PART 1: TERMS OF REFERENCE/EXECUTIVE SUMMARY
This report is based on Zara Company which is a Zara is a publicly traded apparel company with headquarters in Spain and other locations within UK and U.S. among other countries. The report focuses on a critical analysis of the company to identify any problem or opportunity that can be exploited to improve the company’s success. To perform the analysis of Zara, the report will make use of powerful conceptual frameworks which are important in determining the internal and external business environment within which the company operates. These include; identification of current market situation, SWOT analysis, competitor analysis and PEST analysis. Consequently, the report will present the findings and recommendations for solving the identified problem and the recommendations for improving the situation. Zara provides a good case to demonstrate how a company within the apparel industry can succeed by creating a powerful brand and by creating customer value along the entire value chain.
PART 2: METHODOLOGY/PROCEDURE
To establish the current position of Zara and identify the problems or opportunities which remain to be exploited, a critical analysis of the company’s internal and external business environment will be performed. First, the report will give an overview of the company and the current market situation. Secondly, a SWOT analysis which involves analysis of the company’s strengths, weaknesses, opportunities and threats will be performed. Within the SWOT analysis, the strengths and weaknesses will be used to establish the situation within the internal environment while opportunities and threats will be used to offer understanding on the external environment.
Next, a PEST analysis which examines the company’s macro-environment in terms of the political, economic, and social and technological environment will be performed (Gallaugher 2008). After the PEST analysis, the report will carry out a competitor analysis to determine the competitive environment in terms of the strengths and weaknesses of the major competitors (Keller 2012).
The information on competitor analysis will be used to determine the areas that Zara needs to improve or whether it should put in place new strategies to cope with the competition. At the end of each analysis, the company will provide the strategic implication to point out what each means for Zara’s success. Finally, the report will concentrate on explaining the identified problem or opportunity in order to offer appropriate recommendations on how the situation can be improved.
PART 3: FINDINGS
This section presents the major findings of the analysis of Zara and the implications on Zara’s business strategy. The major findings are divided into the following categories:
I. Zara’s current market situation
Zara is a publicly traded company which operates under the parent company the Inditex Group whose headquarters are in Spain, Europe. It was established in 1975 by named Amancio Ortega. Presently, Zara has more than 1,600 physical stores located in over 77 countries around the world. Zara’s business strategy within the fashion industry is based on an efficient supply chain system in which new fashion designs are released within a relatively short period (Keller 2012). Zara’s new fashion products are developed within four to five weeks and delivered to the various stores. This is a record turnover time compared to the industry average which is about six months (Awat and José 2006). Zara is also a market leader in terms of developing new designs as more than 10,000 new designs are released to the market every year.
Besides, Zara has an exemplary strategy of production and marketing as it does not rely on heavy advertising and minimizing production costs like other players within the industry. Instead, the company relies on vertical integration strategy in which the company’s products are produced in a central location and distributed to the worldwide store locations within the shortest time possible. To compensate for the advertising, Zara relies on the strategy of investing in attracting and retaining a pool of talented designers who are extremely committed in developing exceptional designs at a higher rate than the competitors (Awat and José 2006). In this way, the company is able to meet the expectations of the customers who are interested in shopping for the latest fashion regardless of whether the products are offered at a higher price than the market average. However, Zara is moving towards adoption of an online shopping in order to avoid overreliance on the physical store locations. The online shopping offers a good opportunity for the company as it looks forward to increase the market share and to cope with the intense competition from the existing international players within the apparel industry.
In terms of the market, Zara’s products are targeted at customers who are keen on shopping form variety of trendy wear including casual clothes, official wear, shoes, men’s accessories, children clothes and cosmetics among other apparel items. Zara offers its customers with a unique opportunity to sample new fashion trends within a short time. Besides, Zara’s products are differentiated in terms of size and cost in order to increase the customer base. In terms of location, Zara has many flagship stores which are characterized by superior interior designs with locations in prime areas like in George Street in London, Rathenauplatz in Frankfurt, Pitt Street in Sydney and Van Baerlestraat in Amsterdam among other areas (Keller 2012). In terms of marketing, Zara does not put emphasis on advertisements but rather on store locations. The company is looking forward to extent its presence from the traditional European markets using a multi-channel strategy to reach to new markets in the U.S. and Asian countries.
II. SWOT Analysis
SWOT analysis is based on an identification of the company’s internal strengths and weaknesses as well as the external opportunities and potential threats within the operating environment. Zara is a strong brand within the global apparel retail industry due to its ability to develop new designs and avail them to the stores within a short time. Zara has a strictly vertical integrated structure which enables quick decision making, fast distribution of new designs and cost reduction (Dutta 2002). Zara’s strategy also creates enables it to maximize the sales, enhance customer loyalty and to create a unique customer value.