Understanding and Leading Change at Zara and H&M: A Comparative Report

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UNDERSTANDING AND LEADING CHANGE
ZARA

Table of Contents
LIST OF FIGURES.............................................................................................................................2
INTRODUCTION............................................................................................................................. 3
LO-1............................................................................................................................................... 4
P-1 CHANGE AT ZARA AND H&M...............................................................................................4
M-1 DRIVERS OF CHANGE IN ZARA AND H&M..........................................................................6
LO-2............................................................................................................................................... 8
P-2 EFFECTS OF INTERNAL AND EXTERNAL DRIVERS OF CHANGE ON ZARA AND H&M............8
P-3 WAYS TO MINIMIZE NEGATIVE IMPACTS OF CHANGE......................................................13
M-2 THEORIES AND MODELS TO EVALUATE CHANGE IN ORGANISATIONS.............................18
LO-3............................................................................................................................................. 21
P-4 BARRIERS TO CHANGE AND THEIR IMPACT ON DECISION MAKING..................................21
M-3 FORCE FIELD ANALYSIS OF ZARA AND H&M.....................................................................23
LO-4............................................................................................................................................. 25
P-5 LEADERSHIP APPROACHES TO DEAL WITH CHANGE..........................................................25
M-4 EXTENT OF MODELS AND APPROACHES IN DELIVERING CHANGE...................................28
REFERENCES.................................................................................................................................30
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LIST OF FIGURES
Figure 1: burke litwin change model............................................................................................13
Figure 2: ADKAR MODEL..............................................................................................................16
Figure 3: Lewin's Change Model..................................................................................................18
Figure 4: Kotter’s model...............................................................................................................19
Figure 5: LEADERSHIP STYLES...................................................................................................... 25
Figure 6: Main leadership styles.................................................................................................. 26
Figure 7: Mckinsey’s 7s framework..............................................................................................28
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INTRODUCTION
In today's competitive and dynamic environment, change is very important for the success of
every organization. A business which does not adapt changes stay behind in the race of
becoming a successful business enterprise (Hayes, 2018). Change can be brought into the
business by both internal and external environment forces. This changes influence the business
strategies, organizational operations and even short-term and long-term plans (Frankland et al.,
2013).
This assignment will help to understand the impact of changes on the organizational strategy
and operations along with assessing the drivers of change in Zara and H&M. It will also explain
the type of changes brought into both the organization due to these drivers. The assignment
will then evaluate the ways in which internal and external drivers of change affect leadership,
team and individual behaviours within Zara along with evaluating the measures which can be
taken to minimize the negative impacts of change on organizational behaviour. It will also apply
various models to critically evaluate organizational response to change. The assignment will
also explain the barriers of change along with their influence in decision making. Force field
analysis will also be used to analyze the driving and resisting forces to show their influence on
decision-making. In the end, the assignment will explain leadership approaches which can help
in dealing and delivering change in the organization with the help of different models.
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LO-1
P-1 CHANGE AT ZARA AND H&M
Zara
Zara is among the top fashion brands in the world. It was started in the year 1975 by Amancio
Ortega in Spain (Zara, 2019). The world’s largest apparel retailer ‘Inditex’ is the parent company
of Zara and Zara has its presence in 96 countries with more 2000 retails stores. Zara has a
much-diversified portfolio and deals in Men's, Women's and Kid's apparel along with shoes,
cosmetics, bags etc.(Kohan and Danziger, 2018).
H&M
H&M (Hennes & Mauritz AB) is a Swedish company founded in 1947 by Erling Persson (H&M,
2019). H&M deals in fast-fashion and also have a diversified portfolio which includes Men's,
Women's, Teenagers and Children's clothes. It has presences in 62 countries with more than
4500 stores. H&M is the world's second-largest retailer in clothing after Inditex (Kohan and
Danziger, 2018).
H&M and Zara are among the two most popular clothing brand of the world and are involved in
the fast-fashion segment. Fashion has a tendency of changing very frequently and thus both of
these companies have to accept that change in order to keep themselves updated. Zara is often
praised due to its acceptance of new trends before any other competitor and H&M might be a
little slow in the process but also praises the importance of change (Stein, 2019). Changes are
driven by many internal and external environment forces and can affect the business
operations and strategies of different organizations in multiple ways like:
Change in Zara
External forces of change in the Zara can have both negative and positive impact on its
operations and strategies. Thus it has to be ready with contingency plans in all its locations.
Change in fashion trends can change whole inventory collection in the Zara store. The
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preference of customers also decides the life of products in the stores at its location (Roll,
2018). If a design is not liked by the customers and does not show good potential then it will be
discarded from the shelves despite the losses. If the cost of a location is high and customers are
less than the prices of the products might get a little higher in those stores. Zara had also
changed its operations to eco-friendly production and easy checkout on stores to improve its
operations.
Change in H&M
H&M has to adapt changes to compete with high-end brands and hold its market share. To
receive cost advantage H&M started having direct deals with the bulk providers which
decreased the cost of goods at H&M. It has to adapt to the market forces derived by customer
preferences. Though many changes might affect the operations of H&M like seasons affects the
trends and competition affect the prices etc. (Stein, 2019).
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M-1 DRIVERS OF CHANGE IN ZARA AND H&M
Many forces affect the operations of Zara, these forces could also be external or internal but
the effect of these forces can be clearly observed:
 Changing trends: Change in fashion and trend can be brought due to many reasons but
these changes bring big changes in the products available at Zara. Zara adapts trends
faster than any other competitive brand and thus very frequently changes styles
available at its stores (Roll, 2018).
