Zara's Competitive Strategy: PESTLE, SWOT, and Porter's Model

This report provides a comprehensive analysis of Zara's competitive strategy, employing three key frameworks: PESTLE, SWOT, and Porter's Five Forces. The PESTLE framework examines the external factors impacting Zara's business environment, including political, economic, social, technological, legal, and environmental aspects. The SWOT analysis assesses Zara's internal strengths and weaknesses, along with external opportunities and threats. Finally, Porter's Five Forces model evaluates the competitive intensity within the fashion and apparel industry, considering the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitute products, and the intensity of rivalry. The report highlights Zara's strategic responses to these factors, providing insights into its market position and competitive advantages. The report concludes by summarizing the key findings and the strategic importance of the frameworks used.

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COMPETITIVE STRATEGY

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Table of Contents
Introduction................................................................................................................................2
PESTLE Framework..................................................................................................................2
SWOT Explanation....................................................................................................................3
PORTER FIVE FORCE MODEL.............................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
Ever business enterprises have some collection of strategic tools help in the growth of their
business firm. These tools also help the business firm to build blueprint of future scenarios
benefit the enterprise in removing many uncertainties in the strategic plan. Due to dynamic
and competitive business environment, it is important for a firm to better comprehend the
implications of these competitive strategic tools and their associated applications (Sirmon et
al, 2011). Zara is selected to know the importance of these tool in practical terms for the
organisation. It is one of the leading Spanish apparel retailer founded in 1975. It is also a
leading brand of the Inditex (Lopez and Fan 2009). The three tools that are being selected and
applied on Zara to understand its competitive strategy includes PESTLE framework, Swot
analysis and Porter Five Forces.
PESTLE Framework
In business environment of Zara, there is presence of various external variables that impact
the growth and performance of the operational functioning of the company. To identify these
variables from all perspectives, management of ZARA requires PESTLE framework that
views for political, economic, social, technological, legal and environmental factors. Using
this framework benefit the company in the development of long term strategy and also help in
market development i.e. with giving appropriate response to the needs of overseas market and
new market segments (Yuksel, 2012). On small scale, it also helps the company to recognise
changing consumer trends and preferences in the dynamic business environment. The
PESTLE framework is presented and applied on Zara like below -
1. Political factors – In Europe, the free trade agreements help in boosting ZARA UK
sales as it allows goods to move freely amid European nations with no restrictions
(Thompson and McLarney, 2017). Political regulations of every country in which
Zara is operating also impacts firm sustainability and performance. For instance,
owner of Zara had paid fine Brazil as there workers were provided bad working
environments. Hence, Zara has a international existence, it is necessary for

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management to must take into account of political situation of the nations to bring
more stable business roots.
2. Economic Factors – Zara business is also influenced by level of economic activity in
any market or country. Since Zara has an international existence, therefore, the
competence to curb losses or slow gains is important.
3. Social factors – This external environmental factor put utmost importance for the
company and Zara undertakes its social responsibility in align with the varying trends
in the fashion marketplace. The company is fulfilling the needs of diverse cultures by
keeping innovation in mind. Culture also influences people buying decision and so
Zara does its examination and develops products that synchronise with the native
beliefs (Hyun Park et al, 2017). The organisation does not trust in experimentation
and thus shifts fashion that is acceptable for local people.
4. Technological factors – With the global market, technology is also changing in
expressions of communication, transport and everyday business. It also forces ZARA
to move up with technological trends. For instance, Zara also collaborated with
Toyota in 2014 for the application of Lean facilities and JIT through its business
operations (Leite and Vieira, 2015). This helps the company in increasing firm
responsiveness to the demands of customers. The company has also executed RFID
technology for tracking of inventory through its value chain.
5. Legal Factors – It is said that law is everywhere and every business needs to comply
with law to ensure its sustainability. Zara always focuses on developing its ethical
brand image. For instance, Inditex has executed various plans that assure living wages
for its workers. As Zara is a global brand, it is significant for the enterprise to
recognise and fulfil all laws that regulate the global market so as to be a successful
enterprise.
6. Environmental factors – Sustainability always be a prime concern for Zara and its
parental organisation Inditex has assured to develop its stores 100% eco-friendly and
efficient by 2020 (Grover, 2018). The company is also committed to reducing all sorts
of harmful waste from its supply chain structure. These initiatives help the company
to be a recognised brand all over the world.

