Zara: UK Fashion Retailer Analysis and Strategic Response Report

This report provides a comprehensive analysis of Zara, a prominent fast-fashion retailer, examining its strategies, market position, and response to industry changes. The report begins with an introduction to Zara, highlighting its leadership in the UK fashion market and its approach to customer demand and supply chain management. It then delves into key elements such as PESTLE analysis (Political, Economic, Social, Technological, Legal, and Environmental factors) and the microenvironment (customers, competitors, and suppliers) to understand the factors influencing Zara's performance. The PESTLE analysis explores political factors like Brexit, economic factors such as consumer purchasing power, social trends, technological advancements like RFID, environmental sustainability initiatives, and legal compliance. The microenvironment analysis focuses on customer behavior, supplier relationships, and competitor analysis, particularly comparing Zara with H&M. The report also discusses strategies and tactics employed by Zara to adapt to changes in the fashion industry, emphasizing its ability to design and deliver products quickly, its investments in technology and sustainability, and its focus on maintaining a strong market position. The report concludes with recommendations based on the analysis.

ZARA

Table of Contents
INTRODUCTION...........................................................................................................................1
Analysis of Zara..........................................................................................................................2
Strategies and tactics that could be used by the retailer to respond the major changes occur
ZARA..........................................................................................................................................6
Recommendations.......................................................................................................................7
CONCLUSION................................................................................................................................8
References........................................................................................................................................9

INTRODUCTION
Retail enterprises is an operation and process for selling goods and services to the buyers
by using different methods, such as advertising and promoting the product itself to be sold. This
process helps the organization to distribute the information through channels and make profit in
this industry. This present study is based on Zara that is a Spanish Fast Fashion retailer. Zara is a
leader in terms of retailer which deliver and provides different type of products in connection
with customers demand and satisfy the people through supply chain. Its headquarter is in
Arteixo, Spain. This study is going to discuss and analyse some key element that can help the
organization to make changes in fashion industry. It will also discuss and show some micro
environmental factors like customers, competitors &b suppliers that also influence the company's
profitability & sales. With the help of PESTLE analysis it makes itself able to evaluate all
environmental factors. All these factors have negative and positive impacts on the performance
and growth level of the company. Further it will also describe the strategies and tactics that Zara
company use in order to response in terms of changes occur this fashion retailer. It makes enable
this company to take competitive advantages.
Relevant changes in Uk fashion clothing industry
According to Goworek and McGoldrick (2015) retailers relies on and are influenced by society
trends”.
As I stated above, Zara is the leader in the Uk terms of sales, outrunning its direct
competitor H&M. As BUSINESS INSIDER stated (2018),” Zara and H&M are two of the top
brands in fast fashion and Zara reported a 7% increase in profits in 2017 and sales continued
growth in its recent quarter. H&M on the other side, has struggled, with operating profit
dropping 62%”.
Zara was founded in 1975 by Rosalia Mera and Amancio Ortega. This company operates
their own brands such as Uterquie and Zara.They expanded their own business in different
countries and this act determined their international position in the market place.They also
launched online boutique and are present online through their website. Zara online extended in
different countries such as Ireland, Belgium, Austria and Luxembourg. This company uses RFID
(radio frequency identification) technology in the store since 2014, this modern technology helps
and provides high security tags and can be easy removed from the clothing. Zara has more than
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50 stores existing in the Uk and manage many collections every year. The organisation preferred
to invest a big ratio of their revenue in the new opening. Zara can design very fast a new product
and have it the finished good in the physical store.
To continue, we will go through some specific tools to analyse Zara, such as PESTLE
analyse and Micro environment.
It is necessary for this fashion retailer to use business tools to analyse the changes in the macro
and micro environment.
Fashion retailers can also face issues from micro environment because some changes
might occur in consumers and suppliers’ attitude and high level of competition in fashion
industry. To overcome such issues company must adopt some strategies and choose appropriate
retail theory to sustain a dynamic progress in this competitive industry.
Fashion industry is very popular in market because many people preferring brand image and they
buy the product due to their market value. Therefore, Zara needs to maintain and continue to
build a strong position in global world.
