In the 11 years since its public offering, Inditex and its flagship brand, Zara, had expanded into 86 countries, achieved $21.6 billion in revenue, and become the largest specialty apparel retailer in the world. In marked contrast to the general malaise of the Bolsa de Madrid, Inditex's share price tripled from 2008 to 2012 and traded at 25 times expected 2013 earnings, a 15% premium over Swedish rival, H&M. From 1,080 stores in 2000, it had expanded to 6,009 locations while sales and operating profits grew 25% p.a over this period. It had also established online stores across 23 different markets, with plans for launches in Russia and Canada during 2013, and it managed eight different brands. CEO Pablo Isla remained confident of future success and anticipated store expansion would continue growing at 8%-10% per year for the next three to five years. How could Inditex best maintain its strong growth and fend off competition?
Swot Analysis of "Inditex: 2012" written by John R. Wells, Galen Danskin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Inditex 25 facing as an external strategic factors. Some of the topics covered in Inditex: 2012 case study are - Strategic Management Strategies, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Inditex: 2012 casestudy better are - – there is backlash against globalization, increasing transportation and logistics costs, increasing commodity prices, increasing government debt because of Covid-19 spendings, technology disruption, central banks are concerned over increasing inflation, wage bills are increasing,
geopolitical disruptions, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Inditex: 2012 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Inditex 25, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Inditex 25 operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Inditex: 2012 can be done for the following purposes –
1. Strategic planning using facts provided in Inditex: 2012 case study
2. Improving business portfolio management of Inditex 25
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Inditex 25
Strengths Inditex: 2012 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Inditex 25 in Inditex: 2012 Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Inditex 25 in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Inditex 25 has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Learning organization
- Inditex 25 is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Inditex 25 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Inditex: 2012 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Inditex: 2012 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Cross disciplinary teams
– Horizontal connected teams at the Inditex 25 are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Highly skilled collaborators
– Inditex 25 has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Inditex: 2012 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Inditex 25
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Inditex 25 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Inditex 25 is one of the leading recruiters in the industry. Managers in the Inditex: 2012 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Inditex 25 is one of the most innovative firm in sector. Manager in Inditex: 2012 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Inditex 25 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Inditex 25 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Strategy & Execution field
– Inditex 25 is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Inditex 25 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Inditex 25 has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Inditex: 2012 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Inditex: 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Inditex: 2012 are -
Need for greater diversity
– Inditex 25 has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Inditex 25 is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Inditex: 2012 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Inditex 25 has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Inditex: 2012, is just above the industry average. Inditex 25 needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Inditex 25 supply chain. Even after few cautionary changes mentioned in the HBR case study - Inditex: 2012, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Inditex 25 vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, John R. Wells, Galen Danskin suggests that, Inditex 25 is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Inditex 25 products
– To increase the profitability and margins on the products, Inditex 25 needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Inditex 25 is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Inditex 25 needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Inditex 25 to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Inditex 25 has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Inditex 25 even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High operating costs
– Compare to the competitors, firm in the HBR case study Inditex: 2012 has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Inditex 25 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Inditex 25, firm in the HBR case study Inditex: 2012 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Inditex: 2012 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Inditex: 2012 are -
Developing new processes and practices
– Inditex 25 can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Inditex 25 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Inditex: 2012 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Inditex 25 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Inditex 25 in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Inditex 25 has opened avenues for new revenue streams for the organization in the industry. This can help Inditex 25 to build a more holistic ecosystem as suggested in the Inditex: 2012 case study. Inditex 25 can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Inditex 25 to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Inditex 25 can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Inditex: 2012 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Inditex 25 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Inditex 25 can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Inditex 25 to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Inditex 25 to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Inditex 25 can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Inditex 25 has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Inditex 25 can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Inditex 25 can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Inditex: 2012, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Inditex: 2012 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Inditex: 2012 are -
Environmental challenges
– Inditex 25 needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Inditex 25 can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Inditex 25 will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Inditex 25 is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Inditex 25 business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Inditex 25 can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Inditex: 2012 .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Inditex 25 in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing wage structure of Inditex 25
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Inditex 25.
Consumer confidence and its impact on Inditex 25 demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Inditex: 2012, Inditex 25 may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Inditex 25 high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Inditex 25 can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Inditex: 2012 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Inditex: 2012 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Inditex: 2012 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Inditex: 2012 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Inditex: 2012 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Inditex 25 needs to make to build a sustainable competitive advantage.
