Zara: Analyzing Business Strategy, IT, and Competitive Positioning

This report provides a comprehensive analysis of Zara's business strategy, focusing on its IT deployment, competitive environment, and operational processes. It begins with an introduction to Zara, outlining its current business strategy, products, and services. The report then applies Porter's ...Read More

Managing Information and
Technology

Table of Contents
INTRODUCTION...........................................................................................................................3
a) Introduction, identifying current business strategy and its products and services..................3
b) Competitive environment of organisation by applying Porter's five forces models...............5
c) Analysing two primary and support activities in Porter's value chain and evaluating strength
and weaknesses...........................................................................................................................6
d) Summarization and reflection on how the business could deploy IT and use of innovative
ideas for improving its business process and enhancing its competitive positioning.................9
CONCLUSION..............................................................................................................................10
REFRENCES ................................................................................................................................11

INTRODUCTION
Information Technology (IT) is the study of using computer in order to retrieve,
manipulate, store and transmit data and information for enterprise or business (Amies and et. al.,
2012). It is subset of Information and Communication Technology (ICT). Each and every
organisation need to manage IT system for running operations and activities in effective and
efficient manner. The use of IT helps in success and competitive advantage of organisation. The
given report is based on Zara which is retail industry founded in 1975 at Arteixo, Spain. It deals
in clothing and accessories products which is serving worldwide. In this report, will discuss
about current strategy adopted by Zara and its products and services. It also highlights various
models such as Porter's five forces, Porter's value chain, SWOT analysis. The deploy of IT in
organisation along with use of innovative ideas for improving business process to enhance
competitive positioning.
a) Introduction, identifying current business strategy and its products and services
Introduction of Zara

Zara is retail industry which was founded in 1975 at Arteixo, Spain. The founder of Zara
are Amancio Ortega and Rosalia Mera. It is the brand of Inditex group which is world's largest
apparel. It mainly deals in clothing and accessories serving worldwide. It has stores in 88
countries with 6500 outlets and manages 20 clothing collections in a year. This group owns
various brands such as Pull&Bear, Oysho, Uterque, Massimo Dutti, Bershka, Stradivarius and
others. It launches 12,000 new design every year for their consumers. Zara has zero advertising
and its prefer to invest in opening new stores instead. As per data of 2018, it has earned revenue
of $18.9 billion annually (Brown and et. al., 2012).
Identifying Zara current business strategy
The strategy use by Zara is very straight and clear forward. They do innovation in
continuous basis such as designing, shipping to stores, production in factories, selling to
consumers and others. Current business strategy used by Zara are as follows:
Business Strategy on Production and Supply- It has team of 200 professional designers
for designing clothes and 12,000 various models for selling in stores. There are some factories
which are owned by company and external vendors to help Zara for fabrication of model and
ready to sales it in stores having average term of one week policy and 15 days for door to door.
The garments manufacture and purchase from vendors arrive at warehouse of Zara and from
there materials is dispatched to worldwide.
Business Strategy on Positioning- Zara Business Model spends Zero on Digital
Advertising- Zara do promotion on one of their design for short period of time till it viral among
mass people. For this they has following vital strategy such as: Zara Business Strategy of Fast Fashion- Fast fashion is not copy cat production of mill
Chinese. It has global trend spotter feedback system starts from low level of employees in
order to alter quickly and improve upon existing lines of clothing. After that fresh design
is provided to manufactures in Europe and Asia who support feedback for new clothes
lines and ready to sale within a period of one week.
 Zara Business Strategy of Supply Chain- It does not outsource anything to manufacturer
of China. Due to availability of cheaper labour from Asian and Middle Eastern, Spanish
can put new merchandise at store within week. It focus on fast fashion products to
produce and outsourcing shelf life goods for cheaper labour market.

