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BUS501 Strategic Management

Published : 12-Sep,2021  |  Views : 10

Question:

For this assignment, you are required to conduct a strategic audit of an organization. You must select an organization from one of the following industries:

Food and Beverage

Clothing and Apparel

Specialty Retail

Acting as CEO your job is to undertake the strategic decision-making process for the organization using the Strategic Audit found in your e-text and other strategic management tools. The primary question that you must answer is:
 
What should the organization do to obtain or maintain a competitive strategy for the future?
Your Audit will consist of the following:

1: Organization Selected, Finance and Governance Review
2: SWOT analysis
3: Strategy Formation
4: Strategy Implementation and Evaluation

Answer:

Organizational review

Zara is a renowned clothing brand that was established in 1975. Zara has around 2100 retail outlets in different parts of the world. The brand has its retail presence in more than 85 countries (Bhasin, 2017). The brand is headquartered in Spain. Zara offers stylish clothes for men, women, and children according to latest fashion trends. The Zara products include jackets, trousers, sweatshirts, t-shirts, socks, bags, shoes, jumpsuits, dresses, shorts, skirts, tops etc. The location of retail outlets is chosen carefully to ensure high customer walk-in. Zara retains stores is located in populous cities and famous shopping complexes (Bhasin, 2017). Special attention is given to store ambience and customer services. Zara has a centralized supply chain management system. The brand has a robust supply chain involving design, manufacturing, and distribution of products. Zara has a team of in-house designers who are responsible for creating trendy designs that are turned into clothing products. Design and development of a new product take just one week (Bhasin, 2017). Zara products are supplied to its retail outlets twice a week. Zara focuses on quality of products to ensure customer satisfaction. The revenue generation for Zara is approximately 16 billion dollars on an annual basis. The revenue generates through the sale of products is invested in opening new retail outlets. The brand does not believe in spending money on advertising activities (Bhasin, 2017). The governance in Zara is based on JIT (Just in Time) strategy. This helps in proper inventory management.

SWOT Analysis

SWOT analysis helps a brand to take into consideration the various external and internal factors that impact its market position for a given industry. Strengths and weaknesses pertaining to the factors that is internal to the organization (O'Shannassy, 2008). The management of the organization can exert a greater control over these factors. Opportunities and threats pertaining to the factors those are external to the organization. The management of the organization can have little control over these factors (O'Shannassy, 2008). Conducting a SWOT analysis will help Zara in determining the effectiveness of existing organizational strategies and also in formulating new strategies for obtaining an edge over rival organizations.

Strengths- These are the positive attributes that contribute to the success of Zara. The brand has a strong retail presence in the world. The location and visual appeal of the stores have an added advantage. Zara is known for making fashionable clothes while taking into consideration the preferences of consumers. Zara offers a variety of clothes for different occasions. The brand offers clothes for casual wear, party wear, and office wear (Bhasin, 2017). Zara has a strong brand value. The response to changing trends is quick. The product catalogue is changed within 1 month. The superior quality of products makes it popular among customers. The availability of clothes and accessories at affordable prices makes Zara a successful brand. Zara has a strong SCM (Supply Chain Management) system with the in-house production facility. This enables Zara to supply new designs to retail stores within few weeks. Fast changing products compel the customers to visit the stores on regular basis to check new designs. Zara has a robust distribution network to ensure a constant supply of products.  

Weaknesses- These factors have the potential to restrict the market growth of Zara. The brand has the reputation of imitating fashion designs. The design of clothes is taken from runway fashion. Zara is not considered a premium brand because it copies designs showcased during fashion even rather than creating something unique and individual (Mitchell, 2004). Another major weakness is that Zara does not focus on advertising. Lack of promotional activities restricts its customer engagement.  

Opportunities- These are the business areas that can help the organization in becoming a market leader. Zara can focus on these areas of business for out-performing its competitors. Zara can target emerging markets where demand for semi-premium clothing products is high. The brand can improve its market presence in Asia and Africa through online/ offline mode of selling (Mitchell, 2004). Zara can expand its business through e-commerce in order to increase its reach in different countries. The brand can design some flagship design that will be exclusive to Zara.

Threats- These factors can pose risk for the business operations of Zara. The promotional strategies by competitors like H&M, GAP, Benetton, Levi’s and Forever 21 can impact its customer base. Zara faces stiff competition from other apparel brands like Mango, Vero Moda, and Esprit. Low cost of switching in the apparel industry is a threat (Lapersonne, 2013).

