Zara's Business Strategy: Market Analysis and Recommendations

This report provides a comprehensive analysis of Zara's business strategies within the UK fashion retail market. It begins with an application of Porter's Five Forces to assess Zara's competitive environment, examining rivalry, the threat of new entrants, supplier power, buyer power, and the threat of substitutes. A SWOT analysis identifies Zara's strengths, weaknesses, opportunities, and threats. The report then explores the wheel of retailing theory, detailing how Zara has evolved within the market. Strategies and tactics employed by Zara are discussed, including multi-channel strategies, market research, and responses to increased competition and changing consumer preferences. The analysis also addresses the impact of distributors and the rapid growth of the internet. The report concludes with recommendations for Zara to maintain its competitive advantage and adapt to the dynamic fashion market. References and an illustration of the wheel of retailing are included.

Porter's five force
Porter's five forces model analyzes and identify five competitive forces that shape
every organization and help to determine an organization's strengths and
weaknesses.
 Rivalry: In fashion clothing market Zara become a leading clothing brand and
H&M is one of its biggest competitors. It makes pressure on the company in
which they make some changes to get a rise in the marketplace and get a
high position better than others. High rank of rivalry in business world make
impact on company productivity and profitability.
 The threat of new entrance: High rank of New entrance in the fashion world
is one the biggest threat for Zara which impacts on its productivity and
profitability. At this time they provide reasonable prices of products with high
quality that help to retain its customers with them for a longer time of period.
 Bargaining power of suppliers: The company builds an effective supply
chain with multiple suppliers that help to tackle the bargaining power of
suppliers. Power of suppliers has been ranked at medium level.
 Bargaining power of buyers: Buyers want to buy the best offers which are
available by paying minimum prices as possible. It put pressure on Zara profit
margin in the long term, thus to solve this issue company speedily innovating
new products. Consumers often seek offerings and discounts on established
goods so organization keep on bringing with new products then it can control
the bargaining power of buyers. 1 to 5 number of buyers get high rank of
bargaining power.
 The threat of substitute: Threats of substitute will be medium. When new
goods meet similarly consumer needs in a different term, industry profit
suffers. The threat of substitute service or goods is high if it offers a value
proposition that is different from the current offering of Zara. By understanding
the core demand of consumer more than what they buy company can tackle
the threat of substitute. Threats of substitute will be medium, which is easy to
replaced any products of Zara, when goods does not meet with customers
demands and requirements.

. SWOT
It is the best tool or framework that help the company to identify its strength,
weaknesses, opportunities, and threat. It analyses assess external and internal
factors as well as future and current potential
Strength
 Zara offers best prices products to
customers at a reasonable price.
 They have more than 2000 stores
all over the world where they give a
range of clothes.
Opportunities
 By exploring its business at the
global level company can grab the
position of its business at a high
level.
 They offer customers clothes
through online marketing facility that
is gaining importance in the
marketplace.
Weaknesses
 Limited advertising and marketing
as compared to other brands are
one of the weak points about Zara.
 High competition environment for
the company means a lack of
market share and high brand
switching.
Threats
 The threat of new entrants.
 The threat of substitute.
 Sudden change in government
trade policies after Brexit.
Cyclical theories -The wheel of retailing
The wheel of retailing is a theory to state the institutional alteration that takes place
when large business and innovators enter the retail area. This theory is based on
four phases-
 Phase 1- In this phase retailers enter in market as low status, low margin and
low price for example Zara. All these things gradually acquire more
elaborately facilities and premises that help the organization to move
upmarket. Zara enters in fashion market as low margin of profit, introduce low
price products and low financial budgets etc.

Illustration 1: The Wheels of Retailing- 4 Phases
(Source: Wheel Of Retailing, 2017)

 Phase 2- After gaining profit by selling low price company raise its product
prices and offer high price goods, generate high-profit margin which makes its
reputation in the marketplace at a high level. Zara sell products in low prices
that will raise their profit margin more than now and help to gain high platform
in business world.
 Phase 3- they maintain all the process successful. Zara offer low prices
goods to its customer that build its position in marketplace and help to achieve
their organizational desired goals. They will organize all the procedure of
achieving success successfully and get high platform rather than in others.
 Phase 4- When new entrance in the marketplace enter company apply the
same strategy which they are using at phase 1 and offer low price products.
Zara implement low price strategy when new entrance enter in fashion market
which help to retain its customers with them for longer term of period.
Strategies and tactics that are using by retailers
Fashion retailer in the UK wants to provide quality products to customers that
give satisfaction to them about their goods in this sector. For example, Zara
manufactures clothes for men and women according to their preference that
pressure for continually buying their goods more than the others. However, there are
some major changes occurring in the fashion clothing market that effects its
manufacturing procedure and other functions very much. Thus, to resolve these
issues in the process of productivity they are using tactics and strategies.
The rapid growth of the Internet- New generation are mostly depended on
using technologies and internet services that give them all the information about
current trends. In term of Facebook and social media, millions of people are using
internet facilities to get an update regarding changes in fashion clothing market the
most. For example, Zara competitors promote their products by using social media
websites and other application tools that help to introduce goods in the marketplace.

