Strategic Analysis of Zara: Business Strategies and Performance Report

This report provides a comprehensive analysis of Zara's strategic management, examining its strategic direction over the past five years. It includes a PESTEL analysis of the retailing industry and a discussion of Zara's competitive advantages. The report explores probable scenarios faced by Zara, such as market consolidation and the rise of mobile payments. It also addresses strategic drift and proposes mission and vision statements to meet market demands. Furthermore, the report delves into Zara's strategic capabilities, the Business Canvas Model, strategies to defend its core business, and the resource implications of recommendations. The analysis covers various strategies employed by Zara, including its brand-building approach, reverse strategy, and feedback mechanisms, to maintain its market position and adapt to changing consumer preferences and technological advancements. The report emphasizes the importance of communication, information management, and technological adoption in Zara's strategic success.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
Strategic direction of ZARA within past 5 years...................................................................1
TASK 2 ...........................................................................................................................................2
PESTEL of retailing industry.................................................................................................2
Competitive advantage...........................................................................................................3
Probable scenario faced by ZARA within its existing market domains.................................4
TASK 3 ...........................................................................................................................................5
Strategic drift..........................................................................................................................5
Mission and vision statement to demand of marketplace.......................................................6
Strategic capabilities...............................................................................................................6
Business Canvas Model..........................................................................................................8
TASK 4 ...........................................................................................................................................9
Strategies to defend core business..........................................................................................9
TASK 5..........................................................................................................................................11
Resource implications of your recommendations................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic management refers to an effective process in which formulation and
implementation of major plans taken by a company by considering necessary facts or figures in
order to attain company objectives. It basically includes the accurate criteria of utilising available
resources and allocation of different tasks to employees for achieving required targets in proper
manner. There are various kinds of efficient strategies or techniques that are needed to be made
by management for conducting different activities (Barney, 2012). It is necessary to build an
appropriate plan of action for carrying out overall operation procedures in correct direction to
attain better outcomes on regular basis. This report is based on ZARA which is known as
Spanish fast fashion deals in retailing and provides several kinds of clothing or accessory goods
to people at global level. It was founded by Amancio Ortega & Rosalia Mera in the year around
1975. They have almost 2200 stores that are established worldwide for making products
available to customers in easy way. This assignment will discuss about strategic direction that
followed in past and development achieved. It also includes explanation about detailed analysis
of retailing industry involving PESTEL and critical discussion for competitive advantage.
Different types of strategies are used in context of given company for completing various aspects
like grabbing competitive advantage, to defend core business in the report.
TASK 1
Strategic direction of ZARA within past 5 years
There are different types of strategies that are utilised by businesses to conduct required
tasks or activities in correct way along with creating desired outcomes. In case of ZARA, it has
several effective as well as efficient techniques which are beneficial to carrying out various
procedures to completer set targets properly. The company has build certain appropriate policies
and adopt different technological equipments to improve their productivity and profitability
(Berger and Berger, 2011). This organisation is very famous for its quality of clothing and other
products which are rendered to clients. Some of strategies that are followed by ZARA which
helps to gain development are as follows:

Strategy Development
Brand Creates Frenzied Buyers: The ZARA
has an appropriate strategy as it deigns,
produces, distributes and sell its products
within only 1 month and then several
competitors take certain months to do the same
thing.
 This approach render few benefits such
as less clothing in stock means lower
storage costs and fewer mark downs.
People get attracted towards fresh trend
of ZARA and they frequently purchase
them.
Zara’s Reverse Strategy: The reverse method
includes criteria of thoroughly analysing by
going in streets or malls to know
actu1532435471_1532523222 (2)al wearing of
people (Clarke, 2012).
 This techniques is useful to address
appropriate preferences and
requirements of clients properly that
helps to them to become more popular
at global level and gain capability to
cater directly to individual's demands.
Listen to feedback: This refers to primary step
of growth strategy in which the company
collect actual data of clients needs, wants and
demands from different areas such as streets,
malls and customers.
 ZARA has used this policy to know
about actual likes and dislikes of people
that involves which are necessary to
manufacture innovative products to
fulfil expectations of customers. It will
facilitate to gain more number of
clients that helps to attain long term
profits.
TASK 2
PESTEL of retailing industry
The retailing industry is required to focus on external environment factors because they
impacts on this sector in positive or negative manner (Foss and Knudsen, 2013). Some of these
components are given below:
Political Factor: This factor is all about several political rules or norms that are made by
political bodies of particular area. It also includes several government regulations which impacts
on revenue and profitability of retail industry. Political issues creates problems to conduct

