Strategic Analysis Report: Zara's Business Strategy

This report provides a comprehensive strategic analysis of Zara, a Spanish apparel retailer. It begins with an external analysis of the business environment and industry, identifying opportunities and threats through PESTLE and Porter's Five Forces models. The report then delves into Zara's internal analysis, evaluating its resources, key competencies, and core competencies using the value chain, SWOT, and VRIO frameworks. Finally, the report examines a recently implemented strategy of Zara, evaluating it using SAFe criteria to assess its effectiveness. The analysis covers political, economic, social, technological, legal, and environmental factors, competitive rivalry, and the bargaining power of buyers and suppliers. It assesses Zara's strengths, weaknesses, opportunities, and threats, as well as the value, rarity, imitability, and organization of its resources. The report concludes with an evaluation of a chosen strategy and its implications for Zara's future.

Applied Corporate Strategy
Assessment: Strategic Analysis
Report

Table of Contents
INTRODUCTION...........................................................................................................................1
Carry out external analysis (business environment and industry) to identify a set of
Opportunities and Threats and assess industry attractiveness.....................................................1
Analyse the resources and key competences of the organisation and identify core competences
......................................................................................................................................................4
Choose one strategy that the company implemented recently and evaluate it using SAFe
criteria..........................................................................................................................................7
CONCLSUION................................................................................................................................8
REFERENCE ................................................................................................................................10

INTRODUCTION
Corporate strategy is defined as important approach which uses by organization in order
to develop the business performance and productivity. Corporate strategy is like a plan and ideas
which are developed by management by analysing the situation of business and formulating the
planning which can help to develop the future activities (Mukhezakule and Tefera, 2019). This is
important for all industry to know about current trend and culture then brings the new changes
that can help to develop the organizational performance. The report is based on case study of
Zara that is Spanish apparel retailer, providing variety of designing clothes that influences the
number of customers and develop the organizational performance. The management of such
organization conduct the market research and formulates effective strategies which can help to
develop the productivity and brand image. This report covers external analysis by identifying
opportunities and threats, resources and key competence of the organization and selection of one
strategy that the company implemented.
Carry out external analysis (business environment and industry) to identify a set of Opportunities
and Threats and assess industry attractiveness.
The business is composed of all outside factors that are important to consider while
running a business (Schiozer and et.al., 2019). This is needed for company to know which
factors can impacts on the operation and how they influences the environment. In other words,
combination of all factors and aspects in relation to business can affect the performance in
changing environment. In relation to Zara, different model is uses to analysis external
environment such as:
PESTLE Analysis – This can be explained as model which uses by organization to
analysis the environment to know which factor has impact on organization and how to manage
the organizational activities. The analysis is explained as below:
Political factor: This factor is considering tax rates, changing in government, stability,
and fiscal policy that are related to business and needs to follow environment. This is important
for organization to follow all regulations which are related to business and government
activities. Zara is multinational brand that is running their business by following all tax rates and
fiscal policy which has impacts positively. On the other side, increases in tax rate while
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expansion in other country can be challenging situation for Zara to operate their business and
activities continuously (Goodman, 2019).
Economical factor: This factor is related to inflation, interest rate, GDP rates and others
which are important to focus for the purpose of running business. The inflation rate of different
country are stable where Zara is operating and running their business by selling the different
design of clothings to customers which can help to develop the organizational performance. On
the other side, due to occurrence of Covid -19, rate of employment has been decreased which has
reduced the sales of clothing that has impacted on performance negatively (Kitsios and
Kamariotou, 2019).
Social factor: This can be explained as career attitudes, health conscious, population
growth rate, and health consciousness that has affected the organizational performance. In
changing environment needs and wants of customers are changing day by day where Zara is
taking the competitive advantages by offering kind of products and clothes in changing
environment. On the other side, due to cultural barriers sales activities of Zara could be decrease
as it affected the customers choice and wants negatively.
Technological factor: For all organization it is important to bring new technology and
innovation in their business that has impacted the performance in changing environment. In
relation to Zara, using the new technology and innovation for the purpose of enhancing quality of
customers service RFID (Radio Frequency Identification Technology) uses that can help to
influence the number of customers (Coulson-Thomas, 2020). Moreover, cutting edge system is
uses to track the location of garments instantly that makes the demand rapidly available to
customers. On the other side, To adopt the new technology, high cost and time of organization
can be consume which can be challenging for selected company (New technology and innovation
uses by Zara. 2020).
Legal factor: This factor is related to laws and regulation that are related to a business
which are important to follow. Zara is operating their business by following the employment
laws and trade regulations which are important for organization as it support to operate the all
functions. Zara is large size retailer, that is following all employment and trade regulations which
has impacted positively on organization effectively.
Environmental factor: This is another factor that states how organization is maintaining
all activity that are related to business environment. As showing in case study, Zara is taking the
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benefits of environmental factor by joining life collection and operating eco- friendly stores
which can help to increase the business productivity and profitability (Abad-Segura, Cortés-
García and Belmonte-Ureña, 2019).
