Strategic Audit Of Zara International Essay.

Discuss about the Strategic Audit of Zara International.

Zara International is the biggest name in today’s clothing retail market. The company was established in the year 1974 by Amancio Ortega in Spain. Their headquarters is based in Arteixo. Currently, Zara has more than 2,200 stores in 93 countries under the flagship of Inditex Group (Zara, 2017). The core products of the company are divided into three: men’s, women’s and children’s clothing. On to it, they have a wide range of apparel and accessories such as handbags, jewellery and footwear. Zara’s ability to launch and product and make it available in the market within two weeks made it renowned in the market, as the other competitors took a minimum period of six months for the operation (zara official web, 2017). A SWOT analysis along with four business strategic analysis is done in the report for a clear view of the company and its environment. Three strategic issues have been pointed out in the report with recommendations for future plan (Zara Official Website, 2017).

The company has largest chain around the world. They are operating in 93 countries with more than 2,200 stores. Their strong supply chain and distribution channel plays a vital role in their operation and works as a strength. They use a vertically integrated system with ability to recreate fashion. Their diversified range of products separates them from other similar companies. Moreover, their comments and opinion sections in each stores value their customers’ opinion which makes them unique (zara Swot, 2017).

Zara has a centralized production, which cause them a huge labor cost. This is a big drawback of the company that needs to be looked after. Another weakness of the company is the low investment in the advertisement. Their e-commerce section is weak compared to the brick and wall stores. The use of their euro-centric model also works as weakness for their brands as they are operating in a global level. Lastly, Zara International has been tagged as imitators which pose threat to their image. They need to improve their designer section to overcome the fact (Bull et al., 2016).

There are a number of opportunities lies in front of the company that can be used for further development. Company’s designers’ collaborations could expand the company into new markets like the BRIC countries. The increasing market demand by the consumers is an opportunity for the company as they can provide fast trend clothing (Cortez et al., 2014).

Weakness

On the other hand, there are potential threats in that needs to be considered in prior. Firstly, their Spain based manufacturing is becoming more and more expensive, which they need to decentralize. Other companies’ growing market collaborations and broader target market is possible threat for the company. In addition, their oversaturation in Europe market draws negative impression. Last but not the least, the possibility of copying the company’s strategy by the rivals is the biggest possible threat Zara International is facing at the moment. This will leave them with no options but to bring change in their business strategy (Anwar, 2017).

In order to form a strategic plan for the future of the company for ensuring the well established reputation and the ongoing success, a strategic analysis of the company is essential. For the purpose of the report, identification and evaluation of four business strategies are presented.

Corporate strategy or better known as corporate level strategy is the mixture of strategic decisions that a business takes for the overall growth of the company. This strategy effects the entire organization. Zara has strength of bringing any product in market within two weeks which is a unique selling process that needs further exploitation. People all over the world have a tendency of getting products than other which is a vital point that will supplement this idea of bringing products before others. Another point Zara focuses on which helped them achieving their success is their efficient supply chain.  Both the approaches needs higher production cost. Hence, Zara needs to hold their price position, which will enable them to draw customers for fresh fashion products which will ensure the continuous revenue for the company (Furrer, 2016).

It is the strategy in which the company seeks to understand how an organization should compete in each of its strategic business units. Cost leadership, Differentiation and market focus are the key concepts of the Business level strategy. Zara is a name that the customers look forward as the cutting edge fashion supplier at low cost. This is one of the prime reasons that made company achieve the position it is today. To maintain the position, it is necessary for the company to focus on the aspect and maintain a continuous up-gradation in the products. They need to consider the cost of the production while altering the designs. On the other hand, certain product lines needs more focus to gain new opportunities for improving the supply chain and also maintain the high chain market. Company’s fast active supply chain is the center of this which needs to be looked after. As their strategies are well known to the competitors in the market, it is necessary for Zara International for developing the chain with more efficiency. The technology plays a vital role in maintaining a fast supply chain which is developing every second. To keep up with the technology and maintain the fast supply, Zara needs to focus on technology and its efficiencies which require a proper business level strategy (Hill, Jones & Schilling, 2014: Drnevich & Croson, 2013).