various operational activities for improving better outcomes. For example, it is necessary for
ZARA to analyse political stability of particular nation that helps to attain growth of business
successfully.
Economic Factor: The economical factor of external environment can be described
about several elements like inflation, growth & interest rates, taxation etc. which fluctuates at
different places. Thus, it will facilitate to make correct decision for conducting business in
particular country. Retailing companies like ZARA have to focus on such factors to establish
new venture in other nation to gain better probability.
Social Factor: There are various kinds of people who are surviving at place having their
own religion or cultural that results into different values or thoughts. Thus, cultural values or
beliefs of individuals reflect into their perfectness and way of thinking about specific aspect like
product. Retailing industry have to conduct several activities like packaging of goods and
promotional events by making sure, not to harm religious values of people.
Technological Factor: This refers to various technological equipments or software that
are helpful to boost up regular productivity as well as profitability. It is essential observe an
analyse beneficial and advanced technology to improve quality of product and fulfil expectation
of people in retailing industry (Gamble, Thompson and Peteraf, 2013). For example, ZARA is
using pioneering technological strategy for which they become leader of fashion market.
Environmental Factor: There are various kinds of issues that are resulting due to use of
photochemicals, releasing toxic substances and creating pollution by using non -ozone friendly
vehicles. Thus, several problems are takes place such as global warming, pollution etc. and
government has apply few strict regulations to save natural environment. ZARA have to put an
accurate steps towards save environment criteria then they can improve image of brand amongst
customers and legal authorities.
Legal Factor: This refers to various legal rules or norms which are made by government
and it is mandatory for every organisation to follow these regulations to run business properly.
ZARA is required to adopt overall legislation that helps to reduce future legal issues.
Competitive advantage
There are various kinds of strategies that are utilised by different companies of retailing
industry as per their requirements in order to gain competitive advantage among their direct
competitive firms. It includes several policies such as using advanced technology, focus on

quality of product, improve packaging and so on. For example, the ZARA company is is very
famous and competes against some of world's top fashion companies (Hitt, 2011). In case of
ZARA, they also build more effective as well as efficient strategies which are helpful to gain
competitive advantage that are given below:
Current technology: This can be described as to adopt more appropriate technological
equipments or software that are suitable for operational activities of an organisation. ZARA has a
techniques like manager are used handheld devices to convey formalised information concerning
feedback from customers and ordering needs straight to in-house designers. They focus on
current technology for gaining competitive advantage through controlling all aspects of
formulating procedure, production and distribution in proper manner.
Continuous communication: The continuous communication is an essential activity that
should be conducted with staff members so that an appropriate direction can be preferred by
them. Thus, it will facilitate to put overall efforts in correct direction to attain desired gaols
properly. ZARA also focus on maintaining better conversation with clients to store managers and
they convey information to market specialists which is finally gained by designers. This will
provide support in formulating desired products as per demands of consumers. Hence, ZARA
has an effective supply chain due to having more accurate communication amongst several
important people at different level. Continuous flow of correct information is helpful to conduct
production of more desired products that facilitates to gain better competitive advantage for
company as compared to other firms that results into improved brand image in market area.
Information Management: This can be explained as an effective as well as efficient
information system to gain and provide various essential data. In case of ZARA, they has
reviewed operational processes countless times to reassure clients and employees stress free and
safe information transfer.
Probable scenario faced by ZARA within its existing market domains
There are different types of trends that are introduced in market in various times that
impact on growth rate of companies because people prefer products of new fashion. It is
necessary to modify present strategy to garb opportunities welcomed through fresh trends
because it helps in maintaining competitive position of ZARA (Hooley, Piercy and Nicoulaud,
2012) . Some of probable scenarios that may faced by this company are as follows:
Consolidation and Merger & Acquisitions will Increase

