Strategic Management Report: Analyzing Inditex's Business Strategies

This report provides a comprehensive strategic management analysis of Inditex, a Spanish multinational clothing firm and the world's largest fashion group, focusing on its operations in 93 countries, including its flagship store Zara. The report begins with an introduction to strategic management and a background of Inditex, highlighting its unique business approach and rapid production capabilities. It then examines Inditex's external environment, including political, economic, social, technological, legal, and competitive factors. The internal environment is assessed, detailing the company's strengths, weaknesses, opportunities, and threats (SWOT). The report evaluates Inditex's current strategies, such as diversification, cost leadership, acquisition, and market development, and identifies three main strategic issues: big data management, supply chain optimization, and sustainable practices. Finally, the report offers recommendations for Inditex to address these issues and maintain its competitive edge in the global market, emphasizing the importance of adapting to changing consumer demands, technological advancements, and competitive pressures.

STRATEGIC
MANAGEMENT

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Contents
Introduction...........................................................................................................................................2
Background of the company..............................................................................................................3
External environment of Inditex........................................................................................................3
Internal environment of Inditex.........................................................................................................4
Summary Swot...................................................................................................................................5
Strategy evaluation............................................................................................................................6
Three main strategic issues that Inditex is facing...............................................................................7
Recommendations.................................................................................................................................8
Conclusion.............................................................................................................................................9
REFERENCES....................................................................................................................................10
Introduction
In the modern business environment it has become crucial for the firms to give proper
care towards their strategic affairs. A comprehensive strategic management helps a company
to achieve all the objectives in the given time frame (Lasserre, 2017). It is also essential for

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the firm to understand the internal and external environment around their business.
Evaluation of environment helps in making strategic decisions. Apart from this there are
many strategic issues that are faced by an organisation. Company must take use of its
strengths so as to tackle the problems that are faced by them. Industria de Diseno Textile is
Spanish multinational clothing firm that is headquartered in Arteixo, Galacia. It is the biggest
fashion group around the globe and operates in around 93 nations with approx. 7,200 stores.
Its flagship store is Zara. This report highlights the internal and external environment of
Inditex. It also illustrates about the strategic issues that are faced by the company as well as
the strategies they are using for their business.
Background of the company
Inditex is a Spanish retailer that is operational worldwide. It is operational in 93
nations. It is having a famous flagship store named Zara. Apart from this it owns other chains
like Zara homes, Massimo Dutti, Bershka, Stradivarius, Oysho, Uterque and Pull and Bear.
The majority of its stores are owned by any corporates and its franchise is present in the
nations where corporate property cannot be foreign owned. This company is known for its
distinct business approach where the company brings very small amount of new stocks for
the new seasons, takes a consumer feedback and then change the products on weekly basis.
This company is known for its production capacity where new styles are prototyped in just 5
days. It takes only 15 days to go from design to store shelves (Inditex, 2018). This company
was established in 1960’s and opened its first store Zara in 1975. It grew at a very fast rate
and sooner it spread in the whole Spain. In the earlier days company was known for its
design. Later in 1990’s company started opening new stores and factories and companies
with different names. Presently it owns online Zara retail store. According to its financial
report of 2016, company had generated revenue of 23.11 billion euros with net income of
around 3.161 billion euros. Its employee strength is around 162,450.
External environment of Inditex
 Political: There are many political ties that are coming up and breaking down in many
parts of the world (Arrigo, 2013). This had created complication for the business of
Inditex. This is due to the fact that trade policies and taxes totally depend on the
political relation between the two nations. Political decisions such as Brexit had a
greater impact on the operations of the firm (Epstein & Buhovac, 2014).

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 Economic: In many parts of the world especially Europe from where this company
belongs to is facing economic instability. Inditex has a large amount of cash reserve
which will help them in these kinds of financial challenges.
 Social: Society has changed and so is its demand (García-Álvarez, 2015). People look
for the clothes that are in trends and in the age of digitalisation the spread of the
demand is very fast. With the fast operational management of Inditex this company
can easily fulfil the demands of the consumers all around the world.
 Technological: In the clothing industry there have been a lot changes noticed in the
past few decades in terms of technology in use (Kim, 2013). The transformation in the
industry is very fast and companies like Inditex have to be ready for it.
 Legal: The legalities related to retail business is changing at a very fast speed. These
legal changes have to be dealt with proper care so that they do not face any legalities
issues in the future. Companies need to make sure that they follow all the rules and
regulations made by several governments all around the world.
 Competition: Competition in the market is rising at much faster speed. It has made the
ocean red. This company is facing competition from both local and international
competitors. Some of the biggest brands like Gucci, Ikea, D & G and many more have
the capability to change the trends in the market which can be dangerous for the
company (Dawson & Mukoyama, 2014).
Internal environment of Inditex
Strengths
 Its operational mechanism helps them to deliver products to the shelves at a very
faster rate (Inditex 2018).
 It is having a very strong brand name in the market.
 String demand and supply chain that helps them in their operations in 93 markets.
 Strong technological use and employee base is highly capable in speeding up the
process of their growth.
 Highly lower cost products as compared to other competitors.
Weakness

