Zara's Strategies for Adapting to Changes in UK Fashion Retail

This report examines how Zara, a leading fashion retailer, adapts to changes in the UK market by analyzing both macro and micro environmental factors. Using PESTLE analysis, the report identifies key technological, political, social, economic, legal, and environmental changes impacting the industry. Micro environmental factors such as consumer behavior, supplier dynamics, and competition are also considered. The report details Zara's strategies and tactics, including increased online presence, technology adoption, cost leadership, differentiation, and customer-focused approaches, to maintain competitiveness and profitability. It highlights the importance of adapting to evolving consumer demands, technological advancements, and competitive pressures within the UK fashion retail sector. Desklib provides access to similar reports and solved assignments for students.

Retail Theory and
Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
Introduction to Company .........................................................................................................1
Key relevant changes within the UK fashion retail....................................................................2
Relevant Changes in Micro environment....................................................................................3
Strategies and Tactics in Adapting Changes...............................................................................4
RECOMMENDATIONS ...........................................................................................................7
CONCLUSION................................................................................................................................7
.........................................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Retail is the process of selling consumer goods or services to the individuals through
multiple channels of distribution in order to earn profit. In general, it is an activity or a process of
selling goods to the public, usually in small quantities (Bowen, 2016). Retailers satisfies the
needs and wants of consumers by providing them goods through the use of well established
supply chain. Hence retail is the process of selling consumer goods or services through multiple
channels of distribution. Retail process is concerned with collection of goods from manufacturer
in huge quantities and supplying to consumers in small lots. Fashion Retail industry is the group
of companies that goes from the manufacturer to the consumers and offers them the fashionable
goods. It mainly deals in fashion accessories and products. Chosen company under the report is
ZARA. It is the world’s largest apparel retailer and has its own brands such as Zara home,
Oysho, Pull and Bear and many more. Report will focus on how the fashion retailer company has
adopted to recent changes in its products by identifying relevant micro and macro environment.
It has also discussed various strategies and tactics that the fashion retailer company can use in
order to cope up with changes. At last recommendations are discussed that the retailers can use
to meet the challenges. In order to cope up with such competitive challenges company can start
promoting its products in order to create much awareness about its brands.
Introduction to Company
Zara is a Spanish fast fashion clothing and accessories branded company which makes
high quality products at an affordable price to the customer. Its target market includes men and
women between 18 to 40 years of age which provides fashionable clothes and accessories to the
individuals who are highly trend conscious. Company was founded in 1975 by Amanico Ortega
and Rosalia Mera. It is the world's largest apparel retailer has around 7, 475 stores all over the
world. It has a good presence of stores throughout the world targeting more customer base. It
has its operations in UK, Italy, Germany, France including India and many more. In order to
expand its market share. Company has added more 51 stores in UK, having Spain as the biggest
market with 563 stores (Brigham and Ehrhardt, 2013). Its first store was opened in Spain and the
company uses geographic, demographic and psycho graphic behaviour of the customers while
making products. For surviving in ever fast changing environment company has adopted to
recent changes by analysing the macro environment as well as micro environment in order to
1

produce goods according to recent changes. Respective fashion clothing retail sector is highly
competitive with different brand that includes Mango, Gucci and many other national and
international brands.
Key relevant changes within the UK fashion retail
Retail sector remains the single largest private sector providing employment to the
individuals in UK. Increasing globalisation and high on demand lifestyle and expectations of the
customer have led to the change in fashion retail industry. Respective company should analyse
various macro environment and micro environmental factors which assist them to identify the
changes in fashion retail and thereby assist in producing products accordingly. In order to
identify changes in macro environment, PESTLE analysis is described below-
PEST Analysis
 Technological environment- Improvements in technology has been a great impact on
fashion industry. It is because of the higher advancement and use of technology in UK it
has forced companies to adopt to recent technologies in order to provide latest design for
their products. Respective company with use of modern technology has started its online
presence in order to attract customers towards the product and use of efficient supply
chain so that products can be reached at a quicker rate. As with the recent change in
technological factor with the use of modern tools such as promoting products online to its
customers has made a great impact on the sales of the ZARA. This recent change has
allowed ZARA to open online stores and promotes its products via social media tools
enhances growth of the company.
 Political environment- Under this, government of country plays an important role
because of the changes in interest rate, inflation rate and taxation rate which the company
should consider while producing its products. Changes in political environment can
directly impact sales of ZARA products. If the tax rate in the particular industry rises will
create problem for company as with the heavy tax rate products of the Zara will be sold
to the consumers at a higher price, this will lead to less attraction of the customers
towards respective company's products. (Combs, Ketchen and Short, 2011).
 Social Environment- As because of the increasing demand of the customers due to
wider availability of products, it is high demand of customer to shop online and has
forced Zara to open multiple online shops and increase its productivity on a large scale.
2