Zara Business Strategy of Store Points- Zara does not spend more money on
advertisement and promotion rather than it spends on opening of new stores at different places.
Also it pay brokerage and higher rents for store adjacent for luxury apparel brands (Zara business
model and understanding Zara business strategy, 2019).
Products and Services of Zara
Zara provides various products and services for their consumers in order to fulfils their
need and demand. It deals in men, women and children clothing and are supplied on basis of
customer trends. This is highly supply chain ships which provide new products twice a week.
After designing of products, they take ten to fifteen days to reach outlets and stores. The clothing
is prepared through help of distribution centre in Spain. All new products are tagged, inspected,
sorted and loaded into trucks. As it produces more than 450 million items every year. It also sell
cosmetics, shoes and accessories items to consumer. Zara has control over high quality at each
stage of supply chain in order to ensure that products are better for environment and people. It
follows all set benchmark for entire production process for all category of goods which they sell
and supplier who work with them. In 2017, Zara has analysed 750,000 products and performed
inspections of more than 60,000 goods. It has 30 days product exchange policy for their
consumer (Bryson, 2017).
b) Competitive environment of organisation by applying Porter's five forces models
Zara is multinational company operating business in many countries for providing goods
and services to consumers. As this organisation has many rivals in each and every sector and
country. In order to overcome such challenges, it should adopt new technology and trends and
updating themselves from time to time. The organisation can install IT system in their business
for betterment running of its activities and operations. This IT system results in providing
satisfaction to consumers regarding goods and services.
Competitive environment is external system where operation of business are functioning
and competing with each others. If there are more seller selling products and services then it
results into more competition (Ennals and Molyneux, 2012.). Here, Zara is also facing
competition in market because of many new and upcoming brands in market. In order to analyse
competitive environment of Zara, Porter's five force model has been used. This analysis helps in
identifying rivals of Zara, so that effective decision can be made. Porter's five force model is
explained below:

Porter's Five Force Model
It is model which analyses and identifies five competitive forces of any industry and
helps in determining its strengths and weaknesses (Jerman-Blažič and Tekavčič, 2012). It is also
used for identifying structure of organisation to determine corporate strategy about powerfulness
of forces in specified industry. This model was given by Michael Porter in 1979.
Threat of New Entrants- Zara is facing low threat of new entrants in market. As it is
part of Inditex group which is getting benefits form economies of scale. It is difficult for new
entrant to penetrate market of Zara as it has many loyal customer who prefer to buy such
products. It believes in providing high quality products to consumers to satisfy them with their
need and demand.
Threat of Substitute- Zara is facing low threat of substitute as there does not exist high
quality of clothes substitutes in market. It has attracted large number of consumers through
creating through its own niche market. Such market has been created for developing trendy and
fast fashionable clothes at affordable price. Thus, this has made difficult for consumers to go out
and search for substitute. As Zara has managed to attract fashion lover people in market who
does not bother about cost for products.
Bargaining Power of Consumer- The bargaining power of consumer is low. As Zara is
dealing in clothing segment which has high knowledge regarding fashion design and provide
good quality clothes. The people who prefer trendy clothes and fashion lover are ready to pay
any price for product charged by Zara as it meeting expectations of consumers. The price and
brand loyalty does not provide much impact on purchasing decision of consumer.
Bargaining Power of Suppliers- The bargaining power of suppliers is low as they
totally depend upon business of Zara for supplying raw materials. It does not depend upon
external suppliers where 50% of raw materials are from Inditex group. The supplier supply high
quality raw materials which is not used by each and every company due to which bargaining
power is low. The price specified by Zara should be approved by supplier while supplying raw
materials.
Rivalry Among Competitive- There is high level of competitive rivalry among industry.
This situation has arise because of fast expansion of apparel industry in market as new entrants
comes every day. Zara is also facing high level of competition because of GAP and H&M. The
competition is high due to competitors as they look forward for improving same market. As Zara

