Strategic Analysis of ZARA: Corporate Strategy and Recommendations

This report provides a comprehensive strategic analysis of ZARA, a prominent player in the fashion retail industry. It begins with an introduction to ZARA, outlining its history, mission, and vision, with a focus on its commitment to sustainable development and the implementation of 100% sustainable fabrics by 2025. The report then delves into the corporate-level strategies employed by ZARA, specifically discussing the Ansoff Matrix and its application to the company's product development strategy. A detailed strategic analysis follows, utilizing PESTLE and SWOT analyses to assess the impact of external and internal factors on ZARA's operations. Porter's Five Forces Model and Value Chain Analysis are also applied to evaluate the competitive landscape and value creation processes. The report concludes with recommendations for ZARA, based on the strategic analysis and the company's goals.

STRATEGIC
MANAGEMENT

Contents
INTRODUCTION...........................................................................................................................5
MAIN ANALYSIS..........................................................................................................................5
Introduction to ZARA............................................................................................................5
Strategies Chosen on Corporate Level...................................................................................6
Strategic Analysis of ZARA...................................................................................................7
Synthesis of the analysis.......................................................................................................11
Conclusion............................................................................................................................11
Recommendation to chosen organisation.............................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Strategic Management is the process of ongoing planning, monitoring, analysis and
assessment of all activities which are important for the achievement of goals and objectives of an
organisation (Aluko and Knight, 2017). The purpose of this assignment is to know about the
assessment of implementation of a policy in an organisation and the impact of macro and micro
environmental factors on its working. The assignment will make its focus on the use of PESTLE
and SWOT Analysis to know about internal and external environment. In addition to this,
discussion will also be made about Porter's Five Forces Model, Value Chain Analysis and
discussion of some unidentified strategies of the company will also be provided. Lastly, it will
focus on providing recommendation related to different strategies which have been provided and
discussed above.
MAIN ANALYSIS
Introduction to ZARA
The company chosen for the completion of this assignment is ZARA, which was founded
in the year 1975 and is headquartered in Arteixo, Spain. The following organisation dealing in
clothing industry. Due to high competition also, the company has become a successful
organisation because of its good and ethical working that helped it in building good brand image
in minds of customers (ANTREAS, 2017). Amancio Ortega, the owner of this organisation
opened its first store in 1975 in Galicia, Spain. Initially, the name of ZARA was Zorba which
was named after a movie Zorba but the issues related to two block ways made the owners to
make changes in the name which was later on put as ZARA and later on with the making
changes in designs, fashions, manufacturing, distribution processes and many other things that
helped in giving their business a strike through. Further improvements made by ZARA such as
making use of information technologies and using group of designers also helped in taking the
business to international level and after that the expansion of business is continuing. The main
goal of ZARA is to contribute to the sustainable development of and the environment as well
with which it interacts. The mission and vision statement is about to give the customers with a
varied choice of fashion products and bringing more rapid changes in fashion than any other
fashion retailers. ZARA is also planning to make implementation of 100% sustainable fabrics
clothing products before 2025 and which is also the main topic of discussion in the following

assignment. It focuses on proper utilisation of shops in an active manner along with using the
competitive advantages of geographical conditions.
Strategies Chosen on Corporate Level
There are different strategies which are available to an organisation and will help in
achieving success to the business organisation. This could be done with the application of Ansoff
Matrix in ZARA. This model is used in order to know about new opportunities for business to
grow and increase their revenues by making improvement in products and services or going to
new markets (Bansal and Song, 2017). The following matrix is also divided into four parts which
are provided as under:
Strategies Description
Market Penetration: Here, ZARA could work on making improvement in their strategies
and policies and could increase their sales in existing markets.
Market Development: In this strategy, ZARA will focus on finding ways to enter into new
markets which are not explored yet to make increment in sales and
revenues of the company.
Product Development: This strategy makes its focus on developing new products and
services and then selling them into existing markets of their
customers (Bell, Bryman and Harley, 2018).
Product Diversification: In this strategy, ZARA will develop new products and then will sale
in new markets having new competitors as well.
The strategy of ZARA is to make 100% sustainable fabric products for their customer
which lies under Product Development Strategy of this matrix. So the use of this strategy will
also be beneficial for ZARA because this will bring out demands of their products at an
increasing rat. Additionally, the development of this product will also match with vision and
mission statement of this organisation and the customers will also be provided with high quality
products along with focusing on environmental sustainability (Herrmann and Felfe, 2014). So the
company will also be able to fulfil their objectives as well and will be able to establish a good
brand image in society and the marketplace as well.
This strategy will provide ZARA with competitive advantage as this strategy is
differentiated and focused on society, customers and environment as well. The following strategy

