Strategic Analysis of Zara: Evaluating Corporate and Online Strategy

This report offers a comprehensive strategic analysis of Zara, a prominent fashion retailer. It begins with an introduction to corporate strategy, defining its role in organizational success and competitive advantage. The report then delves into Zara's external environment, examining political, economic, social, technological, legal, and environmental factors that influence its operations. It utilizes Porter's Five Forces model to assess industry competition, the threat of new entrants, supplier and customer power, and the threat of substitutes. The internal analysis employs SWOT and VRIO frameworks to evaluate Zara's strengths, weaknesses, opportunities, threats, and its valuable, rare, inimitable, and organized resources, identifying core competencies. Finally, the report evaluates Zara's online strategy, considering its recent implementations and market development strategies, drawing conclusions on the effectiveness of its corporate strategy and providing references.

APPLIED CORPORATE STRATEGY

CONTENTS
INTRODUCTION..........................................................................................................................................................1
MAIN BODY..................................................................................................................................................................1
1.External analysis..................................................................................................................................................1
2. Internal analysis.......................................................................................................................................................5
3. Evaluation.................................................................................................................................................................7
CONCLUSION..............................................................................................................................................................8
REFERENCES.............................................................................................................................................................8

INTRODUCTION
Corporate strategy can be defined as that series of action which is been adopted by
various organizations so that they can manage their resources well, and these
strategies also assist them in achieving their goals and objectives (Rugman. and
Verbeke, 2017). This also helps them in gaining a competitive advantage. It mainly
encompasses those activities that can support organization in their development. It is
necessary to adopt different strategies with the change in market situation so that
business can sustain for a long time. The report will emphasize Zara and evaluate their
online strategy. Zara SA is a Spanish apparel retailer based in Arteixo in Galicia. Zara is
part of Inditex, one of the largest fashion retailers in terms of sales in the world.
(Hanbury,2018). The main purpose of the report is to analyze the business environment
of Zara to gain effectiveness of their corporate strategy. It will also identify and discuss
organizations resources and unique capabilities. It will also evaluate market
development strategy that has recently been adopted by the company.
1.EXTERNAL ANALYSIS
There are various external factors that can affect the working of the organization, these
factors can act as an opportunity or threat for them.
Political factor: Political disruption has affected Zara and also the economy of the
nation. It has been analysed that political turmoil has severely affected the supply chain
of the company and has given rise to several problems for the brand. To overcome this
threat Zara has limited their supply chain operations to UK and neighbouring nations.
The brexit impact may be a threat to zara as it will impact on their growth in UK
market. As there will be change in government policies and procedures can also affect
the operations of business internationally. (Zerfass. and Viertmann, 2017).
Economic factor: Economic condition of any country can affect the business of the
organization. The factors are related to GDP, inflation rate, economic growth, etc. It has
always been a critical factor in terms of business, Zara has taken it as an opportunity
and adopted a great strategy which is known as affordable pricing. So due to Brexit
GDP of UK will decline which can be a threat to company (Slack. and Brandon-Jones,
2018).
Social factor: Zara is focused on its affordability as Zara is considered one of the
fashionable brands for most of the shoppers. According to Zara good quality product
doesn't need lots of money as it has the positive strong presence that enables Zara to
collect the profit margin regarding its stakeholders as buyers feel that are getting the

best deal. Another threat is frequent change in customer taste and preferences in
fashion, which may impact on Zara growth. (Zerfass. and Viertmann, 2017).
Technological- Zara is a well-known brand as it is the most popular brand in terms of
affordability and high quality. Zara has both a large amount of audience and money
required to get the most data. The company is looking out for big data as it implements
the RFID technology which automatically counts the products without stand in a queue
and customers feel more relaxed. Technological advancement of Zara is a better
opportunity to reach and appeal the costumers. There lies a vast number of
opportunities for Zara in the e-commerce sector. It can focus on online selling of goods
as well as to attract more customers and earn revenue. They can expand in those target
market where people buying power is rising. For example, a market like India. it will
enable in increasing customers base and capitalizing market potential.
Legal
Zara is one of the recognizable brands as it has to operate in-bounds regarding the law
as Zara is the one that loves to capture the trends of hot clothes every week and also
make them more affordable to the Costumers so Zara is bound to run some issues
regarding the copyright. As various retailer accused Zara of stealing the design as well
as clothing concepts from the firm like Balenciaga and Adidas, Zara had faced
uncomfortable situations, which can be a threat to company (Danziger, 2018)
Environmental
Feasible development has ended up a necessity for any trade to outlive in a worldwide
environment. Zara contributes to a great extent in sustainability. Inditex is pulling
towards making the stores a hundred per cent productive. They will offer assistance in
sparing energy and reusing. It too works towards removing dangerous waste delivered
from its production. They have also created a line of design- wear which centres on
sustainable clothing.
Porter five force
Competition within Industry - High
Benton, GAP, H&M are the biggest competitors of Zara. The brands are recognized by
being affordable and fashionable. Zara's sales are higher than Benton's and GAP's but
similar to H&M's. Zara's supply chain is more responsive as various other retailers take
months to change their old fashion clothes but Zara changes its collection within
2weeks. Thus Zara is well known for the latest trends, the current change in customer
tastes and preferences can affectZara’s revenue. (Eccles and Youmans, 2016). With

