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The following paper will discuss about the market environment analysis of Zara, which is one of the famous retail brands present globally. The brand is known for its fresh designs and keeping up with the latest trends the brand never fails to satisfy the customers. The aim of the paper is to conduct internal and external market environment analysis with the help of marketing tools which are SWOT analysis and PESTLE analysis. With the assistance of a SWOT analysis, it will help to identify the strength and opportunity of the business which is of a greater advantage for the company. Conducting a SWOT analysis will help to identify the internal factors which are weaknesses and strengths that will influence the ability to take advantage of a new opportunity. In the next section, the PESTLE analysis will assist Zara to establish an external factor which can create an impact on decisions made inside the business firm.
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Zara, is a Spanish apparel brand which is present all over the world. It was founded in the year 1975 in Spain by Amancio Ortega and Rosalia Mera. The brand is known for its fast fashion and the product line comprises of accessories, clothing, shoe, perfumes ad beauty products. In the year 2017, the brand had managed up to 20 clothing collections within a year. It manufactures both men and women clothing line as well as for the children known as Zara Kids. Majority of the Zara customers range from 18-30s years old. Known for its fresh designs, it also keeps its designs on rotation so that the customers get the new designs whenever they visit the store. Till date the brand has zero advertisements expenses and still is one of the powerful brands across the world.
The factor of strength for Zara is its fast fashion trend where Zara has a different business plan that incorporates the strategic fit of demand and supply in order to be profitable. Unlike other companies with fewer fashion cycles, Zara uses their well-planned and interconnected supply chain as well as its top fashion models, to bring in a substantial percentage of fashion cycles this is the label's key advantage. The fundamental part of Zara's distribution chain is its greater control. It generates new designs in less than 15 days while maintaining the highest level of management and collaboration. There are approximately 1800 suppliers and by improving integration, it is capable to control prices and successfully run its company model. Zara provides excellent use of different IT solutions for greater information exchange and improved performance. It has a great deal of help for turning ideas into new products more swiftly. The brand's inexpensive prices and appealing styles are largely targeted at young people and store conversion are high. People prefer high fashion, which Zara delivers by manufacturing it from less costly materials with appealing designs.
The major weakness of Zara is its low presence in some of the market. Zara stores are limited in several fast-growing countries such as India and Malaysia. New Zealand and Thailand have fewer outlets as well. The number of retailers is lower than in the United Kingdom, the United States, Russia, China, Spain, and other countries. Zara should open more stores in a variety of foreign markets, as this is one of the brand's weaknesses. The epidemic, on the other hand, it has accelerated Zara's plan to cut down on the number of retail stores. Zara was able to recover from a large reduction in sales due to COVID-19 issues which related to internet sales. Even with the increase in sales which are still only 89 percent of what they were in 2019.
Zara has always emphasized the customer experiences and customer service, but it should explore adding in augmented worlds, machine learning, and other associated systems to further improve the customer platform. While the brand is more customer-focused, utilizing the technological advancements to make purchasing into a quality experience is really useful. According to AI, collecting data and subdividing the consumer base after assessing it is easier than before. This enables clients to receive customised recommendations. Zara must use this technology for its own benefit.
Zara competes directly from the company's other market leaders. This puts demand on the company's sales and marketing. While Zara has a successful brand and a well-defined supply chain management, it competes directly from many of the other fashion brands.
Zara is a Spanish brand that derives from the advantages of doing company outside of the European Union. One of the most substantial political advantages of establishing a business in the EU is the region's broad international treaties. The European Union is the Europe's leading textile and garment export industry. The sector employs for 74% of the EU's total exports, giving Zara access to a huge client base throughout Europe without having to pay higher temperature tariffs which helps to grow sales. Political instability which impacts the industry and undermines supply chains, is another key variable that affects the market. Zara was prepared to remedy this challenge by restricting its supply chain management to its original land and a few neighbouring countries.
Zara benefits from low labour costs particularly when compared to other western European countries like Germany, France and the United Kingdom. Zara is a much less expensive product as comparison to other European brands, allowing it a higher market share than its competition. An increase in labour costs or overall manufacturing costs might put a competition out of business. Brexit or the United Kingdom's departure from the European Union, has culminated in a change in the price of the sterling, culminating in high inflation rates and less spending power in the hands of the customer to spend on apparel. As a result, Zara's and the apparel industry's total sales have dropped.
Zara has such a large market and provides a wide variety of products; it is doubtful that there would be a movement in social factors. Consumer purchasing choices are affected by culture particularly in the apparel sector. Any product with which clients have trouble understanding is dismissed by that ethnic group. Zara does not engage in innovation; hence its items are tailored to accommodate in with the native culture. The brand is also implicated in a range of social events. Zara has worked on eco-friendly methods to retail management team in order to save resources.
Zara is one of several brands trying to broaden their reach through technology. The corporation has both the budget and the audience and get the most out of data as being one of the world's most successful fashion shops. As a result, Zara is turning to big data that is the science of analysing large data sets which can figure out how to connect and reach the customers more successfully. Zara formed an informed by an understanding with Toyota, implementing JIT and Lean manufacturing processes across the business's production processes. However, it is the technology that should improves a company's capabilities to react to clients.
The brand is known for catching trendy fashion opportunities and making them more inexpensive, but it is planning to push into copyright problems. In fact, a large company already has done so. It has been suspected of stealing off Adidas and Balenciaga's patterns and apparel themes. Zara has largely been able to incorporate itself out of challenging legal complications in the past. Similarly, the company was accused of misrepresenting Adidas and Balenciaga's patterns and apparel concepts. One of the explanations brands can mimic the other without incurring severe repercussions is because of obsolete legal arguments.
Customers change patterns and tastes regularly therefore the entire world of fashion is unfairly associated with inefficiency. This is because today's customers are more ecologically friendly than ever, firms like Zara must embrace sustainable rules to minimize undesirable consequences. Zara has been preparing and considering making all of its stores 100% environmentally friendly. This strategy is based on the normal out a variety of techniques aimed at reducing the brand's impact on the environment. Climate change and energy, animal welfare, biodiversity, sustainable material and other environmental concerns have all been covered in depth by the company.
Hence, it can be concluded that after the recovery from Covid-19 crisis and expanding its presence online. Due to the outbreak of global pandemic, Zara's online purchasing has increased. Its digital and physical foundations must be reinforced in the near future. In its journey to the top of the fashion business industry, it has gotten numerous things right. The major strengths of Zara that derives from being a fast fashion business, providing a wonderful supply chain and so on are being underlined in the SWOT analysis presented in this article. Its key drawbacks include a lack of presence in other markets and a collection that is too broad. The brand gets the chance in developing in cutting-edge customer relationship technologies and moving into internet shopping. Zara sees a danger from its competition as well as an increase in raw material prices.
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