Retail Theory and Practice: Analysing ZARA's Strategies in UK Market

This report provides a comprehensive analysis of ZARA's retail strategies within the UK fashion market. It begins with an introduction to the retail sector and an overview of ZARA's position and size within the UK market. The report then delves into relevant variations in the fashion retail industry, examining both macro-environmental factors using PESTLE analysis (political, economic, social, technological, legal, and environmental) and micro-environmental factors using Porter's Five Forces (competitive rivalry, threat of new entrants, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers). The report discusses the impact of these factors on ZARA's business. Finally, it formulates and explains tactics and strategies that ZARA can employ to address organizational changes and overcome business-related challenges, offering specific recommendations to enhance the company's performance in the competitive UK fashion market.

RETAIL THEORY
AND PRACTICE

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Introduction to the concept of retail sector in context with business firms................................1
Overview of the selected organisation for position and relative size within UK market............1
Relevant variations in the fashion retail industry of United Kingdom......................................1
Discuss about changes related to macro environment and micro environment of business.....1
Formulate and explain tactics or strategics to deal with organisational changes in a proper
manner.........................................................................................................................................1
Provide recommendation for selected organisation to overcome business related issues and
challenges....................................................................................................................................1
CONCLUSION................................................................................................................................1
REFERENCES................................................................................................................................3

INTRODUCTION
Retailing in business is specified as a process to sell goods and services to customer base
with the help of different distribution channels. Major objective of performing retail activities is
to earn maximised revenues and profits. This helps a firm in gaining high advantage over rivals
in a proper manner. In this context, each organisation requires effective supply chain
management (Bodie, 2015). This report is going to mention about ZARA which is a Spain
based apparel and clothing retailer which is headquartered in Arteixo, Spain. This company is
pioneer in offering fast fashion products like accessories, perfumes, shoes, clothes etc. This
assignment will discuss about basic facts about retail sector and overview of chosen firm in
terms of their size and position. Also, changes that emerge is retail sector are discussed. Other
than this, impact of macro and micro environment on business of ZARA is discussed and at last
specific strategies are formulated to reduce the negative impact of business challenges.
MAIN BODY
Introduction to the concept of retail sector in context with business firms
Retailer is basically a person which manage their business operations and activities either
through online or offline stores. This term is used for those persons which sells a service or
product at small or medium level. These people have links with distributors and wholesalers so
that they can get the required quantity of finished goods without any difficulty. In context with
today's time, retail companies are needed to take distinct kind of decisions like selecting target
market, identifying customers, creating appropriately themed outlets etc.
Fashion retail is part of retail sector that offers modern and stylish clothing and other
accessories to their customers on timely basis. Fashion retailers are needed to change their
offering as per change in market demands so that loyal customers can be retained for maximum
time period (Dos Santos, Svensson and Padin, 2013). Retail stores can either be in the form of
large stores, indoor shopping malls, shopping complex or a small fixed outlet. Strategies which
are concerned with retail industry are related with value propositions, distribution channels,
positioning factors, assortments etc. By this, a company is able to distinct themselves from the
rivals in a proper manner.
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Overview of the selected organisation for position and relative size within UK market
ZARA is a UK based apparel and clothing company which offers standardised products
to their consumers. This company is headquartered in Arteixo, Spain and established in 1975. at
present company is successfully operating more than 10,000 stores in global context.
Features of organisation: Company has high commitment and loyalty towards the
customers due to which only standardised products are served.
Main feature of this organisation is its loyalty and commitment of their employees in serving
their customers. Due to this, all the stores of company are working profitably.
Location: This company work in global context and operates in almost every country.
Company has around 10,000 stores in worldwide context (Glover and et. al., 2014).
Business format: This company operates their business activities through two channels
i.e. ZARA online and ZARA outlets. Also, company operates their business via e-commerce.
Due to this, people from all over the world can purchase ZARA products. For delivery purpose,
company charges a minimum amount of 4 dollars.
Classification through size: As per the size, a retail company can either be a big outlet,
high street or departmental store. ZARA has both departmental stores and high street outlets in
global context. There number is around 10,000.
Classification by margins: E-commerce and digital business of ZARA is enhanced by
30% due to increased overall sales of around 3.8% and pre-tax profits which are near about 50%
of entire online income.
