Strategic Review based on Zara - Case Study Example

? Executive Summary Zara, a Spanish based company, is one of the most dominant retailers in the fashion and apparel industry. This paper is primarilya case study that deals with the strategic management of Zara in terms of its tangible and intangible assets. The macro level analysis describes those external issues which are beyond the control of the company. PESTEL analysis indicates certain risks which may impact on the growth and operational activities of Zara in current and near future. Porter’s five forces analysis indicates several external risks and challenges of moderate to high intensity especially it indicates that a fierce competition will continue in future as well. The report presents a brief introduction to the capabilities and competence of the organization which leads to the competitive advantage of Zara over its rivals. Resource audit of Zara briefly highlights the physical, financial, and intellectual resources of the company. It also puts some light on human resource and then critically evaluates the intangible assets of the company. The report clearly mentions that vertical integration is the hallmark of Zara which is well supported by its value chain. The paper critically discusses how Zara adds value to its products to gain a competitive advantage to dominate the fashion industry. Zara is one of the most recognized global brands in the world, but it was badly affected due to the allegations of slave-labour. The incident is stated briefly in the middle of the paper. In the end, the case study configures that Zara is practicing a hybrid strategy which is combination of cost leadership strategy and product differentiation strategy. The paper recommends few steps and target markets where Zara should venture. No doubt, due to globally changing scenario, Zara must take few innovative steps with respect to its online retailing network and expansion strategy. Table of Contents Table of Contents 3 1.0Introduction (203 words) 4 1.1 Aims and Objectives 4 1.2 Methodology 4 2.0The External Environment (1201 words) 5 2.1 PESTEL-DG (All information extracted from Appendix-1) 5 2.2 Porter’s 5 Forces 7 3.0The Internal Strategic Audit (1192 words) 9 3.1 Resource Based View (RBV) 9 3.1.1 Resource Audit 9 3.2 Value Chain 11 4.0The Company Reputation and Brand Image (486 words) 13 5.0Zara’s Strategy and Recommendations (1308 words) 15 6.0REFERENCES 20 7.0 Appendices 23 7.1 – Appendix 1 – PESTEL-DG 23 7.2 – Appendix 2 – Porter’s 5 forces 24 7.3 – Appendix 3 – Resource Audit 25 7.4 – Appendix 4 – VRIO Model 26 7.5 – Appendix 5 – Value Chain 27 1.0 Introduction (203 words) Zara apparel has become the flagship brand of the ?2.5 billion holding group Inditex (Zara Case Study, 2013), Zara has 1,751 stores around the world with 65 in the UK alone (Inditex Group, 2013). The company’s founder, Amancio Ortea Gaona, began retailing clothes in 1963 with the first Zara store opening in 1975. He is current the third richest man in the world with a net worth of ?38 billion (Forbes, 2013). Zara’s strategy has been instrumental to its success, hence why it is so important to analyse it. This report is a strategic report which will review Zara and the industry it is in. It will primarily focus on the UK market but will also include global aspects. 1.1 Aims and Objectives This report has four main aims and objectives: To analyse the external environment To carry out an internal strategic audit To review the company’s reputation and brand image To identify the company’s current strategy and give recommendations on how they should continue in the future. 1.2 Methodology This report took an analytical approach grounded in existing literature and evidence from reliable journalistic, practitioner and government sources. All the research is secondary research based mostly upon qualitative data but also including quantitative information were needed. 2.0 The External Environment (1201 words) This section is focused to looking at the external environment of Zara apparel. To do this the UK clothing/fashion market will be analysed by breaking down the MACRO and MICRO environments. The MACRO environment will be analysed using the PESTEL-DG framework; this has been deemed a useful strategic tool, which has been especially useful for finding general opportunities and risks (Witcher and Chau, 2010). The MICRO environment will be analysed using Porter’s 5 Forces framework; this framework focuses on the five forces that shape the competition within an industry and will be used to identify any opportunities or threats (Hill and Jones, 2009). 