Strategic Analysis of Zara: Business Environment and Strategies

This report provides a comprehensive strategic analysis of Zara, a leading fashion retailer. It begins with an introduction to strategic management and then delves into Zara's business environment, including its market position, competitors, and SWOT analysis. The report examines Zara's strategic position and value proposition, highlighting its use of various positioning strategies. Furthermore, it explores the application of strategic tools and techniques such as PESTLE analysis, Porter's Five Forces, and value chain analysis to understand Zara's competitive landscape and decision-making processes. The report concludes by summarizing Zara's strong market position and potential for future growth, emphasizing its ability to satisfy consumers and sustain its presence in the fashion industry.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Business environment of Zara.................................................................................................3
2. Strategic position and value proposition used by Zara............................................................7
3. Use of selected tools and techniques for analysing strategies:................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
2

INTRODUCTION
Strategic management is the comprehensive collection of activities that provides direction
to the management for making effective planning in order to accomplish goal of the
organization. For the present report Zara fashion company is being taken into account which is
leading fashion retailer that has many stores across the world (Battisti and et.al., 2015). Current
assignment will discuss the business environment of the company, it will describe its competitors
and market position. Strategic position and value proposition of Zara will be illustrated in this
study.
MAIN BODY
1. Business environment of Zara
Zara has become world's biggest fashion retailer that operates in many countries and
provides satisfactory services to the clients. It offers men, women, children wears and it supplies
the cloths as per the current consumer trends (Cairns, 2014). Business environment can be
measured by looking upon the internal and external market position of the organization. That
helps in identifying the drawback of the company by this way managers can make sound
decision for the improvements. Zara has strong brand reputation and having good resources that
are supporting it to sustain in the market for longer duration (Cavalcante, 2013).
SWOT analyses
Strength:
 More than 2000 retail stores across the world.
 Well established brand name.
 Strong supply chain management
 Trendy and well designed cloths Fast delivery
Weakness:
 Limited marketing activities High competition is influencing the mind of consumers
Opportunities:
3

 Online marketing and e commerce business opportunities International expansion
Threats
 Global economic crises
 High competition
 Amendments in trade polices
Competitors of Zara
 Chanel
 Christian Dior
 Burberry
 Prada
 Guccl Versace
Market shares
Zara is working well and its brand image is quite good as compare to other competitors.
Market share of Zara are very high, in the year 2016 its sales were 1338 that was very good and
it has grown to 67.4% which is very high as compare to other brands (Hill, Jones and Schilling,
2014).
Illustration 1: growth comparison
Source:(Zara Leads In Fast Fashion, 2017)
4

By looking upon the figures it is shown that Zara has strong market reputation and its
competitors are giving close competition to the cited firm. Market share of the company is quite
high. It pays attention on needs of consumers and according to the trends it designs the cloths
and supply in the market. That is why consumers of the entity are highly satisfied with the brand
and they give positive feedback to others well (Hollensen, 2015). Products of the company are of
high quality and they meet with the needs of clients. In addition, Zara has poor marketing and
promotional activities and due to this Burberry has high revenues as compare to Zara. Number of
stores of H$M are high in every location except Spain. In Germany, US, UK, Switzerland etc.
H&M has many retail physical outlets at visible locations that attract more people towards the
brand. That is why its sales volume are little higher as compare to Zara.
Porter's Five Forces:
Porters five forces are the great technique that helps in measuring the environment of the
organization significantly (Iyoha, 2012). Rivalry: Zara is facing huge competition but it offers unique products to the consumers
and due to this uniqueness it is gaining profit without spending large amount in
advertisement.
5
Illustration 2: Comparison of Zara with H&M
Source: (Zara vs H&M – who’s in the global lead?, 2014)

 Threats of new entry: It is quite high because new firm can enter in the fashion industry
any time and create pressure on the organization to great extent. That creates high
competition and due to this overall profit and market position of the organization can get
down. Buyer power: Power of buyers in the Zara are moderate pressure because there are many
other firms those which are providing same quality products at lower costs. So in such
situation buyers can turn to other brands easily (Williams and Hopper, 2015). Supplier power: Suppliers have low power in the organization because it has strong
relationship with the suppliers and management of suppliers is very good. They provide
quality products to the entity at lower rates that is why cited firm is able to offer good
cloths to the clients. Threats of substitute: Fashion trends can be changed any time thus, this industry is
unpredictable. But as Zara is providing unique fashionable cloths to the customers that is
by this substitute brands can not affect the business activities of the company majorly.
Current trends
Now days people want designer high quality cloths that can make them attractive. In the
modern competitor environment it is essential to use effective marketing techniques so that
number of consumers can get increased (Yüksel, 2012). Cited firm is selling the products
through e-commerce business and most of the clients are purchasing the cloths through online.
Currently Zara is providing satisfactory products to the end users as per their needs and
requirements. That is why clients of the company are highly satisfied. In addition to this,
organization is having strong brand image in the market and its shares reflects that cited firm
treats its consumers as assets. It adopts the latest technologies to improve its products and
services that is why it has developed its strong brand reputation (Hollensen, 2015).
Future trends
Current figures, sales growth, profitability show that Zara is having great potential to stay
in the market for longer duration. In future its sales will get higher and profitability will be
enhanced (Battisti and et.al., 2015). Zara continuous working on improving its products so in
future it will be able to attract more consumers towards the brand that will enhance its market
share and value in the competitive market.
6

