BPP Business School

Coursework Cover Sheet

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Module Name Global strategy and sustainability

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Assessment Title

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Internal Environment Analysis:

Zara has a unique business model that focuses on fast fashion, which means it produces new designs and collections
quickly and brings them to market faster than its competitors. The internal environment analysis can be done by
using Porter's Five Forces model, which consists of five competitive forces that shape every industry and market.

Bargaining Power of Suppliers: Zara has a strong bargaining power over its suppliers due to its massive purchasing
power and the ability to change suppliers if necessary. The company has also established long-term relationships
with its suppliers, which enables it to get the products at a lower price.

Bargaining Power of Buyers: Zara has a strong bargaining power over its buyers because of its unique selling
proposition of fast fashion. The company produces new collections frequently and at an affordable price, which
attracts a massive customer base.

Threat of New Entrants: The fashion retail industry is highly competitive, and the threat of new entrants is high.
However, Zara has built a strong brand image and established a unique business model that would be challenging for
new entrants to replicate.

Threat of Substitutes: The threat of substitutes is high as there are many other fashion brands in the market.
However, Zara's unique selling proposition of fast fashion sets it apart from its competitors.

Rivalry Among Existing Competitors: The fashion retail industry is highly competitive, and Zara faces intense
competition from other established brands like H&M and Forever 21. However, Zara's unique business model and
fast fashion approach make it stand out from the competition.

Critical Factors:

Based on the analysis of Zara's external and internal environment, the three critical factors that emerge are:

Fast Fashion Model: Zara's fast fashion model is its biggest competitive advantage. The company produces new
collections every few weeks and brings them to market quickly, which attracts a large customer base. Zara's ability to
respond to changing fashion trends quickly also gives it an edge over its competitors.

Supply Chain Management: Zara's efficient and effective supply chain management is another critical factor that sets
it apart from its competitors. The company has a vertically integrated supply chain that enables it to control every
aspect of production and reduce costs. Zara also produces a limited number of products, which enables it to respond
quickly to changing customer preferences.

Brand Image and Customer Loyalty: Zara has built a strong brand image and established a loyal customer base by
offering affordable and fashionable clothing. The company has also focused on creating a unique shopping
experience for its customers by using innovative store designs and layouts.

Sources of Competitive Advantage:

Zara's current sources of competitive advantage are its fast fashion model, efficient supply chain management, and
strong brand image and customer loyalty. The company maintains and builds on these sources of competitive
advantage by continuously improving its production processes, investing in technology, and using customer feedback
to improve its product offerings.

In conclusion, Zara's fast fashion model, efficient supply chain management, and strong brand image and customer
loyalty are critical factors that have enabled the company to maintain a competitive edge in the fashion retail
industry. The company should continue to focus on these factors and explore new growth opportunities by using
global entry strategies such as market penetration, product development, and market development.

External Analysis – Opportunities and Threats:

To evaluate the external environment of Zara, the PESTEL analysis model has been used.

Political:
Zara operates in countries with different political systems, which creates a complex business environment.
Moreover, trade restrictions and policies of countries where Zara operates can affect the supply chain of the brand.

Economic:
The economic environment affects Zara's sales as a decrease in consumer purchasing power can affect the brand's
revenue. Moreover, the brand's global expansion is also affected by the economic environment of the countries it
operates in.

Sociocultural:
The cultural and social values of the countries where Zara operates affect the brand's products' demand. The brand
needs to cater to the diverse cultural and social needs of customers worldwide.

Technological:
Zara's supply chain management system uses the latest technology to streamline its operations, but the brand needs
to continue innovating to stay ahead of the competition.

Environmental:
Zara has been working on becoming more sustainable, and its efforts have been well-received by customers.
However, it needs to continue investing in sustainable production practices and reduce its carbon footprint to
maintain customer loyalty.
Legal:
Zara needs to comply with local laws and regulations to continue operating in different countries. Moreover, the
brand needs to ensure that its supply chain practices align with the legal requirements of the countries where it
operates.

Critical factors:
The critical factors affecting Zara's performance are economic fluctuations, geopolitical risks, and increasing
competition from local and international brands.

Internal Analysis – Distinctive competencies, profitability, and competitive advantage:

To evaluate Zara's internal environment, the VRIO model has been used.

Distinctive competencies:
Zara's distinctive competencies are its fast-fashion business model, efficient supply chain management system, and
in-house design and production process.

Profitability:
Zara's profitability is reflected in its strong financial performance, consistent growth, and healthy profit margins.

Competitive advantage:
Zara's competitive advantage lies in its fast-fashion business model, which enables the brand to introduce new styles
quickly and efficiently, and its supply chain management system that ensures fast delivery of products to customers.

Zara needs to continue building on its strengths and investing in research and development to maintain its
competitive advantage.

Conclusion:
Zara's external and internal environment analysis highlights the brand's strengths and weaknesses. Economic
fluctuations, geopolitical risks, and increasing competition are critical factors that can affect Zara's performance. Zara
needs to continue investing in technology, sustainability practices, and research and development to maintain its
competitive advantage. Additionally, Zara needs to evaluate its global expansion strategies to identify growth
opportunities and enhance its global presence.