2.1 PESTEL-DG (All information extracted from Appendix-1) Political factors can affect any industry; the UK clothing/fashion industry is no different. It once held the interest of affluent individuals due to the amount of jobs it would create. However, many businesses found they could gain a cost advantage by increasing the outsourcing of production to less economically developed country. The industry offering less to the economy meant interests were decreased (Wiggin, 2001). The need for international legislation has been emphasised to allow fair competition based on design, manufacturing quality and production quality (Bohdanowicz and Clamp, 1994). Another recent political factor that has affected the industry is the changes to the VAT rate. It has been reduced to 15%, increased back the 17.5% and in 2011 increased to 20%. This increase alongside inflation has made it harder for many businesses to keep their profit margins and has lead to a number of them going into administration (Mintel, 2012). It is also seen that the government has been looking to influence the industry so that it becomes more environmentally friendly and has helped many firms with their outsourcing (Benjamin, 2007). Haberberg and Rieple (2001) believed that political factors could affect the industry through legal factors. The legislations and regulations set up will affect a company in how they can behave not only in the UK but also with respect to global expansion. In general, it has been observed that UK economy is highly influenced by any political change that occurs in its outsourcing countries (Bohdanowicz and Clamp, 1994). Economic factors are an influence in how well the market itself does. In times of economic boom it is found that people have more disposable income, so spending within the clothing/fashion industry tends to go up, while during recessions people try to cut back unnecessary expenditure such as new fashionable clothing (Suttle, 2013). However, more recent studies have shown that despite the recent recession, most consumers are unwilling to cut their clothing expenditures and deem it as a necessity (Mintel, 2012). Exchange rates have to be watched closely, the increase in imports means that the value of the sterling is pivotal for most businesses. If the sterling becomes weak, the import costs rise for businesses, therefore making the profit margins much tighter. Generally inflation and the availability of consumer credit stimulate the sales; however, according to Mintel report this may not be the case for modern day economy (Bohdanowicz and Clamp, 1994). If it was then companies may find that they have excess stock, which would be sold off at a discount leading to a loss in profits and the brand being damaged (Suttle, 2013). Employment also has to be taken into consideration when looking at the UK fashion/clothing industry. Recently unemployment in the UK has risen to 7.8% with youth unemployment (16-24) rising to 21.2% (BBC1, 2013). This has a knock on affect as the target markets of many firms are more careful about where they spend their money (Mintel1, 2012). It is found that as society changes so does their expectations in fashion, the consumer’s tastes and trends can change rapidly and it is expected for businesses to keep up with these changes. Hence, the importance in what is now known as fast fashion – where the product can go from catwalk to store within two weeks. Another social factor that is linked to environmental factors is that there is a growing popularity in consumers and businesses to appear ethical. This opportunity has been seized by the clothing industry with many businesses creating environmental policies, which include schemes such as fair trade clothing and reductions in CO2 emissions (Hughes, 2005). The use of these policies has helped certain businesses to diversify from others and reap rich rewards via charging premium prices for their products. Social factors also tend to link with technological factors. Social media has allowed the companies to easily promote their products. Also it becomes easier to update the target audiences with the latest trends. Technological advances has also allowed companies to produce their products cheaper, vertical integration is easier to achieve, innovation is easier to produce (new materials such as Gore-tex) and communication systems can easily placed. All these technological advances have helped to price deflation (Wiggin, 2001; Suttle, 2013; Bohdanowicz and Clamp, 1994). Demographically, it is found that the UK has an aging population (Parliament, 2010). With an aging population it would seem that companies would produce more loose fitting classical styles to target these consumers. This works in the favour of many companies as it is easier to outsource this style across the globe instead of creating bespoke orders. Overall, social factors have always meant that there is business within the UK clothing. Technological, environmental and global factors have provided a way for many companies to expand (market development) or improve their products (product development). However, these companies still have to focus on all political, social, economical and demographical issues so that they can remain ahead of their competitors. 