Strategic Management Report: Internal and External Analysis of Zara UK

This report provides a comprehensive analysis of Zara's strategic management, focusing on both its internal and external environments. It begins with an introduction to strategic management principles and then delves into a detailed internal analysis, including a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The report also examines Zara's value chain and stakeholder analysis to understand its operational structure and stakeholder relationships. Furthermore, the report conducts an external analysis using PESTLE and Porter's Five Forces models to assess the political, economic, social, technological, legal, and environmental factors affecting Zara, as well as the competitive landscape. The report concludes with a summary of the key findings and implications for Zara's strategic decision-making, highlighting the impact of competitors and the importance of adapting to market trends. The analysis aims to provide insights into Zara's position in the UK market and its overall business strategy.

Strategic Management

Table of Contents
INTRODUCTION ...................................................................................................................................................3
TASK 1.....................................................................................................................................................................3
Internal and external function analysis of the company.....................................................................................3
CONCLUSION .......................................................................................................................................................9
REFERENCES ......................................................................................................................................................10

INTRODUCTION
Strategic management involves the formulating and implementing the goals,
objectives and initiatives taken by the company top management by the directors, owners
based on the consideration of the resources uses in the company and the assessment of the
internal and external environment effect the company functions (Ackermann and Eden,
2011). The present report based on the Zara is a clothing and accessories retailer in the UK.
This store have men's and women's clothing as well as children's clothing and this supplied
based on the consumers trend and demand. The strategy adopted by the company to
undertake the operations to fulfil the goals and objective.
TASK 1
Internal and external function analysis of the company.
Internal analysis- This analysis is a process of determine the characteristics and
competencies of the business including the resources, capabilities, strategies and its core
competencies. Zara can do the internal analysis in order to identify the its main competencies
or quality. Analysis will help the company to determine the areas where need to
improvement.
Company use the following analysis techniques-
SWOT analysis- SWOT analysis is a internal techniques of the analysis to help the
company to identify the its strength, weakness, threats and opportunities. This techniques
help the business using the its strength to increases the business value and capture the high
market share and try to minimise the revenue in the market. This techniques determine the
weakness such reduce its revenue rates and creditors in the markets (David, 2011). This tool
help the company to determine the its opportunities prevail in the market and help the
business in knowing the threats for the company and take the action for minimise the effect of
threats.
Strengths of the Zara company-
 Zara is a strong and largest brand of the clothing retailers.
 Use the new tools and techniques in the information technology.
 Fast delivery of new products and trends.
 Use the cost leadership strategy.

Weakness of the Zara retailer-
 Its have the centralised distribution system.
 It doesn't spend money in the divertissement.
 Zara only has one manufacturing and distribution centre in the world.
Opportunities of the company-
 Company have a global market penetration.
 Use the online marketing strategies and techniques.
 Distribution centre in US.
Threats of the company-
 Reduce the local competitors.
 Global competitors.
 Low cost in switching.
Value chain analysis of the Zara company- Value chain analysis is very important
to identify the how company structure is created. This analysis is a combination of the
various activities are including-
Primary activities- This includes the marketing, sales, operations and logistics
management of the company.
Support activities- this activities are include the human resources, financial resources,
technology and infrastructure to support tot he company value chain management.
It is a process of creating final products from the raw material and provide the finished
products to the customers (Hair, Sarstedt, Pieper and Ringle, 2012). It help the company in
determine the main activities which added value to the product. This method help to identify
the activities and do the necessary improvements in the process of the value chain function of
the company.
Stakeholders analysis- Stakeholders analysis is a process of determining the affect
the decision making process taken by the company. This information of the decision making
is used to identify the interest of the stakeholders should be given attention or help in the
improvement of the company. This technique of the internal analysis this help the enterprise
in learning attitudes and the behaviours of the stakeholders. By using this analysis Zara
company can take that decision that will result in satisfy the needs and wants of the
customers.

These all techniques are including in the internal analysis of the business operation
and functions (Hill, Jones and Schilling, 2014). The many internal factors which affect on the
business values, its customers. Customers are play an important role it is the responsibilities
of every company before delivering the finished products to their consumers to identify the
needs and choice of the customers. By determine the customers needs and wants by the
enterprise can provide the better products according to the choice of the customers. Other
than the customers and suppliers of the raw material to the firm also effect on the company
activities. The quality of the raw material direct affect the quality of the finished products.
The culture and the structure of the business affect on the final outcome of the company.
Analysis the all factors result in improving the overall effectiveness of the business.
External analysis-
External analysis is the process to identify those factors to affect the company
operations and functions from outside of the company. This analysis process includes the
many factors such as competitors, customers, government policies, technology, economical
and social factors. One of the most important factors comes into the analysis of competitors
of the company. It is very important to analysis for the business because the every decision
taken by the competitors to identify the strategy that affect on the business decisions. In this
analysis process involve the two techniques-
PESTLE analysis- PESTLE analysis of the ZARA company will them in doing
necessary changes in order to get the comparative advantages and position in the market.
Political factor- This factors which effect in the enterprise activities are includes the
supply process, operation function of the Zara company are the restriction by the government
on import and export transaction of the company. Other than this the cost occurred on these
activities results in increasing the overall cost of the product and companies fail to maintain
the profit margins because they have to provide the product on low cost to the public.
Economic factors- its includes the market size and income level of the customers that
effect on the company activities of the finance department (Hitt, Ireland and Hoskisson,
2012). Rise the concept of the disposable fashion allow the consumers to reduce the spending
without any compromise with the new fashion trends and these largely affect the ZARA
business activities.