Relevant variations in the fashion retail industry of United Kingdom by analysing macro
environment
Variations in retail sector comes regularly as needs and choice of people varies at a fast
pace. In earlier time, distribution of retail sector includes interaction with suppliers, distributors,
wholesalers etc. But from last 15 years, this scenario is changed. Now a days, retailing activities
are majorly performed with the help of online distribution channels like online selling, direct
selling, selling through online sites, dual distribution etc. for example, e-commerce and digital
media is major distribution channel that is used by ZARA to deliver their products in global
context (Hristov and Reynolds, 2015). But this way to distribute products has some
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disadvantages like managing real time stock figures. By passing of time, some of the emerged
retail changes are discussed below:
In 1950's, manufacturing companies were treated as king as people were ready to accept
any product which is produced. People of that time did not have any specific demands. In the
year of 1960's, people started giving their perception and customers were treated as king. In
1970's, marketing of products became an important phenomena. Time form 2005 to present is
regarded as modern time where, all offerings are provided as per expatiations of people. If
customers will not be satisfied then organisation may have to face business failure (Tate, Ellram
and Dooley, 2012). In order to acknowledge external changes, frameworks like PESTLE
analysis can be used by manager in ZARA. Information associated with this framework is
mentioned below:
PESTLE analysis
This is a strategic tool by which a company can analyse and evaluate external business
environment in a proper manner. This framework will help the manager in ZARA to identify
about aspects like society, politics, economic, technological advancement, environmental and
legal norms in a detailed manner so that strategies to reduce negative impact on business can be
formulated appropriately.
 Political factors: These factors are related to political stability of the region where a
company is operating their business. Political instability, terrorism, corruption and other
political factors influence an organisation and their working in a considerable manner. In
case of UK, it is politically stable due to which operating in UK is safe for ZARA. But,
after Brexit, UK government is supporting domestic organisations more in comparison
with international businesses. This can reduce the popularity of ZARA in UK (Klaus and
Nguyen, 2013).
 Economic factors: These aspect relates to growth rate, inflation and interest rate, GDP,
disposable income and purchasing power of residents of a nation. In UK, due to high per
capita income, people have good earning. This allow them to purchase the products of
ZARA without becoming price sensitive. But, recently in 2018, a recession has taken
place in Europe due to which inflation is increased. This may impacts sales of company
in negative manner.
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 Social factors: It includes aspects like attitude, belief, perception, choice and opinion of
people which are living in a country. In order to achieve wide advantages, a company is
needed to comply with the social norms of country where they are operating. In UK,
people are advanced and modern due to which they prefers to purchase those products
that can help them in showing off their living standard. Thus, Luxurious products of
ZARA will be appreciated by UK customers. But, variation in choice of customers can
impact the sales and revenues of ZARA in a negative way.
 Technological factors: This aspect denotes the technological advancement of a region
where a company is operating their business. As UK is a developed country where people
are technology Savvy, ZARA is needed to increase their online presence and updates
their technology on regular basics. By this, attention of customers can be grabbed
properly and if company will not update their technology, then customers can shift their
preference towards the products of other company (Shanks and Tilley, 2016).
 Legal factors: These factors states that in order to operate in a region, an organisation is
needed to follow all the legal laws and compliances formulated by government. In case of
UK which is a developed country, legal laws are given supreme consideration. Due to
this, it is important for manager in ZARA to follow all legal norms in a proper manner,
otherwise victim customers, employees or other organisations can file a case against
ZARA.
 Environmental factors: This element of PESTLE framework relates to the policies
which are formulated by the UK government to preserve their environment from harmful
business practices. In this context, ZARA is required to formulate an environment
assessment report through which it will be denoted that no business practice of company
is harming environment. This will help the company in showing their sustainable nature
due to which customers will prefer ZARA over other brands.
Discuss about changes related to micro environment of business
It is very important for an organisation to analyse their internal and external business
environment. This will helps them in determining potential changes which can influence the
business and associated activities in a considerable manner. In case of internal analysis, manager
in ZARA can acknowledge about changes with the help of Porter's five framework.
Porter's five force model
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This model helps in acknowledging the impact of different forces on the working and
productivity of a business. By this, those aspects which can creates a risk for the business of
ZARA can be identified in a proper manner. Elements of this model are mentioned below:
 Competitive rivalry: This is related to the competition which exist between different
organisations to sustain a strong position in marketplace. In case of ZARA, this force is
high as there are various large scale companies which are working hard to serve
customers in appropriate manner (Stewart and Shamdasani, 2014). In this context, some
examples are M&S, H&M etc.
 Threat of new entrants: It is concerned to the entry of new businesses in marketplace to
give a tough competition to existing businesses. ZARA is one of the most renowned
clothing and accessories apparel. In order to perform their work in a productive manner,
this company invest heavy amount on yearly basis. For a new entrant, it is not possible to
invest such high amount. Hence, this force has low impact on working of ZARA.
 Threat of substitutes: On overall basis, it can be inferred that there is no substitute for
clothes. This is the reason they are considered as one of the basic need to survival. This
means that risk of substitution is very less in case of ZARA. This competitive force is in
favour of ZARA and it will not impact business of firm in negative manner (Bowen,
2016).
