Retail Theory and Practice: Zara Company Analysis Report

This report provides a comprehensive analysis of Zara, a prominent fashion retail company. It begins with an overview of Zara, including its history, product offerings, and global presence. The report then delves into the macro environment, utilizing a PESTLE analysis to examine political, economic, social, technological, legal, and environmental factors influencing Zara's operations, particularly within the UK market. A subsequent section focuses on the micro environment, conducting a SWOT analysis to assess Zara's strengths, weaknesses, opportunities, and threats. The report identifies Zara's strong brand portfolio and unique designs as key strengths, while recognizing generalized collections and limited advertising as weaknesses. Market expansion and e-commerce are highlighted as opportunities, and competition is noted as a significant threat. Furthermore, the report explores strategic options, recommending the use of the Ansoff matrix to develop effective strategies for growth, including market penetration, market development, product development, and diversification. The analysis underscores the importance of adapting to changing market trends and customer demands to maintain a competitive edge.

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Retail theory and
practice

Table of Contents
INTRODUCTION...........................................................................................................................1
About Company..........................................................................................................................1
Key relevant changes in macro environment..............................................................................2
Key relevant changes in micro environment...............................................................................3
Strategies and tactics that could be used.....................................................................................5
Recommendation.........................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Retail sector includes all those companies which is selling goods directly to customers.
Business in retail sector are distributing products to end users as per their requirement (Black,
2018). This sector is very important for growth of economy and increasing GDP of country.
Retailers are considering as a link of supplying products from manufacturer to end consumers.
Retailers focus on displaying products as well as describing its benefits and features to customers
in order to increase sales of company. Retail sector is divided into sub categories such as
departmental stores, grocery stores, supermarket, internet retail and so on. Fashion retail sector
refers to group of companies that are supplying fashionable products such as cloths, shoes,
cosmetics and other accessories. These are those companies which are designing and
manufacturing apparel goods. Retail company purchase bulk quantities products with motive of
directly selling products to end users.
About Company
Zara is a Spanish company which is dealing in fashion retail sector. This company was
established in 1875 in Spain and founders of Zara are Amancio Ortega and Rosalia Mera. It is a
fast fashion retailer based company and product portfolio includes cloths, accessories, shoes,
beauty products and cosmetics. Zara is one of the largest company of the world which is dealing
in apparel retail sector (Bodie, 2015. Zara is a multinational company and its headquarter is
located in Arteixo Spain. It is a flagship chain store of Inditex group and Zara company is
providing its products and services in different parts of world. This company operates in approx.
2,220 stores that are situated in around 88 countries. Product range of Zara includes high quality
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Illustration 1: Zara
Source: Zara Logo

goods for women, men as well as kinds outerwear, jackets, blazers, dresses, jumpsuits, tops, t-
shirts, knitwear, sweatshirts, pants, jeans, skirts, shoes, bags and other accessories. Zara offers
fashionable designed products for men, women and kids in order to improve quality of lifestyle.
Zara objectives is to implement an eco-friendly management models in their shops so that they
can reduce energy consumption. This company is committed to satisfying desires and demand of
their customers.
 Mission of Zara company is to contribute most for gaining sustainable growth and
development of society through its business model.
 Vision of this company is to provide high quality fashionable products to customer with
the motive to becoming number one fashion retailer in the world.
Key relevant changes in macro environment
Macro environment can be referring as a condition that exists in the economy as a whole rather
than in some specific sector or region. There are various factors in external environment which
are uncontrollable and leads to have huge impact on business (Hristov and Reynolds, 2015). Zara
company can use PESTLE analyse in order evaluate all factors of macro environment. It includes
political, economic, social, technological, legal and environmental factors. Changes in all these
factors can have both positive and negative impact on Zara business. Political: This factor includes all rules and policies set by political parties on retails
sector. Political factor includes stability or instability of political party, taxation policies,
trade rules and regulations etc. Government and political parties of UK is focusing on
developing strategies that will help retail sector companies (Carter and Yeo, 2016).
