ZARA: Fast Fashion, Chinese Version SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of ZARA: Fast Fashion, Chinese Version
Focuses on Inditex, an apparel retailer from Spain, which has set up an extremely quick response system for its ZARA chain. Instead of predicting months before a season starts what women will want to wear, ZARA observes what's selling and what's not and continuously adjusts what it produces and merchandises on that basis. Powered by ZARA's success, Inditex has expanded into 39 countries, making it one of the most global retailers in the world. But in 2002, it faces important questions concerning its future growth.
Swot Analysis of "ZARA: Fast Fashion, Chinese Version" written by Pankaj Ghemawat, Jose Luis Nueno includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Zara Inditex facing as an external strategic factors. Some of the topics covered in ZARA: Fast Fashion, Chinese Version case study are - Strategic Management Strategies, Competition, Globalization, Marketing, Mergers & acquisitions, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the ZARA: Fast Fashion, Chinese Version casestudy better are - – geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, central banks are concerned over increasing inflation, increasing household debt because of falling income levels,
technology disruption, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of ZARA: Fast Fashion, Chinese Version
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in ZARA: Fast Fashion, Chinese Version case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zara Inditex, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zara Inditex 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 ZARA: Fast Fashion, Chinese Version can be done for the following purposes –
1. Strategic planning using facts provided in ZARA: Fast Fashion, Chinese Version case study
2. Improving business portfolio management of Zara Inditex
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 Zara Inditex
Strengths ZARA: Fast Fashion, Chinese Version | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zara Inditex in ZARA: Fast Fashion, Chinese Version Harvard Business Review case study are -
Diverse revenue streams
– Zara Inditex is present in almost all the verticals within the industry. This has provided firm in ZARA: Fast Fashion, Chinese Version case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Zara Inditex has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zara Inditex to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Zara Inditex 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Zara Inditex digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zara Inditex has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Low bargaining power of suppliers
– Suppliers of Zara Inditex in the sector have low bargaining power. ZARA: Fast Fashion, Chinese Version has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zara Inditex to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Zara Inditex is one of the most innovative firm in sector. Manager in ZARA: Fast Fashion, Chinese Version Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Zara Inditex
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Zara Inditex does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Zara Inditex 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 ZARA: Fast Fashion, Chinese Version HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Zara Inditex is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Zara Inditex 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.
Analytics focus
– Zara Inditex is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Pankaj Ghemawat, Jose Luis Nueno can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Zara Inditex in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses ZARA: Fast Fashion, Chinese Version | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ZARA: Fast Fashion, Chinese Version are -
High cash cycle compare to competitors
Zara Inditex has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the ZARA: Fast Fashion, Chinese Version HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Zara Inditex has relatively successful track record of launching new products.
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 Zara Inditex supply chain. Even after few cautionary changes mentioned in the HBR case study - ZARA: Fast Fashion, Chinese Version, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zara Inditex vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study ZARA: Fast Fashion, Chinese Version, is just above the industry average. Zara Inditex 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.
Low market penetration in new markets
– Outside its home market of Zara Inditex, firm in the HBR case study ZARA: Fast Fashion, Chinese Version needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study ZARA: Fast Fashion, Chinese Version, in the dynamic environment Zara Inditex has struggled to respond to the nimble upstart competition. Zara Inditex has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study ZARA: Fast Fashion, Chinese Version that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case ZARA: Fast Fashion, Chinese Version can leverage the sales team experience to cultivate customer relationships as Zara Inditex is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Zara Inditex needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Increasing silos among functional specialists
– The organizational structure of Zara Inditex is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Zara Inditex needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zara Inditex to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study ZARA: Fast Fashion, Chinese Version 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 Zara Inditex 's lucrative customers.
Lack of clear differentiation of Zara Inditex products
– To increase the profitability and margins on the products, Zara Inditex needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities ZARA: Fast Fashion, Chinese Version | 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 ZARA: Fast Fashion, Chinese Version are -
Creating value in data economy
– The success of analytics program of Zara Inditex has opened avenues for new revenue streams for the organization in the industry. This can help Zara Inditex to build a more holistic ecosystem as suggested in the ZARA: Fast Fashion, Chinese Version case study. Zara Inditex can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zara Inditex can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Zara Inditex can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zara Inditex can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Zara Inditex can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Zara Inditex can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Zara Inditex in the consumer business. Now Zara Inditex can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zara Inditex can use these opportunities to build new business models that can help the communities that Zara Inditex operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Learning at scale
– Online learning technologies has now opened space for Zara Inditex 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.
Better consumer reach
– The expansion of the 5G network will help Zara Inditex to increase its market reach. Zara Inditex will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Zara Inditex 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 Zara Inditex to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Zara Inditex 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.
Leveraging digital technologies
– Zara Inditex can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Zara Inditex to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Threats ZARA: Fast Fashion, Chinese Version External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study ZARA: Fast Fashion, Chinese Version are -
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 Zara Inditex in the Strategy & Execution sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Zara Inditex.
High dependence on third party suppliers
– Zara Inditex 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.
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. Zara Inditex 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zara Inditex 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 ZARA: Fast Fashion, Chinese Version .
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 Zara Inditex business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Zara Inditex
– 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 Zara Inditex.
Technology acceleration in Forth Industrial Revolution
– Zara Inditex has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Zara Inditex needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– Zara Inditex 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. Zara Inditex can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Zara Inditex in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Zara Inditex with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zara Inditex can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Zara Inditex 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 ZARA: Fast Fashion, Chinese Version 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 ZARA: Fast Fashion, Chinese Version 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 ZARA: Fast Fashion, Chinese Version 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 ZARA: Fast Fashion, Chinese Version 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 ZARA: Fast Fashion, Chinese Version 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 Zara Inditex needs to make to build a sustainable competitive advantage.