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MSc Management
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Global Strategy and Sustainability

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Zara Management Consultancy Report

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BPP School of Business and Technology

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 Table of Contents
1 introduction..................................................................................................................................2
2 TASK 1............................................................................................................................................2
2.1 External and Internal Environment of ZARA.............................................................................2
External: PESTEL Analyses of ZARA:..................................................................................................2
Internal: SWOT Analysis of ZARA......................................................................................................3
2.2 Zara's current sources of competitive advantage.....................................................................4
3 TASK 2............................................................................................................................................5
3.1 Strategy in the Global Environment............................................................................................5
Understanding Zara's Motives and Global Entry Strategy through a Model-based Analysis:.........5
3.2 Conceptual Basis for Zara's Entry Strategies in the Global Market: A Critical Evaluation of
Internationalization Strategies.............................................................................................................5
3.4 Global Entry Strategies for Zara: Recommendations for Joint Ventures, Acquisitions and
Franchising........................................................................................................................................5
Conclusion.............................................................................................................................................6
References.............................................................................................................................................7

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1 introduction
The case study examines Zara, a prominent figure in the fast fashion industry. Zara is a
subsidiary of Inditex, a publicly traded corporation that owns various renowned apparel
companies. Zara's clientele had come to anticipate a constant stream of novel offerings during
their visits to the brand's boutiques, and Zara consistently met these expectations (Gabrovek,
2022). Zara was a highly influential figure. No other competitor in the industry can rival its
exceptional capability to replenish store inventory twice a week and offer fashionable catwalk
designs at affordable prices across its global outlets.

Zara's efficient production and sourcing practices enabled the company to deliver a wide
range of products to consumers. Inditex, Zara's parent company, also maintained surplus
capacity in its manufacturing facilities and strategically utilized vertical integration to
enhance its responsiveness (Stooksbury, 2021). Zara's expansion was characterized by a
notable competitive advantage from its highly centralized operations. According to analysts,
Zara's expanding global footprint is anticipated to harm its financial performance, particularly
due to its dependence on air freight for international distribution (De Wit, 2014). The Spanish
headquarters of Inditex and its primary office in Aretino, Galicia, which supported all global
stores, were both situated in Spain. Several individuals expressed scepticism regarding the
feasibility of consolidating operations in such a manner for a multinational corporation.
Nevertheless, adopting a local approach resulted in the forfeiture of Zara's competitive edge.

This report will examine Zara, its internal and external environment, swot analysis and the
best entry strategy for the clothing company.

2 TASK 1
2.1 External and Internal Environment of ZARA
External: PESTEL Analyses of ZARA:
PESTEL analysis greatly affects every organization, company, firm, and business functioning
worldwide (Nandonde, 2015). ZARA, the clothing brand, also involved PESTEL analysis.
The factors that impact ZARA are discussed below,

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Political

Being a Spanish brand, Zara benefits from operating their business in European Union
(Habart, 2023). According to political views, Zara has the biggest pro to running their
company in the EU with extensive trade agreements.

Economical

As Zara belongs to Spain and has the highest unemployment rate within Europe, it means that
Zara benefits from hiring labour at a low cost. This low manufacturing cost helps Zara to
make affordable products and increase customer buying power.

Social

Zara is a fashion brand that meets the customers' requirements and follows the trends.

Technological

Zara is using big data to reach the maximum number of customers. Zara is known for
utilizing technology to satisfy its customers' needs.

Legal

ZARA also faces interference by international regulations and legislation, that's why ZARA
must conduct business following the country's local legal requirements. Another important
political concern affecting ZARA is taxes paid on imports and exports by national and
international agencies.

Environmental

'The textile industry has a considerably larger impact on the environment, and sustainability
is becoming one of the well-known concepts in the market. Therefore, Zara also needs to
focus on sustainable growth to avoid criticism.

Internal: SWOT Analysis of ZARA

Strength:

ZARA provides a unique design that allows them to compete with other brands that help pay
attention to the markets and different fashion brands. ZARA makes excellent quality apparel
and accessories with acceptable and reasonable prices that attract customers.

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Weaknesses

Advertisement sent is considered to play an important role for any brand to achieve
awareness. Whereas Zara has been facing a lack of advertising; although it is one of the well-
known brands, the increase in competitors can affect the company's growth and awareness
(Chen, Y., 2022).

Threats

An increase in Competition in the market also increases the threat to Zara Company, such as
the threat of substitutes.

Opportunities

ZARA uses innovative technology and data to respond to consumer needs and market
conditions. Some customers have expressed worry over the extent of data collecting and
tracking associated with their shopping experience at the company.

2.2 Zara's current sources of competitive advantage

One of the reasons that ZARA has remained competitive is its key elements in the fashion
industry, such as its adaptation technique for market trends; Zara can use new fashion in
products and fulfil customer demands (Besanko, 2017). They have an entire staff dedicated to
keeping up with the current styles and providing their buyers with fast fashion goods. They
travel worldwide for new fashion ideas and acquire various designs from different nations to
fulfil customers' demands across the globe.

Another advantage is that Zara deals with offering trendy products that are up to date with
current trends yet at a lower cost than their rivals (Yide, 2022). This makes them more
appealing to customers of various economic levels and ages, which expands their clientele
and allows them to meet their needs at competitive prices.

