Zara's Strategic Management: Corporate and Business Strategy Analysis

This report provides a comprehensive strategic analysis of Zara, a prominent fashion retailer. It begins with an introduction to Zara and its background, followed by an external analysis using the PESTEL and Porter's Five Forces models to assess the political, economic, social, technological, environmental, and legal factors influencing the company, as well as the competitive landscape. An internal analysis then examines Zara's value chain, resources, competencies, strengths, and weaknesses. The report further explores Zara's corporate and business strategies, including its growth strategy. It identifies key issues and challenges facing the company, such as competition and economic downturns, and evaluates strategic options for growth. Finally, the report concludes with recommendations for Zara's future strategic direction, offering valuable insights into the company's market position and potential for sustained success in the fashion industry.

Table of Contents
Introduction and Company Background...........................................................................................3
Part 1 – External Analysis..................................................................................................................4
Part 2 – Internal Analysis...................................................................................................................6
Part 3 - Company’s corporate and Business Strategy......................................................................8
Part 4 – Identifying issues and challenges facing the company........................................................9
Part 5 – Identification and evaluation of the main strategic options for growth..........................10
Part 6 – Conclusion and Recommendation......................................................................................14
References..........................................................................................................................................16
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Introduction and Company Background
Strategic management incorporates the definition alongside the usage of the expanded
objectives and activities which are taken by the best administration of business association
for the sake of proprietors, which relies upon the thought of assets and in addition an
evaluation of the situations whether it is internal and external in which company can
compete. The procedure associated with strategic management describes as a management
technique which is to plan for the future as the business organization can create a vision by
developing or improving the long-term strategies (Seman et al., 2018). This assist in
identifying the necessary processes as well as the allocation of resources in attaining the goals
and targets. The management of strategies help the business organizations which assist in
strengthening along with the support on their core competencies. The strategic breakthroughs
such as entering another market, are intricate as it might affect distinctive parts of the
organization. In this report, Zara has been selected.
Zara is a garments retailer who has adopted another strategy in the business. Zara is the well-
renowned name in the field of clothes as well as accessories in the whole world. It is a
popular fashion which designs as well as manufacturing business organization, as it is the
most efficient market responding enterprise. The vision statement of “Zara as it is committed
which assist in satisfying the desires of our consumers. Subsequently, it is important to
advance the business to enhance the experience constantly. Its guarantee is to offer new plans
which are produced using quality materials that are moderate” (Inditex, 2018). The business
organization has the pleasing the progress along with the good records in accomplishing its
defined goals. Inditex is recognized as an eco-friendlier business organization while making a
comparison with its competitors. It assists in gaining the reputation of more responsible as
well as a rational company towards the different concern whether it is associated with the
environment as well as community welfare. The business technique of Zara dependent on
centering both cost leadership and differentiation. The main stakeholders of Zara include
suppliers, clients, and employees. The manager of Zara provides effective focus in garments
and faces the reputational risks related to different issues whether it is social, environmental
and economical (Ladesma, 2013).
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Part 1 – External Analysis
An external analysis looks at the wider business environment which has an impact on the
business.
PESTEL model
Political: It is connected to the business world as it assumes a fundamental job in the
organizing of business simply like financial matters. Any action can be attempted by the
business won't go unnoticed by the administration. This isn't constrained to people in the
general segment (Adamkasi, 2016). The disruption of policies may result in the disruption of
the market as it may having an impact on economy. The political turmoil affects the supply
chain and this can be overcome by Zara by limiting its supply chain operations. This assist in
reducing the threat. Moreover, government policies can spoil the brand as it is not friendly
(Pratap, 2017).
Economic: Zara should mull over financial development so chiefs can get learning about
swelling rates. Zara ought to be acquainted with financial development, loan costs, expansion
and tax collection charges (Gomes, 2017). It is vital for them to know whether their image is
reasonable and not in a specific market. The recession hurt the brand as it made the situation
the pleasant for them. The lower economic activity assist in decreasing the purchasing power
of consumers by cutting costs, this provide opportunity in gaining more revenue. When toll
on sales increase then it also enhances the financial burden and it can be a threat (Pratap,
2017).
Social: During the worldwide recession, people have confronted joblessness which expands
the interest for items that were a need. It is critical to be acquainted with the examples
associated with consumer spending along with the changing trends in the fashion market. To
manage the competition, innovation is necessary and follow the trends in the market (Pratap,
2017). Zara need to enter into new businesses as it is a risk of the brands assist in gaining the
popularity which gets high as it assists in investing in the new markets. But need to take more
risk which may be threat. They need to sell new and innovative designs of products and
services (Pratap, 2017).
