What Business Is Zara In? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of What Business Is Zara In?
Zara, a successful fast fashion manufacturer and retailer, noted for its uncommon business process, needs to consider the future of the company and its popular flagship brand. The company produces clothes in the high cost labour market in Europe, spends very little on advertising, ostensibly overspends on positioning high-end stores in chic retail districts, and carries substantially less inventory and charges 15 per cent less than its competitors. Though investors initially viewed this process as a formula for disaster, the company had proven them wrong by establishing itself as a leader in the industry with its hard-to-replicate strategy for success. However, the disruptive business model innovator is now faced with new competitors who are trying to beat the company at its own game by successfully copying key components of its fast fashion approach. The company needs to find a way to continue to differentiate its brand in the evolving industry, while capturing more than its share of the tremendous market growth anticipated in the future. Daniel Doiron is affiliated with University of New Brunswick Saint John.
Swot Analysis of "What Business Is Zara In?" written by Daniel Doiron includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Zara Overspends facing as an external strategic factors. Some of the topics covered in What Business Is Zara In? case study are - Strategic Management Strategies, Growth strategy, Risk management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the What Business Is Zara In? casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing commodity prices, there is backlash against globalization, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation,
increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of What Business Is Zara In?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in What Business Is Zara In? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zara Overspends, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zara Overspends 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 What Business Is Zara In? can be done for the following purposes –
1. Strategic planning using facts provided in What Business Is Zara In? case study
2. Improving business portfolio management of Zara Overspends
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Zara Overspends
Strengths What Business Is Zara In? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zara Overspends in What Business Is Zara In? Harvard Business Review case study are -
Training and development
– Zara Overspends has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in What Business Is Zara In? 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– What Business Is Zara In? firm has clearly differentiated products in the market place. This has enabled Zara Overspends to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Zara Overspends to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Zara Overspends 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 What Business Is Zara In? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Zara Overspends in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Zara Overspends has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Zara Overspends has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Zara Overspends is one of the most innovative firm in sector. Manager in What Business Is Zara In? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Operational resilience
– The operational resilience strategy in the What Business Is Zara In? 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.
Ability to lead change in Leadership & Managing People field
– Zara Overspends 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 Zara Overspends in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Zara Overspends digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zara Overspends 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 Overspends in the sector have low bargaining power. What Business Is Zara In? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zara Overspends to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Zara Overspends is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Zara Overspends is present in almost all the verticals within the industry. This has provided firm in What Business Is Zara In? 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.
Weaknesses What Business Is Zara In? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of What Business Is Zara In? are -
High bargaining power of channel partners
– Because of the regulatory requirements, Daniel Doiron suggests that, Zara Overspends 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study What Business Is Zara In?, it seems that the employees of Zara Overspends 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.
No frontier risks strategy
– After analyzing the HBR case study What Business Is Zara In?, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Zara Overspends 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study What Business Is Zara In?, is just above the industry average. Zara Overspends 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.
Lack of clear differentiation of Zara Overspends products
– To increase the profitability and margins on the products, Zara Overspends needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Zara Overspends has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the What Business Is Zara In? 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 Overspends 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 Overspends supply chain. Even after few cautionary changes mentioned in the HBR case study - What Business Is Zara In?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zara Overspends vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Zara Overspends, firm in the HBR case study What Business Is Zara In? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As What Business Is Zara In? HBR case study mentions - Zara Overspends takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities What Business Is Zara In? | 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 What Business Is Zara In? are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zara Overspends can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Zara Overspends can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Zara Overspends 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 Overspends 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.
Leveraging digital technologies
– Zara Overspends 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.
Learning at scale
– Online learning technologies has now opened space for Zara Overspends 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.
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 Overspends can use these opportunities to build new business models that can help the communities that Zara Overspends operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Developing new processes and practices
– Zara Overspends can develop new processes and procedures in Leadership & Managing People 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, Zara Overspends 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Zara Overspends in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
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 Overspends 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Zara Overspends 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 Overspends to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Zara Overspends has opened avenues for new revenue streams for the organization in the industry. This can help Zara Overspends to build a more holistic ecosystem as suggested in the What Business Is Zara In? case study. Zara Overspends can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Zara Overspends 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 What Business Is Zara In? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zara Overspends to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats What Business Is Zara In? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study What Business Is Zara In? are -
Shortening product life cycle
– it is one of the major threat that Zara Overspends is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Increasing wage structure of Zara Overspends
– 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 Overspends.
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. Zara Overspends needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Zara Overspends with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Zara Overspends 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.
High dependence on third party suppliers
– Zara Overspends 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.
Technology acceleration in Forth Industrial Revolution
– Zara Overspends has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Zara Overspends needs to keep up with the evolution of technology in the Leadership & Managing People 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.
Regulatory challenges
– Zara Overspends 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 Leadership & Managing People industry regulations.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zara Overspends 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 What Business Is Zara In? .
Environmental challenges
– Zara Overspends 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 Overspends can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Zara Overspends can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of What Business Is Zara In? 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 What Business Is Zara In? 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 What Business Is Zara In? 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 What Business Is Zara In? 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 What Business Is Zara In? 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 Overspends needs to make to build a sustainable competitive advantage.
