Zara- Executives Summary, porter, swot and tows PDF

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Executive Summary This report present to conduct the strategic analysis on Zara’s key success factor and challenges that it may facing and finding or evaluate possible ways to solve their strategic issues so that it can differentiate themselves in the market. In the following report, the strategic issues faces by Zara are: 1. Competition in the industry, a major challenges of high emerging competitors and existing competitors against Zara although Zara is the market leader of fast fashion; 2. Poor labour conditions under Zara, which Zara’s third party manufacturer accused for unpaid wages and poor working conditions. However, the Zara is reluctant to properly address the issue and it might affect the Zara’s brand reputation and eventually cause brand switching behaviours in the long run; and last 3. Sustainability of the fast fashion. Fast changing fashion trend and short product life cycle has eventually changing customers’ preferences. In addition, Fast fashion industry has been imposing horrendous environmental burden thus it is questionable whether fast fashion industry like Zara are sustainable in this industry.

The report is begin analysed externally and internally of Zara where the external analysis was done through several tools such as external analysis in term of opportunities and threats, Porter’s Five Forces, competitors analysis, and a strategic group map of the industry. Porter’s Five Forces are used to further analyse the level of competition and the level of attraction in Zara’s industry in this fierce competitive market as well as it will portray how it could be to minimise the threats and how to capitalize the opportunities. Some opportunities were identified such as Zara could specialised production for geographical location, expansion to e-commerce sector and there is a rise of new technology in the market where it could enhance shopping experience and maintain Zara market leader position. On the other side, the threats faced by Zara are fierce competition the market, economic instability affect the customers spending pattern, a change in customers demand, price sensitive and fashion trend, and rising ethical issues in fashion industry.

Moreover, the internal analysis including capabilities, tangible and intangible resources, and core competency are discussed as well to highlight their strengths and weakness. The internal analysis also conducted by using tools such as VRIO framework. Zara possess a positive results in their competitive advantage among the competitors via the analysis of VRIO framework. Through the internal analysis, several strength of Zara are identified such as Zara is the market leader of fast fashion industry, a strong supply chain, a

strong geographically worldwide presence which helping Zara outrun competitors. However, there are some weakness such as Zara is an imitator instead of a creator, a labour issues, inflexible decision maker and lack of transparency.

From the study of Zara’s external and internal analysis, a SWOT analysis was drawn in this report to examine Zara’ strengths, weakness, opportunities and threats. At last, the discussion from SWOT analysis are cross matched in a TOWS matrix to develop possible strategies to form evidence-based recommendation to solve each strategic issues and maintain its position in the market.

The proposed recommendations and solution are derived from the SWOT analysis. It is recommended that Zara to engage with technology in this inconsistent changing internal and external environment to build competitive advantage and to be sustainable in this fashion industry, develop a feedback system and set criteria or term and condition to select manufacturer to maintain the quality and responsiveness of the products and avoid similar problem to occur again, and last it is recommended that Zara could streamline their decisionmaking process by granting more autonomy for the store managers and employees in order to satisfy customers at the particular region.

3.3.4 Threat of Substitute Products and Services      

Number of substitute products available Buyer’s propensity to substitute Relative price performance of substitutes Perceived level of product differentiation Switching costs Substitute producer’s profitability & aggressiveness

The threats of substitute products increases as buyers face few switching costs, substitute products’ price is lower and substitute products quality standard are equal to or greater than the existing products (Grants et al. 2014). Threat of substitute products in this case of Zara is HIGH since switching costs are low and customers’ propensity to substitute is high. For now the market has grown densely populated with fashion brands and still new brands can enter the

market with new concepts. Ethical and sustainable fashion apparels are becoming increasingly attractive because of their basics of ethical values, such as environmental claims products and production method, labour standard and human rights (Khan, Rodrigues and Balasubramanian 2016), despite the extra cost and lack of apparent quality advantage. The Nielsen Global Survey of Corporate Social Responsibility and Sustainability (2015) reported that 66% of consumers are willing to pay more for ethical and sustainable products and services, with a full 73 percent of Millennials are (Company 2015; Curtin 2018). Thus, ZARA is facing a high level of threats of substitute products in its industry.

Khan, Z. Reza., Rodrigues, G. & Balasubramanian, S. 2016, 'Ethical consumerism and apparel industry - towards a new factor model', 33rd International Business Research Conference, World Business Institute, Australia, pp. 1-14. Company, T. N., 2015. The Sustainability Imperative. Accessed by 03 May, http://www.nielsen.com/us/en/insights/reports/2015/the-sustainability-imperative.html Curtin, Melanie. 2018. “73 Percent of Millennials are Willing to Spend More Money on This 1 Type of Product”. Inc. Accessed by 03 May, https://www.inc.com/john-discala/6-apps-to-helpyou-earn-money-while-traveling-for-business.html. 3.3.5 Intensity of Rivalry among Existing Competitors            

