Strategic Analysis of ZARA: PESTLE, SWOT, and Competitive Advantage

This report provides a comprehensive strategic analysis of ZARA, a leading company in the fast-fashion industry. It begins with an introduction to ZARA, detailing its history, mission, and vision, with a focus on its commitment to sustainable fabrics. The report then delves into ZARA's corporate strategy, emphasizing its differentiation strategy and competitive advantages, as well as the use of Porter's generic strategies model. A detailed SWOT analysis is presented, evaluating ZARA's internal strengths and weaknesses, alongside external opportunities and threats. The report also includes a PESTLE analysis, examining the impact of political, economic, social, technological, legal, and environmental factors on ZARA's operations. Furthermore, the analysis covers Porter's Five Forces and Value Chain analysis to understand ZARA's competitive landscape. The report concludes with recommendations for strategic improvements, aiming to enhance ZARA's market position and sustainability efforts, with references to support the analysis.

Strategic
Management

Table of Contents
INTRODUCTION .....................................................................................................................3
MAIN BODY.............................................................................................................................3
Introduction to ZARA...........................................................................................................3
Strategies Chosen on Corporate Level..................................................................................4
Strategic Analysis of ZARA..................................................................................................5
Synthesis of the analysis......................................................................................................10
Conclusion...........................................................................................................................10
Recommendation to chosen organisation............................................................................10
REFERENCES.........................................................................................................................12

INTRODUCTION
Strategic Management is the process of ongoing planning, monitoring, analysis and
assessment of all activities which are important for the achievement of goals and objectives
of an organisation (Aluko and Knight, 2017). The assignment will make its focus on the use
of PESTLE and SWOT Analysis to know about internal and external environment. In
addition to this, discussion will also be made about Porter's Five Forces Model, Value Chain
Analysis and discussion of some unidentified strategies of the company will also be provided.
Lastly, it will focus on providing recommendation related to different strategies which have
been provided and discussed above. Strategic positioning of ZARA in the fast fashion
industry.
MAIN BODY
Introduction to ZARA
The company chosen for the completion of this assignment is ZARA, which was
founded in the year 1975 and is headquartered in Arteixo, Spain. The following organisation
dealing in clothing industry. Due to high competition also, the company has become a
successful organisation because of its good and ethical working that helped it in building
good brand image in minds of customers (ANTREAS, 2017). Amancio Ortega, the owner of
this organisation opened its first store in 1975 in Galicia, Spain. Initially, the name of ZARA
was Zorba which was named after a movie Zorba but the issues related to two block ways
made the owners to make changes in the name which was later on put as ZARA. Further
improvements made by ZARA such as making use of information technologies and using
group of designers also helped in taking the business to international level and after that the
expansion of business is continuing.
The main goal of ZARA is to contribute to the sustainable development of and the
environment as well with which it interacts. The mission and vision statement is about to
give the customers with a varied choice of fashion products and bringing more rapid changes
in fashion than any other fashion retailers. ZARA is also planning to make implementation of
100% sustainable fabrics clothing products before 2025 and which is also the main topic of
discussion in the following assignment. It focuses on proper utilisation of shops in an active
manner along with using the competitive advantages of geographical conditions.