2.2 Porter’s 5 Forces The two main threats to a business are the threat of new entrants and the threat of substitution products. The threat of new entrants is low within the UK clothing industry. Many companies are already well established and have brand recognition. Any new companies trying to enter the industry will find many barriers stopping them such as the high capital needed to make the initial investment. Another barrier is gaining the experience of the market and being able to find a gap within the market. In general the threat of substitute products is high; there may not be any substitutes for clothes as they are a necessity but there are many different brands within the industry and the consumer has the ability to choose between them. If a consumer in unhappy with one brand it can easily change to another or find a cheaper version. When looking into the market, it is also important to examine the bargaining powers involved. The bargaining power of suppliers is regarded as being low due to the global market. The internalization has allowed businesses to source their materials from all over the world, so there is much competition among suppliers to gain contracts from the big clothing/fashion brands. An individual consumer has low bargaining power, if they were to walk into a store and demand a discount it would not happen. However, consumers as a group can dictate their market. If they choose to spend less on their clothing and not have brand loyalty, it would force companies to lower their prices. Rivalry among competitors within this industry is extremely high. Each business is attempting to gain some kind of differentiation from one another. This has lead to each company exploiting different parts of the market and then attempting to take over each other segments when trying to grow. 3.0 The Internal Strategic Audit (1192 words) This internal strategic audit will review the company’s core competencies, resources and capabilities. It is important to do this as it will help identify what strategy Zara takes and what it needs to do this. A resource based view is used in this case. The resource-based view (RBV) infers that firms can create competitive advantage through unique combination of resources and business practices (Werbel and DeMarie, 2005). Where the capability is deemed to be paramount, special attention must be paid to what it comprises of in the value chain (Henry, 2008). 3.1 Resource Based View (RBV) The RBV starts by looking into the internal organisation of a business. The resource based view will be used to identify the resources and core capabilities. A resource has been described as an input into the business that helps it carry out its activities (Henry, 2008). The resource audit is used to identify the resources a business has and how it can be configured to their strategy. The VRIO model looks into the core competencies/capabilities of the business and judges how good they are and well they are used. 3.1.1 Resource Audit Resource audit is basically a brief sketch that shows the available resources of a company. These resources either can be owned or they can be obtained through different strategies like suppliers, contractors, partnership or joint venture. Generally the resource audit of a company is divided into physical, human, financial, and intellectual resources. Zara has a worldwide operational network. By the end of 2012, almost 1751 retailing stores were operating throughout the world. Zara has increased its portfolio and according to Yahoo Finance, around 200 Zara Kids shops are operating in almost 75 countries. It also has opened 270 home furnishing stores in 25 countries. Zara’s designers and engineers introduced around 11,000 designs each year and each of its products takes its place in the store shelf within three weeks from its concept of designing. Different miscellaneous items like symbols, logos, trademarks, and specific signs also come as part of physical resources. Zara’s success is highly characterized by its strong physical resources which are executed through its effective supply chain. These resources contributed a lot towards its flexibility, versatility, and recognition as a global brand at world level (Helm, 2008). No doubt, human resource is the backbone in the success of a company and it always acts as a competitive advantage to its organization. There are around 100,000 employees working across the globe in manufacturing plants, distributing stores, associated with transportation and dealing with suppliers. The company has established a think tank at headquarters, consisting of 200 professional experts. These professionals constantly observe and evaluate the new trends in the industry and then forward their recommendations to top level management as well as provide valuable guidelines to store managers. This set up gives an upper hand to Zara against its rivals (Inditex, 2011). Financially Zara enjoys a great support from its parent company Inditex Group that earned €1.9 billion in 2011 (Inditex, 2011). By the end of 2009, Zara itself has revenue of €7.071 billion. Zara’s main intellectual resources include its capabilities and competence of an organization. These intellectual resources are vital to obtain customers’ loyalty and a sustainable competitive advantage. Vertical integration, flexibility, quick response to the consumers’ preferences and hybrid business strategy are major intellectual resources of Zara. 3.1.2 Business Culture The main feature of Zara’s business culture is that it has a sophisticated vertical integration, giving competitive advantage to the company in the apparel and fashion industry. Its business culture has a unique feature that it manages all the processes related to fashion and apparel industry at its own manufacturing units and stores. 