital marketing which
mainly enhance the company sales
effectively. So that it can be tough for
ZARA because all these firms also
investing in the online advertise
effectively.
Opportunities Threats
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 This company can also form itself in
the emerging market like Nigeria,
Brazil, South Africa as well as
organization able to open their more
stores in the China, UK and India. It
will bring opportunities to ZARA in
order to enhance their sales easily.
 Due to the higher range of
unemployment in Spain, this
organisation can get cheap labour in
order to make low cost of production
which maximise the sales of their
business because they attract customer
with the high quality of products
effectively.
 In the case of threats Zara faces lot of
economic instability in the several
countries wherein it is operated.
 In most of the countries fashion retail
industry does not have similar
copyright protection as different
creative media such as literature and
film (Jeston, 2014). But in the case of
Zara it mostly uses the copied by the
designers so this situation can affect
the company sales in negative
manner.
VRIO Model:
For analyse the capabilities of an organisation, VRIO model has been utilising in
reference to the Zara which are given below:
Factors Valuable Rarity Imitable Organized At last, what
is the result?
Products Products Products Nil Nil Partially
Software Software Software Software Nil Comp.
Advantage
for the
general
basis.
Employees Employees Employees Employees Employees Competitive
advantage.
Global Global Nil Nil Nil competitive
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presence presence Disadvantag
es.
In order to analyse the capabilities of Zara determine the four resources which are global
presence, software, employees and products.
Valuable
It defined the opportunities which is based on the company's capabilities in order to
achieve goals and objectives effectively. In which valuable factors of Zara are given below:
Global presence: Global presence of Zara is very good in the market internationally in
the wildest way. Having this great presence this organisation can easily achieve their goals
effectively.
Software: Zara uses several kind of software in order to operate and manage their
functions smoothly within the marketplace.
Products: In this Zara prepares high quality of product by using the latest technology in
order to make good customer relationship effectively.
Employees: The staff members of Zara operate their company functions in a better way
in order to achieve goals appropriately.
Rarity
It refers to the several kind of aspect in which company rarely meets the advantages
within in the competitive market. There are few rare resources which are given below:
Products: In this products are provided by the company according to the latest
technologies and trends, so that it rare for other organisation in order to copy them (Jocovic and
et. al., 2014).
Software: In this software which is used by Zara all are keep maintained in order to
implement several ideas. It is also rare to the other firm to adopt these ideas.
Employees: Zara have the high skilled employees and they can implement their own
ideas with in the organisation in order to achieve goals easily.
Imitable
It determine about the several sources of an organisation which can not be copied by any
competitor in the industry. Few imitable are given below:
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Employees: As per this all employees have the good knowledge and skills as they are
getting several training programmes from Zara.
Software: This is used by Zara and design according to the organisational structure in a
better way.
Organized
It considered on those elements which require to be arranged in a systematic manner in
order to achieve targeted objectives in an appropriate way.
Employees: These are those staff members which are always used by the company in
order to give them training programmes and different session by the employer effectively
(Klettner, Clarke and Boersma, 2014).
P3.
Porter's five forces model is mainly determine the particular tool which is commonly
used by the several business enterprise to examine the business relation that is available within
the market area. In reference to Zara, this can be understood that company's manager opt this
porter's five forces model for measuring the actual competitive condition of market for an
organisation. With the help of this concept company can easily implement their strategies in a
different and attractive manner. There are all 5 forces of this models which are mentioned below:
Threat of new entry: This is difficult in order to achieve industry goals in which
functions of Zara operated. This condition also creates the production but costlier for the new
entrants. According to this company needs lot of sources in a higher way new entrants make it
very difficult In a negative manner. Along with this capital expenditure is also very much high
this is because higher development and high research costs effectively (Laudon and Traver,
2016). In order to overcome these issues Zara has to take advantage in regards with economic
scale within the organisation. Also this company has to focus on making the strong relationship
with customer with effective brand name image efficiently.
