Zara Case Study - Strategic Planning and Global Environment

Module Title: Strategic Planning and Global Environment (SPaGE)

Assignment Title: ZARA

Date: 22nd January 2016

Word Count:

Student Number: N0662560

Executive Summary:

Introduction:

Zara is one of the most prestigious and famous Spanish brand of clothing founded by the visionary ‘Amancio Ortega Gaona’ and was established in the year 1975 (Zara, 2016). It is one of the major selling brands of one of the largest fashion retailer group called ‘INDITEX’. Zara has close to 6500 stores spread across 88 countries around the world with over 140,000 employees (Zara, 2016). Inditex is a huge fashion retailer group which owns 8 brands namely Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque. The headquarters of Zara is located in Arteixo, Spain. The Inditex group opened its first Zara store in the coastal town of ‘A Coruna’, Spain in the year 1975 (Inditex, 2016). Zara company stores are well known for their fashionable designs for men, women and kids apparel including lower garments, upper garments, various fashionable shoes and various different accessories (Zara, 2016).

External Analysis:

Macro Environment Analysis

There are many forces and factors that affect the organization in which it operates to provide its products or services to its customers. The external environment can be classified in to ‘micro-environment’ and ‘macro-environment’ (Fahy. J., Jobber. D., 2015). The macro-external environment is the various factors which affect an organization from the outside and in general they cannot be controlled. Analysis of the external environment is a critical aspect of the marketing audit and the marketing planning process. The analysis of the external environment can lead to the possible identification of future trends. There are many several factors to analyze the external environment at a macro level (Blythe, J. and Megicks, P., 2010).

Political Factors:

Government is the major and a silent factor in any business; in form of different policies that they may support in an industry. Political factors influence Zara, such as the possible export regulation policy as well as political stability within the regions that Zara operates in. Since, Zara operates globally it is exposed to minimal political risk (Ethical Fashion, 2010). There are many different restrictions in different countries, which have to be considered before forcing a market entry. In addition, the trade policy requires specific adjustments as for example in China there is a currency policy which causes imports on textiles to the countries to be significantly more expensive than the market price (European Commission, 2015).

Economic Factors:

Economic conditions play a significant role on a company’s operations. Changing economic factors will have a strong influence on Zara and the apparel industry, because fashion apparel is considered a luxury product industry that is sensitive to global macro-economic conditions. A recession or a boom will have a direct impact on the industry (Dowsett S., 2008). Another major economical factor that can affect Zara and the whole industry is the fluctuation of currency. Over the past recent years, the Euro has been growing strongly against the American dollar which is beneficial to the Inditex group, since most of its raw material is purchased in American dollars. However, the Euro is expected to lose its strength over the dollar, which could indicate that the raw material cost will increase in the future (Chaudhuri S., 2015).

Social Factors:

When analyzing the social environment, there are two major aspects that need to be examined, namely ‘demographic factors’ and ‘cultural factors’ (Suttle R., 2012). According to reports, more than 46% of Zara customers aged between 25-44 years are looking to receive personalized style advice from an expert via an appointment in-store or an online chat option for fashionable garments (Mintel, 2016). Consumers in Spain and within most other countries in the European Union (EU) could afford the price for Zara products as it is relatively less expensive than compared to the other countries (Zaraforwarding, 2014). In countries outside Europe, especially in Asia the need for affordable and fashionable apparel is growing rapidly and the Asian markets could become as big as the European market in a couple of years (Nyheder, 2007).

Technological Factors:

Technology advancements can play a vital role for various companies. However, when compared to the other industries, technological factors in an apparel industry generally do not require a high level of expertise. Technology is essential for communication in order to achieve fast delivery options of required clothes based on the responses received from customers (Inditex, 2016). Zara is using the advancements in technology to the great extent, since all information flow go through the central server at La Coruna in Spain on daily basis, so managers are able to get information on the new designs by using handheld computers. In this manner, all store managers are notified 24 hours before order deadline for the new designs. Also, the technological progresses will be beneficial for Zara since it has been very efficient in implementing new technologies into all parts in the supply chain, whether it is design, distribution, or marketing (Akbareian E., 2014) (Ruddick, G., 2014).

Environmental Factors:

Environmental factors also play a very important role nowadays. The fashion apparel industry uses water, energy and other resources thus making it important to wisely utilize them and in line with the environmentally friendly policies that Zara has been implementing. Through its business model, Zara wants to help the sustainable developments of the society and the environments with which it interacts (Zara, 2010).

Legal Factors:

Legal factors play an important role for most fashion retailers since lower labor costs and sufficient raw materials are available in some developing countries such as China and India in order to cut costs (Tokatli, N., 2008). Due to these reasons, some fashion apparel companies are often involved in accusations concerning child labor. Zara, however, avoids these accusations by producing 50% of its items in-house and most of the rest within Europe (The Economist, 2011).