3.2 Value Chain Conventional supply chain response from 5-7 months to 2-2.5 months = New fashion weekly not seasonal = small/frequent shipments mean fresh and scarce product inventory. Over the years, Zara has proved its excellence in smooth execution of production through an ever growing value chain at all its manufacturing units and retail stores. A sophisticated system consisting of designing, processing, manufacturing and delivery to customers adds a value to its products which ensures the customers’ loyalty in later stages. A value chain is basically an arrangement of primary activities well supported by primary activities. The primary activities of Zara’s value chain include the designing and production of fashion or apparel items, logistic support, marketing strategies, and store operations. The initial phase starts from designing of a product. Zara has made itself independent of seasons, time, and weather. It just responds to the customers’ preferences irrespective of the scenario and climate and meets the requirements of consumers much early than its competitors. None of the Zara’s designs ever stays more than three days on retailing stores. Its manufacturing and production units are spread all over the world, equipped with latest technologies to reduce the cost of both time and money. Zara has a great logistics set up. Almost 50 to 60% of its logistics support comes from Inditex which gives it an edge against the rivals. Rest it has established most of its manufacturing plants in Asian countries where raw material (cotton and fabric) is available in plenty of amount at low labour cost. This facilitates the company to remain firm on its low cost strategy. The major source of sales and marketing are retailing stores where none of its products stays more than three days. Dissimilar to its competitors, Zara doesn’t spend a huge amount on advertising of its products. GAP, H&M, and Marks and Spencer generally spends 3 to 4% of their income on adverting campaigns, while Zara allocates less than 1% of its income for the same. Word of mouth advertising is the advertising instrument of Zara. Zara operates its stores under the supervision of store managers which takes valuable guidelines from R&D Department for current and forthcoming trends. Zara gives value to its products through store operations because it is the main customer dealing centres where customers get inspirations from its products. As far as supported activities are concerned, they originate from procurement department which is mainly responsible to collect the raw material from Asian countries and then supply it to the manufacturing units through logistics supply chain. Presently, Zara is focusing on procurement of cotton mostly from Asian countries because they are major producers of cotton. Another reason is that labour cost is also substantially low in third world countries (Nordas, 2004). R&D Department supports the company in terms of research. It collects research reports from different universities as well as it manages primary research through surveys, questionnaire, online feedback etc. The department then evaluates the whole findings and deduces the results regarding the market trends and consumer behaviour. Designers and engineers take the basic concepts of every new design from R&D. Human resource is the backbone of all operations of Zara. HRM Department takes specific measures in recruiting the professional lot for the company. The scope of HRM department is beyond the horizon as it not only seeks for competent workers for the company but also ensures their proper training and working exposure. Zara adds a specific value to its designs and high quality products by presenting them to customers at moderate prices. . 4.0 The Company Reputation and Brand Image (486 words) On 18th August 2011 Zara faced a PR nightmare when it was accused of slave labour by many newspapers from all over the world (Burgen and Phillips, 2011; BBC2, 2011; Govan, 2011). It was found that 15 immigrant workers (14 Bolivians and 1 Peruvian) were working in dangerous and unhygienic conditions in Sao Paulo. They were forced to work 12 hour shifts for a wage of ?95 to ?176 per month when the Brazilian minimal wage is ?223. The 15 employees were working in a factory subcontracted by AHA, a company that is responsible for 90% of Zara’s Brazilian production. The Brazilian government had listed 52 charges against Inditex, Zara’s parent group. Inditex quickly replied to these allegations saying that it could not be held responsible for the illegal outsourcing done by AHA but it would still compensate the workers (Burgen and Phillips, 2011; BBC2, 2011; Govan, 2011). Originally most business took the shareholder’s value model where the interests of the owners of the business came first. This view is still dominant in many industries but in the UK clothing industry there has been a shift to the stakeholder’s value model. The stakeholder’s value model evaluates the needs of all the different stakeholders and tries to put them first (Miles, 2012). Zara itself has incorporated the normative stakeholder view in which it attempts to put moral guidelines into its operations and management of the business; this can be seen under Zara’s mission statement and the Inditex CSRs (Donaldson and Preston, 1995). In the case stated above the stakeholders affected would be: the Brazilian Government, the workers, trade