Strategies Chosen on Corporate Level
The Corporate Strategy that has been adopted by the company is related to providing
their customer with 100% sustainable fabrics clothes to their customers considering the
impact of environment and reduce the waste level globally. This will also provide their
customers with competitive advantage over their competitors for the betterment and wellness
of their society and customers. With the help of this strategy, it will be possible for the
company to gain competitive edge over their competitors in the market and also to create
good brand image in the minds of their customers (Zara clothes to be made from 100%
sustainable fabrics by 2025, 2019).
Definition of Differentiation, Expansion and Competitive Advantage Strategy:
Porter Generic Model: The following model refers to the model which is used in order to
gain competitive advantage over the competitors in the market (Porter's Model of Generic
Strategies for Competitive Advantage, 2018). In order to achieve the situation of competitive
edge, the organisation makes use of different strategies that could be adopted in order to gain
the situation of competitive edge. The description of these strategies are provided as under:
Differentiation: The following terms says about differentiation. In other words, it can be said
that this term relates to providing the customers with some differentiated one from the
products of their competitors in order to be special in the market.
Expansion: It is the process in which an organisation increases the size of their organisation
such as by increasing the operations of the business for increasing the reach of their products
and services and also to increase their revenues and incomes (Porter's Model of Generic
Strategies for Competitive Advantage, 2018).
Competitive Advantage Strategy: It refers to the situation in which an organisation due to
its some special strategy or innovation, is able to gain special market share or attention of
people which has impacted positively on the sales and profit of their customers. According to
MALLORY SCHLOSSBERG, 2016, the company has gain good competitive advantage over
their competitors because of their good operations of supply chain and with the help of proper
management of their inventory and this has provided with the company with competitive
advantage.
ZARA is making use of differentiation strategy in order to provide to their customers.
With the help of this strategy, it will be possible for the company to make improvements in
the overall working of the company and also to make increment in the revenues and incomes
of the company. With the help of differentiation strategy, the company will be able to provide
their customers with differentiated products than their competitors so that it could become

possible for the company to gain competitive advantage over their competitors. Additionally,
differentiation of their product will also match with vision and mission statement of this
organisation and the customers will also be provided with high quality products along with
focusing on environmental sustainability (Herrmann and Felfe, 2014). So the company will
also be able to fulfil their objectives as well and will be able to establish a good brand image
in society and the marketplace as well.
This strategy will provide ZARA with competitive advantage as this strategy is
differentiated and focused on society, customers and environment as well. In the core
competencies of ZARA, it is included about the ability to apply the Just in Time
manufacturing by the company to fashion production. It is one among core competencies of
this organisation as the achievement of long term competitive advantage is possible with this
strategy.
Strategic Analysis of ZARA
SWOT Analysis
INTRODUCTION
The first strategic analysis will make its discussion about the SWOT Analysis. It will
also discuss about different things here such as purpose of this analysis, models and
discussion and about summary along with some recommendations.
Purpose of Analysis
The main purpose of this analysis is to know about the strengths and weaknesses
along with opportunities and threats of their organisation. With the help of which, strengths
could be made more and strong and policies and strategies could be taken in order to make
improvements in the overall performance of their organisation (What Is a SWOT Analysis,
and How to Do It Right (With Examples). 2018).
Models and Discussion
It refers to the analysis with the help of which the internal strengths and weaknesses
along with possible opportunities and threats of an organisation could be known (Chen and
Jermias, 2014). The application of this analysis on the working of ZARA has been provided
as under:
Strengths Weaknesses
 The main strength of Zara is its
unique designs which are designed by
 Ineffective advertisement is identified
as main weakness of Zara.
 Less safety stock is used as its core

expertise designers.
 It has strong presence at global level
which is also counted under its
strength.
 Good performances of ZARA in the
emerging markets has also provided
the company with strength as
customers are captured by providing
differentiated and good quality
products to their customers.
strategy at Zara.
 There has been some issues in the
operations of business because of
diversity in culture of individuals
which impacts negatively on the
performances of ZARA.
Opportunities Threats
 Providing differentiated products to
their customers.
 Making increment in the reach of
products to their customers.
 Opportunity to provide their
customers with online sales of their
products and services so as to reduce
the distance between products and
customers of ZARA.
 Increasing competition is becoming
major threat for ZARA (Davies,
2016).
 Reach of products of company is
threat to ZARA that could impact
negatively on the growth and
performances of the organisation.
 Shortage of skilled employees in
certain areas of global market could
impact negatively on the
performances and operations of the
organisation.
Summary and Recommendations
From the above analysis, it has been made clear that there are different areas in which
the company is lacking behind. Along with this, it has also been made clear that there are also
some areas where the company is performing well. So it has been recommended to the
company that make formulation of suitable strategies and policies to improve their reach to
customers of their products and services, provide their employees incentives in order to make
improvements in their dedication and performances. In addition to this, it has also been made
clear that with the help of focusing on the unique designs of their products and services, it has
been made possible to make improvement in the level of their competitiveness. However,
there has been a need to make improvement in the level of advertisement of the company so

