Applied Corporate Strategy: External & Internal Analysis of Zara

This report provides a comprehensive strategic analysis of Zara, a leading fashion retailer. It begins with an introduction to corporate strategy and its application to Zara. The report then delves into external and industrial analysis, utilizing PESTLE and Porter's Five Forces to identify opportunities and threats within the fashion retail industry. An internal analysis, including SWOT and VRIO frameworks, assesses Zara's resources and core competencies. The report further evaluates a recently implemented strategy using the SAFE criteria. The analysis covers political, economic, social, technological, legal, and environmental factors. The report also examines the bargaining power of suppliers and customers, along with competitive rivalry. Overall, the report offers insights into Zara's strategic position and provides a detailed examination of its business environment and internal capabilities.

Applied corporate
strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
External and Industrial analysis to identify Opportunities and Threats......................................1
Analysis of Resources and key competences..............................................................................6
SAFe criteria applied to a strategy implemented by organisation ...........................................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Corporate strategy is a highest strategic plan for an organisation that duly defines
organisation overall directions as well goals along with the way in which they can be achieved.
Goals and objectives of company are unique that are mainly formulated as per according to the
current market situations (Davies, 2016). Present report has been conducted on, Zara. Company
conduct their functioning as a leading fashion entity while operating their services in retailing
organisation. In this report formative discussions has been made on Five Force analysis as well
as PESTLE in order to evaluate external environment. While for internal analysis VRIO is being
covered in this report. Lastly, in this report SAFE criteria is being applied which is being applied
as one of the future strategies of entity.
External and Industrial analysis to identify Opportunities and Threats
Zara perform their operations as main brands of Inditex. Company marked themselves as
a leading entity within fashion retailing segment. Company offer offer latest and fast fashion
apparel to customers with of high quality. Zara parent company is a leading and one of the
biggest global brand operating in fashion retailing industry.
Figure 1: Global Fashion Retail Industry Statistics
(Source: Global Fashion Retail Industry Statistics, 2019)
It is important for each and every organisational unit despite of their size and scope to effectively
determine business environment as to decide strategic course of action for company growth and
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welfare. In order to evaluate external environment, Zara manager undertake of Industry and
PESTLE analysis:
PESTLE Analysis
PESTLE analysis, a strategic tool that that aid an organisation to identify its strength,
weaknesses, threats and opportunities in order to gain competitive advancements. Companies
within retailing sector by undertaking advantage of PESTLE analysis with an aim to increase
their consumer base via applied corporate as well as newly designed strategies.
Political: It involves factors like entry mode policies, political stability, taxation regulations and
more. In this it is essential for organisations those perform their functions in retailing segment to
effectively evaluate factors within this factor as to perform operations in a well defined manner.
Elements that are prevailing in political factor impact of functioning of entity in number of ways.
This factor duly involve threat as well as opportunities that are being defined below:
Opportunity: United Kingdom political condition is strong that provide boost to
companies within retailing sector those who come up with speedy innovations.
Threat: Factors like political instability, trade wars, adverse political situations, terrorist
attacks pose threat to organisation on their sustainability. This will lead towards fluctuations in
demand,supply and price of raw material. This significantly affect functioning of organisation.
Economic: Foreign exchange rates, economic growth, interest rates, inflations are involved in
this factor. Thus, it is essential for entities those who conduct their services in fashion retailing
segment to have proper understanding of all these factors and formulate strategies to overcome
negative impact while undertaking advantage of positive one. This will benefit to ensure their
significant growth in respective sector.
Opportunity: United Kingdom is having stable economic growth rate that duly provide
significant opportunities for relating organisation to expand their operations and market share
holding.
Threat: BREXIT impact of performance of organisations within UK in a vulnerable
manner. In order to overcome this, entities within retailing segment are required to undertake use
of pricing strategies which is affordable to every economic section within society.
Social:Constant fluctuations and changes within taste, preferences and trends within customers
lifestyles are covered in this factor. In order to serve society at its best, companies within
retailing segment must ensure that they have effectively evaluated preferences and perceptions of
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individuals within society in best effective manner. With the help of this, they can effectively
able to ensure competitive positioning is respective organisational sector.
Opportunity: As to determine dynamic trends and changes within customer lifestyle,
entities involved in retailing segment are required to conduct effective market research and fulfil
demand of customers as per according to their preferences.
Threat: Retailing segment involves highest threat, as in this it takes a minute for
customers to give a tag of “outdated” to organisational offerings. This lead organisations
involved within this segment towards a pressure in which they are required to constantly involve
in the process of offerings new and unique to their customers.