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SWOT Explanation
Zara or any other enterprise can discover its corporate strength, weakness, opportunities and
threats in a structured way that helps the business to gain various opportunities in the market
through its strengths, In addition, it also helps the business to take out many protective
measures against the threats and weakness in relation to the enterprise (Jasinevicius and
Petrauskas, 2015). This tool not only developed for corporate enterprises but adopted by
various NGOs and communities in relation to their personal growth and development.
Considering Zara, this tools is applied in some specific ways -
Strengths
 In Apparel and fashion industry,
Zara comes outs as a leading retailer
with large capital investment and
having 2259 stores in 96 countries.
 New products are delivered by Zara
twice each week and ads up to more
than 10,000 new designs annually
(Petro, 2012).
Weakness
 Generalised collection is the first
weakness of Zara as the company is
not specialised in anything. This
direct focus is lacking in Zara and it
is not good for the contemporary
trend.
 Zara also undertakes limited
advertising and promotion in
comparison with other brands and
businesses. This pulls company to
not attract number of customers
towards their collections.
Opportunities
 The company can expand into more
international markets and mainly
emerging economies.
 E-commerce market and online
Threats
 Competition from H&M and other
brands is considered as biggest
threat to the company.
 It was found that various

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marketing are also gaining
significance that can be tapped by
Zara.
merchandisers are imitating Zara
designs leading to hurt the business
a lot and also impact the sales of
Zara Group.
PORTER FIVE FORCE MODEL
In 1979, Porter Five Forces framework was brought up by M. Porter discovering five key
competitive forces that straightly influence enterprise competitiveness in a particular industry
(Gary and Heiko, 2015). In case of Zara, it can help the management to identify the actual
competitive level in the fashion and Apparel industry so that to plan strategies according to
that. Hence, it can be applied like below -
 Threats of new entrants – Threat of new entrants is low due to high capitalisation
and infrastructure. Even though company is known for its limited marketing, but on
an average, Zara spends 3.5% of its revenue on promotion. This shows that the
company has high brand equity that makes it's valuable to the customers.
 Bargaining power of suppliers – The bargaining power of suppliers is low due to
low fibre price. In addition, local cooperatives work without contracts and labour
unions. Being a big brand name, Zara has the power to influence its suppliers to a
great extent.
 Bargaining power of buyers – Considering Zara, bargaining power of buyers is
moderate as to the consumers, they have a lot of choices. However, loyal and regular
customers of Zara do not go for lower quality apparel and Zara is a brand known for
its premium products.
 Threat of substitute services or products – There is low switching cost for the
consumer as they can go to other stores in place of Zara. In addition, various
merchandiser easily imitates the styles of Zara fashion and thus counterfeit the
products of Zara (Song and Mei, 2018). Therefore, threat of substitute can be said to
be moderate.
 Threat of Rivalry – Threat of rivalry is high in case of Zara due to an increased
number of firms entering into fashion and apparel industry. There are also various

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other recognised brands such as H&M, Uniqlo and URBN who are affecting Zara
growth and performance from various sides.

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Conclusion
Collection of these competitors’ tools help any enterprise to gain competitive advantage in
the industry by helping them to grab various opportunities from their macro environment.
With regards to this, it also benefits Zara to react proactively in response to many dynamic
variables in the business environment. Adopting these tools also benefit the firm in its market
development and reducing threat to a great extent as Zara has dominated the market in
fashion and apparel industry.

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References
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Hyun Park, S., Seon Shin, W., Hyun Park, Y. and Lee, Y. (2017) Building a new culture for
quality management in the era of the Fourth Industrial Revolution. Total Quality
Management & Business Excellence, 28(9-10), pp.934-945.
Jasinevicius, R. and Petrauskas, V. (2015) Dynamic SWOT analysis as a tool for system
experts. Engineering Economics, 50(5).
Leite, H.D.R. and Vieira, G.E. (2015) Lean philosophy and its applications in the service
industry: a review of the current knowledge. Production, 25(3), pp.529-541.
Lopez, C. and Fan, Y. (2009) Internationalisation of the Spanish fashion brand Zara. Journal
of Fashion Marketing and Management: An International Journal, 13(2), pp.279-296.
Petro, G. (2012) The Future Of Fashion Retailing: The Zara Approach (Part 2 of 3)
[ONLINE] Available from: https://www.forbes.com/sites/gregpetro/2012/10/25/the-future-
of-fashion-retailing-the-zara-approach-part-2-of-3/ [Accessed 13/08/2019].
Sirmon, D.G., Hitt, M.A., Ireland, R.D. and Gilbert, B.A. (2011) Resource orchestration to
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Song, S. and Mei, T. (20189) When Multimedia Meets Fashion. IEEE MultiMedia, 25(3),
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Thompson, J. and McLarney, C. (2017) What effects will the strategy changes undertaken by
next Plc have on themselves and their competition in the UK Clothing Retail
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