Strategic Management Report: Zara's Market Analysis and Strategies

This report provides a detailed strategic management analysis of Zara, a prominent player in the fashion retail industry. It begins with an executive summary and introduction to strategic management, emphasizing the importance of environmental analysis for organizational growth. The report then delves into the Australian fashion retailing market, discussing its size, trends, and Zara's position within it. A financial and corporate performance evaluation of Zara is conducted, highlighting sales, profit margins, and potential financial challenges. A SWOT analysis is presented to assess Zara's internal strengths and weaknesses, as well as external opportunities and threats. The report explores Zara's competitive performance in relation to key rivals like H&M and American Apparel. It recommends the application of Porter's generic strategies, including cost leadership, differentiation, and focus strategies, to address identified challenges and capitalize on opportunities. The report concludes with recommendations for Zara to maintain market competitiveness and achieve sustainable growth, emphasizing the need for continuous environmental analysis, stakeholder engagement, and financial management. References to support the analysis are provided.

Strategic Management

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Executive Summary
The main aim of this report is to understand the concept of strategic management. In this
report, Zara has been taken into consideration in order to analyse its position in the market.
The internal and external analysis has been done in this report. As per the financial
evaluation, it is observed that the organisation will face the financial issues in the near future.
After that, the internal analysis will be done by using the SWOT Analysis tool. Porter’s
generic strategies has been recommended to the company in order to achieve the high success
in the market.

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Contents
Introduction...........................................................................................................................................3
Market size and trends...........................................................................................................................3
Financial and corporate performance.....................................................................................................4
SWOT Analysis and Competitive performance.....................................................................................5
Strategic options....................................................................................................................................7
Possible recommendations....................................................................................................................8
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9

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Introduction
Strategic Management is the process of analysing, monitoring and controlling the
environment of the organisation. It is essential for the organisation to analyse the
environment for the growth. It is beneficial for the company to analyse the environment in
order to adopt the effective strategies for the high growth. There are different types of
strategic tools which are used to analyse the environment of the organisation such as SWOT
Analysis, PESTLE Analysis and many others. It is an important for the company to evaluate
its financial position in the market by analysing the financial performances (Rothaermel,
2015). The company can easily adopt the effective strategies after analysing the environment
for the growth in the market. In this report, the discussion is made on the fashion retailing
industry of Australia by selecting Zara for analyses.
At the beginning of the report, the market size and trends will be discussed. After that,
financial position of the company will be evaluated by analysing financial and corporate
performances. SWOT Analysis and competitive advantage of the company will be analysed
in order to analyse the effective strategies. At the end of the report, strategies will be
recommended with the appropriate strategies for the organisation.
Market size and trends
Zara is a Spanish fast fashion retailer which is based in Arteixo in Galicia. It is the main
brand of Inditex group which is the world largest apparel retailer. The company manages the
20 clothing collection in a year. Zara’s supplied the products as per the consumer requirement
or as per the market trends. The supply chain of the organisation is high responsive and
visible in the stores. The strong supply chain helps the company to serve the services at the
large number of consumers in order to satisfy their demands. It produces the 450 million

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items in a year with the high quality of services. The company has high brand image in the
market and in the year 2015, it was ranked 30 in the list of best global brands (Zara’s, 2018a).
(Source: IBIS World, 2018)
The fashion retailing industry of Australia is growing with the continuous rate as the
consumers demand towards the fashion is increasing over the five years. The revenue of the
industry is expected to grow at an annualised 11.8% over the five years through 2018-2019
with the amount of $2.1 billion. The increasing demand of consumers to the latest fashion is
more and the social media application is contributed in the success of social media. The
current year demand of the market is 4.4%. The industry is operating with the continuously
success rate and it is estimated that the annual growth of the industry is also growing with the
percentage of 11.8%. There are many popular brands in the industry such as Zara, Myer, H &
M and many others.
Financial and corporate performance
It has been seen that the demand of consumers is increases over the five year due to which the
sales of product is also increases. It is observed that the sale of the company is increases

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every year as compare to previous year. In the year 2017, the sales climbed 10% with the
amount of $22B. The Net sale of the company in the year 2017 is 25,336 in millions and it is
increases with the amount of 26,145 million. The demand of products of Zara is high up to
holiday season and due to which the company has to produce more products to attract the
consumers. The Gross profit margin of the company is also increases with increasing sale of
the products (Zara’s, 2018b). The gross profit of the company is also increases with the
amount of 556 million. In the year 2017, the gross profit of the company is 14260 but it is
increases with the increasing sale with the amount of 14816.
In the year 2018, net profit of the company is 4428 in millions of euros. As per the analysis of
annual report, it is observed that the company is growing continuously by earning the high
profit amount. It has been evaluated that the liabilities of the company is also increases and
due to which the current amount of 21,684 which and it was 20231 in the year 2017. The
liability of the company is increases with the profit. It is estimated that the organisation will
face the financial crisis in the near future due to high debts.
SWOT Analysis and Competitive performance
Strength
The company has high brand image in the
market especially in terms of quality of
product and services.
It was ranked on 30th number in the global
market of fashion retailing.
Weaknesses
It is observed that the organisation advertise
its products in the less number due to which
it faces the issues of attracting new
consumers.
The quality of product is high but the product
of the company is generalised. It does not

