Full Strategic Appraisal of a Real Company Zara

Case Report – Full Strategic Appraisal of a real company

ZARA

Table of Content

1. Cover page…..………………………………….……………………………………..         P. 2
2. Table of Content….……………………………………………………………………         P. 3
3. Introduction and Company Background….…………………………………………   P. 4
4. PART I : External Analysis……….………..…..……………………………………..          P. 5
5. PART II : Internal Analysis………..…………………………………………………..        P. 9
6. PART III : Company’s Corporate and Business Strategy…………………………   P.12
7. PART IV : Identifying Issues and Challenges Facing the Company ……….........        P.12
8. PART V : Identifying and evaluation of main Strategic Options for Growth……..  P.13
9. PART VI : Recommendation and Conclusion…………....…................................        P.16
10. Reference List....................................................................................................        P.18
11. Appendices........................................................................................................        P.20

Introduction and Company Background

Zara is a well reputed international fast-fashion company owned by the Spanish fashion group Inditex. Zara’s story begins with the opening of their first store in the Spanish coastal city of A Coruña in 1975 by the founder, Amancio Ortega, who is one of the richest men in Europe and the wealthiest retailer in the world now (Forbes 2018).

Zara’s core values are expressed simply in the same four key words that define all their stores: beauty, clarity, functionality and sustainability. The company maintain a relationship of transparency and dialogue with the stakeholders, such as customers, employees, suppliers, shareholders, NGO,  social media and government, which allows Zara to create sustainable value and face the challenges and opportunities in future.

Zara is clear about each countries requirements and marketing segments. It mainly markets in metropolitan cities, it caters to both male and females in different age groups. And, It mainly focuses on upper middle class people who are highly sensitive to latest fashion trends.

Zara provides high-end fashion at low prices. Their generic strategy is cost leadership which is their distinct source of competitive advantage. Apart from that, to a certain extent, it has also used differentiation for advantage over other fast fashion brands like H&M, Uniqlo & Gap.  

Up to fiscal year of 2017, Zara operates 2,251 stores in 96 markets and 46 online markets. It generated about 16.6 billion Euro which occupied 65% of total revenue of Inditex group (Inditex 2018).

Vision : Zara is committed to satisfy the desire of customer. They pledge to innovate business to improve experience. Also, they promise to provide new design made from quality material which are affordable.

Mission Statement: Through Zara's business model, one aims to contribute to sustainable development of society and that of the environment with which it interacts.

PART I : External Analysis

1. PESTEL analysis:

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Political Factors

Fast Fashion industry is subject to the effects of different political factors such as war, terrorism, expropriation, nationalization, taxation and manufacturing rules of a country. In additions, trade restrictions and political sanctions could lead to potential sales decreases and operation cost increases. Although the impact of UK leaving the European Union (“Brexit”) was not significant for the Inditex group (Inditex, 2017), the Trade War between USA & China will surely bring the company uncertainty and challenges again as it affects the entire world dramatically. (Don-Alvin 2018) (Nadra 2018)

Economic Factors

Although the global economic condition has been fluctuating in last few years, Zara is still increasing their sales in last 5 years gradually by opening its new stores all over the world (Inditex 2017). However, according to the press release of World Bank recently, the global growth is expected to decelerate over the next two years as global slack dissipates, major central banks remove policy accommodation, and the recovery in commodity exporters matures..

Social Factors 

People are spending lots of time in mobile and social platforms every day, according to latest PwC’s Global Consumer Insights Survey, the respondents said social networks is the main source of inspiration for their purchases, it’s a must for Zara to establish strong social media relationship to satisfy customer demands due to the change of new generation now. (PwC 2018)

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Figure 1: PwC – Global Consumer Insights Survey (2018)

Technological Factors 

Important innovations can help fashion businesses, they make the processes more efficient, enhance user experience and offer an improved overall customer value proposition.

Ecological Factors

Sustainability has become more of a requirement than just an option due to increased global concerns about climate change. There are increasing sustainability strategies among fashion chains which included developing innovative eco-materials, advanced manufacturing process which can save energy and reduce pollution. The fashion companies also need to come up with environment-friendly products which can comply with product safety regulations of different countries and enhance the brand image.

Legal Factors

The companies need to set up robust policies to make sure their global suppliers to comply with business code of conduct and other environmental, health and safety regulations or applicable local laws.

1.  Porter’s Five Forces:

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Five Forces of Competition framework

There are a wide variety of external factors that may affect the fast fashion retail companies. However, based on Porter’s Five Forces Analysis, the following are the intensities of these forces:

Competitive Rivalry (Strong Force)

Fast Fashion industry is highly competitive and saturated. The competitors of Zara, such as H&M,