Strategies- Multi-channel strategy is one of the best techniques that help
fashion clothing market to raise their position in the market better than its
competition. In this plan they must promote their clothes through advertising on TV,
print pictures on the magazine, holding etc. that help to attract more customers
towards them. It is one of the marketing practice that interacts consumers via
multiple channels both indirect and direct in order to sell their goods. For example,
Zara must use a multi-channel strategy to providing numerous ways for its
customers to purchase their clothes. This process includes selling through traditional
outlets such as catalogs, mortar and brick stores.
In response to this factor Zara marketing manager make their best marketing
plans and strategies for beating competitors in marketplace. Organization invest
money in marketing procedure for promoting their products in market, with the help
to this method they will garb the attention of customers more than now in competitive
business environment.
Tactics- Retailer should make effective marketing plans and for that, they
have to provide training to their workers . For example, Zara is using a multi-channel
strategy that helps to promote their products in the marketplace. Thus, for that, they
must create promotional plans within including all the source of advertisement. The
organization gives coaching and directions to the marketing department in which
they develop their skills and knowledge of marketing plans more than now.
Changes in customer preference- Consumer preference are expectations,
dislikes, likes and inclinations that drive consumer purchasing decision (Kalezić,
2015). This will be changed for the reason of changes in the fashion clothing market.
It is one of the major modification that impacts on the retail sector, for example, Zara.
Strategies- Conducting market research is one of the strategies that help to
understand customers preference and identify their trends as well. Thus, after getting
all the information about their needs and expectations Zara offers them products
according to it.
Tactics- the organization must take clients feedback that helps to know about
them and their likes. Monitor customers like on daily basic services which get details
regarding their choices and dislikes. Taking feedbacks is one of the tactics that
support company to offer goods according to people likes and fulfill their
expectations.

Increase the power of distributer- Zara provides their clothes and good
quality products to the customer with the help of distributes that avail all goods in
stores. The distributor distributes Zara product at many stores and in the mall that
gives benefits to the organization. However, increasing charges of supply effects
company profit.
Strategies- Firm supply product independently without any suppliers that
save their time and money as well. It will help to deal with this change and run
business functions and activities effectively.
Tactics- Retailer build a strong team who help for supplying product in stores
on time that build their reputation in the marketplace better than others. Zara should
use fast deliver technologies which support to accomplish their tasks at the decided
framework.
The rapid growth of competitors- In fashion clothing market rising new
competition is one of the major changes that effects whole businesses function of
Zara. They have a new plan which is different from the others that make their
positive image in the marketplace. New rivals give tough competition to other
existing organization that impacts on their customer base and another process very
much. It pressures others to make changes in its structure and entire marketing
system that is much expensive.
Strategies- Zara must create attractive marketing plans and focus on their
products quality and design which is related to customers preferences. It is one of
the best strategies that help the organization to increase profit margin more and
more.
Tactics- company train employees and guide them on how to manufacture
products, they must give the best offers to customers and discount facilities that
attract them more towards Zara. Provide good quality goods within affordable prices
help to retain clients with firm and pressure them for consistently buying.

CONCLUSION
This report discussed retail theories and practices and fashion retailer
industries that run their business efficiently in the UK. It has been concluded that
macro environment factors affect functions of Zara that influence on its profit margin.
Changes in customer’s preference and rising competitors are one that factor which
impacts on organization productivity. It includes some suggestion that helps to
overcome with the major changes that occur fashion clothing market as well as Zara
marketing functions. This report discuss about the rising trend of internet using in
which company make their strategies for taking advantages through invest more in
advertisement. This unit cover all the relevant tactics and strategy using by Zara for
increase reputation and profit margin more than the another.
Recommendation-
 New entrance in UK fashion market raise more and more thus, to deal with
this thing, Zara must make its new plans for marketing and offer low price
products.
 They should concentrate on products quality and manufacture procedure for
beating existing and new entrance in marketplace.
 Distributer raise their prices of supply products more than now, Zara may be
will advise supplying goods independently and make good provider chain in
which they can provide its products easily.

REFERENCES
Online
Wheel Of Retailing.2017.[Online].Available
through:<https://marketbusinessnews.com/financial-glossary/wheel-retailing-
definition-meaning/>