Technological: the variations in the technology help in quality control as well as maintain the
sort of standard all through every item. Zara has the worldwide nearness which helps in
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connecting the company with the different consumers and Zara can attain the targets
(Moutinho and Phillips, 2018). Zara provide the respond to the consumer demand by
coordinating the supply chain and logistics activities needs be better. Innovative technology
assist in offering effective products which enhance the opportunities. But it may have the
threat of reducing the number of consumers sometime they do not like the products (Pratap,
2017).
Environmental: The organization needs to center around their items and administrations
which are made from the earth agreeable material as though some other items are hurting the
earth (Pratap, 2017). Zara provide the commitment to the elimination of the hazardous waste
from the supply chain system. This assist in investing the time and efforts in the business.
This can be opportunity and threat for the company (Pratap, 2017).
Legal: It is an integral part of the business organization as they need to make sure the
coverage of all the legal obligations as it helps in maintaining the operating costs along with
the making profits (Adamkasi, 2016). Inditex provide guarantee to the living wages for its
labor force and provide effective focus on creating the ethical brand image. It assists in
ensuring that brand adheres to the local laws in the local markets wherever it operates
(Pratap, 2017).
Porter’s five force model
The threat of new entrants: It is very troublesome for new players in entering the design
business. In the industry, the threat from new entrants is low. A few organizations acquired a
critical piece of the pie and furthermore have a decent brand picture for their one of a kind
products and enterprises (Kubo, 2017).
The threat of substitution: Zara has applied a niche marketing strategy as they can sell the
products at an affordable price. In this, the danger of substitution might be low as far as the
form retail industry (Adamkasi, 2017).
Bargaining power of consumers: the clients or consumers can gather or collect data about the
new and in vogue garments by utilizing the media, for example, the web and TV (Danemo,
2018). Customers dependably search at the low costs alongside the better quality which
assists in fulfilling the requirements of consumers. In this threat is moderate (The Berkeley
MBA, 2012).
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Bargaining power of suppliers: The fashion companies such as Zara which is almost the only
consumers of their vendors along with the suppliers. The dependence of strategy on outside
providers isn't extensive (Qumruzzaman 2017). In addition, the crude materials are offered
from the creating nations, for example, China. These elements show that the industry has low
bartering force with its providers.
The intensity of competitive rivalry: the danger of industry contention is very high as the
design industry in Hong Kong is to a great degree aggressive (Trehan and Mehta, 2014).
There are a few driving rivals in the business which present a risk to the others. The
execution of new systems in business by every contender has made a noteworthy test for
other companies.
To sum up, INDITEX is attractive as it brings the attractive and responsible fashion to the
consumers as well as assist in improving the quality of consumer services as these are the
priorities of Zara.
Opportunities and Threats
Opportunities Threats
There are more global markets which Zara
business organization can explore.
The company can enter into segments as
well as expand the business in different
areas (Mierzejewska, 2017).
The economic downturn may be a risk to the
objective section (Khurshid, 2017).
Top of the line mold merchandisers can be a
noteworthy danger to them.
Part 2 – Internal Analysis
An internal analysis looks at the different factors within the business such as strength and
weaknesses.
Value Chain model
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Zara has an interesting plan of action regarding its esteem chain and in addition, has
accomplished a higher income consistently.
Management: Clear strategic direction and the company having a strong resource.
Vertical Integration and Structure: Zara has a unique supply chain which increases flexibility
and differentiation as well as improve efficiency (Christopher, 2016).
IT Integration and technology: The integration of information technology makes the
innovation process.
Human resources: Flexible organization along with the autonomous. Shop manager includes
the development of cloth.
Design: Reduce the risk of cloth through flexible design and keep improving. Unsuccessful
collections which having the low percentage.
Production and procurement: Fashionable cloth close to headquarters and the company made
the cheap labor cost
Distribution: Complicated as well as the deficient distribution system. Centralized logistics
and distribution problematic (Holweg and Helo, 2014).
Marketing and sales: No advertising and expensive shop locations
There are different activities which assist in generating the more values to the consumers
include effective designs. When company adopts new and innovation technology, then also
assist in creating the value to the consumers. The most important is marketing and sales of
the company as advertisement and campaign assist in attracting the values of products in
front of the consumers.