Maintaining Competitive Advantage In Future 

Zara can maintain a competitive position in the future by re-inventing its business strategies. An organization can establish market leadership only if it adopts an innovation approach to understanding the market trends. Zara needs to work on weakness areas and explore the business opportunities identified through SWOT analysis (Bhasin, 2017). Competitor analysis is also a helpful tool in developing competitive strategies. Zara should maintain a close watch on competitor activities in terms of new product developments and promotional strategies. The strategies adopted by an organization should be compared with those adopted by rival brands in order to identify the scope for improvement. Maintaining superior customer responsiveness and superior product quality can help to ensure competitive advantage (Bhasin, 2017).

 Strategy Formation

Rather than coping designs from fashion runway, Zara should focus on creating its own designs. This will help in lending “exclusivity” to the brand image (Day, Ward, Choi & Zhao, 2011). Zara should identify markets with high purchasing power. New markets should be explored rather than focusing on developed countries where competition is already fierce. The brand should target markets where consumers are ready to spend money on stylish clothes and accessories (Day, Ward, Choi & Zhao, 2011). Business communication plays an important role in improving customer engagement. Zara should spend a certain amount of revenue on advertising. It will become easy to attract more customers through advertisements. The customer should be given information about the latest designs offered by Zara by means of advertisements. E-commerce is fast gaining popularity among buyers. Zara should focus on the online selling of clothes and accessories along with retail sales (Day, Ward, Choi & Zhao, 2011). Displaying all products for online purchase will help to increase sales.

Strategy Implementation and Evaluation 

Zara should hire a team of new designers that will be responsible for creating original designs for clothing products and accessories. This team will also be responsible for creating flagship designs that will be sold exclusively at Zara outlets. Zara should make its presence felt in the E-commerce market. The official website of Zara should have a provision for placing online orders. Zara should establish a tie-up with leading online shopping sites to facilitate an increase in sales (Lapersonne, 2013). Zara should focus on advertisements as well as internet marketing for targeting the existing and potential customers. Media planning should be done before communicating with the target market segment. The choice of medium for advertisements will include television and magazines. Zara products will be advertised in selected fashion magazines. Advertising campaigns should be designed for promoting clothes and accessories. Advertising through television should use emotional appeal (Amoako-Gyampah & Acquaah, 2008). The advertisement should associate comfort and joy with Zara products. The advertisements should contain pictures of clothing products and accessories to entice the buyers. Zara should choose celebrities as brand ambassadors. Famous television personalities will be an ideal choice for promoting Zara products. Information about new products and special offers should be communicated to customers through social media. Face book, Instagram, and Twitter should be used extensively for sharing important information with customers and obtaining their feedback (Amoako-Gyampah & Acquaah, 2008).

The effectiveness of competitive strategies can be evaluated by analyzing the growth in customer base and sales revenue. Successful competitive strategies will ensure more sales through online and offline mode. Original and exclusive product designs will increase positive word-of-mouth. Consumer surveys can be conducted to evaluate the impact of competitive strategies (Amoako-Gyampah & Acquaah, 2008). The impact of online communication can be evaluated by analyzing the comments and likes on social media.

References

Amoako-Gyampah, K., & Acquaah, M. (2008). Manufacturing strategy, competitive strategy and firm performance: An empirical study in a developing economy environment. International Journal Of Production Economics, 111(2), 575-592.

Bhasin, H. (2017). SWOT analysis of Zara - Zara SWOT analysis or Internal analysis. Marketing91. Retrieved 18 August 2017, from http://www.marketing91.com/swot-analysis-zara/

Day, J., Ward, L., Choi, S., & Zhao, C. (2011). Catching the long tail: competitive advantage through distribution strategy. Journal Of Hospitality And Tourism Technology, 2(3), 204-215.

Lapersonne, A. (2013). Managing Multiple Sources of Competitive Advantage in a Complex Competitive Environment. Future Studies Research Journal: Trends And Strategies, 5(2), 221-251.

Mitchell, D. (2004). Strategy implementation gets another building block. Journal Of Business Strategy, 25(5).

O'Shannassy, T. (2008). Sustainable competitive advantage or temporary competitive advantage. Journal Of Strategy And Management, 1(2), 168-180.

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