Stability of political parties is advantage for Zara as rules and regulation of developed by
UK government will be in favour of company and its operation. It will help organisation
to grow business and enhance its profitability. Economical: This factor can be considering as an economic condition of country.
Economical factor will lead to influences customers as well as business process. It
includes factors such as economic growth rate, exchange rates, inflation rates, interest
rates, income of consumers. This factor affect purchasing power of customers because
when economic condition of country is not good, customers will only focus on full filling
their basic needs. UK country have one of the fast growing economic rates. It is an
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opportunity for Zara company to provide high quality of produce as targeted customers
can easily afford products of Zara. Social: Social factors determines all demographic characteristics, norms, believes,
attitudes, customers, value of population and so on. Lifestyle of customers as well as
social trends will have major impact on Zara company (Elbeltagi and Agag, 2016). This
company is dealing in fashion retail sector so it is very important to develop and
manufacture products as per requirement of customers and market trends. It is quite
difficult for this company to identify and analyse needs and wants of targeted customers
because requirement of consumers or market is continuously changing. Technological: This factor refers to innovative and new technology that helps business to
gain competitive advantage. Technology is a major factor that can have huge impact on
Zara's business. UK country has one of the most advance technology so this external
factor is beneficial for company as it will lead to increase productivity and profitability of
organisation. By using more updated and high technology Zara company can develop and
deliver high quality products to customers and satisfy their demands. Legal: It includes all those factor which are related to laws and legislations of
government set in retail industry. Legal factors refer to various factor such as
discrimination law, anti-trust, employment, consumer protection, employment law,
copyright, patents and so on (Hayes, 2018). Zara company is developing unique products
with motive of differentiating its offering for other companies. This factor will help Zara
by providing patents and copyright to its products. This will lead to protection of
imitation of products and satisfying customers by providing original products.
 Environmental: Environmental factor includes several factors such as weather, climate,
environmental offsets, ecological factors and so on. This factor consists of laws to protect
environment from air and water pollutions. This factor is advantages for Zara to develop
positive image in market as objective of this company to is provides high quality products
without damage to environment. Company can conduct different activities of social
responsibility and this will help in creating strong relationship with customers.
Key relevant changes in micro environment
This analysis is undertaken by an organisation to identify as well as analyse internal
strength, weaknesses and external opportunities, threats. It is designed to facilitate a realistic
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situation which an organisation face in business world. Moreover, it is a strategic planning
technique that provides assessment tools. Following are the keys factors which are included
under SWOT analysis:
Strengths: Strength usually aims at describing the strong points of a brand which distinguish it
from firm's potential competitors (Kajalo and Lindblom, 2015). As a leading retail organisation
Zara has plenty of strengths which separates it from competitors. These strengths essentially help
Zara to protect the market share. Following are the major strength of Zara: Strong brand portfolio: The company has strong brand portfolio with global presences
all around the world. Zara has approximately 10000 stores which spread in different parts
of the world. Moreover, if company need to survive in retail then they need to
continuously expand its business organisation in the areas where there are no stores.
 Unique design: One of the foremost benefit of Zara is that it produces unique fashion
accessories which essentially separates it from competitors. The clothes produced are of
superior quality and elegant.
Weaknesses: this usually stop an organisation to perform at its optimum level. In context to Zara
following are included under weakness. Generalised collection: One of the major weakness of Zara is that it does provide
specialise products. Every product produced are available for everyone. This is the main
reason due to which demand of customers shows a shift.
 Lack of advertising: Zara never advertise itself into the business world. This sometimes
negativity impacts the Zara's overall profitability in long run. In order to overcome this
weakness the company might invest in advertising.