is doing investment in developing unique products over its competitors and trying bes t to fulfils
their need and requirement to increase sales and profits (Zara Portfolio, 2019).
Through analysing Porter's five force model, Zara can easily its competitors, new
entrants, substitute, supplier and buyer bargaining power. After knowing their brand value and
goodwill in market, they can produce good and service. In order to beat competition, they can
focus on improving quality along with fashion and trends. This tool is used mainly for market
and industry analysis so that better decision can be made by firm. As Zara is recognised and high
valued brand which is serving its product worldwide for fulfilment of their customer need and
requirement. Thus, in this analysis can help to improve them and achieve their goals and
objectives of organisation (Lambert, Reddy and Munjal, 2012).
c) Analysing two primary and support activities in Porter's value chain and evaluating strength
and weaknesses
In Zara, manger analysis and evaluate activities which is conducting at a workplace in
order to specified products for that they use Michael Porter's Model. It is essential for every
company to produce there products and services in proper chain because by it they can conduct
work in smooth and effective manner. If a company want to do innovation and update company
need to change chain process accordingly. There are two basic elements of Porter's value chain
that are primary element and secondary element. Explanation of Porter's value chain in context
of respective company is given below:-
Primary activities
It refers to those activities which is use by Zara to manufacture final goods and this
process include all steps from staring to ends (Laudon and Laudon, 2015). By this respective
company will gain competitive advantage in marketplace. Some major primary activities are
explained below:- Marketing and sales- This activity is related to the advertising and promotion of products
and services which help a company in enhancing there sales and profitability. Company
can do this by using various channels like digital media, social media, print media and
many more. When Zara adopt or conduct this they able to increase there sales,
profitability and competitive advancement. By this they also able to enlarge there reach
of customers which directly shown on increase in sales, market shares and profit. For this

respective company can use medium like social media- Facebook, twitter, Instagram etc.;
print media- advertising in newspaper, manginess, pamphlets and many more.
 Service- This is a service which is done by a company after launching of product and
services at marketplace. By adopting respective factor company able to retain there
customers for a long time in effective manner. Respective company adopt this factor of
primary activities to take feedback and suggestions from customers which help them in
developing and innovating there products in effective manner. Through which Zara can
also retain there customers for long run that enhance there profit and market shares.
Secondary activities
The major objective of this activity is to support in conducting of primary activities in
effective and efficient manner (Major and Savin-Baden, 2012). When nay change or update
required or conduct in primary activities respective activities factors will provide guidance.
Some of the secondary activities are explained below in context of Zara:- Human resource management- This department of respective company is very
important and essential for accomplishment of task in appropriate manner. This is so
because this department hire appropriate candidates according to requirement of
particular task. Along with this they also provide training and development to employees
according to requirement and need. Which help them in conducting task in proper
manner.
 Technological department- This department is essential and important for Zara to apply
or adopt new and innovative technology in there producing process. That help respective
company in conducting work in effective and appropriate manner. By this they also able
to gain competitive advancement at marketplace. Due to which Zara able to offer more
innovative and attractive products to there customers which attract customers and
encourage them for purchase.
Gaps and Areas of Improvement:-
By analysis and evaluating all factors of Porter's value chain Zara manger identify some
gap which they must improve to enhance there customer base. They found that respective
company must increase there advertisement channel so that they cover more populations across
the world. This will also help in enhancing in sales and profitability ratio. For that they must do