Analysis of Zara
Zara is the most admired and popular brand that continued growing in the past few years.
It is a great fashion designer for producing clothes at affordable price. Another positive attraction
of Zara is when boost its fashion cycle and changed their fashion quality responding to the
demand of customers. The fast rising the fashion brand had a lot of success recently. In this way,
they expanded the business internationally.
There was some pressure in the global market, but Zara has been successful because Zara
acts and plans in the smarter way to achieve the goals and its objectives. An organisation like
Zara is subjected to multiple forces in the global market Bernon, Tjahjono and Ripanti(2018).
Pestle analysis helps for easily understand what type of forces and factors affect Zara in their
moving business. These aspects are important and their effect on the company. Pestle consists in
macro environment factors that can influence Zara to determine the changes in their business
operation.
PESTLE ANALYSIS
Political factors:
It is the most common political factor that can have an impact on the business operation and
process which depends on the financial regulations of nation. Many businesses and the
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government from a specific country does not have the same out look on the enterprises. But on
the other hand, there are no other ways to penetrate the market.
For example: China or Asia general speaking is an important nation and continent that can face
many barriers for the foreign brands trying to enter in the market, Colombi, Kim and Wyatt
(2018).
Because we are at the political factor impact we will discuss about Brexit, how Brexit
will affect the fashion industry. There are some doubts regarding Brexit and as I mentioned
above Brexit will affect the fashion industry because most of the clothes are imported from
different countries which are part of Union European.
According to Huffpost (2016) Zara clothes and its items could get more expensive, in other
words ZARA can go up in prices because England was part of UE (Union European) and
between them was a free trade agreement, so Britain might have to pay more money to import
clothes.
But these are the factors which might be negotiated, it depends what new trade agreement
are in the next 2 years. As we can concise most of the businesses are depended on what
Government decides and ZARA should wait to see what a new agreement says and then adapting
to the new rules or regulations. Furthermore, Zara has been over the difficult problem and issues
by limiting the supply chain operations. Zara minimized the threats and political disruption, but
they need to look at Brexit because businesses are always under a government “shoes” and
government policies can spoil the “game” of brands.
Economical Factors:
The economic activity in every country has an important impact on the business process.
It is a crucial and critical factor in terms of enterprises. Zara always planning an efficient and
effective strategy that is affordable for consumers.
Sometimes, economic activity will decline, and customer can do cost cutting, Wang (2018). The
price approach or strategy help the business, but economic activity affects them. Some
organisations move to another luxury brands, but Zara sells the products at affordable prices.
Recession had hurt some brand activity deeply.
Lower economy decreases the purchasing power and the customers start cutting the costs.
As Goworek and McGoldrick (2015) stated, economical aspect influences the purchasing power
of the consumers because of other factors such as: employment level or interest rate, are keys
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element which can affect the retailers.
Social factors:
This factor is also an important element in the fashion industry across the world.
Businesses never stay separate from community or society. They must work on the social people
trend and mind. Zara is the most rapid growing organisation who investing in the social
responsibilities. It is worth it and generates good results. Culture and society play an important
role for the enterprises and that has been proved by researchers, Wang (2018).
Technology Factor:
Technological factor is changing the global world and the market environment which
make them happen at faster grades in terms of transport and communication. In the same time
manufacturing of marketing and their supply chain. Zara uses that reaches an unprecedented
level when business makes the difference on some important decisions, Hayes (2018). Zara is
being named the most disruptive new brand in the fashion industry because is implementing
cautious and mindful on utilising the power of technology. Zara is collaborating with Toyota
since 2014 for the application of lean facilities and JIT (JUST IN TIME). In this way, Zara
responds to the customer demand as soon as possible. It is also coordinate to the supply chain
and logistics. Therefore, this technology reduced the pressure on the company and increase its
efficiency and performance. Zara is also using the RFID system to track the inventory along with
the chain and help the employees to track the inventory product through website. This
technology improves also the customer experience.
Environmental Factor
The sustainability starts nowadays as a trend and has become one of the important
concerns for business development. Green aspects have become very important for Zara, the
company has invested in sustainability. The company promised to make its store 100% eco-
efficient in 2020. Zara stores also consume less energy and water compared to other similar
organisations. Zara uses equipped energy items so that can be easy recycled in proper manner.