 Bargaining power of buyers: Serving consumers in an appropriate manner is the
foremost important tasks for an organisation. If customers will not be satisfied with the
offerings of concerned company then it will be very difficult for ZARA to operate their
business in a successful manner. Hence, this force is high for ZARA and company is
required to offer products according to the choice of customers otherwise, earning high
revenues will not be possible.
 Bargaining power of suppliers: In retail sector, hundreds of big retailers are operating
to gain superiority against other organisation. To distinct themselves from rivals, each
company is needed to provide unique products and services to their clients. For this, firm
is needed to contact with most suitable suppliers (Sorescu and et. al., 2011)). If suppliers
will not provide the materials and resources on time, it will not be possible for ZARA to
ma manufacture their products. Hence, Bargaining power of the suppliers is high.
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 Bargaining power of suppliers: Retail sector is very competitive as large number of
businesses came under it. Due to this, demand of rare or basic resources is very high.
This is the reason, bargaining power of supplier is very high as it depends upon them
which raw material will be supplied to which organisation. If ZARA will not comply
with suppliers of company then achieving appropriate outcomes will not be possible
(Combs, Ketchen Jr and Short, 2011).
Formulate and explain tactics or strategics to deal with organisational changes in a proper
manner
There are various business strategies that can be adapted by manager of ZARA so that
they can achieve high profits and revenues. In this context, some of the strategies to tackle with
change are stated below:
Identified changes Appropriate strategy
Variation in opinions of
customers
 UK people are highly advanced due to which their opinion
about style and trends change at a fast pace. To overcome
it, ZARA can adopt strategy of diversification in which
innovative and unique offerings will be given to the
people. By this, customer base will be retained for
maximum time and high revenues can be earned.
More relying on digital
media
 In earlier time, customers prefers to purchase offerings via
brick and mortar stores but now, people are more attracted
towards online shopping. Firm can adopt automation to
manage their online processes (Dant, Grünhagen and
Windsperger, 2011).
Reduced purchasing
power( Brexit and Great
recession of 2018)
 Firm can adopt JIT or TQM approach so that extra costs
from the products can be reduced. By this, customers can
be offered products in less amount without compromising
with profits.
High bargaining
 To tackles with high bargaining influence of clients,
ZARA can adapt product development. If clients will be
given new products in genuine price, this change can be
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power of customers dealt efficiently.
Provide recommendation for selected organisation to overcome business related issues and
challenges
There are various recommendations which can be suggested to an organisation to resolve
their business issues. These recommendations will benefits in overcoming challenges and issues
in an appropriate manner. In this context, some of the recommendations for ZARA are discussed
below:
 Manager in ZARA is recommanded to give regular training to their workforce so that
changes in market trends and perception of people can be dealt in an appropriate manner.
By this, revenues and profits of firm will be maintained appropriately (Lorenzo-Romero
and et. al., 2011).
 Company can expand their online reach so that visibility of their offerings can be
increased. This is going to help the firm in achieving high profits in both domestic and
national countries.
 Other than this, company is given the recommendation to comply with all the
governmental policies and legal laws. This will allow ZARA to sustain a positive
reputation in the minds of customers. This will help concerned firm in retaining their
customers appropriately without worrying about rival organisations.
CONCLUSION
In accordance with this discussed project, this has been summarised that retain firm are
needed to have a strong supply chain and delivery system. This will benefits them in serving
customer base is an efficient manner. In business environment, there are internal and external
factors which impacts a business in a considerable manner. Thus, to analyse and deal with these
changes in a better manner, a company is needed to use strategic frameworks such as PESTLE
analysis, Porter's five force model etc. Retail sector also helps a country in stabilising their
economy due to generation of high revenues. To achieve, maximised outputs, a company is
needed to formulate various strategies on regular basis so that challenges faced by business can
be overcome efficiently.
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REFERENCES
Books and Journals
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practices: Woolworths in South Africa. Supply Chain Management: An International
Journal. 18(1). pp.104-108.
Glover, J. L. and et. al., 2014. An Institutional Theory perspective on sustainable practices across
the dairy supply chain. International Journal of Production Economics. 152. pp.102-
111.
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Klaus, P. and Nguyen, B., 2013. Exploring the role of the online customer experience in firms'
multi-channel strategy: An empirical analysis of the retail banking services sector.
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implications for theory and practice. Journal of research in Interactive Marketing.
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Sorescu, A. and et. al., 2011. Innovations in retail business models. Journal of Retailing, 87,
pp.S3-S16.
Tate, W. L., Ellram, L. M. and Dooley, K. J., 2012. Environmental purchasing and supplier
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