the actual economic deterioration, Zara needs to compete with lower price retailers as
Primark. (Gallaugher,2018) The competition in the retail sector is high.
This Positioning Map gives Zara an outline of its
position in connection to that of competitor
brands inside the market (Posner, 2011).
There's a very strong rivalry among competitors
as companies ought to battle for market share.
Zara is seen as being slightly more in vogue than
its competitors. (Tokatli,2018)
Potential of new entrants- Low
With the rise of the fashion industry, people focus more on the latest products and if the
products are more economical then customers are attracted towards the brand. The
profitability and uniqueness of retail industry attract new players. The initiation of a price
war among existing businesses on the market is also an advantage for new entrants. In
any case, high costs for setting up trade, and promoting etc makes it troublesome for
new participants. A new player must have reasonable assets to develop a new line of
fashion. Zara as of now has the advantage of economies of scale and built up brand title
which makes it easy for new players to enter.
Power of suppliers- High suppliers
Zara has strong bargaining power of the suppliers as it offers their suppliers the
contracts which are licensed based. The cost of switching from Zara to another firm is
very high and the company established relationships that can be more loyal to the
suppliers and also have the full knowledge regarding safety as well as quality. Suppliers
also enjoy the price-setting for needed materials. As there are proceeded liberalization
of the worldwide exchange, the control of the provider is less through contention from
the makers in low wage boundaries such as China. Providers control is considerably
high because it consumes more time to set up quality partnerships. The provider control
of haggling is more when the individuals within the industry encounter higher costs by
exchanging to an unused provider since the providers are well learned on guidelines of
security and quality. Thus, Zara organizes the different licenses advertised to all
providers and thus with the existing authorizing contract, the control of the providers is
advance debilitated as they are required to stay to specific arrangements which
Source: Wordpress,2019

minimize variety or control of the plans. Therefore, the power of the supplier within Zara
is high. (Parawansa, 2015).
Power of Customers- High
The consumers of Zara are from the middle class and upper class. Even if competitors
of Zara also supply similar products, client devotion to the company’s items places more
weight on innovation. Zara focuses on new trends faster compared to other brands and
also offers low prices. These facts increase customer loyalty (Zerfass. and Viertmann,
2017). Indeed even though Zara has exceptionally numerous direct rivals such as Gap
and H &M its brand has still impressive faithful customers. Zara remains afloat from its
competitors. The chances of buyers’ fetched of exchanging to other brands are
moderately high in case they don't just like the cost setting. So, buyer power is high.
Threats of substitute products- High
Nowadays individual personality is shown through fashion products. Zara and its
competitors display similar products, so the customers can easily switch. Constant
changing in buyers preferences represent a high threat for substituting products.
Various new online shopping sites are also one of the threats of Zara, as they can offer
similar products at a low price. Therefore, the threat of substitute is high.
Conclusion: The customers are more concerned about the notoriety of the brand.
Subsequently, a company such as clothing industry offers quality which makes the
buyers to not choose other alternatives.
2. INTERNAL ANALYSIS
The internal analysis of the business environment is useful in identifying company
position, cost, competitive rivalry within the industry. For conducting analysis there are
different models and frameworks available which can be applied as SWOT and VRIO.
They are evaluated below :

SWOT – This is a strategic planning technique that enables the firm to identify its
current position in the market. So, Zara SWOT is as below :
Strengths
Its unique and attractive design clothes provide them with a distinct image within fashion
retail. The clothes are of elegant quality and superior finishing. Also, the accessories of
the company are of high quality and accessible. Another strength of the organization is
its strong presence in many countries. There are a total of 2,250 stores around the
world as in 2019 according to Statista. Its brand value is also high as compared to
other firms in fashion retail. This is because of the high performance of the firm in recent
years and a positive culture. The supply chain of Zara is strong and quick. The latest
design products are available within 6 weeks (Parawansa, 2015). Zara low cost and
high profit have developed a strong brand image. Moreover, its low cost in operations
and high revenue in generating high returns on products.
Weakness
Zara weakness is lack of advertising due to which people are not able to get aware of
the latest designs. There is a low stock kept in stores of Zara so customers are not able
to find items of their choice. This results in quick checkouts (Eccles. and Youmans,
2016). Zara does not produce a variety of products for everyone. They produce limited
items in terms of quantity and measures. Zara is known for imitating designs of bigger
fashion retailers.