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3 TASK 2
3.1 Strategy in the Global Environment
Understanding Zara's Motives and Global Entry Strategy through a Model-
based Analysis:
Zara, a Spanish clothing and accessories retailer, has expanded rapidly into the global market.
Dunning's Eclectic Paradigm Model can be used to understand how a global strategy will
effect management in a commercial context. This model explains why corporations
participate in FDI rather than exporting, licensing, or franchising (Schlegelmilch, 2022).

3.2 Conceptual Basis for Zara's Entry Strategies in the Global

Market: A Critical Evaluation of Internationalization Strategies
Zara's growth was driven by numerous causes, including a desire to boost sales and
profitability, access to new markets, additional resources, and economies of scale (Grant et
al., 2019). Zara may obtain more control over its supply chain, decrease costs, and improve
product quality through FDI. Furthermore, by expanding into new regions, Zara can offset the
risk of exchange rate swings and political instability in its native nation.

3.4 GlobalEntry Strategies for Zara: Recommendations for Joint

Ventures, Acquisitions and Franchising
Zara's global expansion strategy includes a number of entrance approaches, such as wholly-
owned subsidiaries, joint ventures, and franchising (Rashid and Bames, 2021). The Uppsala
Model of Internationalization serves as the conceptual foundation for this strategy. According
to this model, enterprises gradually develop their involvement in overseas markets, beginning
with exporting and progressing to more complicated forms of entrance as they gain expertise
and knowledge of the foreign market (Gabroviek, 2022). Zara can employ at least three entry
methods to enter better and compete in the global environment:

 Joint Ventures: Zara can enter into joint ventures with local businesses to access their
understanding of the local market and culture (Stooksbury, 2021). Other corporations,
such as Starbucks, have employed this method effectively, which formed two joint
ventures with Tata Global Beverages to investigate the Indian market.

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  Acquisitions: Zara can acquire local businesses to access their current distribution
networks and consumer base. Other firms have utilized this tactic, such as Walmart,
which 'bought Flip Kart to penetrate the Indian market' (Saraswathy, 2015).
 Franchising: Zara can franchise its outlets to local entrepreneurs familiar with the
market and culture. Other corporations, like McDonald's, have successfully franchised
their restaurants worldwide using this method (Tien et al., 2020).

Conclusion
Conclusively, Zara's global market expansion was motivated by numerous objectives,
including a desire to expand sales and profitability, access to new markets and resources, and
economies of scale. Zara may obtain more control over its supply chain, decrease costs, and
improve product quality through FDI. Zara's suggested entry options include joint ventures,
acquisitions, and franchising. By getting access to local knowledge, distribution networks,
and client bases, Zara will be able to better enter and compete on a global scale.

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References
Chen, Y., 2022. How ZARA Should Improve Guest Satisfaction After the Xinjiang Cotton
Incident. Frontiers in Business, Economics and Management, 3(3), pp.137-143.

Gabrovšek K., 2022. Internationalization Process and Entry Strategies According to Sun
Tzu's The Art of War: Case Study Analysis on Zara: Bachelor's Thesis. https://www.katoliski-
institut.si/public_resources_cache/files/original/original/9/906/Katja-Gabrovsek.pdf.

Habarta, A., Komissarova, Z., Maslova, E., Nadashvili, C., Zaritskiy, B., Sergeev, E., &
Sidorova, E., Tsibulina, A., and Volkov, A., 2023. "European Union," Contributions to
Economics, in: Alexander Bulatov (ed.), World Economy and International Business, pp 299-
336.

Nandonde, F. A., 2019. A PESTLE analysis of international retailing in the East African
Community. Global Business and Organizational Excellence, 38(4), pp. 54-61.
https://doi.org/10.1002/joe.21935.

Rashid, A. and Barnes, L, 2021. Exploring the blurring of fashion retail and wholesale brands
from industry perspectives. The Journal of The Textile Institute, 112(3), pp.370-376.

Saraswathy, 5, 2019. The Fipkart-Walmart Des! in India: A look into Competition and other
related issues. The Antitrust Bulletin, 64(1), pp 136-147.

Schlegelmilch, B.B., 2022. Marketing Strategy: A Global Discipline. In Global Marketing

Strategy: An Executive Digest (pp. 1:17). Cham: Springer International Publishing.

Stooksbury, A, 2021. Inditex: A Case Study in Transferring Fast Fashion to International

Markets. Senior Theses. 392, pp. 3-36. https://scholarcommons.sc.edu/senior_theses/392

Tien, NH. Dana, LP. Jose, RUS. Van Dat, N. and Duc, P.M, 2020. Analysis of McDonald's
entry strategy into the Vietnam market. International journal of advanced research and
development, 5(3), pp. 23.29.

Yide, S., 2022. Value Creation Strategy Analysis of ZARA since Internationalization.
Academic Journal of Business and Management, 3(11), Pp. 13-19. 9,
https://doi.org/10.25236/AJBM.2021.03110.

De Wit, B., 2020. Strategy: An International Perspective. (7th Ed). Cengage Learning. UK.

Besanko, D., et al., 2017.

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Besanko, D., et al., 2017. Economics of Strategy. (7th Ed.). Wiley. USA.