Zara: Fast fashion from Savvy Systems

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Table of Contents

Introduction
Vision, Mission and corporate objectives
Situational analysis
Strategic Options and Choices
Implementation issues
Conclusion
References

Introduction

Strategic management is defined as the set of managerial decisions and actions that determine the performance of the organization in the long run (Robert, 2002, p. 76). It includes scanning the internal and external environment, strategy formulation, and strategy implementation.

It is carried out through evaluation of the firm’s internal environment and the external factors. These factors contribute in the determination of the internal strengths and weaknesses as well as the opportunities and threats in the external environment (Frederick, 2001, p. 49). This report presents the Zara’s strategic plan that will play a key role in ensuring that its strategic growth ambitions are achieved.

Vision, Mission and corporate objectives

A corporation’s vision is a statement that presents the end picture of how it visualizes itself when all its targets have been achieved (Richard & Colin, 2004, p. 23). Zara fashion Vision is “to be the world leading fashion company that will enjoy undisputed market share among all the nations of the world” An organization’s mission shows its reason for existence.

Zara’s mission is “To be the preferred organization among the consumers of fashion products and to provide affordable yet high quality fashion products”. Objectives indicate what results are to be achieved and when (Maurice, 1995, p. 48).

Objectives are usually stated as action verbs. Zara’s objectives are to achieve a gross margin of at least 50% of the cost of sales, to increase market presence and brand visibility in all countries of the world, to use environmental friendly production methods, and to maintain high standards of professionalism and ethical practices in all its operations.

Situational analysis

In the last decade, Zara has grown to become one of the best fashion designers and retailers in the world. However, due to the recent global economic crisis, Zara was adversely affected with revenues reaching all time lows. The situation has been worsened by new market entrants that have brought stiff competition. This has compelled the organization to revisit its strategy so as to continue thriving.

Environmental analysis

It is a strategic management action that involves scanning of both the internal and external environment.

Internal analysis is aimed at identifying the resources within the organization that can be used to formulate organizational strategy to achieve competitive excellence (Comeford & Callaghan, 2011, p. 63). External environment analysis presents the opportunities that a firm may have as well as the threats it may be facing (Richard & Colin, 2004, p. 52).

The use of PESTLE analysis by Zara indicates various external factors. An analysis of Social/Political environment indicates that the company faces major social and political barriers in some countries where religious practices are strict. These countries have religious laws that dictate dressing code hence cut the fashion market.

This is a threat to Zara’s expansion plan since it cannot penetrate these markets. Analyses of Economic factors also reveal that most of the people are still recovering from the global financial crisis that reduced the individuals’ propensity to consume because of the high costs of living. Analyses of the technological factors reveal that the company has a huge opportunity of increasing sales through internet such as the use of social media marketing such as face-book and twitter.

Industry Analysis

Carrying out industry analysis ensures that the researcher is aware of the prevailing market conditions and industry practices. The fashion industry has been saturated with many substandard fashion products. This has dealt a blow to genuine fashion retailers since their products are always copied and sold at a lower price per unit.

Some countries such as China do not have copyright laws. This has led to companies from such countries enjoying competitive advantage over Zara since they do not invest in research and development. This costs the company a lot of revenues since its products are easily copied, reproduced, and sold at lower prices.

Zara’s internal analysis

Zara has maintained a relatively amiable internal environment that has enabled it to gain a competitive advantage over the other firms. The use of resource based view as a management tool of internal analysis reveals that the company prides in various resources that help it stand out from others (Robert, 2002, p. 52).

The company’s physical resources include human personnel who are very competent. The company’s human resource has been useful in innovation and research of new fashion products and improvement of the existing ones. The firm also enjoys distinctive capabilities since it has an invested a lot of resources in research and development. This gives it a competitive edge over other industry players.

Summary of the current Situation Analysis

A study of the situation analysis reveals several positive and negative factors that are available in the internal and external environment. The internal environment of the company presents resources that can be used to formulate strategy which would help the company to achieve competitive advantage (Barney, 1991, p. 36). This would be done through the resources which provide the company with distinctive capabilities and key competencies (Henk, 1999, p. 51).

The company prides itself in having top fashion designers, innovative personnel and competent and professional employees. This helps it maintain high levels of efficiency thus low production costs. The main negative factor affecting Zara is the copying and subsequent sale of substandard products by the competitors.

This act reduces their cost of production since research and development costs are excluded from the cost of production. These substandard products then retail at cheaper prices thus offering stiff competition to Zara’s original and genuine products. This is a major threat to the company’s profitability.

Strategic Options and Choices

Strategies form a comprehensive master plan of how the company will achieve its objectives (Elspeth & Peter, 2002, p. 23). There are three types of strategies that Zara can adopt; corporate, Business, and functional strategy (Michael & Charlotte, 2003, p. 41). Corporate strategy is meant to help the company in the overall direction. This strategy can therefore be achieved through expanding to specific countries first and then slowly moving to harsher markets.

The business strategies occur at the product level and emphasize on the improvement of the competitive position of the company (Jerry, 2003, p. 42). This can be achieved through product design and innovations. Functional strategy deals with functional areas and aims at achieving unit objectives. To achieve this, the company may nurture and develop the distinctive capabilities that will help it stand out from the rest of the competitors.

Implementation issues

The most important stage in strategic management is strategy implementation (Robert, 2002, p. 198). Employees may object to the implementation of the new strategy due to various factors. Resources may also be insufficient to implement planned actions that require cash outlays.

The processes of implementation and change are also tedious and thus hinder cooperation by the employees. Proper communication by the top management should be done to all the employees. This would ensure that each and every member of the organization owns up to the actions decided upon.

Conclusion

Strategic management has become an important management area in the modern day world. Organizations should therefore keep on looking for new ways of doing business so that they may not only survive but also thrive the in the current day business environment.

References

Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management , 99-120.

Comeford, R., & Callaghan, d. (2011). Environmental, industry, and internal analysis. London: Prentice Hall.

Elspeth, J. M., & Peter, R. R. (2002). fast Forward: Organizational Change in a 100 Days. Oxford: Oxford University Press.

Frederick, B. (2001). Executive Strategy: Strategic Management and Information Technology. New York: John Wiley & Sons.

Henk, W. V. (1999). Building the Flexible Firm. Oxford: Oxford University Press.

Jerry, N. L. (2003). Competing in The Information Age: Align in the Sand. London: Oxfor University Press.

Maurice, E. (1995). Electronic Technology, Corporate Strategy, and World Transformation. New York: Quorum Books.

Michael, B., & Charlotte, B. (2003). Big in Asia: 25 Strategies for Business Success. London: Palgrave MacMillan.

Richard, M. W., & Colin, G. (2004). Strategic Marketing Management: Planning, Implementation and Control. Oxford: Butterworth-Heinemann.

Robert, H. L. (2002). Strategic Operations Management: The New Competitive Advantage. London: Routledge.

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