unions, Zara’s customers and the suppliers. This case has potentially damaged the relationship between Zara and AHA and they would now have to work harder to ensure that no incident such as this happens again. This may have also damaged how customers view the brand, but this has been reduced by how well Zara reacted to the situation. Corporate governance is the mechanism to ensure that executives respect the rights and interest of all the stakeholders (Martin et al., 2012).The main conflict of interest here is between Zara’s executives who are trying to install the stakeholder’s value model and the suppliers who are attempting to increase the fiscal value. In accordance to Inditex’s CSR it would seem that they are disregarding the principles they set out. However, they have reinforced their principles by installing further analysis tools of suppliers to ensure such an incident does not reoccur (Inditex CSR, 2013). Alongside this they have reiterated that last year out of 7 million garments outsourced only 0.03% were made in unlicensed workshops (Burgen and Phillips, 2011). Brand equity is the value of having a good brand name with the benefits of becoming a consumer’s favourite (Keller, 2003). Keller (1993) pointed out that this can be done on different levels such as firm, product or consumer level. Zara seems to have created a good brand image through every single level and thus gained positive brand equity. However, these accusations may have damaged it at the consumer level. 5.0 Zara’s Strategy and Recommendations (1308 words) The primary market of Zara is the young generation and educated community that like the trendy life and have special feelings towards the fashion and apparel. In broader perspective, this target market is massive as it is neither segmented with respect to ages nor with respect to lifestyles. Zara’s business level strategy is based on low cost products and product differentiation strategies. Currently uses hybrid strategy – differentiation and cost leadership Fashion and apparel; industry is facing a tremendous competition since long and Zara has proved that presence of strong supply chain is not only acts as a major strategic tool but it is also exclusively necessary for smooth execution of operations. Presently Zara is running its business by the application of hybrid strategy which primarily deals with both aspects of business i.e. cost leadership and product differentiation (Allen & Helms, 2006). Cost leadership is basically a technique that is used by companies to keep the prices of their products lower than its competitors so that it may attract the target markets successfully. Product differentiation is actually the strategy where companies get a prominent place in the market through some exclusive features or innovation. Shortly, it can be concluded that Zara’s success lies in the open secret that it offers good quality products and new brands at much lower rates than other competitors. This is basically the application of hybrid strategy. This strategy enables the Zara to modify its products continuously with respect to consumers’ preferences. This further leads the company to gain the customers’ loyalty. Although, the competitors copy the design of its products, however, they are unable to copy the supply chain strategies. Differentiation (through key activities in its supply value chain) i. Zara has a competitive advantage over its rivals in terms of vertical integration structure that makes the company less dependent on its suppliers and contractors (Gallaugher, 2008). Having substantial support from Inditex Group, the organization is capable to manufacture more than 60% of its products without the assistance of any external agencies. ii. Zara stands alone because of its IT department which plays a key role in the smooth execution of all operations through its supply chain. The department also reviews and the reports collected from universities regarding the current trends in fashion industry, consumer changing behaviour, their preferences, and induction of new designs by the competitors. The recommendations of IT department are taken seriously in design and product making. This is simply an exclusive strategy which is implemented by only Zara. iii. None of the products of Zara ever remains for more than three days in the stores. Zara is capable to replenishes its stores twice in a week while its major competitors hardly manage to do the same once in week. iv. in terms of collecting the raw material, Zara has established major set up in several Asian countries because cotton is not only easily available there but also in huge quantity (Nordas, 2004). The procurement units also make the company distinguished because collect the material mostly from those areas where labour is available at low cost. Thus it enables the company to strengthen its cost leadership strategy. v. Zara makes itself unique by adding value to its high quality products at reasonable cost because it has no advertising cell in its marketing department. Zara believes on word of mouth advertising. Contrary to its competitors that spend 3 to 4% of their revenue, Zara hardly spends about 1%. This low budget advertising strategy as well as the operational excellence enables it to persistently follow