is also a critical success factor because this will help ZARA in providing competitive advantage
to ZARA over their competitors as the achievement of vision, mission and goals is possible by
using this strategy (Cavusgil and et. al., 2014). It is one among core competencies of this
organisation as the achievement of long term competitive advantage is possible with this
strategy.
Strategic Analysis of ZARA
PESTLE Analysis
So in order to know about the impact of external factors on the working of an
organisation the use of PESTLE Analysis will be done (Habbash, 2017). This analysis is defined
as tool used for knowing the impact of external factors on an organisation. The application on
ZARA is being provided as under:
Factors Description
Political Factors Considering the impact of political situation of ASIA, it can be said
that the situation of Brexit has impacted adversely on political
stability of this country. So it increases the chances of negative
impact related to failure of making long term policies for the
company and many more.
Economical Factors The consideration related to economical factors has also been made
because of decreased rates of ASIA's currency which impacts upon
prices and revenues of the company in negative way (Brewster,
2017).
Social Factors The policy related to 100% sustainable fabrics and looking onto past
performance of the organisation, ZARA is able to attract customers
and has also made good brand image in minds of people and society
impacting positively on growth and development of ZARA.
Technological Factors The continuous use of updated technology by ZARA has also made
it gain positive affect of this factor by having large number of market
share and by attracting large number of customers towards the
products and services of the company (FORT, 2019).

Legal Factors In some countries, the rules and regulation made by government are
strict but ZARA is having competitive advantage here as well
because the working of this organisation is focused towards
environment, society and customers so there is an opportunity for the
company to continue with this working and to get positive response
from these factors as well (Gnan, Montemerlo and Huse, 2015).
Environmental Factors However, the working ZARA is not impacting negatively on the
environment but its contribution towards preventing environment
will help the company in increasing its awareness and brand image in
the minds of customers (Charter and Polonsky, 2017).
From the above analysis it has been made clear that with ZARA is dealing good with the
external environment. However, there are some specific areas where it needs to work and that
could help in making improvement in making its position more strong in the marketplace (Kaul,
2017).
Porter's Five Forces Model
The following tool was developed by Michael E. Porter and is used in order to know
about intensity of competition in an industry and the level of profitability.
Forces Description
Competitive Rivalry There are a number of companies operating in this industry. So the
following power is considered as high because the threat is not only
from international competitors but also from local companies as well.
Bargaining Power of
Buyers
The following power is considered as Moderate because the buyers
do have some power to influence upon the prices of the company but
not much. It is because of continuous updated technology of the
company and latest designs which are produced by the company. So
due to this reason, buyers do not have much option and also do not
possess much power to influence on pricing decisions of the
company (Chang, 2016).
Threat of Substitutes Due to the large number of competitors on the international as well
as local level, there are large number of substitutes of the products of

the company. However, depending upon the quality of products, the
comparison could not be made. So the following power is also
considered as moderate.
Threat of New
Entrants
The business operations of ZARA are being operated on a large scale
and there is a lot of difference in between the rules and regulations of
different countries regarding their processes of entry and exit from an
industry but looking at overall, it can be said that the following
power is high due to low barriers to entry and exiting the industry
(Jones and Comfort, 2018).
Bargaining Power of
Suppliers
As ZARA is operating at global level, so the company is having good
brand image in the market. Along with this, there are number of
suppliers with which ZARA makes purchase of raw material all over
the world and the material used is also available with many suppliers.
This makes it difficult for suppliers to bargain upon this power.
Hence, the power is considered as low.
This analysis also provides good industry position of ZARA in relation to other
performers in the industry because of its ethical working and high quality products and services
that provided it with a distinct place in the industry.
SWOT Analysis
It refers to the analysis with the help of which the internal strengths and weaknesses
along with possible opportunities and threats of an organisation could be known (Chen and
Jermias, 2014). The application of this analysis on the working of ZARA has been provided as
under:
Strength:
 The main strength of Zara is its unique designs which are designed by expertise designers
who create products as per the brand name of company. Designing of cloths are done in
elegant manner with higher quality and fantastic finishing. Its variety in clothing includes
office wears, casuals and party wear for men, women as well as kids.
 It has strong presence at global level. The company has more than 2300 stores at
international marketplace whose annual sale has been seen approximately 17 Billion on