Resources and competencies
The main resources of Zara include that they are selling their stock in short team to their
consumer and also offers the unique designs. Company integrating the production with the
retailing and also provide response quickly to the market. Zara having their labor-intensive
operations which are outsources to the local subcontractors (Brenner and Iafrati, 2014).
Moreover, Zara having the target market with the low-priced fashionable products.
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There are some competencies of Zara include they are providing the powerful designing team
and also deliver their products fast. Zara have the quick and the fast production process and
sale their products at a low cost so that consumers can easily afford. According to the needs
and wants of the consumers, Zara is manufacturing and designing the new products
frequently and having the fast fashion brand image in the competitive market (Brenner and
Iafrati, 2014).
Strength and Weaknesses
Strength Weaknesses
The company has established a brand name.
Clothes are produced at a competitive price
with the designs whether it is innovative and
fashionable (Cao, 2018).
Zara offers handbags.
The company has limited marketing along
with the advertising to the other brands.
High competition for Zara denotes limited
market share (Anwar, 2017).
Part 3 - Company’s corporate and Business Strategy
The corporate strategy focuses on the selection of business in which the company wants to
compete in the marketplace. The strategy of the business is concerned with the particular unit.
The corporate strategy which focuses on the whole organization as it comprises the different
business units.
Corporate Strategy: The three main business strategies include:
Growth Strategy: In this strategy, the company expands the number of products which is
offered by them to consumers. This can be done through its current business. The
organization develops by utilizing distinctive procedures, for example, focus, expansion and
vertical and level joining. Zara applies this development technique in its exercises.
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To expand the business, Zara is using diversification strategy as this strategy is helpful in
entering into the new market in which business does not currently operate, but on the other
side they can create the new products for the new market. Along with this, company
continues to serve their consumers with the same product by making products with effective
quality designs/ Company stores in Hong Kong and the supply chain its supply costs (Lueg et
al., 2015).
Generic Strategies Model
Upper hand set up whether items are separated in an unexpected way. There are a few
elements which indicate that Zara has an upper hand. The organization offers a wide
assortment of items to its buyers which ranging from men, and children’s clothes to shoes
from which they can choose about product differentiation (Pearlson et al., 2016). Zara is an
overall organization with the extent of its stores which is extending from mainland extending
the distance which provide it with a wide market coverage.
 Cost leadership includes a company which assists in getting an upper hand because of having
the capacity to create the wares at the most reduced expense. The nearness of Zara can be felt
all around with the foundations of stages.
 A differentiation strategy includes designing a product with unique qualities which
consumers can perceive better than competitors (Piercy, 2016). It is entrenched esteem chain
empowers it forward another item into the worldwide market which getting a distinction the
mold business that its rivals which have not yet accomplished.
 The focus is the essential aspect of a generic strategy. The needs of a market can be well
attained by providing effective focus. The company can earn more revenue by focusing on
market trend as well as examining their consumer demand through effective communication
(Lee and Lee, 2018).
Part 4 – Identifying issues and challenges facing the company
Marketing: Zara has embraced a differentiated marketing methodology which isn't to
publicize by the customary media. There are not differentiated organizations which are
running with no sort of promoting regarding correspondence and innovation. On the off
chance that a portion of the organizations are doing great without promoting, it doesn't imply
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that the business had caught most extreme market yet there are no more chances to develop
(García-Álvarez 2015).
Product: Zara is based in Europe as it has only 3 to 4 main colors which are utilized by its
designers. But in other countries, there are a lot of colors used in the readymade cloth
industry, particularly bright color. The clothes of male and female lack of fashion designs of
Zara.
Weather: The weather of India is just different from Hong Kong in a year. The variation or
changes require the rapid fashion as per the local weather. At the store of Zara, it will find
most of the clothes for the normal weather as well as not for the extreme weather (Jameel et
al., 2018).
Another issue is Zara is confronting a gigantic danger which may imperil the business. The
organization has a lithe inventory network as the underlying plans are made in the little
clumps and more are taken off. This strategy provides the permission to them which assist in
matching the supply chain according to the changing demand.
Another issue is the material business is experiencing emotional changes as it is a region
which requires incompetent work which may migration of generation with the end goal to
bring down the expenses (Richmond et al., 2018).