low cost strategy. The main rationale behind this low advertising strategy is to increase the number of stores around the world as well as rapid launching of its products at the store (generally 3 to 4 weeks). Sustainable Competitive Differentiation and Positioning A well-established supply chain enables a company to manage its resources efficiently to gain a sustainable competitive differentiation and positioning. It also ensures less manufacturing cost, reducing the inventories, and generating an excessive amount of revenue to the stakeholders. i. Zara differentiates itself from other rivals of fashion industry by introducing new products and designs within just three weeks. As far as domestic operations are concerned, the speedy introductions of new designs have made the company independent of seasons, climate and weather. Other competitors offer their products by a span of 4 to 5 months. Thus Zara leads the industry with respect to time factor. ii. Zara launches almost 11,000 new designs each year, three times ahead of its competitors that merely manage to introduce 4000 designs per year (The Economist, 16th June, 2005). iii. Zara has a unique strategy that it produces the products in limited number of small batches. The dearth of quantity in the stores enables the company to replace them by new designs frequently. This pulls the customers to visit the Zara’s stores more frequently and makes them buy the design of their choice because they know that the product will be no more available till their next visit. iv. It is estimated that on average a visitor visits the company’s stores 17 times while its rival observe just 3 visits of their customers in a year. Zara has a much better system of getting the feedback from the customers that visit its stores time and again. Recommendations Expansion Strategy According to Porter’s five forces analysis, the fashion and apparel industry is facing a fierce competition. Globalization is changing the pattern of business world. Therefore, in order to encounter the future challenges, Zara needs to expand its operational network up to certain new markets. Till now it has mainly focused on major European and American markets and overlooked several countries which could be a potential target market for it. These countries include Poland, Netherlands, Luxembourg, Switzerland and Austria. On Asian corner, Zara needs to develop its markets as it has already ventured into Chinese, Japanese, Korean, Indian, and Malaysian markets. Middle East and Central Asian States are also emerging apparel markets and possess lot of potential to generate large revenue for Zara. In order to venture into these markets or to enhance its effectiveness in already ventured markets, Zara can follow the suggested techniques outlined below. i. There are several countries where establishing of manufacturing plants will not be feasible for Zara e.g. in Middle East countries where Zara could face some cultural and social problems. The company can capture this region by exporting its high quality products at low costs. ii. In past, Zara has opened several retailing stores through some franchised agreements. Venezuela, Cyprus, and Mauritius are some examples of franchising deal of Zara. Zara should apply this technique to develop its marketing in Central Asian States. The franchising technique will not only save the manufacturing cost but will also reduce the risks of opening the new stores in foreign markets at its own. iii. Zara should make joint ventures with some local companies to venture into new markets of Eastern European countries. Zara will take necessary support from companies of host countries to invest there. iv. In United Kingdom and United States, Zara entered into markets by establishing its wholly owned subsidiaries. Zara should apply this technique in developed countries because it will not face any critical obstacles in these countries to open its operations at its own. Online Marketing This is a little weak area of Zara as it is lacking in online retailing than its competitors. After the development of cloud-based computing model, the business world is shifting their operational networks on internet. Zara must also focus its future retailing through internet because it will not only make its marketing speedier but will also create new segmentations in target markets. By e-commerce, Zara will be able to save lots expenditures with respect to manufacturing plants, transportation, and utilization of manpower. The strategy will boost up the implementation of low cost strategy as well. By establishing new stores, it will not only increase its revenue but will also be able to address the copy scams of unauthorized enterprises that do their businesses by the name of Zara. 6.0 REFERENCES Allen RS, Helms MM. (2006). Linking strategic practices and organizational performance to Porter’s generic strategies. Business Process Management 12 (4): 433-454. BBC1 (2013) UK Unemployment rises to 2.52m, BBC News Business [Online] 20th March. Available at: Last Accessed: 25th March 2013 BBC2 (2011) Fashion chain Zara acts on Brazil sweatshop conditions, BBC News Latin America and Caribbean [Online] 18th August. Available at: Last Accessed: 26th March 2013. Benjamin, A. (2007) Clothing Industry joins