The mergers and acquisitions are helpful to directly reduce competition and facilitate to
grab new customers in bulk through expanding business in other nations successfully. Thus, this
technique is helpful for retail industry because companies like ZARA are capable to enhance
business and boost up profitability in defined time frame.
Mobile Payments Will Accelerate a Cashless Economy
In present scenario, some people are utilising mode of online payments that are available
in few of stores or other required places but it is not common everywhere. This technique of
mobile payments can be considered as an effective driver for accelerating cashless economy.
Retailing industry can make every person comfortable to use it by applying these methods of
payments in various retailing companies like ZARA. They can easily expand business in other
nations by reducing threat of different currency.
Robotic Retail Will Scale: This can be described as most advanced technology to be
adopted for using robots in order to conduct various activities of business. Thus, it includes to
established robots at retailing stores for shelf-scanning and cleaning quite aggressively. ZARA
can also use this method to improve attractiveness of their brand and improve perfection of
services properly (Jardon and Susana Martos, 2012).
TASK 3
Strategic drift
The term strategic drift refers to an effective idea or thought that is related to
management of strategies at the time to deal with dynamic environment. The factor is strategic
drift occurs when the companies are not able to cope up with several changes that are suddenly
introduced in market due to which they start facing losses. In also involves certain modifications
into internal and external environment which impacts negatively on regular outcomes of
company. There are various kinds of components that are considered as cause of facing strategic
drift like laxity of management and reluctance to evolve with times but largest underlying
elements is culture. Zara needs to make strategy for coping up with changes which incurred at
marketplace such as; customer choices are fluctuating due to the emergence of unique trends and
substitutes. Hence, strategy of an association is getting affected as managers needs to design
strategies as per current requirement and wants.

However, changing trends of market in fashion industry is a major factor that can be
considered in strategic drift of ZARA. Thus, such modifications force companies to sell their
existing products at discounted rate and organise offers such as sale for selling previous stock in
market. It also include manufacturing present concept and goods for customers which is required
to fulfil their current needs, wants and demands properly.
Mission and vision statement to demand of marketplace
The mission statement that ZARA is committed to satisfying desires of its customers by
innovating their business and render fresh designs of new product along with higher quality at
reasonable price. Thus, they are required to facilitate efforts of company to fulfil demands of
clients in correct manner that help to gain loyal customers to ensure long term profitability. The
vision of ZARA is to use its business model for contributing sustainable development of society
and environment. Hence, this direction is helpful to the firm because it facilitate to boost up
brand image of an organisation (Kamukama, Ahiauzu and Ntayi, 2011).
Strategic capabilities
There are different types of capabilities in company which is measured by calculating
efficiency of resources and skills of manpower. It is necessary to have required machines or raw
material along with well qualified and experienced staff members because their efforts are
responsible for growth of business. In case of ZARA, they have several abilities due to which it
is famous brand for better quality of product with new and unique concepts. Some of these
strategies which are used by given firm are given below:
High product variability: This refers to an effective policy of ZARA of having wide
range varieties in products that helps to gain number of customers having differentiated needs
and wants. Introducing various kinds of goods or services in market, provide support to fulfil
actual demands of every individual in correct manner along with achieving their satisfaction.
Thus, it will help to grab more market share to maintain strong position amongst competitive
organisations and boost up profitability (Leonidou and et. al., 2013).
Small lot manufacturing: The small lot manufacturing is also an effective as well as
efficient technique of given company that makes helps to fulfil small needs of people in an
appropriate way. It will provide support to grab more number of people for brand by providing
satisfactory services. It basically includes criteria to render single product and gain one more

customer for brand then according to varieties of goods will attain clients separately that
facilitate to garb improve profit share by ZARA.
Low inventory: This refers to technique of managing inventory of an organisation and in
case of ZARA, they are considered as extremely cognizant of perils of inventory. It is one the
major wastage of production system that is known as loss for company. They have an
appropriate criteria of considering holding inventory is hazardous for fast fashion because
products which are in demand today can be out of favour next day. ZARA put efforts to
manufacturing and supply chain to maintain low inventory to reduce chance of facing loss.
Excess capacity for agility: This can be described as an efficient capability of company
through which they can fulfil sudden increased demands of customers. In case of ZARA. They
have an effective skill to quick respond to unexpected changes or developed demands of people.
It is possible for this firm as it has more accurate and capable production system through which
manufacturing operation give response quickly to sudden modification (Leonidou, Palihawadana
and Theodosiou, 2011) .
Quick new product introduction capability: ZARA has an effective ability through
they can introduce fresh product with new concept in market as per quick demand or scenario.
This capability provide support to make an appropriate product as per new trends of market to
fulfil actual desires of people. It is known as most supporting core strategy due to having more
efficient supply chain and entire designing team of this organisation.