Porter's 5 forces Model – This can be explained as organizational model which uses to
analysis the competition level and attain the competitive advantages in changing environment.
To analysis the competition and formulation of effective planning organization can develop the
opportunities that are as explained:
Bargaining power of buyers – This can be explained power of buyers in getting the
product by reducing the prices of specific products and services. As Zara spends more on its
advertisement and promotion. It is a quite unpredictable brand. As customers are fee to but any
fashion brand which is suitable for them. As Zara has a strong quality and premium prices, so
loyal customers still waits to opt for new trend in the company. And the limited stock of the
product gives excitement to the people.
Competitive rivalry: Biggest competitors of Zara company is are H&M and Benton.
Zara is the most expensive and fashionable brand originated from Spain. It produced a very
awesome quality of clothes. Zara has very responsive supply chain model. Other competitors
takes time to launch the latest collection of clothes but Zara responds instantly and put its new
collection in just two weeks.
Threat of substitute products- This is the second factor which can impact the
profitability of the business (Simon, 2020). H&M is the biggest competitor of Zara in terms of
quality and prices. As Zara spends lot of money on advertisements and promotions. So, Zara has
a threat of customer preference changes. As if another company sell its products low prices then
this can lead to severe loss of the company.
Threat of new entrants- Fashion industry is the fast growing industry in today's world.
As people prefer new and trendy things in the market with reasonable prices. Zara provides
reasonable prices for the high quality products. In UK, government has given permission to new
entrants only those who can face high competition in the market. Zara has earned lot of customer
satisfaction and reputation in the market. Because Zara has appeals to target new customers or
large audience to attract their new trends within a week and so on (Zara Harvard Case Study
Solution & Online Case Analysis. 2019).
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Bargaining power of suppliers- Zara has provided license to its suppliers that can give
power to them and by this suppliers are more dependent on the company operations. The buying
power of suppliers is relatively strong in the market so it is difficult to shift to another supplier.
Analyse the resources and key competences of the organisation and identify core competences
Internal analysis: This is an analysis of business organisation that uses to know the
internal capabilities of organisation. The management of Fiat Chrysler and Peugeot has
conducted the internal analysis by using following models.
Value chain analysis: This analysis is related to knowing the different types of business
activities and functions that deliver the best value to customers and attain the organizational
performance. The value chain analysis is shown below:
Primary activities:
 Operations: In operations, materials and resources that are produced in the company. Zara
focuses on its all manufacturing activities which includes designs, trending, product
quality, features and suitability to attract its large number of audience in all over the
world.
 Marketing and sales: This is the another primary activity that is used to manage its
customers demands and preferences. For example- Zara uses online marketing and
advertisements facilities to sales its products. They provides various offers and discounts
on occasions so attract the customers (Zara Porter's Five Forces Analysis, 2020).
 Services: After marketing and selling activities company takes feedbacks of the products.
This creates good impression to the customers. As after usage of that cloth, whether the
customer is happy or not. This helps the company in increasing customer satisfaction and
profitability of the company.
Supporting activities:
 HRM: It is the main department in every organisation. As HR manger formulates many
policies and rules that is to be followed by every employees working in the company. HR
manager in Zara manage all the activities in the company and also evaluate the
performance of the employees.
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 Technology development: Company uses latest technologies to manufacture its products
and services and this attracts large number of customers. Customers can order their
products online and can see offers that are available on occasions.
 Procurement: Procurement is the another activity that is used by the company to procure
its resources. Company uses different types of process in procuring and selling the
products and services.
SWOT analysis-
SWOT analysis is an appropriate model which uses by organization to analysis the
strength and weakness that are handling by management. For increasing the business
productivity and profitability management of Zara has described the SWOT analysis that are as
explained:
Strengths Weaknesses
 Fast fashion like Zara is focuses on
designing, producing, and selling the
clothes of different design that
influences number of customers.
 It is selling products in 202 markets
and has stores in 96 of them.
 Inditex has a team of 700 trained
designers that transform the
customer's desires to design.
 Inditex is investing $3 billion in
bolstering its online sales by
engaging number of customers in
changing environment.
 The supply chain activities of
organization is good as it uses
software to double speed.
 The geographical presence of chosen
organization is weak.
 The organization is facing the
challenges with ethical practices and
issues that occurs while operation.
 Changing in customers demand and
needs that has created the problem for
running and operating the business.
 This mainly depends on physical stores
which are limited (Mukhezakule and
Tefera, 2019).
Opportunities Threats
 This is big brand in clothing sector  Due to Covid and other Pandemic sales
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where it is operating its business.
 The organization is focusing on Eco-
friendly activities and sustainable
performance by delivering better
quality of products.
 Rapid delivery cycle of product as it
influenced number of customers.
 Uses of new technology and
innovation.
 Improving brand image and market
share.
of organization have been influenced
negatively.
 Zara is operating business in niche
market where price war is facing by
organization.
 Government regulation is creating
challenge for organization as new laws
in different country.