Respective company has to properly analyse the demand of clothes in UK and other
respective countries and produces product according to their culture and beliefs. For
example, Zara operates in various countries they should analyse culture and demand of
the individuals and accordingly supply and produce goods. As social change in UK
environment is customers are highly demanding quality products over the price. This
driving change has made the fashion retail industry to provide quality products to satisfy
needs.
 Economic Environment- Respective country should consider economic growth of its
country regarding taking decisions of producing products. Zara should consider economic
growth, interest rate, inflation rate as to know whether their brand is affordable in the
particular market or not. Sudden change in economic environment as during inflation
there will be low purchasing power which will make the customers purchase products at
a low price. This change in UK Economic environment. Fashion industries should
provide goods at a goods at lower price and gains larger satisfaction.
 Legal factors- This factors includes the legal laws that has a great influence on the
functioning of fashion retail industry. Their are certain changes including in the legal
environment of UK such as introduction of national minimum wage system and stricter
measures taken against discrimination factor. This has made Zara to function properly as
well as avoid any discrimination on the basis of gender. This will have impact on ZARA
to provide minimum wage to its workers as well as provides extra incentives if the
workers do over pay.
 Environmental factors- As the government in UK is majorly focusing on sustainable
development as well as is concerned with natural resources, waste health and quality of
life. For this ZARA has made use of paper bags instead of polythene bags to become
environmental friendly in nature.
Relevant Changes in Micro environment
Changes within the micro environment can be understood as the change in consumer's
behaviour and attitude, supplier’s behaviour and level of competition within the specific brand.
Zara should consider such factors to analyse behaviour of customers, suppliers and competitors
3

and should produce products accordingly (Dalkir and Beaulieu, 2017). Factors within the micro
environment are discussed below-
 Customers attitude and behaviour- There is a great change in consumers’ behaviour
and attitude as they started demanding quality products over the price. Customers main
concern is having qualitative products as well as they want highly fashionable clothes.
This driving change in customers’ behaviour has made the fashion retail industries to
provide high quality products as well as provides products which are high in trend.
 Suppliers behaviour- Respective company has to analyse suppliers’ behaviour in
context of getting raw materials at a proper quality and within specific time so that
production process can be carried without any disruption and customer’s requirement
could be fulfilled. Company acquires raw material from various suppliers in different
countries. If the suppliers provide products at a high price as well as sacrificing it with
the quality, this change makes the fashion retail industry like ZARA to lose its market
share and therefore lowers its profit margins. Respective retail industry should analyse
those changes and adopt strategies accordingly. (Sorescu and et. al., 2011).
 Competition – Zara is facing intense competition from Christian Dior, Gucci, Prada and
many more. Brand should analyse competitor’s products and strategies and should
accordingly produce goods in order to attract more customers. Zara should specifically
analyse competitors’ strategy and technology used in order to take decision regarding
their production process. As its competitors are adopting customer focused strategy in
which respective company are producing products according to customers’ demand. This
has made ZARA to analyse such competitors’ strategy and provides products accordingly
so as to capture larger market share.
Strategies and Tactics in Adapting Changes
Fashion retail industry is facing dynamic changes from the various macro environment
and micro environment factors which have forced retailers to desire low cost for its products as
well as flexibility in its design and quality are the key strategies to maintain a profitable position
in an increasingly demanding market. As by analysing the macro environmental factors it has
been determined that there is vast increase in technology with the wide spread use of internet
along with this it has also been analysed that increasing demand of clothes according to
individual culture, beliefs and attitudes. Company needs to adopt such changes in order to
4