VRIO analysis
VRIO analysis is an analytical technique that can be used for evaluating an
organization's resources and thus the competitive advantage. VRIO Analysis of Zara will
help in the analysis of their internal resources in order to access whether these
resources provide sustained competitive advantage. This analysis will also help in
understanding whether there is a requirement to improve these resources for
competitive advantage or not. VRIO Analysis of Zara is as follows:
Valuable:
· Financial resources of Zara are highly valuable as it helps them in investing in arising
opportunities that can be beneficial for their organization. It also helps them it takes
required actions for all kinds of external threats.
· Their patents are another valuable resource as it helps them to gain long-term
competitive advantage as it allows them to sell their products.
· The employees of Zara are another valuable resources of for the organization as they
are, highly skills and trained employees helps them to produce more productive output
for the organization (Grinblatt, and Titman, 2016).
Rare:
· Financial resources of Zara are rare as these strong financial resources are only
possessed by few organizations.
· Their patents are another rare resource as these patents are not easily available and
are not possessed by its competitors.
· Zara’ s employees are other rare resources of the organization. Because of high skills
and trained employees they can ensure that they have a better working environment,
they can provide better compensation to their workers so that employees do not leave
them for other firms (Eccles. and Youmans, 2016).
Imitable:
· Financial resources of Zara are quite costly to imitate as these resources have been
acquired by the organization with the help of profit they earned over the years.
· Patents of Zara are difficult to imitate as it is illegal to imitate a patent product and to
develop similar resources and getting a patent is a costly process.

· Employees of Zara are not costly to imitate as other firms can also train their
employees to become highly skilled. Other companies can hire Zara employees by
paying them better compensation, better package, growth opportunities and many more
that can provide them with a temporary competitive advantage (Parawansa, 2015).
Organization:
· Financial resources of Zara are quite organized. These resources are invested at the
right time at the right place to make use of available opportunities and take action
against identified threats.
· Patents of Zara are not organized in a good format i.e. organization is not properly
using their patents and completely. An unused competitive advantage can be changed
into a sustainable competitive advantage if Zara sells their patents before it expires
(Andersen. and Sax, 2019).
Resources Valuable Rare Imitable Organization
Financial
resources
Yes Yes No Yes
Patent Yes Yes No No
Employees Yes Yes Yes No
It is analysed that zara resources are rare and can not be copied by rivals. Also,
these resources enable to gain competitive advantage in market. Besides that, firm has
gained competency in its design and patent.
3. EVALUATION
Zara must analyse its strategies so that an effective strategy is developed. The strategic
evaluation is the process of forming effective goals and objectives. Here, the strategy is
evaluated on the basis of certain factors and elements that provide a direction to the
company. Besides that, it assists in proceeding forward and achieving goals. The
method is defined as:

Suitability- it is referred to as evaluating the strategy that whether it is suitable or not
for the firm. Moreover, it also covers many aspects that is opportunity and threats. So,
for Zara market development is a suitable strategy as it will allow to enter in a new
market. This is because their brand image is high and strong so this strategy will be
suitable for them. Furthermore, they can increase their presence at the global level.
Also, the strategy will help the company to compete with rivals and gain competitive
advantage (Eccles. and Youmans, 2016).
Adaptability – This element refers to whether the strategy is accepted by everyone in
the company or not. However, it includes stakeholder as well that provide support in
strategy implementation. Within strategy entire plan is included that how goals and
objectives will be attained. It provides an overview of the role of suppliers, managers,
employees, etc. Along with it, the strategy has to be communicated to customers,
suppliers, etc. Thus, as Zara is known for its unique products so stakeholder will easily
adapt the strategy of market development (Andersen. and Sax, 2019).
Feasibility – this refers to the adequacy of having sufficient resources to implement the
strategy. the resources are in terms of finance, HR, tools and equipment's, etc. thus,
strategy goals are compared with resources. as Zara is having skilled staff and huge
funds so they do not require any additional resources for market development strategy.
Alongside, the firm is having a strong back up of cash that can be utilised. In this way,
Zara will be able to increase their global presence and increasing sales and revenue
(Puranam and Vanneste, 2016).
CONCLUSION
The major components responsible for Zara’s success are speedy conveyances, client
administrations, utilize advanced innovation, coordinations, vertical integration,
economies of scale. Zara has a fundamental centre on creating client value to pick up a
competitive advantage. Zara’s trade model cannot be effortlessly imitated by its
competitors until their supply chain model is actualized. Supply chain demonstrate is
built on different variables such as individuals, innovation, strategies. This needs
precise preparing and legitimately utilize of innovation. Their victory is straightforwardly
related to the way they get it client needs and how they fulfil them by utilizing the best

approaches and methodologies. They are always included in innovation which makes a
difference them fulfil client requests viably. Hence Zara is a great case of strategic trade
model and integration of supply chain administration in progressing client esteem. Also,
it look at how contributing to great innovation makes a difference in the brand in the long
run.
REFERENCES
Annual Reports:

Inditex Annual Report 2019, Inditex.com [Online], Available from: www.inditex.com [Accessed
20/04/2020]
Inditex Annual Report 2018, Inditex.com [Online], Available from: www.inditex.com [20/04/2020]