an average. These sales figures are increasing day by day. Along with this, it also offers
online services to customers through which any of its customers can approach product
from anywhere and get the project in rightful manner.
Weakness:
 Ineffective advertisement is identified as main weakness of Zara. This directly affects the
sales performance of company as if customers do not get information about latest trendy
cloths of Zara then they will not be able to buy products. As a result, it directly affects
profitability and turnover of company which also influences their business growth too.
 Less safety stock is used as its core strategy at Zara. The company believes excessive
stock might enhance their loss because trends among fashionable clothes are changing
every day. Another motive of this strategy is to bring customers again and again at the
store which ultimately enhances their sales performance (Du and et. al., 2013). This
might become weakness for the ZARA as if they do not get expected product at every
time of their visit then it develops negative image of company in mind. As a result, they
might not make purchase from the same brand. This simply places impact on the sales
performance as well as profitability of the company.
Opportunities:
 The company can attain huge opportunities by keeping constant eye on emerging
marketplace. This will provide higher rise to the company as they can bring higher
business with the market expansion to the company.
 Zara can also gain opportunity by increasing its product range at reasonable price too.
This will be helpful in attracting customers belonging to middle class and lower middle
class range (Jocovic, and et. al., 2014). Bigger range of product portfolio is attractive for
all customers because they can buy their favourite product from it.
Threat:
 Increasing competition is becoming major threat for ZARA. The company has numerous
of competitors such as Mango, H&M and Vero moda who offers similar range of
products and services to customers at almost similar prices. This affects sales
performance of Zara. In order to minimise impact of this, Zara is required to keep them
upgraded towards latest trends so that they can attract customers towards themselves for
longer period of time (Davies, 2016).

Synthesis of the analysis
The overall described discussion analysed in above report, it has been identified that in
some manners all framework are interconnected with one another as finding developed from
them are somewhat same. The usage of Porter’s five force model have expressed that retailed
industry is dense in nature which means the company has to take several initiatives and also
required to place constant based efforts for attaining competitive advantage. Thus, for
maintaining their name at marketplace they have to develop all products with higher quality so
that customers could understand its importance and remain loyal to the same company for longer
period of time (Engert and Baumgartner, 2016). In addition to this, it has also been analysed that
maintenance of quality also allows business associations reducing impact of substitutes as it is
developing competition for them.
Apart from this, it is also seen that for reducing impact of competition for ZARA, its top
managers are required to go for planning of collaborating with the competitors like H&M, Vero
moda etc. This will help the company in taking advantage of resources of each other in terms of
manpower, finance, asset, machinery etc. Here, it’s better for companies to enjoy strength of one
another instead of fighting within the industry (Klettner, Clarke and Boersma, 2014). As a result,
this will support the overall industry in its growth. This will also raise their profitability in
effective manner.
As per the overall analysis, it is essential for ZARA to go for product development
strategy raised from Ansoff matrix. As per this strategy, ZARA can improve its market
performance by offering economic range products so that people belonging to middle class and
lower middle class can also use product offered by this company (He and Balmer, 2017). This
will ultimately help the company in gaining competitive advantage its products in every income
group will attract all kind of customers towards them. This will also raise sales performance
figure of ZARA that will also lead to increase in profitability of company ineffective manner.
Conclusion
From the above described report, it is concluded that strategic management plays an
essential role in the growth of company. It has been identified that is a continuous based process
thus it is required by business organisations to modify their strategies according to the changing
environment so that they can remain competitive at marketplace for longer period of time. Usage

of different framework like PESTEL analysis, Porter’s five forces analysis, SWOT and Ansoff
matrix allows companies in understanding favourable non supportive market conditions which
supports and hinders them from growth. Along with this, Adoption of SWOT and PESTEL have
collaboratively supported in identifying major threats weaknesses which affects business
performance and keeps them away from attaining competitive edge. It has also been identified
that businesses are required to develop their knowledge about current market trends so that they
can provide training to their employees accordingly which also supports them in becoming
market leader of industry.
Recommendation to chosen organisation
According to the overall analysis made in above section, there are some recommendation
provided to manager of ZARA through which they can improvise their organisational
performance and gain competitive edge. These recommendations are developed with base of
expressed frameworks. The core recommendations for this ZARA are explained below in
effective manner:
 At first, it is advised to marketing manager of ZARA to emphasise on acquiring certain
marketing practices that could help them out in awaring maximum number of customers
about its recent or upcoming sales. This will support them in enhancing sales
performance of company in quick manner (Goffee and Scase, 2015).
 At next, it is advised to management department to conduct regular based market
research so that customers needs and requirement can be identified at preliminary stage.
As a result, this will support company in developing and designing trendy cloths
according customers requirement.
 Furthermore, it is suggested to managerial team to conduct some constant based training
and development sessions for the existing employees through which they learn new skills
that are helpful for them as well as their company. This will also result in enhancement in
the productivity of employees as they are able to use their full potential with developed
skills.
 At last, it is recommended to ZARA to develop certain corporate social responsibility
campaign. This will help the company in contributing in societal development. Also, it
will support in creating positive image of company in front of customers and society.