2. Strategic position and value proposition used by Zara
Strategic positioning of a company can be defined as the organisation's positioning in the
future by considering various other factors such as constantly changing environment, tastes and
preferences of customers, brand image in the minds of customers etc. Zara is considered as a top
most popular brand of fashion in the entire world, therefore, it uses various positioning strategies
to compete with the other brands and to maintain position in the minds of customers.
Zara is popular for its strategies and it adopts different strategies to maintain its image in
the market. Zara positions itself taking into consideration consumer analysis as it offers the best
designer products so it has to use various tools and techniques to analyse the trends.
It adopts various analysis for evaluating the strategic position of the company like
PESTLE Analysis, Internal Analysis, SWOT Analysis, competitive analysis etc.
PESTLE Analysis:
It includes political, economic, socio-cultural, technological, legal and environmental
factors.
Political factors:
Strategic position is sometimes affected by the political factors like constantly changing
rules and policies by the political parties. UK is considered to be the biggest hub for fashion
industry and it has many showrooms of Zara located there. Therefore, company's strategic
position is affected by the political factors of UK like due to Brexit Zara suffered great losses.
Economic factors:
Economic factors are also considered important for analyzing the customer attitudes and
preferences towards a particular brand. GDP, inflation rate, demand and supply of various
fashion products which are produced by Zara are also considered while analyzing.
Socio-cultural factors:
These factors are important for determining what customers perceive towards the
products offered by Zara. It includes what gender it is targeting, age structure, different religions
etc. which helps them to create strategies accordingly (Hill, Jones and Schilling, 2014).
Technological factors:
7

This covers modern technologies used in the factories and other innovations are also
considered. Obsolete technology should not be used by Zara in order to maintain image in the
market and also to assure quality products.
Legal factors:
Legal factors such as guidelines, rules and policies made by the government and various
other laws applied to the fashion industry. These factors affects the strategic position of Zara.
Environmental factors:
Strategic position is also affected by the constantly changing environment which is very
difficult for every company to resist the change. But Zara adopts the changing environment and
produce their products according to the latest trends (Hollensen, 2015).
Value proposition by Zara:
Value proposition can be defined as value added to the company by offering a particular
product or a service. Companies use this concept to define that whether target consumers are
provided benefits by considering low expenditure. Zara is popular for its faster delivery to the
stores in different locations. Better administration helps in faster delivery of products. Zara aims
at delivering faster with better quality and affordable prices as customers pay for the speed. It is
also aimed at delivery, experience of the customers and communication.
Company is able to fulfill the demands of the customers by offering them products
according to the latest trends and specifications. This company offers an added advantage that its
collections are changed in stores in every three to four weeks to let the customers updated.
3. Use of selected tools and techniques for analysing strategies:
As the company uses various tools and techniques for strategic management, therefore, it
also analyses what benefits are accrued by using these tools. SWOT analysis, Porter's five forces
model, Pestle analysis etc. are used by the company in order to analyses their strategies.
Pestle analysis is used by the company to pre-plan its strategies so that if government amends
any rules or there is any fluctuation in demand and supply of products, it will not affect the
company's performance (Cavalcante, 2013). It also helps the company to analyze and maintain
deeper understanding of the economic and technological developments. Taste and preferences of
the customers are evaluated and then the products are offered according to the specifications of
the customers
8

SWOT analysis framework is also used by the company to maintain its position in the market. It
helps the company to plan its strategies according to the preferences and attitude of the
customers and also considers various competitors before producing their products. It helps the
company to decide and takes the advantage of the new opportunities and also helps in innovating
their products and technology from time to time (Iyoha, 2012). This framework helps the
company to identify those areas which are performing very well and gives attention to other
areas. It aims at minimizing weaknesses as well as building their internal as well as external
strengths.
Company also considers value chain analysis as a strategic tool or a framework. This
framework is used by the company to analyze the internal environment and also analyses
competitors, its products and value proposition. It also aims at analyzing customer value by
evaluating the commitments and promises made by the company.
Porters five forces model is also used by the company to analyze the threat of new
substitutes and new entrants. It helps the buyers and suppliers to earn profits and helps to analyze
what are the substitute products, whether there are any rivals in the industry which can affect the
company's performance (Yüksel, 2012). It helps to explain why different industries are able to
earn different levels of profitability. It is used to measure competitive intensity as well as
attractiveness in the entire industry. It also helps the company to analyze whether to enter in the
specific segment or not.
CONCLUSION
From the above report it can be concluded that Zara is working well and it has strong
position in the market. It quality products and extremely well services can satisfy the consumers
and due to this it is able to sustain in the market for longer duration.
9

REFERENCES
Books and Journals
Battisti, W. P. and et.al.,, 2015. Good publication practice for communicating company-
sponsored medical research: GPP3. Annals of internal medicine. 163(6). pp.461-464.
Cairns, G., 2014. A critical scenario analysis of end-of-life ship disposal: The “bottom of the
pyramid” as opportunity and graveyard. Critical perspectives on international business.
10(3). pp.172 – 189.
Cavalcante, A. S., 2013. Understanding the impact of technology on firms’ business models.
European Journal of Innovation Management. 16(3). pp.285 – 300.
Hill, C. W., Jones, G. R. and Schilling, M. A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
Iyoha, F. O., 2012. Company attributes and the timeliness of financial reporting in
Nigeria. Business intelligence journal. 5(1). pp.41-49.
Williams, L. S. and Hopper, P. D., 2015. Understanding medical surgical nursing. FA Davis.
Yüksel, I., 2012. Developing a multi-criteria decision making model for PESTEL analysis.
International Journal of Business and Management. 7(24). pp.52.
Online
Zara Leads In Fast Fashion, 2017. [Online] Available through:
<https://www.forbes.com/sites/walterloeb/2015/03/30/zara-leads-in-fast-fashion/
#4bd465205944>. [Accessed on February 2016].
Zara vs H&M – who’s in the global lead?, 2014. [Online] Available through:
<https://edited.com/blog/2014/04/zara-vs-hm-whos-in-the-global-lead/>. [Accessed on
February 2016].
10