as to make more customers attracted towards the products and services of an organisation.
Strategies are also needed to be made so as to make improvement in the level of
competitiveness as there are large number of competitors who are operating their business at
international level. ZARA is also having the opportunity to avail opportunities available to
them such as providing online delivery systems to their customers which will also increase
their sales and some potential customers may not feel to buy the products of ZARA as they
are not provided online or lack of faith in online delivery systems from other companies. It is
also important to take into consideration their promotional tools as well because this has also
been made clear in the analysis that the advertising work is not performed well which has
impacted negatively on the performances of their organisation in the market. So in order to be
competitive in the market and achieve their goals and objectives in an effective manner, it is
important to consider upon the issues provided above.
PESTLE Analysis
Introduction
In the next analysis, the discussion will be made about PESTLE Analysis along with
the impact of different factors which it creates on the working of an organisation such as
ZARA. In addition to this, an overview of overall situation will also be provided here and
lastly, the discussion will be made about summary and recommendations provided to ZARA
in order to make improvement in their organisation's working.
Purpose of PESTLE Analysis
The main reason behind conducting this analysis is to know about the issues which
have been faced by the company in relation to different factors. So that with the help of
knowing these issues and problems faced by ZARA, it could be made possible to remove
these issues from the working of their organisations so as to enhance the performance and
productivity of the organisation.
Discussion
So in order to know about the impact of external factors on the working of an
organisation the use of PESTLE Analysis will be done (Habbash, 2017). This analysis is
defined as tool used for knowing the impact of external factors on an organisation. The
application on ZARA is being provided as under:
Factors Description
Political Factors  Considering the impact of political situation of ASIA, it can
be said that the situation of Brexit has impacted adversely on

political stability of this country.
 So it increases the chances of negative impact related to
failure of making long term policies for the company and
many more.
 situation of Brexit has impacted adversely on political
stability of this country
 increases the chances of negative impact related to failure of
making long term policies
Economical Factors  The consideration related to economical factors has also been
made because of decreased rates of ASIA's currency which
impacts upon prices and revenues of the company in negative
way (Brewster, 2017)
 decreased rates of ASIA's currency which impacts upon
prices and revenues of the company
Social Factors  The policy related to 100% sustainable fabrics and looking
onto past performance of the organisation, ZARA is able to
attract customers.
 It has also made good brand image in minds of people and
society impacting positively on growth and development of
ZARA.
Technological Factors  The continuous use of updated technology by ZARA has also
made it gain positive affect of this factor.
 With the help of having large number of market share and by
attracting large number of customers towards the products
and services of the company (FORT, 2019).
Legal Factors  In some countries, the rules and regulation made by
government are strict but ZARA is having competitive
advantage here as well.
 The working of ZARA is focused towards environment,
society and customers so there is an opportunity for the
company to continue with this working and to get positive
response from these factors as well (Gnan, Montemerlo and

Huse, 2015).
Environmental Factors  However, the working ZARA is not impacting negatively on
the environment but its contribution towards preventing
environment will help the company in increasing its
awareness and brand image in the minds of customers
(Charter and Polonsky, 2017).
Summary
From the above analysis it has been made clear that with ZARA is dealing good with
the external environment. However, there are some specific areas where it needs to work and
that could help in making improvement in making its position more strong in the marketplace
(Kaul, 2017). ZARA is required to make improvement in their own advertising processes
such as providing the customers with the real advertisements in which the organisation's
products actually looks like so that it could not impact negatively on the mindset of their
customers. With the help of this, it will be possible for the company to prevent itself from
indulging in the government compliances. Along with this, the focus is also made on making
improvement in the overall working of the organisation such as by contributing towards the
environment so that could image of the company could be made in the minds of customers
and society.
Porter's Five Forces Model
The following tool was developed by Michael E. Porter in the year 1985 and is used
in order to know about intensity of competition in an industry and the level of profitability
(Porter's 5 Forces. 2019).
Competitive forces Threat to
Industry
Profit
Low Moderate High
Bargaining power
of suppliers
√
Bargaining power
of customer
√
Threat of New
Entrances
√
Thread of
Substitution
√
Rivalry among
existing
competitors
√