green drive, The Guardian [Online] 6th September. Available at: Last Accessed: 15th March 2013. Bohdanowicz, J., Clamp, L. (1994) Fashion Marketing. London: Routledge, p.7-48. Burgen, S., Phillips, T. (2011) Zara accused in Brazil sweatshop inquiry, The Guardian [Online] 18th August. Available at: Last Accessed: 26th March 2013. Donaldson, T., Preston, L.E. (1995) The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. Academy of Management Review, 20(1), pp.71. Forbes (2013) Amancio Ortega. [Online] Available at: Last accessed: 13th March 2013. Gallaugher, J. (2008). Zara Case: Fast Fashion from Savvy Systems. Available at < http://www.gallaugher.com/Zara%20Case.pdf> Govan, F. (2011) Company behind Zara investigated for ‘slave labour’, The Telegraph [Online] 18th August. Available at: Last accessed: 26th March 2013. Haberberg, A., Rieple, A. (2001) The Strategic Management of Organisations. London: Financial Times/ Prentice Hall Helm, B. (2008). Best Global Brands. Retrieved from Business Week Henry, A. (2008). Understanding strategic management. New York: Oxford University Press Inc., p.126. Hill, C., Jones, G.R. (2009). Strategic Management: An Integrated Approach: Theory (9th edition). Mason: South-Western Cengage Learning, p.42. Hughes A, (2005) Corporate strategy and the management of ethical trade: the case of the UK food and clothing retailers, Environment and Planning, 37(7), pp. 1145 – 1163 Inditex (2013) Stores around the world. [Online] Available at: Last accessed: 13th March 2013. Inditex CSR (2013) Compliance Programme [Online] Available at: Last accessed: 26th March 2013. Inditex (2011). Inditex Annual Report. ACoruna: Inditex Martin, G., Farndale, E., Paauwe, J. and Stiles, P. (2012). Corporate Governance and SHRM: Configurations and future research agenda. Available at: Last Accessed: 26th March 2013. Miles, S. (2012) Stakeholders: essentially contested or just confused? Journal of Business Ethics, 108(3), pp. 285–298. Mintel (2012) Clothing Retailing – UK – October 2012. [Online] Available at: Last accessed: 15th March 2013. Mintel1 (2012), Clothing Retailing – Europe [Online] Available at: Last accessed on: 25th March 2013. Nordas, H.K. (2004). The global textile and clothing industry post the agreement on textiles and clothing, available from . Retrieved on April 2006. Parliament (2010). The ageing population. [Online] Available at: Last Accessed: 16th March 2013. Suttle, R. (2013) The Macroenvironmental Factors Affecting the Clothing Industry. [Online] Available at: Last Accessed: 16th March 2013. The Economist (2005). The future of fast fashion, available from http://www.economist.com/business/displaystory.cfm?story_id=4086117. Retrieved May 2006. Werbel, J.D. and DeMarie, S.M. (2005). Aligning strategic human resource management and person–environment fit. Human Resource Management Review, 15, pp.247-262. Wiggin, E. (2001) UK Clothing and Footwear (8th edition) [Online] Available at: Last accessed: 15th March 2013. Witcher, B., Chau, V.S. (2010) Strategic Management: Principles and Practice. Hampshire: Cengage Learning EMEA, p.91. Yahoo Finance. Retrieved from 23 April 2013 on < http://uk.finance.yahoo.com/news/zara-probed-over-slave-labour-192339975.html> 7.0 Appendices 7.1 – Appendix 1 – PESTEL-DG Factor Effect of factor Impact on ZARA Political 1. VAT changes 2. Legislation changes 3. Political factors from outsourced countries 4. Political pressures 1. Price inflation/deflation Smaller profit margin 2. Influence market – how the business behaves 3. Can affect imports/ costs abroad 4. Enforce unwanted policies 1. Increase costs 2. 3. 4. Economical 1. Economic boom/recession 2. Exchange rates 3. Inflation 4. Employment Socio-cultural 1. Trends in fashion 2. Social media 3. Eco-friendliness Technological 1. Social media 2. Improvements in machinery 3. Improvements in materials 4. Communication Environmental 1. Fair trade clothing 2. Materials used 3. CO2 emissions Legal 1. Legislation Demographic 1. Aging country 2. Unemployment high in youth Global 1. International legislation 2. Culture abroad 7.2 – Appendix 2 – Porter’s 5 forces 7.3 – Appendix 3 – Resource Audit Type of resource What is the resource Impact on Zara Financial Resource €7.071 billion assets, Also supported by Inditex Facilitates Zara to venture into new markets. Human Resource 100,000 employees working across the world Operational competence is increased. Physical Resource 1751 retailing stores, 270 home furnishing stores. The stores give an impression of Zara to the world. They also act as advertising agency for Zara Intangible Resource Vertical integration, instant response to customers’ preferences, hybrid strategy They provide a competitive advantage to Zara against its competitors. 7.4 – Appendix 4 – VRIO Model Core Competence Is it Valuable? Is it Rare? Can it be Imitated? Can it be exploited by the organisation? Competitive implications Performance within industry Fast Fashion Yes No Yes No Capability Considerable impact on market and industry Vertical Integration Yes Yes Yes No Competitive advantage Key role in the success of Zara The cube Yes No Yes No Less Moderate influence 7.5 – Appendix 5 – Value Chain Primary Activities Procurement R&D Department Human Resource Management Cost factor Read More