VRIO of Zara:
VRIO is the analysis that is related to the activities which occurs in the market and
increasing profitability of the organisation. Very organisations needs to evaluate and analysis the
activities which supports the organisation and manage all the business and staffs. It has various
resources that are are valuable for the company (Ford, 2020).
Valuable resources: These are the valuable resources which helps the company in
performing all the functions. Zara has certain resources like clothes, customer supports and
distribution channel and financial resources that all valuable to operate the company and to
increase the profitability. Zara has made best quality products and services. Features and designs
are also very good which can enhance the customers to visit the company once. Finance
resources are use to purchase raw material, conducting marketing strategies and doing research.
This increase the profitability and revenue of the business.
Rare resources: Rare resources are those resources which are rarely available in the
market and they can become competitive advantage of the firm. In Zara, raw material and quality
of the products are not different or rare because it has various comparatives in the market who
has similar types of product available with them. On the other hand, customer supports and
distribution channel is the rarest in the market. This can helps the company to increase its
customers base and attracts large number of audience.
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Inimitable resources: In this resources are use to attain competitive advantage. Like inn
Zara company, its financial resources and product quality is the elements which can helps them
to achieve competitive advantage in the market. Also, company has good transportation facility
that has create an good impact on the customers demand. Zara has large number of stores all over
the world (Schreyögg and Koch, 2020). So it has large number of customer base which helps the
organisation in choosing its brand and achieving their organisational objectives.
Organised resources: These are the activities which are operating in the organisation
and creates business opportunities. Zara ahas strong financial resources with them. So it
manages all its activities that are suitable for the customers and by which it can increase
customer satisfaction.
Justification – From the above analysis and uses of different strategy Zara is operating
their business by managing all functions and expanding the business in other country. For
example, RFID technology and cutting edge system uses by selected organization that are
appropriate strategy for company, helps to increase the organizational performance and
profitability in competitive environment (Kherchi, Mohamed and Ahlem, 2019). Moreover,
management is underlining the brand's unwavering that develop the customer experience and
sustainability.
Choose one strategy that the company implemented recently and evaluate it using SAFe criteria
Corporate strategies implies portfolio approach for formulation of strategic decisions by
looking into business for determination of ways in which value can be created. It becomes
important to analyse the factors that will lead to creation of significant impact on the ways in
which services are being delivered by the organisation (De Kort and et. al, 2020) . In context of
Zara, the firm need to formulate their strategies by considering the environment in which they
are delivering their services. Different strategies have been illustrated in previous sections in
order to acknowledge the environment in which organisation is delivering their services. For an
instance by making use of Pestle analysis firm will be able to analyse the external environment
which will further enable them to develop their strategies in accordance to that. With reference to
this, SAFs criteria in context of Zara is illustrated below:
Suitability: This is accessed in context of distinct criteria that are crucial for the
organisation like it will identify that the strategy that is being utilised by Zara will yield them
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what organisation wants or not. In this case, Zara have opted for making use of Pestle, SWOT
Porter's five force, value chain and VRIO analysis for understanding their internal as well as
external factors. Through this they will be able to acknowledge their strengths and also can
identify their potential weaknesses that can be converted into opportunities and further enhance
their capabilities. In addition this, by making use of these strategies they can determine their
competitors along with strategies they are utilising and accordingly further alterations can be
made within their offerings (Moshi, Tooher and Merlin, 2018). This will enable Zara to identify
their customers and provide their customers with significant services to have desired levels of
profitability.
Acceptability: This aspect is associated with measurement of returns, stakeholder
reaction and risk that will be yielded from specific strategy. Zara can measure their returns on the
basis of benefits that are anticipated via stakeholders. For this firm is making sure that they are
using all the resources in an appropriate manner and accept the alterations that are required while
delivering their services. For an instance, Zara has opted for online mediums through which they
are able to reach ample of customers in relevant manner. This implies that the alteration have
brought and this is accepted by their consumers (McConnell and et. al, 2020). Furthermore,
management can measure liquidity, risk and reaction of stakeholders through which it becomes
easy formulate precise decisions.
Feasibility: This implies the make or break of the strategies that have been developed by
the respective organisation. It can be analysed by looking into financial figures of the Zara and it
is found that in year 2019, the net sales that have been occurred was 28,286 million. In addition
to this, the online sales that have been occurred is 14% of the total. In addition to this, the net
profit that was attained through the usage of strategy by Zara was 3,639 million in the same year
(Annual Report, 2019.). This clearly implies that strategies that are being used by the
organisation are feasible as relevant return on the investments have been attained.
CONCLSUION
From the above report it can be concluded that an environment should be analysed by
management that can help to know which factor can influenced the organizational performance.
To analysis the external environment PESTLE analysis is uses that states which external factor
have negative impact and how SWOT analysis states strength, weakness, opportunities and
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threats. To get the competitive advantage proper model and strategy is uses by company that
develop the organizational productivity.
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REFERENCE
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Online
New technology and innovation uses by Zara. 2020. [Online]. Available through:
<https://www.inditex.com/about-us/our-brands/zara>
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