Grand Strategy of Zara - Essay Example

It is clear from the SWOT analysis that despite several competitive advantages and core competencies, several weaknesses and external issues are affecting the business performance of Zara. Following recommended strategies can help the organization to overcome its issues.

Porter’s Generic Strategy
Porter’s generic strategy consists of three different business-level strategies, such as cost leadership strategy, differentiation strategy and focus strategy. It is highly important for Zara to consider both cost leadership and differentiation strategy in the business operation processes.

Cost Leadership
Higher labour cost is the major weakness of the organization. It is true that the organization always tries to reduce overall supply chain cost by reducing the supply chain and inventory management lead time. But, high labour cost and manual business operation process lead to an increase in overall operating cost. Zara needs to implement an online business strategy in the business operation process. It is highly important that several competitors of this organization are adopting the online business processes in order to reduce the business operation cost. Online business operation processes will enhance the implementation of cost leadership strategy (Griffin 207). In addition to this, the organization should also try to bring efficiency and pace in the supply chain turnover rate in order to reduce the manufacturing and distribution time and cost. These implementations will help the organization to reduce overall business operation cost so that the organization can maximize its business profit.

Differentiation Strategy
Zara already implemented a product differentiation strategy. The organization always tries to offer differentiated clothes to target customers. The organization does not target a narrow market segment. Differentiated products for people of all ages and different cultural backgrounds are the major success mantra of Zara. The organization should differentiate its business operation. The fashion and accessories market is highly demanding and achieving a strong growth rate. It is important for Zara to enter the footwear and eyewear industry as these industries have huge prospects. The strong brand name of Zara and maintaining quality in the business operation processes will help the organization to capitalize on more potential business opportunities.

The organization should not consider focus strategy as it is important for the organization to focus on a broad market segment. It will help the organization to gain more competitive advantages.

Grand Strategy
The organization should also try to adopt and implement the grand strategy in the business operation process in order to enhance decision making and strategy development process to set effective long term plans from several available alternatives. This grand strategy can be classified into four major strategies, such as growth strategy, stability strategy, retrenchment strategy and a combination strategy. The management of the organization should adopt and implement a growth strategy as it is important for the organization to achieve further growth.

It is true that the emergence of new entrants and adoption of online business activities are creating a real threat for Zara. In addition to this, high labour cost is affecting the profit maximization aspect of Zara. Adoption of a growth strategy will enhance the decision making and strategy development process of the organization. It is highly important for the organization to integrate the online business operation process to achieve a sustainable growth rate in this competitive industry. In addition to this, consideration of growth strategy in the decision-making process will help the organization to adopt an effective differentiation process that can influence the management of the organization to enter different fast fashion and fashion accessories industries to secure more market share and gain more potential competitive advantages.

Functional Strategy
Function strategy can be classified into several strategies, such as financial strategy, manufacturing strategy, marketing strategy, human resource management strategy and supply chain management strategy. Supply chain strategy and human resource management strategy can be considered for Zara based on its major weaknesses.

Supply Chain Management Strategy
Slow inventory turnover and critical supply chain management process are the major weaknesses of Zara. Therefore, it is important for Zara to source or prepare limited inventories according to the market demand and requirement. Appropriate production and supply according to the current market demand will help the organization to increase the efficiency of its inventory turnover. In addition to this, the organization should maintain a short production cycle to reduce overall supply chain costs.

Human Resource Management Strategy
High labour cost is another weakness of Zara. Therefore, it is important for the management of the organization to integrate automation in the business operation processes that can help to reduce the stress and pressure of the employees. High automation can improve business performance and can reduce human resource management associated costs. Read More