Business Strategy Analysis: Zara's Online Presence Evaluation Report

This report provides an in-depth analysis of Zara's online strategy. It begins with an examination of the business environment using a PESTLE analysis to identify opportunities and threats. The report then delves into Zara's resources and unique capabilities, utilizing the VRIO model to assess their competitive advantages. Furthermore, the report evaluates a recent strategic initiative undertaken by the company, employing the SAFe test to measure its effectiveness. The report concludes with a summary of findings and recommendations for Zara's continued success in the fast-fashion online market. The report also covers Zara's strengths and weaknesses, including its design advantage, strong brand presence, and weaknesses such as a generalized collection and a lack of focus on advertising.

Evaluate
Zara
Online Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
1 Discussing business environment and assessing industry attractiveness............................3
2. Identify and discuss organisation’s resources & unique capabilities.................................5
3. Choose a recent strategy that company undertook and evaluate it using the three SAFe test 9
CONCLUSION..............................................................................................................................11
REFRENCES.................................................................................................................................12
APPENDIX....................................................................................................................................13

INTRODUCTION
Online strategy is adopted by business to go online and utilise online and web approaches
for marketing, communicating and engaging customers through a proprietary website. It is
basically a strategic plan to that is adopted by organisation in order to create and develop online
presence of their operations by adhering over all business development strategy (Munthiu and
et.al., 2014). In this report organisation chosen is Zara, a Spanish fast fashion brand of clothing
and accessories retailer in Arteixo. Its products are supplied all over based on consumer trend
and it has highly responsive in supply chain ships of its new product to its store twice a weak.
This report is going to analyse its business environment in order to identify number of
opportunities and threats and industry analysis that has been applied to access industry
attractiveness. Moreover, identifying and discussing resources and capabilities that help to attain
competitive advantage. Furthermore, adopting SAFe tests to evaluate company's strategy.
1 Discussing business environment and assessing industry attractiveness
In today's context business environment is a collection of all individual, entities and other
factors which may or may not be control by an organisation. But it ultimately affects
performance, profitability, growth and sustainability in competitive market place. Eventually, an
organisation wants to operate in an distinctive environment as business cannot exist in isolation
for longer period of time. Herein, ZARA mangers have adopted PESTLE analysis in order to it
threats and opportunities from business environment.
PESTLE Analysis of ZARA
PESTLE analysis is a framework in an analytical tool that is adopted by an organisation
to identify key drivers of change in strategic environment (Zara and et.al., 2012). This analysis
is done to identify macro (external) forces that are faced by an organisation.
Political Factors: Political factors determines extent in which government and its policies may
impact on organisation or a specific industry. Herein, ZARA managers have its impact both in
positive and negative manner such as:
Opportunities: With free trade agreements ZARA has boost its sales and its overall sales
group. Such as with such instance goods can move freely between European countries with no
tariffs, no restriction on quality or quantity of imported or exported goods to other countries.

Threats: ZARA are operating over all worldwide. Herein, they are facing many
government interventions with their rules and regulation of different operating countries such as
high tax rate, inflation rate and exercise duty on importing and exporting goods and services.
Thus, it creates threats for ZARA in operating at worldwide.
Economic Factor: These factors impact on economy and its performance which ultimately turn
direct impact on organisation and its profitability.
Opportunities: ZARA is one of the fast growing environment in clothing retail industry.
It has one of the biggest brand by astonishing high level of unemployment opportunities, low
labour cost, production cost and high quality product with reduced price which leads to attract
more customers towards it. Thus in this way they are creating opportunities in competitive
marketplace.
Threats: Due to European counties ZARA has affected with high depreciation with high
inflation rate as well increased cost of living which results into less income for customers. Thus,
it affected its sales and overall profitability of its appeal and clothing industry.
Social Factor: Social factors indicates social environment that help in identifying emerging
trends of customer's need and preferences (Sharma and Sahni, 2015). It includes demographic,
education levels, cultural trends and buying pattern of consumer. Impact of social factor in
ZARA are;
Opportunities: ZARA is increasing is productivity and profitability by the urge of
customers form its online shopping app. Moreover, with ability to compare its prices from other
and this has proven to be success in overall sales. Thus, in this way there are creating
opportunities to attract more customer's towards its product and services.
Threats: ZARA are operating in many countries around global. Herein, they are facing
problems such as diversified cultures and new market trends in operating counties. They need to
identify culture and market trend according offerings should be made for different cultures.
Technological Factors: This factors includes technological innovation and development that
affect market such as changes in technologies, method of distribution and manufacturing product
(Gamboa and Gonçalves, 2014). Technological factor that impact on ZARA profitability are:
Opportunities: With the adoption of advance tools and technologies Zara has augmented
retail technology which allow customer's to see how models wear specified pieces of clothes
with new approach of sensors with smart phones somewhere in stores. Thus, in this way