Opportunities: These are favourable factors which helps a business to achieve the established
business goals effective. Market Expansion:The company can expand its business operation in several parts. In
order to do this effectively it need to keep a constant eye on emerging markets (Ko, Phau
and Aiello, 2016). It shall essentially its business where people are ready to purpose
premium quality.
 E-commerce: It can potentially sale its products using online buying trend and increase
its overall printability. E-commerce store brings a hike in sale.
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Threats: These factors potentially harm the overall growth of an organisations. In context to
Zara these are the factors that harm the firm:
 Competition: The company faces tough competition under retail organisation due which
sales shows a negative shift. Prime competitors of Zara are: Vero moda, H&M, Mango
and many others.
Strategies and tactics that could be used
Strategies and tactics can be refers a as a plan of actions that can be used in achieving
long term goals of organisation. These are conceptual actions that are aiming at attaining specific
objectives. There are various strategies and tactics that can be used by Zara organisation to
enhance its productions and profitability. By developing an effective strategies company can
gain competitive advantage over its rival companies. It will not only help in growth of company
but also leads to handle difficult situations. Ansoff matrix will help Zara company to develop
effective and creative strategies so that company can achieve growth and larger market share.
Identifying and analysing all factor of micro and macro environment will help in evaluating their
positive and negative impact on business (Leck and et.al., 2015). These factors have major
impact on business so by carefully evaluating these factors Zara company can develop better
strategies. Ansoff matrix is a tool which was developed by H. Igor Ansoff to provide effective
strategies for growth of business. This matrix is also known as product and market expansion
grid. It includes four different strategies which is mention below:
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Illustration 2: Ansoff Matrix
Source: Ansoff Matrix

Market penetration: This strategies refers to providing existing product and services to
current market area. This is the least risky strategies as company is dealing in current market
area. Market penetration strategies will help company in increase its sales and profitability. It
will also decrease risk which is associated with products and market area as company is focusing
on increasing sales in existing market area. Company can use this strategies by improving its
adverting and marketing techniques so that organisation can attract more customers. Market
penetration will also leads to building strong image and relationship with its customers.
Market development: It is a strategies where company is planning to increase it market
area by entering into new market place market development strategy consist of those strategy in
which organisation is offering current products to new market area (Nepal and Jamasb, 2015).
For this company need to identify and analyse new place which has demand and requirement of
current products produced by company. This strategies will help firm to sell more product by
expanding its products and services to new market area. Zara company can enter into new market
where it is currently not providing its products and services. This will help in enhancing profits
and satisfying needs to new customers.
Product development: Product development strategies refers to introducing new products
in current market area. This strategies is very help in attracting current customers towards
company. In this strategies company is completely focusing on developing new products to
targets it existing market segments. For adopting product development strategies Zara needs to
offer goods with better quality or design (Shanks and Tilley, 2016). By providing unique
products to customers, company can develop its positive brand image in market area. Company
needs to identify and analyse needs and wants of current customers and then develop product
which is able to stratify requirements of customers.
Diversification: Diversification strategies is the most risky strategies as in this company
is planning to move into new market area with new product. This strategies includes offering
new product into new market area. This strategies is risky but it is very good opportunities for
business gain more market share and increase profit of organisation. Diversification strategies
will help in provide various opportunities to Zara company as company is expanding business by
full filling requirements of new customers. Company need to identify requirements of new
customers of that they can develop products according to demand of new customers.
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By analysing different strategies of Ansoff matrix., it can be evaluated that diversification
strategies will be best for growth of Zara company. This strategies will help business to move
into new market as well as develop new product. By developing new products as per requirement
of customers company can enhance its profits. Diversification strategies will leads to gain
competitive advantages over other rival companies (Suhartanto and et.al., 2018). For adopting
this strategies Zara company should conduct a proper market research that helps in evaluating
requirement of new customer and market area. By developing products as per requirement of
new customers company can increase its market share as well as profitability.