Sociocultural factors- Zara company target the both adult and young of the different
gander and also target the all ages of the customers (Hodgkinson and Healey, 2011).
Customer different regions affect the perception and buying behaviours of them and this
affect the Zara company functions. Information about the different income level and
perception of the people lead to Zara in changing their patterns off the doing the work
because the style of the customers are are changing more quickly according to the market
trends.
Technological Factors- In fashion industry a lot of technology improved in the
logistics facilities and this logistics capabilities helps the firm in better utilizing technologies
in order to maintain the inventories and reduce the waste. Other than this an a lot of changes
or improvements take place in communication technologies and this helps the firm in better
communicating with the customers.
Legal factors- This factors are included the all legal laws and regulations. It make the
compulsory to the all company and its suppliers to follow the all rules of the company
policies and company solve the all legal issues with the help of these laws and regulations.
Environment factors- Zara has to give proper attention on the whatever actions or
decisions they take because it is a giant enterprise. Whatever the actions or decisions taken by
the company should be free from environmental hazards. It is the duty of every company to
follow environmental law.
If all the factors have been critically evaluated by the firm than it will allow the firm to take
effective decisions and ensures in fulfilling the objectives of the firm.
Porters five force analysis- This methods the determination of the level of the
competition among the company and development of the new strategy use in the company is
referred as porters five force analysis methods. Use this methods to identify the intensity of
the business competition and the factors of the attraction of the company the forces draws
upon the economics of the organizations (Keupp, Palmié and Gassmann, 2012). The overall
profitability of the company is said as attractiveness of the business. Porters five force model
includes the threats of new entrants, Threats of substitute, Bargaining power of customers,
Bargaining power of suppliers and Industry rivalry.
These elements are discussed as follows-

Threats of new entrants- The threats of new entrants in the market that can affect the
company activities. The high profitability of the company in the market to lead and gain the
attraction for the emergence of the new business in the market and economy. This leads to the
new entries in the new business market. The newly started business leads to decline in the
profits of the established firms. The abnormal profits will decline to the Zero till the new
entries are not blocked by the incumbents.
Threats of substitute- There are many firms the existence of the smilier products in
the company world leads to the switching for the other substitute products by the consumers
in the industry world (Molina-Azorin, 2012). There are some potential factors to the threats
of the substitutes-
 Propensity of the buyer for the substitute.
 Switching cost for the individual buyer in the market.
 Deprecation of the quality products.
 The availability of the numbers of the substitute products in the market.
Bargaining power of customers:- The bargaining power of the customer is rapidly
affect of the basslines activities. The prices changes with the ability of the customers to but
the business in pressure for the price of the product.
Bargaining power of suppliers:- Bargaining power of suppliers can be described as
the the market of inputs. In industry it can be possible that there is only one suppliers of a
particular raw material and for which the company has no alternative. In the situation where
suppliers denies and refuse to supply the product in any reason than this situation will create
problem for the enterprise (Poister, 2010).
Industry rivalry:- Industry rivalry is the major determinant of the competitiveness of
the industry. Potential factors of industry rivalry are as follows:
 Competitive advantage through innovation
 Online and offline competition
 Level of promotion activities
 Transparency
Competitors- Competitors of the company in the market to affect by its marketing,
pricing and promotion strategies uses in the market. Competitors of the company exit in the

market and these effect a lot of the activities or decision taken by the company. Same as the
Zara company there are many numbers of the customers of the Zara which provide the same
products as the Zara in an affordable price and this becomes necessary for Zara to examine
the competitors activities in order to provide the best products to their customers for then its
competitors.
Top three competitors of Zara are as follows-
 La Iala company
 Gap profile
 Uniqlo company
other than these the other competitors of Zara includes the following-
 Nike
Brand value of Zara and its competitors in the market-
Analysis of internal and external analysis help or provide guidance to the firm in taking
appropriate decision in order to get effective results (Poister, Pitts and Hamilton Edwards,
2010). This analysis will help the firm in doing effective segmentation on the demographic
factors. ZARA provide its facilities to the people of different gender including male and
female. The company do the study of needs of the people about what kind of clothes they and
ZARA provide designer clothes to their customers at an affordable price this helps it in
capturing great market share.

CONCLUSION
From the above information it can be concluded that the internal and external
environment of Zara affect its decisions or business activities a lot. Identify the company
internal and external factors those are affect on the company operation and functions. Any
decision taken by the competitors of the firm affect the activities of decisions. By doing
analysis of its competitors Zara can make better strategies and can achieve its objectives.
REFERENCES
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