Zara as a Global Organisation Leading & Managing Change

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Table of Contents

Zara: Background Information
Leadership Theory
Change Management Models
Overcoming Resistance and Managing Change
Conclusion
Reference List

Managing change effectively is crucial for ensuring a high level of performance and competitiveness in organizations. This paper applies a leadership theory and changes management models to Zara, a Spanish clothing retailer that has stores worldwide. It reviews the strengths and weaknesses of the company’s marketing strategy and operations from various perspectives and addresses the issues of strategic development. The paper concludes by outlining the ways of managing change effectively and overcoming possible resistance to change.

Zara: Background Information

Zara Group, commonly known as Zara, is a large Spanish apparel retailer owned by Inditex. The first Zara store was opened in 1975; currently, the company owns more than 1500 stores in 60 countries (Wang, 2018). The brand is one of those specializing in fast fashion, striving to respond to all fashion trends timely to remain competitive. Zara introduces more than 11,000 new models per year; it needs only two weeks to develop a new model of clothing and start selling it (Wang, 2018). It is possible to say that the firm is highly significant in the textile industry, as it uses information and communication technologies (ICTs) and innovative approaches to achieve success (García-Álvarez, 2015). The company’s business model and its relation to leadership theories and change management models will be discussed in detail below.

Leadership Theory

There are many leadership theories applicable to Zara; the transformational theory is one of them. It was first introduced by James MacGregor Burns in 1978. This theory presents leadership as the process in which the leaders and the followers engage with each other to create a connection and increase both sides’ motivation and morality (Alloubani and Akhu-Zaheya, 2018). Moreover, transformational leadership implies that the interaction of employers and employees is based on common beliefs, values, and aims (Zakeer, Nawaz, and Khan, 2016). This theory can be applied to Zara because the company’s authorities are focused on both the performance of group members and each person in particular. It is evident from the company’s hierarchy that involves the management personnel of various levels aimed at supporting employees.

Change Management Models

SWOT

Strengths, weaknesses, opportunities, and threats (SWOT) analysis is one of the key tools utilized for strategic planning. It allows for evaluating companies’ capabilities, deficiencies, market opportunities, and external threats to their success in the market (Gürel and Tat, 2017). The dimensions of strengths and weaknesses represent internal organizational factors, while the opportunities and threats are external ones associated with the environment. The analysis of Zara from this perspective is presented below.

Zara has several significant strengths that affect its productivity and position in the market positively. First, the brand offers a wide variety of styles and clothes and introduces new ones frequently (Wang, 2018). Second, the company has created a climate of opportunity and scarcity, motivating its customers to buy products often, as they may disappear from the market. Such a strategy has allowed Zara to reduce its markdown merchandise by around 15% compared to other retailers (Wang, 2018). Third, the firm offers excellent customer service, utilizing a quick response system and striving to meet clients’ demands. Moreover, Zara has a centralized distribution facility, which allows it to minimize the lead-time of its products and have a competitive advantage over other retail companies (Wang, 2018). Finally, one of the company’s strengths is that it has low advertisement costs.

While having a successful business model, Zara shows several weaknesses affecting its growth. For example, the company has a vertical integration; it may lead to the firm’s inability to inability to acquire economies of scale (Ge, Sun and Li, 2018; Wang, 2018). As a result, Zara may not gain profit from producing large numbers of items for discounted prices. In addition, the fact that the company specializes in fast fashion may make its brand image poor. The reason for it is that nowadays, many people prefer sustainable brands over the ones that are not concerned about the environmental issues associated with fast fashion (Lei and Zhang, 2018). The global population has become aware of the problems related to the industry Zara works in, such as wasting resources. Thus, while focusing on introducing new designs rapidly, the company potentially decreases its customers’ loyalty as well.

One of the significant opportunities Zara is expanding in other countries. For instance, although the company is present in China, it has a highly limited number of stores there (Wang, 2018). The brand may also expand to other potentially profitable markets, such as India. Another opportunity for the firm is investing in marketing and promotions. As mentioned above, currently, Zara does not invest much in advertisements, which is beneficial for the company but may decrease its competitive advantages compared to other brands. Such a step may potentially allow the firm to extend its customer base and increase sales.