Bargaining power of suppliers: In the marketplace there are lot of bargaining power of
suppliers in which supplier have low control over the price and that makes them low bargaining
power of suppliers in a weak force. According to this supplier do not offer any kind of threat for
integration in to the industry in which Zara is operated. For overcome these issues Zara has to
purchase raw material from the suppliers at a low price. In that case it the product cost of Zara
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not suitable so that Zara can easily switch to another supplier where cost is low. Along with this
Zara can also develop the strong relationship with its suppliers in which they both can get
benefits effectively.
Bargaining power of buyers: There are large number of suppliers with in the market
place in which Zara is also operated. In this condition buyers has the choice to select one firm so
that they do not have much control over the price. In this product differentiation is very high
because according to this buyers are not able to find out the other options of firms in a particular
manner (Lawton, 2017). On the other side quality matters a lot in front of the customers so that
buyers can easily purchase within the industry. For this Zara can focus on their innovative ideas
and product differentiation effectively.
Threat of substitutes: There are some substitute of products are available in the market.
But there are few substitute who are produced their product through low price. It means there is
not much profit in which firms can easily earn in the organisation in which Zara operates as well.
There are some substitute which are available on the higher price in a more expensive way. For
reducing all these errors Zara has to improve their product quality effectively so that buyers can
easily select the product and also can get attracted towards them. Apart this Zara ensures that
they will provide benefits to their customers in order to understanding their requirement and
needs effectively.
Competitive rivalry: In the present market, there are huge number of competitors with
in the industry. It influence the firms negatively by this any company can not move in another
place without any noticed. This situation create rivalry among the existing firms. By this there
are some competitors who have a huge market share it means they are involved in the
competitive action in order to gain good position in the market and they also want to become
leader of the market (Peng, 2017). In reference to Zara this can be said that company is required
to focus on the several products on the basis of competitors will have low influence and customer
can get their product easily.
As per the above explanation about Porter’s five forces model this can be said that this
model is very helpful for Zara and it leaders or managers in order to generate good plan of
marketing and gaining competitive advantages effectively. Along with this by using this model
company can easily increase their growth and sustainability for the long period of time with in
the market.
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P4.
Ansoff Matrix is the tool of strategical planning in order to lead management team of the
business organisation effectively. By this a firm can increase their growth in the effective
manner. In reference to the Zara their manager and leader has formed to use this aspects in order
to analyse the best growth rate scheme in an effective manner. There are four strategies which
are briefly given below:
Market Insight: It is the kind of growth strategies rate which is generally categories the
delivering products those can be exist in the market effectively. In context to the Zara this can be
said that their leaders and managers always adopt a unique and different strategies with the help
of focusing on several kind of customer’s with in the existing market effectively. With the helps
of this concept company can achieve their target in an effective manner (Scholes, 2015).
Market expansion: This is also known as the market improvement strategy. It mainly
focusing on the providing existing products and services in to the new market place effectively.
The main purpose of this strategy is to intensify company sales at higher level. In context to Zara
it can be really said that by adopting this strategy this organisation can effectively increase the
profits and by this they also able to get geographical areas efficiently.
Product expansion: According to this strategy an organisation concentrate on
developing the unique product within the existing market. In reference to the Zara, if this
organisation will adopt this strategy as per the behalf of consumers than they have to generate
product according to the customer base. Moreover, these products also provided by the existing
market at the same time. Now it can be said that Zara can easily expand their clothing market in
United Kingdom and any other benefited are within the marketplace. So that this process can
helps the company a lot to raise there gross revenue with extra profit effectively.
Diversification: This strategy always provide the new product with geographical area. It
seems to be the very much risk effective strategies which is always not available for any kind of
organisation because it is possible when any firm makes new product in order to get customer
support with new product in the new market effectively (Veita nd et. al., 2014). If Zara will think
to adopt this stratgey than it be comes as a very much expensive strategy but it has good impact
on customers in order to build strong relationship efficiently. Therefore, it directly affects the
customer and sales of companies in a higher way.
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As per the above analysation of Ansoff Matrix it has been concluded that Zara should
adopt the market penetration strategy in order to make their relations with customers effectively
and by this they can easily improve the company sales in an effective manner. This strategy
make them customers happy in an efficient way (Spender, 2014). This process make it easier and
this is also good for Zara in order to adopt several things or unique strategies in order to earn lot
of profit and sales effectively.
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