Technological:It involves rapid change in software and technical tools and techniques. With the
rapid change in technological segment there is constant change in tools and well as technologies
that are required to be duly determined by entities within fashion retailing sector. This will
effectively allow them to save themselves from being get outdated among customers mindset and
marketplace.
Opportunity: UK is technological advanced nation that give boost to entities to make
significant increase in their sales and performance. By taking advantage of upcoming
innovations and technologies retailing organisation can significant able to gain more competitive
advancements. In addition to this, it is essential for entities to implement newly advanced
software within their departments as to serve customer within marketplace in best effective
manner. It further allow them to gain more effective manner.
Threat: Technology is very dynamic that makes entity to conduct constant research as to
determined new trends within technology that provide formative assistance to organisation to
safe themselves from being get obsolete. Major threat that revolves around this factor is that, as
to implement new technologies on regular basis firm required large amount of funds.
Legal: Laws related to employment safety & health, patent violation, import & export regulation
etc. are covered in this factor. By abiding all legal rules and well as regulations entities
performing their operations in retailing organisational segment can operate their functioning
without facing any legal hindrances from government institutions and authorities.
Opportunity: By abiding all legal obligations and laws organisations within retailing
segment can provide healthy workplace environment to their workers and can further build
positive image among public that maximise their global market share. In addition to this, it has
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been evaluated that by applying all relevant legal laws into consideration organisations can not
only serve customers in best effective manner but can also help them to ensure their strong
marketplace.
Threat: Breach of any law will lead organisation to loose their goodwill and market
positioning that further lead towards hampering loyal customer base of organisation.
Environmental: This factor include organisation attitude towards waste disposal, environmental
concern, energy consumption and more.
Opportunity: By having positive attitude towards environment company can ensure long
term sustainability and good market positioning.
Threat: Negligence of environmental concerns lead organisation to affect their overall
organisational functioning. Thus, it is important for organisations to ensure that they did not
neglect to frame strategies for ensuring environment as it will significantly aid them to gain
better goodwill in marketplace.
Further, company top management is intending to conduct Porter Five Force analysis as
to gain knowledge of the respective sector in which they operate their functioning.
PORTER FIVE FORCES
Porter’s five forces is a analytical tool that aid an organisation to gain formative insight
about industry in which they operate their functioning (Herrmann and Felfe, 2014). Top
management of Zara has planned to undertake use of Porter’s five forces as to make significant
improvement in their market performance by evaluating threat and opportunities in retailing
industry:
Threat of new entrants: In context with retailing industry, this has been evaluated that
Zara is facing low threat of new entrants. As company positioned themselves as leading
organisation an as a well known brand with having bulk of loyal consumers. (Lam and
O'Higgins, 2012) Apart from this, as to enter into retailing sector organisation require large
amount of funding and time to settle down as well known entity. Thus, it has been evaluated that,
there is less threat of new entrant for Zara in respective industry.
Threat of substitutes: Zara operate their functioning in fashion retail industry with
having high threat of substitutes. As number of organisation coming up with alternative services
and products as to lure customers. Thus in order to generate new consumer base and retain loyal
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ones, Zara is required to use innovation and uniqueness of continuous basis as to offer new
clothing range of consumers.
Bargaining power of customers: Within retailing sector, bargaining power of consumers
is high as they are major source for revenue generation of every entity and if they do not get
satisfied by organisational offerings they switch their preferences towards other brand in fashion
retailing sector. In context with Zara, it is essential for organisation to offer qualitative products
to customers at low pricing. This is due to the presence of other entities those who offer their
products and services to customers in an affordable price range. This makes customers to change
their shift from company that depicts presence of high bargaining power of consumers.
Bargaining power of suppliers: Supplier offer raw material to organisation on regular
basis that males company to conduct their functioning of production in well effective manner.
This has been evaluated that, bargaining power of supplier is low in fashion retailing industry.
ZARA continuously give bulk order to their suppliers that automatically benefit suppliers with
long term business functioning (The State of Fashion 2019: A year of awakening, 2019). Thus, as
to maintain this relationship suppliers does not negotiate much upon price and quantity that
signifies low bargaining power of suppliers for ZARA.
Competitive rivalry: It has been analysed that competitive rivalry within retailing
industrial sector is high. Thus, it become essential for entities engaging within retailing sector to
analyse strategies and policies of competitors. In addition, to this it has been evaluated that by
merging with other companies market lead can be duly ensured in best effective manner. It will
not only aid entities to make significant improvement in their market share holding but also
benefit them to attract attention of large base of customers towards organisational products and
services. Further, it also benefit them to make significant increase overall sales ratio of entity.