 Customer preferences: Zara has a very customer-centric business model and put
customers in the centre of every process. Thus any change in the choice of customers
affects the operations and working of the company (Stein, 2019).
 Environmental Issues: Zara is known for being very concerned about the environment
and thus maintain its business activities which possess no harm to the environment.
Therefore, it changed its production to an eco-friendly and non-toxic process which uses
renewable energy (Kohan and Danziger, 2018).
 Regulations: Zara operates in multiple countries and has to work as per the regulations
of authorities and any change in the regulations demands Zara to adjust as per them.
 Competition: Competition is again a very big factor which forces changes in Zara. Since
Zara operates in a highly competitive environment where many strong brands are
available thus it has to be having competitive processes to face them (Roll, 2018).
H&M also gets affected by various external and internal forces like:
 Competition: H&M provides clothing at very low prices and also provide discount which
attracted price-sensitive customers to H&M. Thus it has to keep its pricing
comparatively lower than its competitors to retain its market share (Milne, 2019).
 Technology: H&M aims to decrease the price of its products to the lowest possible
against its competitors and thus adapts technological changes very rapidly to ensure its
competitive advantage (H&M, 2018).
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 Employees' behaviour: Behavior of employees directly relates to customer satisfaction
in H&M and thus it ensures that all its employees are satisfied and every issue is
considered by management.
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LO-2
P-2 EFFECTS OF INTERNAL AND EXTERNAL DRIVERS OF CHANGE ON ZARA
AND H&M
SWOT Analysis of Zara
STRENGTHS
 Strong Supply chain network.
 Strong in house production backed by Inditex.
 Fast response to changing fashion.
 Stronghold on E-commerce.
 Strong presence in 96 countries and a good distribution network.
 The strategic location of stores.
 Affordable prices against high-end brands.
 Quality products.
WEAKNESSES
 Doesn’t spend much on advertisements.
 The vulnerable centralized distribution network which might halt the whole operation of
Zara.
 Image of copying designs of high-end brands.
 Does not utilize digital media for marketing.
OPPORTUNITIES
 Utilize digital media to reach new customers.
 Expand in emerging countries.
 Setup production facilities in countries with cheap labour to reduce cost.
 Use e-commerce to reach markets where physical stores are not available.
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THREATS
 A very high competition can attract its existing market share.
 Chances of economic stability in countries might affect operations.
PESTLE Analysis of Zara
POLITICAL FACTORS
Most of the stores of Zara are in Europe and with recent Brexit issue the operations of Zara in
Britain and might increase the cost of products. Zara also operates in multiple countries and
with increasing political instability in many countries; operations of Zara might also get affected
(Kohan and Danziger, 2018).
ECONOMIC FACTORS
Britain's exit from the EU has depreciated the pound which resulted in increased cost of living
that too with less income along with high inflation in Britain. This decreased the levels which
people in Britain spend on clothing which lead to decreased sale and profitability of Zara in
Britain.
Zara's headquarter is in Spain, where its production facilities also benefited Zara. High
unemployment and population in Spain provide cheap labour which leads to low-cost
production and quality produce (Roll, 2018).
SOCIAL FACTORS
Increase inclination towards e-commerce made Zara avail its products on multiple e-commerce
platforms and this resulted in increasing sale and profit of the company along with providing
access to consumers in distant locations (Kohan and Danziger, 2018).
Zara is a multinational company and has to deal with many different cultures and thus it avails
the products in store based on the preferences of local customers.
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TECHNOLOGICAL FACTORS
Zara tends to upgrade its technology from time to time. This helps in attracting young
customers and eases customer’s efforts in purchasing products. Thus it results in an increased
sale and more profit for the company (Aller, 2017).
LEGAL FACTORS
Zara deals in the fashion industry and thus faces many copyright issues. It sometimes also get
hard to obtain a copyright for a design which leads to the availability of counterfeit products in
the market. Such issues attract huge losses for the company (Arvaniti, 2010).
ENVIRONMENTAL FACTORS
Zara had always shown environmental concerns and worked towards sustainable development
of the environment. It had pledged to make all its stores eco-friendly by 2020 and invested a
huge amount in that (Inditex, 2019). Zara also started keeping fashion bins in its stores where
customers can drop unwanted items so that Zara can recycle those items. Inditex also produces
its products from organic materials and renewable energy.
SWOT Analysis of H&M
STRENGTHS
 Strong presence across the globe.
 Good financial records.
 Affordable products.
 Good collection in stores.
WEAKNESSES
 High inventory of unsold goods.
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 Most stores are in malls which attracts high competition.
 Designs are replicable.
 Takes time to respond to changing trends.
OPPORTUNITIES
 Chances of growth in developing markets.
 Customer’s inclination towards e-commerce.
 Setup production facilities instead of sourcing goods from others to decrease the cost of
production.
THREATS
 Highly dynamic fashion marketing.
 Threats from the existing competition in the market.
PESTLE Analysis of H&M
POLITICAL FACTORS
A wave of nationalization from globalization is changing customer’s preference towards local
products from global products. Decreasing stability in global politics ranging from trade war
between America and China to Brexit is affecting sales of H&M (Ashar, 2019).
ECONOMIC FACTORS
Increasing economic instability in the global market like decreased disposable income in Britain,
Unemployment etc. are negatively affecting the sales of H&M. whereas increasing disposable
income in developing countries and the availability of cheap labour due to unemployment is
positively affecting the performance of H&M.
SOCIAL FACTORS
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