Opportunity

As a fast trend fashion company, Zara International should focus on the innovation. Constant building economic pressure put Zara into the situation where they need to cut down the production cost. The only way it is possible for the company is to emphasize in manufacturing area where new innovative designs can play the role for cutting down the production cost. This way, the company will be able to achieve the goal without compromising their ethics (Caro, 2012).

This level of strategy focuses on the improvement of the effectiveness of operation within the company. The purpose of this is to see its management decisions as specific to a functional area of the organizations. The company is famous for fast fashion. The company should focus on the outsourcing. This may led to question the quality management and employee relationship management. It can also cause policy making issues.  It will require fresh ideas and introduction on new designs in product. It will eventually produce new culture based products which can increase the demand. But it will help the company to manage their distribution more efficient way. Another thing which has to be considered is the eco friendly approach. As the competitors are at the company’s tail in the eco friendly mission, Zara needs to set another benchmark for the cause that can keep the company well ahead (Zara case study, 2017).

One of the major strategic issues of Zara international is the marketing as they don’t advertise through traditional media. Only a selected few business adopts this strategy and Zara is one of them. But it does not mean that the business has captured the maximum market. The business needs advertisement to access more opportunities.

Being a centralized company, Zara international has a universal economic strategy for all the country. But the pricing strategy of the company needs to vary depending on the country’s economy and the duties the company needs to pay in that country for doing business. Hence, there is a clear cut need for a better pricing strategy for every country. On to it, they need efficient designers to produce cost efficient clothing to deal with the economic pressure all around.

The designs that are available at Zara are European based keeping in mind the European condition which needs to be changed. For example, Asian countries need more diverse clothing based on their weather. But there are only normal cloths available at Zara Stores around the world.

Threats

First, the company should start thinking globally and consider the cultures of the country they are dealing in. The company supplies the fashion garments that are praised by the western countries. The supply of culture based fashion will increase the demand. The ethical issues that are faced by the company needs to be dealt with. Finally, the customers’ suggestions should be given utmost priority. The negative suggestions should be immediately dealt with to hold their likings toward their product as the customers’ satisfaction should be of prime interest to holdthe present customer loyalty.

Conclusion

The company is a well established international fashion retailer. They are famous for their fast fashion and bringing the product in stores within 2 weeks of launch. This is the area where the company distinguishes itself from other similar companies that also at a low cost. The SWOT analysis that has been presented in the report identifies some weaknesses and threats that need to be attended. Some issues are identified in business strategies such as universal pricing strategy that need to be changed in order to continue their uprising in the industry. One of the major issues is the pricing and the economic pressure that has been identified under strategic business issues needs a proper solution as mention in the report. Last but not the least, the recommendation that are made in the report should be thoroughly checked and implemented.

References

Anwar, S. T. (2017). Zara vs. Uniqlo: Leadership strategies in the competitive textile and apparel industry. Global Business and Organizational Excellence, 36(5), 26-35.

Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., ... & Carter-Silk, E. (2016). Strengths, weaknesses, opportunities and threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111.

Caro, F. (2012). Zara: Staying fast and fresh. The European Case Clearing House, ECCH Case, 612-006.

Cortez, M. A., Tu, N. T., Van Anh, D., Ng, B. Z., & Vegafria, E. (2014). Fast fashion quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), 1.

Drnevich, P. L., & Croson, D. C. (2013). Information technology and business-level strategy: Toward an integrated theoretical perspective. Mis Quarterly, 37(2).

Furrer, O. (2016). Corporate level strategy: Theory and applications. Routledge.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Zara. (2017). forbes.com. Retrieved 5 August 2017, from https://www.forbes.com/companies/zara/

Zara case study. (2017). academia.edu. Retrieved 5 August 2017, from https://www.academia.edu/22559112/International_Marketing-Zara_Case_Study

zara official web. (2017). zara.com. Retrieved 5 August 2017, from https://www.zara.com/in/en/info/company-c11112.html

Zara Official Website. (2017). Zara.com. Retrieved 5 Aug 2017, from https://zara.com

zara Swot. (2017). wordpress.com. Retrieved 5 August 2017, from https://wrightunt.files.wordpress.com/2011/12/swotanalysis-wrighttonaya1.pdf