Discuss about the Strategic Management for Internal and External Analysis.
Zara is a lifestyle and retailing company, which is headquartered in Spain. The main products of Zara are apparels, shoes and accessories. It is largely a Conglomerate Company, the company target consumers are men, women and children. The main competitors of Zara are mango, uniqlo, H&M, GAP, and Benetton (Business insider, 2017). The report focuses on the analysis of company’s internal and external environment. In these analyses the report considers of Australian operations.
These are the factors which are not in direct control of the company, but the company can adopt strategies and measures to reduce its effects on it. Following are some factors that may affect the company externally.
Social factors: these factors are those which are to be considered while entering into other countries especially like its cultural factors, consumers’ preference.
Technological factors: as technology play a very important role in modern era to compete with online market. Hence Zara should develop its technology factors such as applicability by various operating software, uses of social media platforms should also be done.
Environmental factors: while focusing on sales and profits of company, usually environmental factors are ignored. But to make customers loyal towards the company, it should start focusing on consumer’s latent needs. For example green consumers would prefer only those products which are made through green technologies and machines.
Ethical factors: it has to be ensured by Zara, that to reduce cost of its products, the environment sustainability and workers costs are not affected and to remain fashionable, animals and species are not harmed (Emmanuel, 2015).
Political factors: political factors play an important role for having good trade relations between countries. Zara as a company would be affected by the trade laws of Australia and other countries markets.
Legal factors: the company should focus on legal factors of the emerging target markets of other countries. As it will help the company to build better trade relations and will reduce cost by reducing tariff barriers.
Economic factors: Zara should match economic policies of the respective country in which it is trading that is Australia and other countries for make a match of taxation policies, economic cycle.
Inditex as the biggest fashion group of world owns Zara which is an opportunity to Zara in terms of increase in sales, location advantages. . Zara is located in approximately 88 countries, and 8 stores in Australia, hence it has created a lot of opportunities to invest and target more customers. Australian consumers take Zara as a fashionable industry and more foreigners are seeing the brand with a positive feedback (Pascoe, 2014).
The threats to Zara are online retailers, hence to influence customers who usually purchases online, the major threats to company are exchange rate fluctuation, market entry barriers in other countries. The changing preferences of consumers of Australia have welcomed other international fashion stores, which have lead to direct competition with Zara by David Jones and H&M. Apart from that, where stores of Zara in southern Australia contains summer dresses and shorts while in northern Australia the stores should contain coats and scarves (Bloomberg, 2014).
Threat from bargaining power of suppliers: Zara limited has a control over its outbound logistics. Those are warehouses, suppliers. In case of suppliers, where Zara purchases its raw material, are under its ownership, as Zara has its stores wherever its products are retailed. This helps the company in reducing its cost and knowledge about taste and preferences of consumers (Kordamentha, 2016).
Threat from new entrants: the preference of Australian consumers regarding fashion has invited many retailers and fashion stores in Australia which has created a threat to Zara.
Threat from bargaining power of customers: when the customers are in large number and suppliers are in smaller number that creates a threat from consumers, like discount to be offered, customization in fashion specially.
Threat from substitutes: apart from having cost advantage, distinctive competencies, Zara has a cut throat competition from H&M, Uniqlo, Benetton, Woolworths limited. Threats like they provide is providing customized products, trial rooms (Mo, 2015).
Threat from rivalry: the uniqueness of Zara limited benefits the company in increasing profits without even expending money on advertisement for gaining market share (Tradegecko, 2017).
In today’s cut throat competition between fashion industries, Zara has managed to be successful; the key consumers of Zara limited are kids, men and women. The company is able to be successful by having its advantage in supply chain. Zara makes itself different from its competitor by having competitive advantages as stated below. Apart from this the company also stock fewer amounts of designs in its store and changes it within three weeks while the industry takes six weeks for same. Zara keeps a record of its customers regarding their taste and preferences which helps in making designs for them (Schlossberg, 2016). In case of labor rights and slavery rights Zara has grade A.