There are several threats relevant to Zara and its marketing strategy. Extensive direct competition can be considered one of the most significant ones (Wang, 2018). As the company sells products in several categories, it competes with many clothing retailers. Moreover, in some countries, such as China, many other successful brands offer goods for lower prices compared to Zara (Wang, 2018). Finally, another threat that can be outlined is the rising cost of materials and labor, which may increase the company’s operational costs.

PESTLE

Political, economic, socio-cultural, technological, legal, and environmental analysis (PESTLE) is a tool for evaluating the factors affecting a company, its performance, and competitiveness. Like the SWOT analysis presented above, it can also help to identify the strengths and weaknesses a company has, analyzing them from five viewpoints (Nurmi and Niemelä, 2018). The evaluation of Zara from all of these perspectives is presented in detail below.

From the political viewpoint, Zara operates in a relatively friendly political environment, which allows it to minimize potential political disruption. From an economic perspective, Zara has a notable strategy because it offers goods at affordable prices while not spending much on advertisements. The clothes and accessories the company has are not in the luxury segment but are high-quality, which is significant for customers. However, as mentioned above, the company may encounter difficulties due to the increasing cost of labor and materials; currently, Zara does not show that it is affected by these challenges highly (García-Álvarez, 2015). From the socio-cultural perspective, the firm can be considered highly successful, as it strives to create a positive culture for its staff members and customers, and interact with them effectively. For instance, Zara is known for fostering communication and the transfer of knowledge among its employees, as well as using appropriate strategies for interacting with its clients online and offline (García-Álvarez, 2015). In addition, the firm pays attention to trends and innovations in the market and performs thorough research before creating new products, which allows it to gain loyalty among local consumers.

From the perspective of technology, Zara’s approaches can also be considered effective. The company utilizes several innovations regularly, including real-time information systems, management systems based on electronic communication, Extranet, and e-commerce applications (García-Álvarez, 2015). It allows the firm to create a dialogue with its employees and customers and helps workers to internalize necessary knowledge about products and improve their professional skills. From the legal perspective, Zara does not show signs of legal compliance, which is significant for its brand image. Finally, from an environmental viewpoint, the company’s approach cannot be considered fully appropriate. As mentioned above, the rapid development of the fast fashion industry is a challenge today’s world strives to overcome (Lei and Zhang, 2018). By selling a high number of clothing items at low prices, the organization supports unsustainable approaches and contributes to global environmental problems.

McKinsey 7S Model

McKinsey’s 7s model is another significant tool for analyzing a company’s organizational structure. It was developed in the 1980s and is based on seven elements, including strategy, structure, systems, shared values, style, staff, and skills (Ravanfar, 2015). The model aims to reveal how the elements presented above can be utilized to enhance a company’s effectiveness. All of these seven factors are interconnected; the change in one of them may affect other ones. The first three elements are considered hard ones, while the last is the soft ones (Ravanfar, 2015). The analysis of Zara from the perspective of the McKinsey 7s model is presented below.

The strategy the company utilizes allows it to remain highly competitive in the market. As mentioned above, Zara offers fashionable pieces and responds to trends rapidly, which makes it successful compared to other firms in the field (Wang, 2018). However, vertical integration shows that it may exploit economies of scale inappropriately. Zara’s structure is hierarchical, similar to many other retailers operating in the fashion industry; the firm has the chairman, Amancio Ortega, a CEO, and an International Board of Directors as the primary leaders (Wang, 2018). It also includes regional, country, department, and store managers, along with international employees working in the stores. As for organizational systems, the company has several ones supporting its operations. For instance, the system of rapid customer support and the implementation of ICTs allow the firm to ensure effective socialization, exteriorization, combination, and interiorization within its structures (García-Álvarez, 2015). Thus, Zara’s systems align to increase sales and customers’ trust.