technological factors are creating opportunities for an respective organisation to attain
sustainability.
Threats: If mangers of ZARA fail to adopted technologies which the emerging
environment that it leada to decrease in its productivity and profitability within market place.
Moreover, now a days technologies are mainly meant to target young customer's.
Legal factor: Legal factor includes that an organisation must understand legal laws in operating
business activities (Ho2014). Such as employment legislation, consumer law, health and safety,
trade regulation and restrictions.
Opportunities: By adopting such legal rules and regulation ZARA can adopt various
opportunities that is beneficial for both organisation and economy. Such as by ensuring
subsidiaries, low interest rate and taxes rate on import and export of goods and services.
Threats: ZARA need to ensure copyrights of laws so that their products can be launched
in market and cannot be reproduce at local shop at low prices. Moreover, they need that no other
marketers can copy their brand name and its trade marks.
Environment Factor: This factor is related to factors that influences surroundings and
environment and its impact on its ecological factors. Such as climate, recycling procedures,
carbon foot prints and waste disposals.
Opportunities: Now a days government strive to create a greener and health
environment. Moreover. ZARA are adopting this factor in order to make stores eco friendly.
Such as by manufacturing clothes with organic material by adopting sustainable energy with
efficient comfortable fabric. This help help them to create opportunities as people are more
attractive towards such stuff and material.
Threats: If managers of ZARA fail to adopt certain environment laws regarding
consumer and employees then they will be abided with certain penalties that are imposed by
governments. Thus, they need to maintain healthy relation with their employees and staff
member in order attain sustainability in competitive marketplace.
2. Identify and discuss organisation’s resources & unique capabilities
ZARA is one of the famous and fast fashion brand whose headquarter is in Arteixo,
Spain. They are dealing in retail sector of clothing and serve their products at worldwide market
(Kim and Lee, 2014). Respective company parent brand is Inditex group which is known as
largest retailer of apparels. They have approx 7,475 stores which is running all over the world.

There are various strength and weakness which Zara face, some major of them are mention
below:-
Strength:
 Unique and creative design- Clothing design of Zara is unique, creative, elegant, best
quality and finishing which attract customer and encourage them for purchase. They offer
their apparels in various ranges such as party wear, office wear, daily wear, kids wear and
many others. They offer their products for men, women and kids.
 Strong Presence- Zara is continuously expanding their stores and presence in worldwide
market. According to research in 2015 it has approx 2100 stores in global market and
they are earning average sales of 15.9 billions per year (SWOT analysis of ZARA, 2019).
Respective company is expanding their business on regular basis.
 Brand Value- Brand value of Zara is very high, they are ranked by Forbes at 53 number.
Respective company provide quality products with valuable cost which help them in
maintaining their brand value in market and between their loyal customers.
 Brilliant supply chain- Design and supply chain of respective company is of high
quality. They design approx 450 millions items or products every annum and launch best
from it which attract customers. Stores of Zara get updated with new products and items
in every 2 weeks or maximum in 6 weeks.
 Design advantage- There are approx 1000 new designed item are launched every year
which encourage customers to visit their stores more than five to six times in a year
(Fridley, 2018). Those who are fashion freak and like shopping they visit store approx 3
times a month. Design which Zara offer is unique and fresh which attract customers.
 Physical evidences of stores- Physical evidence and services of Zara store is very good
and it satisfy customers. Stores of respective company is wide and deep where customers
can walk easily and check out collections.
Weaknesses:
 Generalised collection- Zara is designing and launching products for every one and
everything. They are not specifying on particular sectors or range which slightly affect
their market. This come us as a major reason of shifting customers to their competitors.

 Lack of advertising- Zara is not much focus on advertising which is seem as their
weakness. Due to their sometime respective company not able convey about their new
collections to their customers which affect their sales.
 Traditional stock is missing- Zara mainly focus on new trends and western design they
didn't focus on traditional design which may affect sales and footfall of customers at their
stores.
 High research cost- To design product or items respective company conduct research on
the regular basis and sometime research get waste if outcome is not satisfied (Dawot,
2015). Regular research and develop required huge cost which come up as a weakness for
the respective company.
 Online presence- Online presence of Zara is weak as well as less which directly affect
their sales and profitability ratio.
 Distribution and manufacturing centre- Zara has only one manufacturing and
distribution centre in the world, sometimes it affect respective company business and
operations. It is so because they not able to fulfil need and demand of customers at time.
Analysis of Zara resources and capabilities through VRIO model:
VRIO model is strategy which is use by an organisation in order to identify and analysis
their resources and capabilities that gives competitive advancement to a company. The autonomy
of VRIO is Value, rareness, Imitability and organization. By this a company can evaluate their
resources that gives them competitive advancement in marketplace (Munthiu and et.al., 2014).
By adopting VRIO model Zara can evaluate marketplace and then develop strategies and
planning according to situation and circumstances. By using this respective company can
analysis their internal environment. There are various resources in respective company which is
valuable and which provide competitive advancement to company. Explanation of VRIO model
in context of respective company is given below:
Resources Value Rare Imitability Organized
Plant Location Plant Location - - -
Designs Designs Designs - -
Software Software Software Software -
Employees Employees Employees Employees Employees