Business Canvas Model

TASK 4
Strategies to defend core business
There are different types of companies running in present scenario of changing trends and
all are having their own strategies or policies for conducting their business in proper manner.
Strategies includes various operational activities or procedures in required way to get desired
productivity as well as profitability (Li and Liu, 2014). It is necessary to make an effective as
well as efficient plan of action by putting different essential steps which provide help to carrying
out required operational procedures in correct manner along with generating desired outputs on
daily basis. Every company is dealing in specific industry having its own idea or concepts of
producing goods to complete expectations of consumers. However, core business of an
organization is all about managing primary activities of an association as well as requisite to
focus on their basic operations for preventing it from various damages. Thus, number of
techniques are identified which aids in defending core business of Zara in order to control the
probabilities of short losses. For example; it is important to render services with better features at
reasonable rates so that more number of people become capable to purchase of goods of
particular brand. This will facilitates to attract new clients along with retaining the current ones
to boost up productivity of the organisation. It is necessary to maintain core business because the
brand is known for particular product and if it dissolves, then goodwill of company get
decreased. Hence, some of the major elements which aids in preventing core business are
discussed as follows-
In market leverage- This is one of significant and more effective strategy which focus
over seeking new opportunities of growth among existing consumer for supporting core business
in market. Zara can support their core business through obtaining available opportunities of
development in business which is identified amongst current consumers in order to acquire
loyalty of entire society. As a result, firm can easily attain maximum return on their investment
by satisfying customers wants as per their choice or preferences. Through this, company can
support their business organisation efficiently. This strategy is more beneficial to identify certain
opportunities of current abilities of company rather than launching new concept or adopt other
trends to improve profitability of business. ZARA can analyse their own core strengths or skills
of work force through which they can grab more profit share and attain strong position at market
which facilitates to gain growth of business in successfully (López-Nicolás and Meroño-Cerdán,

2011). Zara can attract new customers for long term by introducing innovative goods by utilising
their rooted abilities in which they can boost up goodwill without spending much times or money
on new concepts.
Near market expansion- According to this method, an organization can expand their
business into new sector from which they are unfamiliar such as; Zara can launch household
materials in new segments of market in various countries such as S. Africa, China etc. through
which they can strengthen their core business by strengthening it through support of other trade.
In another word, this framework is considered as elaboration through adjacencies. People has an
image of company by packing images of logos of core business. It indicates to primarily focus on
core product and it development to improve profit share of an enterprise. Thus, this technique
includes three pathways such as optimize core business, extend the boundaries of core business
and re-scope and reinvent core business. The ZARA is required to analyse several opportunities
to expand core business and put more accurate efforts towards it to maintain image of brand
strong in market place. Hence, they can sustain their effective position and able to garb more
profit share successfully.
Disruptive growth- This strategy to refer to the disruption in market when an
organization can also act towards dramatic modification by coming with totally new business
enterprise. However, this approach is rarely used by company because linking of existing
capabilities system to the new one is totally complex one. This can be explained as to conduct
those activities which are helpful favourable to core business. It is necessary for owner and
management relevant people to focus on various procedures and implement more effective
techniques that are supportive to maintain and defend core entity in proper manner (McGrath,
2013) . ZARA is required to build goals or objectives of regular basis regarding different
activities such as selling, marketing and serving core products to customers in correct way. It is
helpful to conduct all essential procedures to complete desired targets or goals on daily basis
along with creating desired outputs.
Capability development- Managers of Zara is liable for creating several organizational
proficiency in unique manner for supporting other forms of growth. This thing can implemented
if an association can come up with various changes such as; creativity, improvements in
operational activities, management and administration henceforth (Wheelen and Hunger, 2011).
It is best strategy to implement the work performance and bring effectiveness within organisation