capture larger market share and enhance its productivity and profitability. Various strategies and
tactics adopted by ZARA in order to adopt and cope with changes effectively (Dant, Grünhagen
and Windsperger, 2011).
Technological Change
From the macro environmental analysis, it has been analysed that there is change in
technology because of the rapid growth of internet. In order to cope up with this change ZARA
has adopted various strategies-
 Zara has increased its online presence because of the greater demand, it has started
supplying online products which assist the consumers to compare cost and quality with
those to competitors’ products and thereby increased awareness of its products.
 In order to cope up with technological change ZARA has to use machineries of recent
innovative and updated technology which can produce latest design of products
according to customers’ needs and can enhanced its productivity and can meet changing
needs of the customers.
 ZARA could also adopt cost leadership strategy in which it can reduce the cost of
production by using modern innovative technology and can produce less expensive
products with good quality in order to capture larger market share (Jones and Murphy,
2011).
Social Change
Because of the increasing globalisation, consumers start demanding products according
to their culture, attitudes and beliefs, moreover there is a social change in consumers’ behaviour
as they focus on getting quality products over the price as well as demands products according to
existing trends and market. In order to maintain long term sustainability in market ZARA has to
adopt to such changes and attracts more customers towards the brand. ZARA has adopted
strategies which are described as follows-
 Zara has adopted Differentiation strategy which aims to distinguish a product from other
similar products that are offered by competitors. Company entails development of
product according to customers’ attitude and culture and will satisfy them. This will assist
the company to gain a unique position in the market and would attract larger customer
base.
5

 In order to cope up with the social change, company adopted customer focused strategy
in which in which they start producing products according to specialised needs of
customers as well as provides quality products over the price in order to target more
customer base and to be ahead of its competitors.
 By analysing political and economic environment it has been determined that there is
stable political government with no restrictions on trade and tariffs, this will assist the
company to increase its productivity level by specifically analysing customers’ needs and
import and export goods on a large scale and thereby generating more revenues (Lorenzo,
Romero and et. al., 2011).
Strategies in order to meet micro environmental changes
There are various changes identified in consumers’ behaviour and attitude as well in
suppliers’ behaviour and because of the intense competition faced by the respective industry and
with these changes company has adopted to recent strategies such as because of prevailing
competition in market, respective company should adopt to pricing strategy in which respect
brand can lower the price of its products but should not sacrifice with quality. This would assist
them to capture larger market share and thereby earns more profit and in order to produce
products according to consumers demands Zara focuses on customer focused strategy as this
strategy focuses on providing goods according customers desires.
Use of Appropriate theories
As there are significant changes in complex business dynamic environment it is
necessary for the companies to properly understand the concept of retailing and maintain a
significant position in market. This could be explained with the help of Cyclical theories-
The wheel of retailing theory-
Philip Kotler has discovered wheel of retailing theory in which it is discussed that
retailers have to follow a proper cycle in order to maintain sustainability in market for longer
period of time (Theories of Retailing - • Retail life cycle theory Wheel. 2018). In this context,
some phases and steps are mentioned below-
 Step 1- Lower prices, lesser margins and lower reputation.
 Step 2- Heavier cost price and increased reputation for firm
 Step 3- In this phase retailer observes increasing profits with adopting change.
6

