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Requirement
Part B: (1500 words approximately)
Summary SWOT: This will be based on the strength, weaknesses, opportunities and threats you identified as part of your internal and external analysis in Part A.
Strategy evaluation -Evaluate four current strategies. Consider all relevant strategies and select four. This could include all or many of the following: business level strategy, diversification, acquisitions/mergers, international strategy and/or co-operative strategies.
Problems/Challenges and recommendation - Identify three main strategic issues.
In this section you should outline a range of strategic actions for the company: where to from now to resolve the three significant strategic issues/challenges identified. You should consider the threats, weaknesses and risks of strategies in identifying strategic issues/challenges. You should recommend some alternative actions and justify your choice in terms of the company’s SWOT analysis. To link together the results of the external and internal environmental analysis, you could use the TOWS matrix.
Conclusion (major results of your analysis and recommendations with regards to the main strategic issues identified)
Solution
Part B
SWOT Summary
Strengths
Inditex’s success as one of the leading fashion retailer in the world has been built upon the numerous strengths of the parent company. The strength of the parent company makes Inditex a challenging competitor within the market. There is very tough competition in the fashion industry. All the companies are fighting or competing on price and providing low price is depend on low-cost outsourcing (Cortez et al., 2014). Quick response time is also one of the competitive advantages nowadays. Inditex has reduced its production cycle with the help of vertical integration. Reduced production cycle helps in enhancing the response time of the company which is one of the competitive advantages for the company. The company has employed more than 1000 people in the central production department to make response time more flexible.
The strong brand name of the parent company is also one of the major strengths of the company. The brand name of Zara contributes in to strengthen the brand name of Inditex. The reach of the company is also the strength of the company. The company has broad reach both within the industry as well as globally. The company also ensures effective communication within the organization in order to keep all the function of the organization on the right track (Hammoudeh, 2014). It uses real-time data to predict the market situation which also keeps the company ahead of the competitors.
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Weaknesses
Underdevelopment of the non-Zara brands is one of the major weaknesses of the company. More than 65% of the total revenue is shared by only Zara and rest of the seven retailers share in 35%. Inditex is highly dependent on the domestic as well as European market. The price of the products is also high which is not affordable by the middle-class consumer. So, high prices of the product of the company are also one of the weaknesses of the company. There is lack of proper marketing strategy which is also affecting the capabilities of the company.
Opportunities
The company has a golden opportunity to go for online sales. The trend of an online sale is increasing day by day, and people are spending more online. There are various untapped markets, and if the company expands its business in those markets, it can make a handsome profit (Gremme, 2014). Through innovation and creativity, the company can also attract new customers in the new market and existing market as well.
Threats
The fashion industry attracts a new player to enter the market despite the tough competition. So, entry of the new players is one of the major threats to Inditex. The prices of the raw material are also increasing which is also a threat to the company (Marza Mallol, 2015). Apart from this, the change in government’s rules and regulation, as well as policies and procedures, is also a major threat.
Corporate/Business level strategy
Every organization tends to develop a corporate level strategy as well as business level strategy in order to achieve their vision, mission, goals, objectives, and values. Corporate level or business level strategy helps the organization to effectively accomplish the goals and objectives of the organization. The following are the corporate/business level strategy of the company;
Differentiation
One of the most important marketing strategies of the companies is differentiation strategy in today business environment. A large number of brands and products are available in the market, and each brand and product is competing with hundreds and thousands brand and product in the market. So, keeping in mind the level of competition the companies go for product differentiation in order to create a strong brand image in the market (Zehir et al., 2015). It is also necessary to attract more customers towards the product or brand of the company. Inditex also uses differentiation strategy to differentiate its product in the market to attract more customers. The company differentiates its product through;
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Innovation: Inditex uses innovation to differentiate its product in the market. It is one of the best ways to differentiate the product. Through innovation, Inditex introduces new style in its product. It also uses new and advance technology and makes trendy products to get the attention of the customer and induce them to purchase the product.
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Price differentiation: the price of the product is one of the most important determinants of the success and failure of the product. The price of the product should reflect the values of the product and if both match the consumer will purchase the product. Inditex provides a luxury package of the price for its premium products. It attracts high-income group people.
Cost leadership
Cost leadership is also one of the important corporate/business strategies which provide a competitive edge to the company. The strategy of cost leadership aims at decreasing the operating cost of the business and hence increases the margin of profit. The companies which use cost leadership strategy get ahead of the competitors (D. Banker et al., 2014). Inditex does not rely on the third party to outsource. Instead of outsourcing and depending on the third party, it employs people who significantly reduce the operating cost of the company.