Number of competitors Diversity of competitors Industry concentration and balance Industry growth Industry life cycle Quality differences Product differentiation Brand identity/loyalty Switching costs Intermittent overcapacity Informational complexity Barriers to exit

Competitive rivalry analysis is one of the key areas that business must consider to determine the business strategy that could bring competitive advantage over time. Having numerous competitors in the market, the competition between players are powerful. There are countless numbers of fashion apparel companies that compete with Zara in certain market, but only a few companies that have the sheer size and established distribution channels to compete across all the products line of ZARA offers. For instance, one of the popular online apparel retailer Asos can produce merchandise in 2-4 weeks and provides up to 4,500 products daily to their website compared to 5 weeks for ZARA (Weinswig 2017; Intelligence Node 2018). This demonstrated that ZARA having high level of intensity of rivalry

among existing competitors. Therefore, in order to remain ahead in the fashion industry, Zara has to focused on continuing to use digitalization and big-data analysis to increase sales turnover and remain competitive in this industry.

Intelligence Node.2018. “Is ASOS set to outstrip Zara?”. Intelligence Node. Accessed by 03 May, http://www.intelligencenode.com/blog/asos-ultra-fast-fashion-leader/

3.3.6 Summary

In a nutshell, ZARA need to pay more attention on the rival among existing competitors and the substitute products that are available in the market. The moderate bargaining power of buyers will lead customers’ easily switch to another brands due to the low switching cost. Hence, it affects the ZARA bargaining power of supplier become low. Last but not least, the threats of new entrants for ZARA is low, which is a positive points for Zara.

Hi h

Strengths S1: Strong geographically worldwide present S2: Strong Brand image S3: Strong supply chain S4:

Weaknesses W1: Imitator, not creator W2: Labour issues use by supplies may lead to negative word of mouth W3: Rushing products out of market W4: Limited Stock

Opportunities O1: Global Expansion O2: Expand to E-Commerce Sector O3: Availability of new technology to enhance shopping experiences? O4: Backing some flagship design- NEW DESIGNERS FOR BETTER DESIGN O5: Rising environmental issues worldwide

Threats T1: Unauthorised copy – No collaboration with international designers T2: Fierce competition T3: Economic instability affect customers spending pattern Resistance to sweatshop ??? T4: Labour issues use by supplies may lead to negative word of mouth T5: Change in customer demand, price sensitivity and trend

5.0 Swot Analysis

TOWS Matrix

S1: Strong geographically worldwide present S2: Strong presence S3: Strong supply chain S4:

O1: Global Expansion O2: Expand to E-Commerce Sector O3: Availability of new technology to enhance shopping experiences? O4: Backing some flagship design- NEW DESIGNERS FOR BETTER DESIGN O5: Rising environmental issues worldwide

T1: Unauthorised copy – No collaboration with international designers T2: Fierce competition

SO strategies S1S9O1O2- Using existingbrand loyalty and awarenessand multichannel strategy toexpand market and flourishin the ecommerce sector S3S4S6S10O2The huge number of products coming to the store within a veryshort cycle of time will helpincreasing sale in the onlinestore as well, more the newproducts more attractive online shopping experience. Along with this Zara’sunparalleled supply chainwill be helpful for productshipment delivery in case ofonline store and that will leadto high level of customersatisfaction. Also alreadybeing started to sell online inthe existing customer base itwill help out in expandingfurthermore S5S11O3- Healthy financialcondition and saving costscan help them focus on thebetterment of the brad imagein terms of engaging labourand other social andenvironmental activities S9S10T3Usingmultichannel strategies andonline expansion to grabonline shoppers that will helpdeal

W1: Imitator, not creator W2: Labour issues use by supplies may lead to negative word of mouth W3: Rushing products out of market W4: Limited Stock WO strategies W3O1O2O3- To make it bigthe company needs to look atthe immense opportunity ithas in the online sector andcreate or develop an imagethat would boost online salesalong with giving customersan exclusive experience.Also focusing on the onlinemarketing and selling in thekey markets. W2O2- To grow in theecommerce sector Zara cankeep its best selling productsin more variationspermanently in its onlinestore.

WT strategies W3T3- As shoppingbehaviour is changing tokeep pace with that Zara cantap on the online

T3: Economic instability affect customers spending pattern Resistance to sweatshop T4: Labour issues use by supplies may lead to negative word of mouth T5: Change in customer demand, price sensitivity and trend

with the changingshopping behaviour. Onlinestrategies can includediscounts to attract pricesensitive segment. S1S3S4S6T5- To deal withthe competitors Zara needs tomake use of all its corestrength that give it a sustainable advantage. S1S9S10O2- To overcomebarriers in entering newmarkets they have to focuson their branding and alsoexpansion strategy andmultichannel strategy

market withintense marketing andpromotional activities thatwill ensure growth and alsobe able to stay at par with theconsumer base that ininclining towards onlineshopping...