This theory observes that retailers have to follow step by step cycle in order to increase its profits
and captures larger market share. ZARA has to carefully analyse its competitors and accordingly
adopts to change. This retailing theory would assist the respective company to analyse the
market properly and cope with micro environmental changes and capture larger market share by
following step by step of practising retail.
Accordion theory
This theory provides an opportunity to retailer to realize the institutional changes which
may assist in taking initiatives. It is a proper way of understanding that institutions where it goes
from a store with great mixture to specified shop and then again to wide assortment institutional
sales outlet (Sciacovelli and et. al., 2011).
Above mentioned theories that has been adapted by ZARA will assist in taking effective
decisions to achieve targets in effective way. As changes take place in macro environmental
factors, accordion theory will help in realizing changes in macro environmental factors and takes
actions and adopts strategy to capture larger market share. This theory will allow respective
company to face this macro environmental changes and gains maximum profit margins.
RECOMMENDATIONS
From the above report it has been examined that in order to enhance its productivity and
profitability Fashion retail brand ZARA should adopt changes effectively in order to survive in
complex dynamic business environment. Here are the following recommendations which ZARA
brand should adopt which are described as follows-
 ZARA should increase its online presence, because of the wide spread of technology Zara
should provide more fashionable products to consumer. As it provides them convenience
to buy 24*7. It also helps the customers to compare products with those from
competitors’ products. This will allow brand to target more customers which will
enhance its profitability.
 Respective company should also create awareness of its products through the help of
social media tools such as Facebook, Instagram, Twitter etc. and start promoting their
products. This will assist the company to make the wider presence of its products in the
market. As increased target consumer base for the company will lead to higher
profitability.
7

 Apart from this ZARA which is the giant in fashion retail companies should completely
analyze consumer needs and desires and should also takes into consideration the
competitors’ products and strategies and accordingly produce products so as to attain
larger customer base. As the satisfied customers will have positive word of mouth
advertising and will also influence other customers to purchase Zara products.
 Zara could also come under joint partnership with company dealing in similar product
segments which will assist in producing high quality products and therefore helps in
capturing larger market share within specified time period.
CONCLUSION
From the above report it has been concluded that retail stores are rapidly expanding their
business and generating employment level in the country. Retail companies should specifically
identify individual needs and wants and produces product accordingly as to attract larger
customer base and therefore earns more profitability. Companies should specifically analyses the
macro and micro environmental changes in which company so as to adopt and implement
strategies accordingly in order to manage and cope up with changes. Company has adopted
various strategies so to manage and work according to change analyzed in fashion retail industry.
Apart from these recommendations are also provided in order to gain awareness and capture
larger market share.
8

REFERENCES
Books and Journals
Bowen, D. E., 2016. The changing role of employees in service theory and practice: An
interdisciplinary view. Human Resource Management Review. 26(1). pp.4-13.
Brigham, E. F. and Ehrhardt, M. C., 2013. Financial management: Theory & practice. Cengage
Learning.
Combs, J. G., Ketchen Jr, D. J. and Short, J. C., 2011. Franchising research: major milestones,
new directions, and its future within entrepreneurship. Entrepreneurship Theory and
Practice. 35(3). pp.413-425.
Dalkir, K. and Beaulieu, M., 2017. Knowledge management in theory and practice. MIT press.
Dant, R. P., Grünhagen, M. and Windsperger, J., 2011. Franchising research frontiers for the
twenty-first century. Journal of Retailing. 87(3). pp.253-268.
Jones, A. and Murphy, J. T., 2011. Theorizing practice in economic geography: Foundations,
challenges, and possibilities. Progress in Human Geography. 35(3). pp.366-392.
Lorenzo-Romero, C. and et. al., 2011. Consumer adoption of social networking sites:
implications for theory and practice. Journal of research in Interactive Marketing.
5(2/3). pp.170-188.
Sciacovelli, L. and et. al., 2011. Quality Indicators in Laboratory Medicine: from theory to
practice. Clinical chemistry and laboratory medicine. 49(5). pp.835-844.
Sorescu, A. and et. al., 2011. Innovations in retail business models. Journal of Retailing, 87,
pp.S3-S16.
Stewart, D. W. and Shamdasani, P. N., 2014. Focus groups: Theory and practice (Vol. 20). Sage
publications.
Tate, W. L., Ellram, L. M. and Dooley, K. J., 2012. Environmental purchasing and supplier
management (EPSM): Theory and practice. Journal of Purchasing and Supply
Management. 18(3). pp.173-188.
: <https://www.coursehero.com/file/12325649/Theories-of-Retailing/>
9