Luxury brand
The strategy of a luxury brand is not used by every organization because it requires a very high and fine quality of the product as well as the huge investment of time and money. A few organizations go for the strategy of a luxury brand in the market. The luxury brand keeps the organization at the high end of the competitive pricing scale (Kernstock et al., 2017). Luxury brands attract a distinct type of customers with high income. Inditex has a strong brand name, and it also gains from the brand name of its parent company. Zara is very popular and one of the most luxurious brands in the world. It helps Inditex to attract a distinct type of consumer.
Niche market
Inditex is a luxury brand which offers a wide range of luxury products. The company also charges a high price for its product due to the brand image as well as the quality of the product. Therefore, it focuses on a niche market (Pedersen et al., 2016). It targets a narrow group of customers with the goods which meet the needs and demands of such group of customer. The major segment of the consumer of the company is a high-income group of people.
Strategic Issues
Every organization faces issues or problems while running into the market. There are several factors which create hindrances for the organization. In order to keep functioning in the market effectively, the organizations need to deal with such strategic issues or problem. Inditex is also facing the following strategic issues; Not using traditional media for advertisement
Inditex group has decided not to use traditional media for advertising its product. It is solely dependent on social media to advertise its products and keep in touch with its consumers. Social media is one of the very effective modes of advertisement, but it is not enough to use only social media to reach all the potential consumers (Mejias et al., 2015). However, a large segment of consumers are using social media, but still, there are some people who rely on the traditional media before making a purchase. Therefore, it is one of the major strategic issues of the company.
The various untapped market in Asia
The company can expand its business in many of the Asian countries as it has not yet stepped in some of the potential markets. It is also one of the strategic issues of the company. India and China are the two most potential markets for any business due to their high population. The company is present in these countries, but there are only a few outlets of the company (de Jorge Moreno and Carrasco, 2016). The company needs to conduct market analysis to identify such market in order to enter into.
Cultural differences
It is also one of the major strategic issues of the company. The company is not effectively dealing with cultural differences between the various countries. For example, the designer of the company uses three to four colors only for the European countries (Koku, 2015).But the consumer in India likes colorful and bright products which the company is lacking.
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In order to deal with the strategic issues identified in this paper, the company should look into the following recommendations;
The company should effective stepped into some of the potential developing countries such as India and China. Both the countries are high potential for the company. In terms of a number of potential consumers, both the countries are very important to enter into. Therefore, the company should invest to enter into such countries effectively.
The company should also address the cultural differences and focus on localization of product. As Indian consumers like colorful and bright clothes for the party, the company should provide products according to the needs and wants of local consumers. If it focuses on standard product, it might not be beneficial for another market than the European market.
As far as advertisement through traditional media is concerned, it is still effective in keeping in touch with potential customers. The company should revise its decision and must think about traditional media to advertise its product and to be in touch with its potential consumers.
References
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Cortez, M. A., Tu, N. T., Van Anh, D., Ng, B. Z., & Vegafria, E. (2014). Fast fashion quadrangle: An analysis. Academy of Marketing Studies Journal, 18(1), 1.
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Hammoudeh, R. (2014). Zara, from Spain to the big wide world. Company analysis, markets, and competition.
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Gremme, M. (2014). Zara. Global Fashion at Local Prices.
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Marzá Mallol, A. (2015). The marketing plan of VIPs Jeans.
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Zehir, C., Can, E., & Karaboga, T. (2015). Linking entrepreneurial orientation to firm performance: the role of differentiation strategy and innovation performance. Procedia-Social and Behavioral Sciences, 210, 358-367.
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D. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.
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Kernstock, J., Brexendorf, T. O., & Powell, S. M. (2017). Introduction: Luxury Brand Management Insights and Opportunities. In Advances in Luxury Brand Management (pp. 1-24). Palgrave Macmillan, Cham.
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Pedersen, E. R. G., Gwozdz, W., & Hvass, K. K. (2016). Exploring the relationship between business model innovation, corporate sustainability, and organizational values within the fashion industry. Journal of Business Ethics, 1-18.
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Mejías, A. M., Garrido, N., & Pardo, J. E. (2015). INDITEX, a model company in the implementation of sustainable human resource management. International Journal of Engineering Management and Economics, 5(1-2), 59-72.
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de Jorge Moreno, J., & Carrasco, O. R. (2016). Efficiency, internationalization and market positioning in textiles fast fashion: The Inditex case. International Journal of Retail & Distribution Management, 44(4), 397-425.
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Koku, P. S. (2015). A view from the street: an exploratory study of consumer attitudes toward offshoring of professional services in the United States. Journal of Services Marketing, 29(2), 150-159.
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