The organisation commitments are to eliminate all type of waste from the supply chain process.
This fashion retailer always invests money, time and efforts in having and sustain a green
business. They can use sustainable clothes produced from the organic material by using
sustainable technology.
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Legal Factor
Legislation is also an important factor anywhere and, in any country, businesses must
comply within the legal laws and rules of the local places where they operate. There are different
and multiple laws to make the organisation to run the business in a legal way. Apart from that,
ZARA is concerned about the ethical frame. Local compliance is a vital requirement for business
or brands and help to manage the entire system within legal policies. It makes sure that an
organisation follows local laws for the business progress.
Micro environment Factors
Micro environment plays an important element in the business and can affect the business
strategy, performance and decision making.
Customer:
Customers are integral fragments of business as they tend to be attracted by the fashion
clothes. Zara is engaged with their potential customer who always wants a new thing. Social
culture and people are important for organisation that’s why Zara always identifies the
requirements of the consumers. They can provide the best product based on their choice,
Holbrook (2018). This factor is combined with the social aspect because if the customer is not
happy it has an impact on the social communities. It is necessary for organisation to add more
value on their services as well on their products.
Suppliers:
Supplier can influence the business strategy and provides the raw materials for the
business. Zara use and try legal aspects for supplier because each supplier follows different rules
or regulations. The supplier usually delivers the raw material in time, Sit, Hoang and Inversini
(2018). Otherwise delaying it will directly affect the production of the organisation
According to ZARA (2017), ZARA works and collaborates with suppliers who comply with
ZARA’s stringency level. In 2017 over 11000 audits were executed to follow ZARA ‘s code of
conduct.
Thus, Zara keeps a strong relationship with its suppliers because they adopt a positive
attitude, this is one of the reasons why this company is growing and is developing in market
place.
Competitors:
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This micro factor can directly have an impact over the business strategy and plan. ZARA
knows how to do a competition analyse. Zara is a leading brand in this industry and always
maintain its position in marketplace.
Zara ‘s direct competitor is H&M and as UNITY MARKETING (2018) mentions that:
“Zara wins H&M loses, H&M focuses on Price -ZARA on exchange for value thinks
place, ZARA is Everyplace, H&M still thinks Product is King -Zara knows its experience”.
As the author says, ZARA knows how to trait and how to deal with all these aspects to ensure a
better position in the market.
This graph shows and summarized the position in sales between ZARA and H&M.
DATA RETRIEVED FROM theatlas.com (2016).
Strategies and tactics that could be used by the retailer to respond the major changes occur
ZARA
Retail strategy is a holistic marketing plans to promote the products and services to reach
the objectives. This strategy influences always the business process.
ZARA is a famous growing organisation in fashion industry and can use strategies and
tactics to expand its business all over the world. Zara has applied to key relevant changes in the
operation and functions of its business, Li ,Liu and Jacobson(2018).
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Affordable price:
This type of changes is applicable in the organisation to boost and increase the popularity
and demand in the industry. Zara is using the penetration pricing strategy in changes where the
product price is initially kept lower than the competitors. In this way it can gain a positive
attention in the market place. The tactic of affordable price is when encouraging the impulse of
buying which requires selecting the right product. Pricing is one of the most important concepts
for customer to choose the right product.
Change legal policies:
Zara company uses a strong policy scheme to manage and control the business in a
efficient manner. It is being guided by the legal policies. This policy is integrated with the
security in business operations and functions, Ovezmyradov and Kurata(2019). Zara implements
security policy to change their rules and regulation on the basis of trends.
Uses modern technology:
Nowadays technology has become very important “weapon” for business and help the
business to attract more customers and more profit. Technology is a great and easy mode for
organisation because it can change the business operation and function by using this technique.
Zara continuously uses a modern concept to check the performance and efficiency of its
employees.
Eco efficient store:
Zara uses less energy, 50% of their stores are already eco efficient, Fashion United
(2016). Zara also uses to clean the stores, a combination of distilled water and vinegar, which
takes less time to clean the physical stores.