By undertaking use of Porter's five force analysis organisation can effectively able to
shape their competition within retailing industrial sector. In addition to this, it has also been
signified that with the help of this, company can effectively able to ensure best effective
planning. Further it has been analysed that, it also benefit company to effectively deal with
suppliers and buyers in a well defined manner. In addition to this, it has been evaluated that by
undertaking advantages of these competitive forces organisation can effectively able to pressure
and can significantly create more competitive advantages. This will not only benefit company to
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expand their organisational growth but can also able to increase overall profitability and
productivity in a significant way.
Figure 2: Porter Five Force Analysis Model
Analysis of Resources and key competences
It is important for an organisation to evaluate its strength, weaknesses, threats and
opportunities as to gain competitive edge. Zara top management undertakes advantage SWOT
and VRIO analysis as to gain knowledge of organisation key resources and competences.
Mentioned below SWOT analysis is being conducted in context with company.
SWOT ANALYSIS
It is a strategic analysis tool with the help of which organisation can gain insight about its
internal environment that further aid them to formulate well defined strategies accordingly.
STRENGTHS WEAKNESSES
 With having 2000 outlets ZARA  Promotional and marketing activities of
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marked themselves as leading business
organisation in retailing sector.
 Company is having large base of loyal
customers those who are fully
committed towards entity (Ocasio and
Radoynovska, 2016).
 Company continuously undertake use
of unique, fashionable and innovative
fashion trends that ensure their strong
market share holding captivity.
 ZARA is also well known for their
handbag section with having vertical
integrated business process.
 Online presence of company is also
very strong.
ZARA is not that much affective as
compared to their competitors. This is
the major weakness for company.
 Company is having low presence in
marketplace like New Zealand,
Malaysia, India and Thailand.
 Labour turnover of this company is
comparatively high.
 Business functioning of ZARA suffers
a lot because of high competition in
fashion retailing market.
OPPORTUNITIES THREATS
 ZARA can gain opportunities by
expanding their business operations in
those marketplace areas where their
services are still untouched (Quader
and Sohel, 2018).
 Company is also having opportunity to
make their entrance into new market
segment such as, accessories. This will
allow entity to enhance their customer
base along with profitability.
 By undertaking use of best effective
marketing strategies ZARA can gain
opportunity to increase their global
market share holding.
 Company is facing threat, owing to
existence of organisations like H & M,
Vero Moda, Mango. This pose threat
upon business profitability of ZARA.
 Due to low investment of company
within its promotional and marketing
programmes, company is facing threat
as to attract customers towards their
offerings.
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Illustration 21: FINANCIAL PERFORMANCE OF INDITEX AND ITS SISTER BRANDS
(Source: FINANCIAL PERFORMANCE OF INDITEX AND ITS SISTER BRANDS, 2019)
VRIO ANALYSIS
V: Value creating potential
R: Rarity
I: Imitability
O: Organization Appropriateness
TYPES OF RESOURCES
Human Resources
ZARA CEO Óscar Pérez Marcote, is considered as one of the most important resource of
organisation as he significantly drive workforce of entity towards more growth. In addition to
this, employees are also termed as essential resource of company as they are major source of
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revenue generation (Klettner, Clarke and Boersma, 2014). In order to manage organisational
workforce in best effective manner company provide them with continuous training as to
increase their skills and efficiency.
Physical Resources
As to conduct their manufacturing process in a well defined manner company undertake
use of equipments, machines and infrastructure. This aid ZARA to effectively fulfil needs and
demands of customers in best effective manner.
Financial Resources
ZARA operate their functioning as large scale fashion retailing organisation, owing to
this company is having adequate funds availability all the time as to operate business operations
in a smooth and effective manner.
Intangible Resources
ZARA is having established online presence because of its e-commerce platforms and
websites (Lawton, 2017). This offer organisation a strength to ensure high sales as well as
profitability in marketplace.
This has been determined that negative publicity of entity act as a threat for company that
can impact upon their market positioning. This is because Zara is an international firm having a
large customer base which can be negatively influenced as a result of adverse publicity.
VRIO is being undertaken by entity as to evaluate organisational resources in order to
gain competitive advancements:
Valuable
It include those aspects that duly posses value for organisational unit and further benefit
in accomplishment of objectives in time effective manner. Mentioned below ZARA valuable
elements is being defined:
Sinewy brand image:Organisation is having strong marketing strategies that create
positive brand image within mindset of consumers. Entity undertake use of their effective brand
image and further charge high price range from consumers.
Offerings: Company is having product range of each consumer base and provide high
quality products to their customers. With the help of this company can ensure increase in overall
profitability base of company.
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