External analyses are required to be known as they are not in the direct control of the company but they affect the company’s operations indirectly. The company cannot eliminate these threats completely, but can reduce them to a certain level, so that the company operations could not affect so much.
These factors are studied to know about the capabilities of the organization, which may be its strength, weakness, opportunities and threats. These are in the direct control of the company through which the company is able to grab availing opportunities in the market. Zara has an advantage in quality products and price, which has make able the company to build a good image in the minds of Australian consumers (Schlossberg, 2016). Intangible factors of Zara are its core competencies, whereas tangible factors are its logistics management.
This analysis is done to know about the competitive advantage that the firm has and its competitors don’t, that is factors that are able to drive the company more sales and profits. By providing the customers superior quality products and latest designs, the company is able to be at a good position in the market. Hence Zara by having control on its operations and logistics, it is an advantage to company to get information about the changing fashion trends, stock at retail outlets (Fryans & Mellahi, 2011).
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Strength Good command over its inbound logistics, value chain. Zara produces all the designs itself. Apart from that the company has vertical integration model. |
Weakness It has own distribution system, which can welcome some unpredicted problems. Apart from that Zara did not spent on advertisements. |
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Opportunities While considering the advantages to company, the company can reach to the global market, as it has reach only to some countries. |
Threats As Zara has great competition from brands like uniqlo, H&M, Benetton. Apart from that the company has no link with international designers. |
Conclusion
The reason behind Zara in Australia can be said that as it occupies smaller area than the other targeted countries market; hence by this it is seemed to be as more valuable by the company to provide fashionable and international designs.
References
Bloomberg. (2014). BOF. South Africa’s Woolworths takes on Zara and H&M with Australian bid. Retrieved by https://www.businessoffashion.com/articles/news-analysis/south-africas-woolworths-takes-zara-hm-australian-bid
Business insider.(2017). This clothing company whose CEO is richer than Warren Buffet is blowing the competition out of water. Retrieved by https://www.businessinsider.in/This-clothing-company-whose-CEO-is-richer-than-Warren-Buffett-is-blowing-the-competition-out-of-the-water/articleshow/47655720.cms
Emmanuel,A. (2015) good on you. The ethics of fast and fashion: H&M and Zara. Retrieved by https://goodonyou.org.au/the-ethics-of-fast-fashion-hm-and-zara/
Fryans,J,G & Mellahi,K. (2011). Global strategic management, Oxford university, united kingdom
Kordamentha. (2016). fashion retailing and wholesaling in australia from catwalk to customer. Retrieved by https://www.kordamentha.com/docs/default-source/publications/16-01_fashion-retailing-and-wholesaling.pdf
Mo,Z. (2015). Internationalization process of fast fashion retailers: Evidence of H&M and Zara, International journal of business and management, Vol 10, No 3, Canadian centre of science and education
Pascoe,M. (2014). The Sydney morning herald, David Jones takeover: the foreigner brands are here because Australia is rubbish at retail. Retrieved by https://www.smh.com.au/business/comment-and-analysis/david-jones-takeover-the-foreign-brands-are-here-because-australia-is-rubbish-at-retail-20140409-36cfi.html
Schlossberg,M. (2016). Business insider India. While the rest of the industry struggles, this store has created the ‘best business model in apparel’- and millennials are flocking to it. Retrieved by https://www.businessinsider.in/While-the-rest-of-the-industry-struggles-this-store-has-created-the-best-business-model-in-apparel-and-millennials-are-flocking-to-it/articleshow/52784616.cms
Strang,E. (2016). the register retail intelligence. New Zealand’s ethical fashion companies for 2016 reealed: who passed the test? Retrieved by https://theregister.co.nz/news/2016/04/new-zealands-ethical-fashion-companies-2016-revealed-who-passed-test
The conversation. (2011). Zara’s Australian entrance to challenge local retailers. Retrieved by https://theconversation.com/zaras-australian-entrance-to-challenge-local-retailers-272
Tradegecko. (2017). Zara supply chain analysis- the secret behind Zara’s retail success, viewed on 9th January, 2017, retrieved by https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success
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