Value: It refers to those resources and capability which is valuable to an organisation in
order to gain competitive advancement. Along with this it helps in adopting opportunities and
avoiding treats which may occur (Zara and et.al., 2012). In an organisation there are various
resource which is valuable for an organisation because it helps in satisfying organizational need
and demand. In context of respective company there are various resources which is valuable for
company such as plant location, design, software and employees.
 Plant location is valuable for respective company because by it they able to focus on
appropriate customers and market.
 Design is valuable for Zara because by it company able to attract and satisfy customers in
appropriate and effective manner.
 Software is essential because by it they able to manage their data and store it in proper
manner.
 Employees are most valuable resource of a company because by them company able to
attain their goal and objective.
Rare: Rare refers to those resources which is rare and unique from other companies or
competitors. This will give a company competitive advancement in market place. In other word
it refers to resources which is similar to very few companies and very unique (Sharma and Sahni,
2015). Which help in gaining advantage in a market and able to attract customers in appropriate
manner. In context of respective company there are several resources and capabilities which is
rear and which help company in gaining competitive advancement. Along with this it will help
Zara in attaining their goal and objective in appropriate and effective manner. But there are some
product which is not rare like plant location for respective company. Some of the unique
resources and capabilities of respective company are
 Design of Zara products are unique and creative which is not easily adopted by any
company and quality of their products are also best which attract customers.
 Software of the respective company is valuable and unique because they design and
develop their software according to their requirement.
 Employees of respective company is rare and valuable because by their unique
knowledge and skills Zara able to gain competitive advancement.

Imitability: It refers to the resources which can be adopt and imitate by another company
or any competitor. Imitability is done by any company in major two ways that is direct imitating
which means making duplicate products and items. Another is indirect imitating in which
another company design substitute or comparable product of original item. These products not
give competitive advancement for a long time. In context of Zara there are certain product which
can be imitate by another company or their competitors such as their designs. But there are some
products which didn't get imitate by any company or competitors and these resources and
capabilities provide competitive advancement to respective company. Such resources are
 Software of the respective company is not copied or imitate by any other company
because they develop it according to their requirement and need.
 Employees of Zara have unique knowledge and skills which is not copied by any one
which help them in gaining competitive advancement.
Organized: It refers to those resources which is not required to organised and it give
competitive advancement at high level. A firm need to organised their resources, management
resources, policies and regulation, organisation structure, culture and many other (Gamboa and
Gonçalves, 2014). By it company able to utilize potential and capability of their resources in
appropriate and effective manner. In context of respective company there are certain resources
and capabilities which is require to be organize in regular time duration such as software. It need
to organise according to requirement and need. But there are some resources which is valuable,
rare, not possible to imitate and not required to be organized such as:-
 Employees of respective company not required to be organise they are skilled and
knowledgeable and know their work properly and how to conduct it in appropriate
manner.
3. Choose a recent strategy that company undertook and evaluate it using the three SAFe test
The recent and current strategy of respective company is that they are developing new
online application on which customers can take advice with ZARA expertise and they can try
cloth online. By this they able to attract more and more customers and also satisfy them at high
level (Ho, 2014). This will help customers in selecting and purchasing cloth which is appropriate
for them. Which make consumers more loyal and company able to enlarge there customers base
and profitability ratio. To understand effectiveness of this particular strategy Zara conduct
evaluation and analysis by adopting SAFe model strategy.