Shared values allow the organization to state its beliefs and goals. The company aims at meeting the demands of its customers, which may be seen from its excellent customer service and the desire to communicate with its clients. Moreover, one of the values Zara has is offering affordable designs for anyone interested in fashion and wanting to keep up with trends. As for staff, the company aims at communicating with its employees and provide them with an appropriate working environment (García-Álvarez, 2015). It is beneficial for the organization’s public image, which may increase customers’ and workers’ loyalty. Finally, from the perspective of skills, the company strives to ensure co-learning among its employees and obtain greater organizational flexibility.

Overcoming Resistance and Managing Change

The results of SWOT and PESTLE analyses, as well as the findings obtained through the implementation of the McKinsey 7S Model, show that Zara should implement strategic development in several fields of operation. First, the company should focus on ensuring the sustainability of the business. For example, the organization may reduce the number of designs it introduces or minimize the frequency of supplies, since, currently, Zara presents new pieces of clothing and accessories every two weeks (Wang, 2018). Second, the firm may need to invest more in advertisement since the lack of funding may threaten its competitive advantages.

To manage change effectively, Zara can use the following steps. First, it should discuss the need for change and align it with its aims (Georgalis et al., 2015). Second, the company should address the possible outcomes of change and provide the necessary training for those affected by it. Finally, the firm should implement a support structure and measure the change progress regularly. To overcome possible resistance to change among employees, the company should focus on educating employees about the necessity of change timely and respond to their concerns (Georgalis et al., 2015). Moreover, Zara should strive to involve employees in the planning, learning, and implementation strategies to reduce their resistance.

Conclusion

The paper reveals that although Zara’s organizational strategy has several advantages, change is necessary, too. The company should implement a more sustainable approach and retain its competitive advantage. To manage change and overcome resistance to it, Zara should address the significance of it and involve employees in implementation and planning strategies. Moreover, it is possible to recommend providing the necessary training for people working in the organization.

Reference List

Alloubani, A. and Akhu-Zaheya, L. (2018) ‘Leadership styles and theories’, Leadership Styles and Nursing Care Management, 5(1), pp. 6-14.

García-Álvarez, M. T. (2015) ‘Analysis of the effects of ICTs in knowledge management and innovation: the case of Zara Group’, Computers in Human Behavior, 51, pp. 994-1002.

Ge, L., Sun, X. and Li, C. (2018) ‘Performance analysis of China’s fast fashion clothing market based on SCP model,’ Open Journal of Business and Management, 7(1), pp. 106-115.

Georgalis, J. et al. (2015) ‘Change process characteristics and resistance to organisational change: the role of employee perceptions of justice,’ Australian Journal of Management, 40(1), pp. 89-113.

Gürel, E. and Tat, M. (2017) ‘SWOT analysis: a theoretical review,’ Journal of International Social Research, 10(51), pp. 994-1006.

Lei, Y. A. O. and Zhang, J. (2018) ‘Research on the development status and strategy on sustainable fashion of fast fashion brands,’ 2018 International Conference on Energy Development and Environmental Protection (EDEP 2018). AGH University of Science and Technology, Nanjing, China, 17-19 August. Paris: Atlantis Press, pp. 372-378.

Nurmi, J. and Niemelä, M. S. (2018) ‘PESTEL analysis of hacktivism campaign motivations,’ 23rd Nordic Conference, NordSec 2018. University of Oslo, Oslo, Norway, 28-30 November. Cham: Springer, pp. 323-335.

Ravanfar, M. M. (2015) ‘Analyzing organizational structure based on 7s model of McKinsey,’ Global Journal of Management and Business Research, 15(10). Web.

Wang, Y. (2018) ‘An exploratory study of brand strategy in fast fashion brand–using Zara as an example,’ 3rd International Conference on Contemporary Education, Social Sciences and Humanities (ICCESSH 2018). People’s Friendship University, Moscow, Russia, 25-27 April. Paris: Atlantis Press, pp. 648-651.

Zakeer, A. K., Nawaz, A. and Khan, I. (2016) ‘Leadership theories and styles: a literature review,’ Leadership, 16, pp. 1-7.

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