In spite of the fact that Zara has achieved a considerable measure of accomplishment in the
conveyance framework as it is a brought together dissemination framework which is inclined
to the shortcomings particularly when the company is producing a large number of products
at a discounted rate. Zara having a business in the worldwide market which is inclined to
improving the number of stores as it helps with upgrading its market size and this help with
requiring the more dispersion framework which helps in cooking for the expanded worked.
The business association ought to likewise improve its number of appropriation stores in the
market of UK (Richmond et al., 2018).
Another issue is varieties in the consumer behavior as the buying conduct of buyers affecting
the capacity of the business association to progress as the methodologies of Zara alongside
the subsequent plan of action. The retail design market of Zara is attached to those buyers
who are difficult to foresee and influence and also whose preferences change.
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Part 5 – Identification and evaluation of the main strategic options for growth
The identification along with the assessment of different growth options are complex in
nature and it is a critical process. Even they are more critical as well as intricate as it is the
measurement of the risk which is associated and related with the each and every option which
are given for the growth and enhancing sustainability. It assists in offering a robust
framework as it enables the managers along with their firms which need to select the different
development choices which have the most obvious opportunity with regards to succeeding.
The structure aids fundamentally survey the diverse choice as for market, income and
capability of benefit development, the capacity of vital hazard and the favored exchange off
among development and hazard (Grant, 2016).
5.1) Generating Strategic Options
The Ansoff matrix of Zara denotes that the appropriate and best options which business
organization can adopt for the growth as well as the development of the business.
Existing New
Markets Development of new
products such as designs of
dresses.
Provide effective focus on
the retail sector of UK.
Penetration of the market
(Bryson, 2018).
Development of the
products and services.
Advancement or
improvement of technology.
New Development of market
Enter to the new segments
New users
Diversification
Home as well as food
beauty.
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Franchising in Hong Kong
The TOWS matrix of ZARA denotes the appropriate and best options which business
organization can adopt.
Strength and Opportunity Strategies: Outsourcing some designs which is helpful in growing
markets so that they can keep up with the new trends. Along with this expand the online
business in the key essential markets.
Weakness and Opportunity Strategies: Open the new stores in the emerging economics and
also open the new distribution as it is also in the new emerging economics.
Strength and Threat Strategies: Zara need to keep the designs and deliveries quicker and fast
that their competitors. Moreover, need to outsource the logistics to have more the control
over the production processes.
Weakness and Threat Strategies: Company need to expand the business into the other
countries and also pursue the stronger marketing campaign.
5.2) Evaluating the Strategic Options
SFA Strategy: There are diversified processes which may be followed but to analyze there is
the simplest examination of proposed strategies that is Suitability, feasibility, and
Acceptability. Suitability denotes as a reassurance which describes the proposed strategy
which helps in addressing and resolving the key issues which have been identified by using
SWOT analysis.
CRITERIA SO strategic
option
ST strategic
option
WO strategic
option
WT strategic
option
Suitability 6 4 5 4
Feasibility 3 3 2 2
Acceptability 4 4 2 4
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Total 13 11 9 10
The SFA methodology of Zara was made by the reviewing size of 5 and in which 1 is the
most veering off and 5 is the slightest straying from the prerequisites of Suitability,
feasibility, and Acceptability. The Strategy Opportunity strategic option describes the most
appropriate strategy for Zara as it helps in attaining the high scores in SFA on its
requirements. This alternative makes the way for Zara with the prerequisites in the new
market which signifies in Ansoff framework which offer help Zara in building up the new
market for its items and enhance its market measure (Ginter et al., 2018). This is genuine in
light of the fact that, diversification is now being connected on account of generation in the
assortment of items and administrations. In the advancement or enhancement of item, the best
innovation is being connected since it is a worldwide pioneer in the retail business alongside
alternate brands which have been produced as of now notwithstanding Zara under the Inditex
group.
Under the penetration of the market, the new items and administrations are being created
once in a while and in addition, immediately discharged to the market. Alongside this, it is an
accentuation which is being made on the UK market which helps with guaranteeing the
development in the region (Ginter et al., 2018). Hence, the most accessible procedure which
is left for Zara which helps with guaranteeing its business development in creating or
enhancing its current market which diminishes in accordance with the key alternative
identified with strength and opportunities.
5.3) Implementation
There are different measures which can be actualized and executed to guarantee that Zara
achieves its vital choice to guarantee its development and in addition improvement in the
market.
Entering a new market segment: Zara can enter into the new segment by coming into existing
market but by preparing or manufacturing the new products and services such as
complementary goods which requires the capital along with the designers which are highly
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