The main aim and mission of zara is to become sustainabile business & also contribute to
sustainabile development of socirty in which it operates.
Low inventoey or just in time:
It is an effective approach that can help Zara to reduce their ptoduction costs. With the
help of this approach it can increase efficiency if its products raw materials are being orders on
that time where it required. By this it can decrease its wastes and can accomplish its goals and
mission.
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Recommendations
From the above study it can be recommended to Zara that it should focus on becoming
sustainable and CSR policy. With the help of CSR policy it can attract customers to the wider
range by providing them satisfactory products & services. It can also use and take help of
competitive analysis tool like Porter's 5 forces which can enable it to become the market leader
and increase customers experience. There are not so many things to be recommended on ZARA
because ZARA is doing well. It has good skills to manage capacity and ability to operate. Other
thing that Zara need to focus is Brexit to see and check the new trade agreement between UK and
UE and make itself able to react in the same way that they have reacted, and they had to face
with all external or internal issues.
CONCLUSION
From the above study it has been summarized that PESTLE analysis played a vital role in
analysing impacts of external factors. PESTLE analysis showed some factors such as political,
social, technological that has positive and negative impacts on the selected company's
performance and processes. It has also shown some micro factors that also impacted on its
growth and sales. Some strategies and tactics also helped the company in accomplishing their
goals.
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References
Books and Journals
Bernon, M., Tjahjono, B., and Ripanti, E.F., 2018. Aligning retail reverse logistics practice with
circular economy values :an exploratory framework. Production Planning &Control.29.
(6).pp.483-497.
Colombi, C., Kim, P. and Wyatt, N., 2018. Fashion retailing “tech-gagement”:engagement fueled
by new technology .Research Journal of Textile and Apparel.22(4).pp.390-406.
Goworek, H and McGoldrick (2015), RETAIL MARKETING MANAGEMENT, PRINCIPLES
AND PRACTICE, Introduction to retail marketing environment. Conflict theory.pp.19.
Goworek, H and McGoldrick (2015), RETAIL MARKETING MANAGEMENT, PRINCIPLES
AND PRACTICE.Chapter 2. Retail Marketing Strategy.pp.44.
Huffpost (2016), Style, Brexit Could Make Zara More Expensive. More bad news people.
Available at https://huffingtonpost.co.uk/entry/will-brexit-make-clothes-more-expensive
uk 576d2677e4b0232d331dd971. (Accessed online :30/03/2019).
Li, K., Liu, X.Y. and Jacobson, D., 2018.Information and profit sharing between a buyer and a
supplier :Theory and practice. Managerial and Decision Economics.39(1).pp.79-90.
Ovezmyradov, B. and Kurata, H., 2019. Effects of customer response to fashion product stockout
on holding costs, order sizes and profitability in omnichannel retailing.International
Transactions in Operation Research.26(1).pp.200-222.
Hayes, J., 2018. The theory and practice of change management. Palgrave.
Holbrook, M.B., 2018.Creating value: the theory and practice of marketing semiotics research.
Sit, J,K., Hoang, A. and Inversini ,A.,2018.showrooming and retail opportunities:A qualitative
investigation via consumer-experience.Journal Of Retailing and Consumer
Services.40.pp.163-174.
Online
BUSINESS INSIDER (2018). Retail. We visited H&M and Zara to see which was a
better fast fashion store, and the winner was clear for a key reason. Available
at :https://amp.businessinsider.com/hm-zara-compared-photos-details-2018-5 .
(Accessed online: 30/03/2019).
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Fashion united (2016). Zara goes sustainable with new Join Life initiative. Available at:
https://fashionunited.uk/news/fashion/zara-goes-sustainable-with-new-join-life-
initiative/201692021831. (Accessed online :30/03/2019).
Unity Marketing (2018),Battle of the Fast Fashion Giants.Available at:
https://unitymarketingonline.com/battle-of-the-fast-fashion-giants-why-zara-wins-hm-
loses/ .(Accessed online :30/03/2019).
Theatlas.com(2016).Zara and H&M Annual Sales 2008-2016.Available at :
https://www.theatlas.com .(Accessed online :30/03/2019).
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