There are several tactics and strategies that can be used by Zara company to deal with
impact environment. There are different factor which influences business operations and its
profits. Zara company needs to develop advertisement and promotional strategies for improving
so that it can attract more customers towards company. Marketing and promotion of goods or
services is very important for influencing targeted customers and increase sales.
Recommendation
By evaluating above report carefully it has been analysed that there are some factors that
needs to be improved in Zara company. This is a well known and established company as well
as it is providing its high quality products in different parts of the world. Some recommendation
are mention below that will help Zara company to gain competitive advantages.
Zara company needs to focus on promotion and adverting of its products. It is a weakness of this
company that it is lacking in effective marketing of its goods and services. So develop creative
promotional strategies will help in increasing sales of Zara.
Company should follow all rules and regulation set by government as it will leads to smooth
functioning of organisation.
Zara should introduce more unique and different products in order to gain competitive advantage
from other companies. It is very important to analyse requirement of customers and market area
before developing products.
It should use innovation and advance technology in its business process and promotion of
product. By using updated and modified techniques and techniques in its operations, it will leads
to enhance its productivity and sales of Zara company.
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CONCLUSION
From the above report it can be concluded that there are various factor of micro and
macro environment which is affecting business of retail sectors. This sector have to face many
issues and challenges of internal or external environment for successful functioning of business.
Changes in these factors can have positive as well as negative impact on organisation. Evaluating
or analysing these factor will help in developing effective strategies for growth of business. By
developing strategies and using tactics business can enhance its market share as well as build
strong relationship with customers.
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REFERENCES
Books & Journals
Black, J., 2018. Urban transport planning: Theory and practice. Routledge.
Bodie, Z., 2015. Thoughts on the future: Life-cycle investing in theory and practice. Financial
Analysts Journal. 71(1). pp.43-48.
Carter, S. and Yeo, A.C.M., 2016. Mobile apps usage by Malaysian business undergraduates and
postgraduates: implications for consumer behaviour theory and marketing
practice. Internet Research, 26(3), pp.733-757.
Elbeltagi, I. and Agag, G., 2016. E-retailing ethics and its impact on customer satisfaction and
repurchase intention: a cultural and commitment-trust theory perspective. Internet
Research. 26(1). pp.288-310.
Hayes, J., 2018. The theory and practice of change management. Palgrave.
Hristov, L. and Reynolds, J., 2015. Perceptions and practices of innovation in retailing:
Challenges of definition and measurement. International Journal of Retail &
Distribution Management. 43(2). pp.126-147.
Kajalo, S. and Lindblom, A., 2015. Market orientation, entrepreneurial orientation and business
performance among small retailers. International Journal of Retail & Distribution
Management. 43(7). pp.580-596.
Ko, E., Phau, I. and Aiello, G., 2016. Luxury brand strategies and customer experiences:
Contributions to theory and practice. Journal of Business Research. 69(12). pp.5749-5752.
Leck, H., and et.al., 2015. Tracing the water–energy–food nexus: Description, theory and
practice. Geography Compass. 9(8). pp.445-460.
Nepal, R. and Jamasb, T., 2015. Caught between theory and practice: Government, market, and
regulatory failure in electricity sector reforms. Economic Analysis and Policy. 46.
pp.16-24.
Shanks, M. and Tilley, C., 2016. Re-constructing archaeology: theory and practice. Routledge.
Suhartanto, D., and et.al., 2018. The link between tourism involvement and service performance:
Evidence from frontline retail employees. Journal of Business Research. 83. pp.130-
137.
Syntetos, A.A., and et.al., 2016. Supply chain forecasting: Theory, practice, their gap and the
future. European Journal of Operational Research. 252(1). pp.1-26.
Online
Zara Logo. 2018. [Online]. Available through:<https://www.stickpng.com/img/icons-logos-
emojis/iconic-brands/zara-logo>.
Ansoff Matrix. 2018. [Online]. Available
through:<https://www.tutor2u.net/business/reference/ansoffs-matrix>.
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