Strategic Analysis of ZARA Essay Example | Topics and Well Written Essays - 3000 words

Strategic Analysis of ZARA - Essay Example Per se, Zara has many risks imposed by such factors as rival promotional competence, the ability of consumers to dictate pricing among retailers, and even responsiveness (or lack thereof) of suppliers that are critical to meeting the two week lead time from design to delivery. The report identified that Zara requires acknowledgement of market forces that can potentially impede brand sustainment and growth in sales. These forces include ongoing negative publicity for allegations of unethical business practices, the competence of competitive rivalry especially related to marketing philosophies of rivals, and even macro-economic issues related to foreign currency exchanges. All of these factors influence Zara’s strategic position and direction. Findings indicate recommendations that include more proactive efforts at promoting corporate social responsibility, changing trading currency from the Euro to the American dollar, conducting more market research studies on consumer target groups, and working to build an internal culture focused on ethical behaviour. These recommendations will assist Zara in sustaining a positive brand reputation and building equity that can translate into future revenue gains through diversification efforts. CONTENTS 1.0 Introduction......................................................................................... 2.0 Competitive forces and industry audit............................................. 2.1 PESTLE Analysis..................................................................... 3.0 An internal strategic audit.................................................................. 4.0 Public relations crises at Zara........................................................... 5.0 Recommendations for improving future business position........... 6.0 Conclusion........................................................................................... References 1.0 Introduction Zara is a leader in providing what is referred to a s fast fashion products in the retail environment. Fast fashion is defined as the ability of the company to rapidly replenish inventories in the sales environment in a lead time of two weeks or less. Accomplishment of this strategy entails aligning all elements of the value chain that are necessary to achieve competitive advantage. This report highlights Zara’s industry environment, the competitive pressures and threats of the firm’s operating environment, and proposes recommendations for future business improvement. 2.0 Competitive forces and industry audit The retail industry in most developed countries is very saturated, meaning that international markets are inundated with a variety of retail competitors. Zara is currently most impacted by competitive forces from H&M, The Gap and Benetton, which are competitors that offer similar fashion products at reasonably similar pricing structures. Because of this saturation and presence of like rivals, Zara must be ever-awar e of the changing market forces that have the ability to improve business position or severely hinder its performance and profitability. Porter (2011) describes five forces that impact whether or not a business can adapt or find positive market position in its operating markets. These include threat of substitutes, buyer power, supplier power, rivalry between competitors, and the risk of new market entrants by competing retail organisations. All of these forces influence business strategy development as well as responsiveness of Zara in attempting to outperform competitors. Zara faces very little in its sales markets in relation to substitutes. Substitutes are defined as replacement products that can serve as surrogate products for consumers. In the fashion industry, except for like products