advertisement and promotions when ever they introduce new editions or stock of cloths. So that
more and more customers base aware about it.
SWOT analysis of Zara
Strength
 Unique Designs- Cloths which are offered by Zara are elegant, superiors, quality, unique
design and proper finishing. They also serve variety of ranges in clothings such as party
wear, office wear, for woman, for kids, for men, formal and many others. Along with this
respective company also offer accessories and foot wear.
 Strong presence- Stores of Zara are present in global marketplace, according to research
there are approx 2100 stores globally in year 2015. Through which they are earning 15.6
Billions per year and also they are expanding there presence on regular basis (Margetts,
2012).
 Benefits of designs- Zara change or update there stocks on regular basis which encourage
customers to visit there stores twice a weeks. They basically launch 1000 new designs in
per annum at global market. Design of Zara products are simple and attractive which
attract customers on huge amount, along with this they offer quality products.
Weakness
 Generalised collections- It can be consider as main weakness that they are offer
everything for everyone, instead of specific on a particular sections. It is a major reason
due to which customers are shifting from Zara to another companies who are focusing on
one particular thing.
 Low safety stocks- Zara have less inventories to reserve there stocks which they can
supply when demand will increase in market. Due to which respective company face
situation of fulfilling demand of customers of a particular products (Silver, 2014).
Opportunities-
 Online E-commerce- It can be seems as an opportunities for respective company to
expand there sales by using E- commerce websites because customers able to purchase
products from anywhere and at any time.
Threats

Competition- Zara is well known brand which have numbers of competitors at global
marketplace. Such as H & M, Mango, And, Only, Vero moda, Forever 21 and many mores.
These brands are also liked and loved by customers.
d) Summarization and reflection on how the business could deploy IT and use of innovative
ideas for improving its business process and enhancing its competitive positioning
Zara is largest retail industry in Spain which deals in clothing and accessories. This
organisation is serving its goods and service all over world for their consumers. It is serving in
men, women, children clothing and accessories product such as perfumes, lipstick, shirts,
trousers and others. Zara was incorporate by Amancio Ortega and Rosalia Merain 1975. the
supply chain used by Zara is the reason for its success. It is achieving growth through
diversification with vertical integrations. As it has adopted couture designs, distributes,
manufactures and retails clothes within two weeks of design after appearing on catwalks. It has
adopted fast fashion such as Just in Time production, centralised order fulfilment, solid
distribution network and lean inventory management. Zara is getting success because of such
reasons (Spire and et. al., 2013).
Zara has used Porter's five force model in order to identify threats in future. This model
has suggested various threats, substitute, bargaining power of supplier & buyer, competition and
entrants which arise in future for Zara and give competition to it. If same category or similar
products arise in market then it create threat for business as consumer attract towards those
products. The bargaining power of buyer and suppliers are also threat for business as they can
charge high price for products and customer can charge low cost for goods. In other part of
report, Porter's value chain has been explained that helps in identification of primary and
secondary activities. The activities which helps to develop product and services from initial to
end is called primary. Similarly, secondary activity helps in supporting primary activities in case
of change. Zara is stronger in brand value, distribution channel and supply chain management.
In order to run business successfully, Zara need to implement IT system in their business.
Such system or service helps in supporting and satisfying consumers. The various IT services
implemented by Zara are discussed below:
Click and Collect and Fitting Room Tech- Zara has introduce its first store in London
where consumer can click and collect. This technology is displayed at pop-up with other
characteristics. This has online order collection where consumer has option to order and pay

online. Such technology is used to increase orders and online shopper at website. It also consists
of high fitting room feature for trail of clothes (White, 2015).
Clothing comes to life with Augmented Reality- Zara has launched AR app, that is
designed for bringing clothes to life in stores. Through pointing of cameras at sensors, users can
see virtual fashion models strutting their staff. It also includes mannequins moving all round and
showing new collection of brand. After viewing experience they have option to buy clothes
through app or store (How Zara is using in-store tech to improve its frustrating shopper
experience, 2019).
CONCLUSION
From above report, it can be concluded that Zara is providing various huge products and
services to their customers. It has adopted business strategy for expansion of its business in and
market in many areas. Due to large business, competition to the company is also higher which is
identified through Porter's five forces model. The strength and weakness of company are also
explained for measuring effectiveness and improving them. The effective IT systems help
company in gaining competitive advantage among its rivals.
REFRENCES
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handling system power supply capacity utilization based on load sharing power loss.
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Major, C. H. and Savin-Baden, M., 2012. An introduction to qualitative research synthesis:
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