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The organisation has strong presence
across the globe as it has the strong supply
chain network in the market (Ansoff, et. al,
2018).
specialise in anything.
Opportunity
The company has high brand images in the
market due to which it has the opportunity to
grab the online market.
The company can grab the high market share
in the fashion retailing industry by producing
the new designs.
Threat
The company has high level of threat of
competitors who provides the similar
services to consumers in the low prices or
with the high quality such as H&M, Uniqlo
and American Apparel (Owler, 2018).
It has their own stores to display their
products but it does not display its clothes in
small or big shops. It is difficult to reach at
the large number of shops of services.
Competitive performance
There are many companies in the fashion retailing industry that beat the Zara with their
quality of services and cost leadership strategy. H& M, American Apparel, Burberry and
many others are the main competitors of the company. H&M opened the latest stores in
London’s Regent streets and it also have high brand image. It is evaluated that the revenue of
H&M was $ 25.191 billion which is high as compare to Zara as it has 18.9 billion (H&M,

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2018). The revenue of American Apparel was $608.89 in million which is also high as
compare to Zara (American Apparel®, 2018). It can be said that the company have high
competition with its competitors as they also have high brand image.
Strategic options
As per the above discussion, the company has the option to adopt the porter’s generic
strategies to overcome the challenges.
Cost leadership strategies
The company offers the products on high prices to consumers. It is difficult for the middle
and lower class to buy the product. It is recommended that the company has to adopt the cost
leadership strategy.
Differentiation strategies
As discussed above, the company does not have any specialisation in any products and
services. It offers the generalised products with the high quality and high prices. It has the
option to adopt the differentiation strategy by developing new design (Lasserre, 2017).
Focus strategies
This strategies state that the company has to focuses on the existing products and increases
their sales by promoting it in the market. It does not advertise its product that is why, it has
the option to advertise the product and attracts the large number of consumers or new
consumers (Salavou, 2015).

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Possible recommendations
All the above strategies are appropriated for the company to achieve the high growth in the
market. It is recommended that the company has to adopt these strategies to operate in the
market.
As the company has high competition with their competitors that is why, it is recommended
that the organisation has to analyse the environment on the regular basis. Analysis the
company environment helps to beat the competitor easily by adopting the effective strategies
and by satisfying the consumer needs (Bell, Dyck, & Neubert, 2017).
It has been seen that the financial position of the company is not good and appropriate. It is
evaluated that the company will face the challenge in the near future that is why; it is
recommended that the company has to maintain the relations with its stakeholders and
shareholder. Building relation helps to increase the investment of the organisation in the
market (Salavou, 2015).
Conclusion
From the limelight discussion, it is concluded that the increasing demand of consumers
directly affects the growth of Fashion retail industry. The industry is also growing with the
continuous rate. The sale of Zara product is also increases and it earned the high revenue but
it has been evaluated that the liability is also increases. The company will face the challenges
due to financial condition. The company has many opportunities to grab and it is observed
that the company can easily grab it by adopting the strategies. Porter’s generic strategies are
the appropriate recommendation for the company.

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References
American Apparel®. (2018). About us. Retrieved from:
https://www.americanapparel.com/en/aboutus/privacypolicy.jsp;jsessionid=A10174FE497B6
1E07C5073F6B036F70E.aap-prd-dal-app-03-p-app2
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting
strategic management. Springer.
Bell, G. G., Dyck, B., & Neubert, M. J. (2017). Ethical Leadership, Virtue Theory, And
Generic Strategies. Radical Thoughts on Ethical Leadership, 113.
H&M. (2018). Full-yearreport. Retrieved from:
https://about.hm.com/content/dam/hmgroup/groupsite/documents/masterlanguage/cision/
2019/01/2371044.pdf
IBIS World. (2018) Fast Fashion - Australia Market Research Report. Retrieved from:
https://www.ibisworld.com.au/industry-trends/specialised-market-research-reports/consumer-
goods-services/fast-fashion.html
Lasserre, P. (2017). Global strategic management. Macmillan International Higher
Education.
Owler. (2018). ZARA's Competitors, Revenue, Number of Employees, Funding and
Acquisitions. Retrieved from: https://www.owler.com/company/zara
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Salavou, H. E. (2015). Competitive strategies and their shift to the future. European Business
Review, 27(1), 80-99.
Zara’s. (2018a). Zara SuccessStory. Retrieved from: https://successstory.com/companies/zara

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Zara’s. (2018b). Annual report of 2018. Retrieved from:
https://www.inditex.com/documents/10279/619384/Annual+Accounts
%2C+management+report+and+audit+report+2018.pdf/c8aca0aa-5885-fe0d-9809-
8466fe8f60c6