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 It lacks in terms of safety stock which can help them at the time when there is sudden
increase in any particular design (Madhani, 2012).
 This company does not focus on the advertisements. This lack of advertisements
reduces its chances of growth at faster speed.
 Most of the collection of the company is highly generalised especially in terms of
trendy wears.
Opportunities
 It is having higher opportunity in the developing nations especially in the sub-urban
cities that are coming up (Sorescu, Frambach, Singh, Rangaswamy & Bridges, 2011).
 In the e-commerce market it has larger scope of expansion.
 They have higher scope in flagship designs which always pulls consumers towards
their stores.
Threats
 A cut throat competition in the market may result in higher loses to the company in
their future (Caro, 2012).
 The reach of the company is very poor. This is due to the reason that company sales
with their own exclusive stores.
 There are many local companies in the market that is copying the design of Zara. This
is a greater loss for the company.
 In the heavy advertising environment Inditex can face huge brand loss as they are not
investing in such campaigns.
Resources: This Company has a very good stock of resources which will help them in their
future operations. They have also adopted a good planning for sustainable utilisation of
resources. They have also made this plan for arranging new resources. This company also has
the large amount of skilled labourers which is helping it in their growth.
Core competencies: There are many core competencies of the company but one of the major
competencies that this company has is its supply chain management (Bhardwaj, Eickman &
Runyan, 2011). They also have an excellent technological infrastructure that will help them
in meeting the demands of the market while reducing the cost of operations.

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Summary Swot
This company is having higher capabilities of generating huge profits (Cordón, Hald &
Seifert, 2013). This is due to its bigger brand name and excellent supply chain. With their
adoption of new technologies for their operations they have ensured long term sustainability
and reduction in their operational cost. It lags in the field of advertisements and design
generalisation which can be loss to the company in the longer run. This company also has
many opportunities in the developing market. Apart from this there are many threats that are
posing in front of the company and hence they need to make sure that they give their focus on
these. On the other hand in the changing political environment it is difficult for the company
to make sure that they achieve higher growth rate (Sanders, 2011). The tax barriers in many
parts of the world can be eliminated by the company with the use of their local productive
units and efficient supply chain. Apart from this the economic challenges faced by the
company can be removed with the use of cash reserve they have (Díaz, Solís & Claes, 2011).
With the use of low cost pricing strategy they can face the competition present in the
industry. The change in the trends can be very fast for which companies can use its fast
operational mechanism to fulfil their demands. Products are of lower cost as compared to
other competitors in the market which helps them in generating higher profits. They are not
promoting their products on regular basis which can have negative results for the company
since it might slow down the process of their expansion. Its new trends are not popularised
soon. Design and logo piracy especially in the south Asian Countries have led to heavy losses
for the cited company. Apart from this biggest challenge is thrown by local competitors who
sell their product at lower cost. Quality is the tool that can help the company in fighting this
competition. This company has also not made innovations in terms of collections it has. This
made most of its products has generalised which is not for their expansion plans. Moreover
there are several opportunities available with the firm and its focusing on its core
competencies can help them in grabbing these. The amount of resources this company has, it
will not be the serious problem for the company in the longer run.
Strategy evaluation
There are many types of strategies that are used by the companies at various levels so
as to make edge in the market and face all the challenges coming to them (Madhani, 2012).
Four current strategies that Inditex is using are as follows:

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 Diversification: This is one of the best strategies that help in attracting the clients that
are coming to the company. It is essential for the company to make changes in their
product and add some new to the existing product portfolio. This will also help in
managing the competition present in the market (Dawson & Mukoyama, 2014).
 Cost leadership: Due to its efficient supply chain and smart arrangement of low cost
raw material has helped them in becoming cost leaders. Since the raw materials are
available at the lower cost and the charges in the middle is also low and hence it helps
them in generating higher profits which is necessary for having edge in the industry.
 Acquisition: This Company has acquired many of the smaller companies in various
parts of the world so as to expand in the market (Madhani, 2012). Some of the prime
acquisition was Pull and Bear, Stradivarius Espana, Massimo Dutti in Mexico etc.
This helped the company in expanding at a very faster rate. It also enabled the
company to do the business of many of the products for almost all the type of market
sections. Through such acquisition it performs horizontal integration.
 Market development: In the international strategy Inditex has adopted market
development strategy. In this strategy company has expanded in the countries like
India, China, and Bangladesh etc. It is due to these strategies that company has earned
so much revenue. Due to its market development strategy this company is buying its
raw materials from the lower cost markets (osenbaum-Elliott, Percy & Pervan, 2015).
This can be seen in the case of Jute products where it is buying jute from Bangladesh
where it is of lower cost and bringing it into the factories of China where the cost of
production is less. This helps them in managing the overall operational cost of the
firm.
Three main strategic issues that Inditex is facing
 Big data: Since this company is operational in so many countries. So many stores and
other units of company generate a lot of valuable data that can be used by the
company for their future operations. It is difficult for the company to make sure that
they have a data management system that is capable of managing such a huge Big
Data (García-Álvarez, 2015). Some of the actions are taken by the company to
manage this data like the adoption of data storage facilities like hadoop. This is highly
important in the case of its marketing where they need to manage data that is
associated with their consumers as well as for producing cloths as per their
expectation. Biggest set of data is generated on financial affairs like data related to the

