Executive Summary Zara is an international fashion retailer which has gained considerable acclaim, being one of the leaders of the high-street fashion industry, and regularly producing new products for the market, at a rate that is quicker than its competitors can achieve, due to the strong supply chain in place. Despite this, the organisation is facing continual challenges, both in terms of consumer demand and costs; therefore, a detailed strategic analysis needs to be undertaken, to look at broader forces that are upon the industry and identifying ways in which the company can then use its own strengths and opportunity to establish an even stronger position within the high street fashion industry. By focusing on what it does best, namely using an efficient supply chain, this will enable it to beat its competitors to the market and to produce new products, on a regular basis, thus allowing the company to gain a competitive advantage in the war which is emerging among these high-street brands. The purpose of this report is to undertake a strategic review of Zara, based on the current position within the company. Over the years, Zara has become one of the largest and best known retail brands, on a global scale. Originating in Spain, back in , the company has since become internationally recognised, with more than stores worldwide. In order to create a presence within the fashion industry, Zara has managed to create a high level of differentiation and is seen as being a unique organisation which is able to provide customers with products that competitors cannot readily imitate. This has been achieved with full recognition of the external environment and competitive pressures being faced by organisations of this nature, something that is particularly relevant during the difficult economic times, when consumers have less disposable income available in order to purchase fashion clothing items. One of the key ways in which Zara has achieved a competitive advantage in the market is to bring the lead-time of new products down from approximately six months to just two months, which means customers are able to obtain the very best fashion designs at high street prices. This also works to the advantage of the company as it is able to continuously turn over new products and this places a sense of urgency on customers to purchase items, immediately, when they see them, for fear that they will not be available next week. This is reflected in the fact that the global average of visits per year per customer is 17 in Zara, as opposed to a general average of three, across other similar organisations Bigelow, This report will go on to analyse the external and internal environment within which the organisation operates, before going on to look at crises that have been faced by the company, and to produce a strategic analysis of the company, drawing on all of the above information. The report will also include suggestions for future strategy. Analysis of the External Environment Looking specifically at the way in which Zara has managed itself into such a strong position within the industry, it is helpful to identify the external environment within which the company operates. This information can then be used alongside the internal narratives to create the appropriate business strategy for the organisation, going forward. PESTLE Analysis Politically, there has been a general opening of the market, with textiles now being readily available and not subject to quotas. This has made the market, in general, much more competitive and has encouraged all organisations within the industry to look towards reducing costs and attracting a broader customer base. This deregulation of the textile industry, from a quota point of view, has encouraged greater price competition which has, to a large extent, permeated through the large organisations such as Zara, which are able to enjoy economies of scale, when it comes to large-scale production Lopez and Fan, Furthermore, there has been the legal removal of import quotas, which has enabled the Spanish retailer to gain greater access to international markets and can therefore generate more sales and enjoy even greater economies of scale Acur and Bititci Economically, there are huge impacts on the fashion industry, as the world is currently facing a global recession and, as such, consumers are facing difficult choices in terms of how they spend their disposable income. In this context, consumers are reducing the amount of expenditure on items such as clothing and, in particular, fashion items, thus putting pressure on retailers to provide cutting edge fashion at a budget price, something which Zara has become particularly good at and is using this to gain success during difficult economic times. There is no denying that when it comes to fashion and choices regarding fashion purchases, social factors play a huge role. Typically, individuals will prefer specific clothes that have a distinct image, when choosing fashion items. Having a strong brand identity that is widely recognised has enabled Zara to retain social popularity; therefore, while looking at economic drivers, it is also important to ensure that social acceptance of the brand is high and that the brand is seen as a desirable option De Toni and Tonchia Improvements in technology have also had an impact on the fashion industry, particularly during the difficult economic times where consumers are looking for the latest technologies for design. Furthermore, and of particular relevance to Zara, is the use of new technologies, in order to produce a more efficient supply chain and to ensure that products can be in the high street, at a much quicker rate than where technology is not being fully embraced. Given the higher level of competition that is now being experienced within the fashion industry and when combined with greater legal protection, particularly where the protection of intellectual property is concerned, the individual designers are becoming very protective of their own ideas from the threat that the competition will seek to copy. Zara has overcome this threat by reducing the time frame within its supply chain. This means that it will always have a first mover advantage, where there are two or more designers looking to create a similar product. Any additional legal requirements, in terms of intellectual property protection, will not only be beneficial to the original design protection but may have the opposite effect and may limit opportunities for new product developments, as imitation and development is often an inherent part of fashion design. Finally, environmental factors are also relevant to anyone looking towards transporting textiles across the globe and the amount of energy that is likely to be consumed in doing so. This new approach to fast fashion also creates environmental concerns as cheap items are often viewed as disposable by the consumer and simply thrown away, rather than recycled or treated in an environmentally friendly manner. This places an additional burden on companies such as Zara which are looking towards making themselves more environmentally friendly, while still retaining the basic position within the market.
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