SAFe model strategy:-
It refers to the framework which provide guidelines related to strategy which a company
will adopt in future. By using this an organisation can get clear and fair view of strategy that is
will prove beneficial for company or not (Glück, 2016). If strategy if not valuable for company
they will develop another strategy and plan. Respective model is conduct by adopting three stage
that is Suitability, Acceptability and Feasibility. Explanation of respective stage in context of
Zara is given below-
Suitability: It is most important and necessary factor of SAFe model strategy, in this an
organisation will analysis and evaluate whether their planned strategy if appropriate for them are
not. Along with this they analysis that selected strategy will give them any advantage or not, if
not they will plan new one according to requirement (Bakker, 2015). For this a company
evaluate suitability in three major ways that is suitability of environment, expectation and
capability. In context of Zara they will identify their strategy to develop online application which
help customers in selecting cloth which is appropriate for them. They analysis that did they get
any type of advantage when they will develop new online application
Acceptability: At this stage of SAFe model strategy an organisation will measure return,
risk and stakeholders reaction on the strategy which they want to adopt. In it stakeholders will
analysis return which they get from strategy which is made by company, it can be in financial
term or non- financial term. Return of strategy is calculated by several method such as cost
benefit analysis, profitability evaluation, real options analysis, analysis of shareholder values and
many more. In context of Zara stakeholders of company will analysis and evaluate benefit and
advantage of strategy which they want to adopt. For which they do calculation various ways and
try to identify exact acceptability ratio of strategy to develop new online application in which
customers get advice from ZARA expertise and also they can try cloths with there mobile
camera. After evaluation of strategy in all aspect and respective company shareholders
identifying whether the strategy is acceptable and profitable, respective company will move to
next and last stage to identify its feasibility.
Feasibility: It is last and most essential strategy of SAFe model strategy which make or
break selected strategy of an organisation which they are decide to adopt. In this step
management of a company will identify resources, aptitude and ability to implement respective
strategy which they develop (Avenas and et.al., 2015). Along with this they forecast and evaluate

requirement of funds and resources by using various methods such as preparing cash flow,
conduct break even analysis and many other test related to financial analysis. In respect of Zara
they will analysis requirement of funds, resources and skilled and experienced manpower to
develop online store according to there plan.
By using SAFe model strategy the respective company able to identify whether to
develop new online application or not (Oliveira, 2014). If it seems beneficial they will develop
strategies accordingly and if seems useless respective company try to develop another strategy.
CONCLUSION
From the above discussed point it can be conclude that every organisation makes
strategies according to requirement and need. But before implementing it they conduct various
type of evaluation and analysis. They conduct analysis of external environment and internal
environment. External environment is done by conducting PESTEL analysis in which company
able to evaluate all factors related to political, economical, social, technological, environmental
and legal. For conducting internal analysis an organisation can conduct SWOT analysis in which
they identify their strength, weakness, opportunities and threats. After analysing these factor
company able to make plans and strategies accordingly. A company can conduct VIRO analysis
organisation unique capabilities and resources. For analysing effectiveness of strategy develop
by company they can use SAFe model strategy.

REFRENCES
Books and journals
Munthiu, M. C., and et.al., 2014. Service quality evaluation models determined by Online
consumer perception and satisfaction. Procedia-Social and Behavioral Sciences. 109.
pp.1303-1308.
Zara, I. A., and et.al., 2012. Using analytics for understanding the consumer online. Anale. Seria
Stiinte Economice. Timisoara. 18. p.791.
Sharma, R. B. and Sahni, M. M., 2015. Evaluating the efficacy of Facebook communities &
Twitter tweets on brand equity: An empirical study on fashion brands. Advances in
Economics and Business Management (AEBM). 2(5). pp.503-508.
Gamboa, A. M. and Gonçalves, H. M., 2014. Customer loyalty through social networks: Lessons
from Zara on Facebook. Business Horizons. 57(6). pp.709-717.
Ho, C. W., 2014. Consumer behavior on Facebook: does consumer participation bring positive
consumer evaluation of the brand?. EuroMed Journal of Business. 9(3). pp.252-267.
Kim, G. and Lee, S., 2014. Business Strategy of Fast Fashion-A Case Study of Zara. Journal of
the Korean Society of Clothing and Textiles. 38(2). pp.175-190.
Fridley, L., 2018. Improving online demand forecast using novel features in website data: a case
study at Zara (Doctoral dissertation, Massachusetts Institute of Technology).
Dawot, N. I. M., 2015. A Framework for Evaluating Viral Marketing Effectiveness Using Social
Media (Doctoral dissertation, Universiti Teknologi Malaysia).
Glück, R., 2016. Preliminary Report on Polynomial-Time Program Staging by Partial Evaluation.
In Fifth International Valentin Turchin Workshop on Metacomputation (p. 24).
Bakker, A., 2015. Online shopping and the absence of touch: finding the best strategy to improve
the online shopping experience (Master's thesis, University of Twente).
Avenas, Y., and et.al., 2015. Condition monitoring: A decade of proposed techniques. IEEE
Industrial Electronics Magazine. 9(4). pp.22-36.
Oliveira, C. L. B. O. D., 2014. Zara: Marketing in Fast Fashion: A case-study (Doctoral
dissertation).
Online
SWOT analysis of ZARA. 2019. [Online] Available
through<https://www.marketing91.com/swot-analysis-zara/>

APPENDIX