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 - – central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, increasing government debt because of Covid-19 spendings, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy,
there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, 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 -
Effective Research and Development (R&D)
– Inditex 25 has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Inditex: 2012 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Inditex 25 is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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 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.
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.
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.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Inditex 25 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Inditex 25 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.
Analytics focus
– Inditex 25 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 John R. Wells, Galen Danskin 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.
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.
Weaknesses Inditex: 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Inditex: 2012 are -
Workers concerns about automation
– As automation is fast increasing in the segment, Inditex 25 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Inditex: 2012, it seems that the employees of Inditex 25 don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Inditex 25 has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Inditex 25 has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Inditex: 2012 should strive to include more intangible value offerings along with its core products and services.
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.
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.
Aligning sales with marketing
– It come across in the case study Inditex: 2012 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 Inditex: 2012 can leverage the sales team experience to cultivate customer relationships as Inditex 25 is planning to shift buying processes online.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Inditex: 2012 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 Inditex 25 has relatively successful track record of launching new products.
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.
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.
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 -
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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Inditex 25 to increase its market reach. Inditex 25 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.
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.
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.
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.
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.
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 Inditex 25 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.
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 Inditex 25 in the consumer business. Now Inditex 25 can target international markets with far fewer capital restrictions requirements than the existing system.
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. Inditex 25 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. Inditex 25 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.
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.
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 -
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.
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 .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Inditex 25 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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Inditex 25 needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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. Inditex 25 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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 Inditex 25.
Regulatory challenges
– Inditex 25 needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Inditex 25 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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.