Summary of Porter Five Forces Analysis
Competitive Rivalry: There are a number of companies operating in this industry. So the
following power is considered as high because the threat is not only from international
competitors but also from local companies as well.
Bargaining Power of Buyers: The following power is considered as Moderate because the
buyers do have some power to influence upon the prices of the company but not much. It is
because of continuous updated technology of the company and latest designs which are
produced by the company. So due to this reason, buyers do not have much option and also do
not possess much power to influence on pricing decisions of the company (Chang, 2016).
Threat of Substitutes: Due to the large number of competitors on the international as well as
local level, there are large number of substitutes of the products of the company. However,
depending upon the quality of products, the comparison could not be made. So the following
power is also considered as moderate. The threat of substitutes comes from other apparel
retailers, designer clothes tailor houses. The examples are Marks and Spencer, H&M and
many more companies which are giving competition to the company. So the following power
is considered as high.
Threat of New Entrants: The business operations of ZARA are being operated on a large
scale and there is a lot of difference in between the rules and regulations of different countries
regarding their processes of entry and exit from an industry but looking at overall, it can be
said that the following power is high due to low barriers to entry and exiting the industry
(Jones and Comfort, 2018).
Bargaining Power of Suppliers: As ZARA is operating at global level, so the company is
having good brand image in the market. Along with this, there are number of suppliers with
which ZARA makes purchase of raw material all over the world and the material used is also
available with many suppliers. This makes it difficult for suppliers to bargain upon this
power. Hence, the power is considered as low.
This analysis also provides good industry position of ZARA in relation to other
performers in the industry because of its ethical working and high quality products and
services that provided it with a distinct place in the industry.
Synthesis of the analysis
According to SWOT Analysis, it has been said that the unique designs of the
company are considered under the main strength of the company which is important and

provides the company with competitive advantage over their competitors. ZARA's position
in the international market is good and with this it will be possible for the organisation to
provide their customers with high quality goods at affordable prices. The company is
focusing on continuous expansion of their markets so that the vision of the company could be
achieved which is related to expand their business globally and to meet the needs of current
and future generations as well.
Porter Five Forces Model also provides about the industry condition which makes it
important for the company to focus on making improvement in their strategies that will
provide an individual with many advantages such as improvement in profitability level and
many more.
PESTLE Analysis will provide the company with the situation prevailing in the
external market and the ways to make improvement in them. ZARA is also required to
consider the importance of this analysis so as to gain more opportunities and remove the
issues related to threats to the company as well.
Conclusion
From the above described report, it is concluded that strategic management plays an
essential role in the growth of company. It has been identified that is a continuous based
process thus it is required by business organisations to modify their strategies according to
the changing environment so that they can remain competitive at marketplace for longer
period of time. Usage of different framework like PESTEL analysis, Porter’s five forces
analysis, SWOT and Ansoff matrix allows companies in understanding favourable non
supportive market conditions which supports and hinders them from growth. Along with this,
Adoption of SWOT and PESTEL have collaboratively supported in identifying major threats
weaknesses which affects business performance and keeps them away from attaining
competitive edge. It has also been identified that businesses are required to develop their
knowledge about current market trends so that they can provide training to their employees
accordingly which also supports them in becoming market leader of industry.
Recommendation to chosen organisation
According to the overall analysis made in above section, there are some
recommendation provided to manager of ZARA through which they can improvise their
organisational performance and gain competitive edge. These recommendations are
developed with base of expressed frameworks. The core recommendations for this ZARA are
explained below in effective manner:

 At next, it is advised to management department to conduct regular based market
research so that customers needs and requirement can be identified at preliminary
stage. As a result, this will support company in developing and designing trendy
cloths according customers requirement.
 Furthermore, it is suggested to managerial team to conduct some constant based
training and development sessions for the existing employees through which they
learn new skills that are helpful for them as well as their company. This will also
result in enhancement in the productivity of employees as they are able to use their
full potential with developed skills.
 At last, it is recommended to ZARA to develop certain corporate social responsibility
campaign. This will help the company in contributing in societal development. Also,
it will support in creating positive image of company in front of customers and
society. This will also bring more number of opportunities for ZARA at marketplace
as customers are accepting them easily with its positive image.
By following all these recommendations, ZARA can easily improve its performance
at global scale and gain competitive edge effectively.