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transactions, taxes etc. Managing the privacy of this Big data is a major issue for the
company. Negligence of this issue can lead to long term loses to the company which
can be the cause of business failure. It is always good for the company if they take
help of any third party company.
 Financial crisis: There are instabilities in many of the markets where Inditex is
operational. This has limited the chances of company generating higher profits. This
has also forced the company to think upon its investments plans in new regions. The
slowdown of the American market has also made the situation worst. The cases like
Greece have resulted for the company in a negative way (Zhenxiang & Lijie, 2011).
In order to tackle this problems company can invest at the minimum cost for which
franchising can be an excellent option. Apart from this in order to manage their
financial resources they can invest more in the developing nations. They have to
make the cost cuts in the production mechanism which can be done by the adoption of
new methods like lean production. They also have to add more investors in their
stakeholders list so that they can help them in their investment plans. New sources of
raising funds need to be added into the portfolio of Inditex.
 Competition: There have been large numbers of firms that have come up in the retail
industry (Cachon & Swinney, 2011). This has lowered down the profit margin of the
company in some of the areas. The biggest threat is posed by the small scale firm who
are duplicating the products what Inditex makes in their tag name. This is causing a
heavy loses to the company especially in the Indian sub-continent market. Since brand
loyalty has become least in the clothing retail market and hence company needs to
focus on maintaining its quality. They have been known in all around the world for
producing best quality products. They have adopted the tools like total quality
management which helps them in attracting larger set of consumers. This is highly
beneficial in terms of retaining the old consumers even when there is low consumer
loyalty. Apart from this they have also adopted lean production which helps them in
reducing the amount of wastage generated. With the use of supply chain management,
the problems related to availability of products can be resolved. This can give the
company edge over the other competitors.

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Recommendations
This company is known for its physical evidence. In spite of the price war in the
market company need to maintain the quality it delivering to its clients. Inditex also needs to
invest more in their CSR activities. This will help in improving the brand image of the
company. Inditex needs to invest more in the digital marketing campaigns. This will help in
fastening their speed of growth. They also have to invest on the quality management which
will be helpful for retaining their consumers. Company needs to invest on its data
management system as the bulk of data that is going to come in the future operations of the
company is huge. This company also needs to manage its premium brand image which is
necessary for the growth of the firm. They need to make better relations with their suppliers
so that they can ensure smoothness in their business operations. Company has been lagging in
making the changes in terms of trends that are in the market. They have been producing large
number of generalised products which is a problem for Inditex as they have to think about
making trends rather than following their trade mark fashion.
Conclusion
From the above based report it can be concluded that there are many challenges faced
by Inditex. It is one of the biggest clothing retail companies of the world which makes them
highly capable of expanding into the new markets. This is necessary for the growth of the
cited firm. Inditex has been using different levels of strategies for their growth. This company
has a unique supply chain that makes them in fulfilling the demands of the people and also
attracts new consumers towards their products. Quality maintenance has been the trade mark
of the company over the years. Since there are large amount of data that is generated in the
operations of the firm and hence it has become essential for the firm to manage its data with
the use of new software in data management. It is also crucial that company expands its reach
in the new markets which will be beneficial for its long term growth.

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REFERENCES
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Distribution and Consumer Research, 21(3), 293-307.
Cachon, G. P., & Swinney, R. (2011). The value of fast fashion: Quick response, enhanced
design, and strategic consumer behavior. Management science, 57(4), 778-795.
Caro, F. (2012). Zara: Staying fast and fresh. The European Case Clearing House, ECCH
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Cordón, C., Hald, K. S., & Seifert, R. W. (2013). Strategic supply chain management.
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Dawson, J. A., & Mukoyama, M. (2014). Building international strategy with formats and
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Díaz, A., Solís, L., & Claes, B. (2011). Improving logistics and supply chain management in
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Epstein, M. J., & Buhovac, A. R. (2014). Making sustainability work: Best practices in
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management-of-the-supply-chain/strategic-plan-2014-2018-2016-review.php
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us/who-we-are
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Sorescu, A., Frambach, R. T., Singh, J., Rangaswamy, A., & Bridges, C. (2011). Innovations
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