BUSINESS STRATEGY

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ASSIGNMENT OF HND (HIGHER NATIONAL DIPLOMA)

4TH SEMESTER

BUSINESS STRATEGY

SUBMITTED TO:

MADAM AYESHA

SUBMITTED BY:

MUHAMMAD AFSAR KHAN

DATE: 6 JUNE 2013

BUSINESS STRATEGY

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TABLE OF CONTENT………………………………………………………………PAGES

Mission & Vision Statement of ZARA……………………………………………………3

Porter five forces of ZARA ……………………………………………………………….5

PESTEL Analysis of ZARA……………………………………………………………….7

Resources Audit of ZARA………………………………………………………………...9

SWOT Analysis of ZARA ………………………………………………………………..10

ANSOFF Analysis of ZARA……………………………………………………………...11

Strategic Planning of ZARA………………………………………………………………12

Future Growth Strategy of ZARA ………………………………………………………..13

The overall Business level strategy……………………………………………………….14

Elements of Marketing Mix for the New Strategy………………………………………..15

Financial Plan of ZARA …………………………………………………………………16

Roles and responsibilities for strategy implementation…………………………………..17

Resources required for implementation of new strategy………………………………....18

Stakeholder analysis of ZARA…………………………………………………………...19

References………………………………………………………………………………..20

BUSINESS STRATEGY

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Scenario:

There is a foreign clothing retail brand (for e.g. ZARA, NEXT, PRIMARK etc.) that is planning

to start its operations in Pakistan. This information will be used by Board members in a meeting

where they will look into stakeholder, national and global environments and the effect it has on

business and will decide their future direction.

Task 1:

● Design a mission statement, vision, goals and objectives for your clothing retail brand.

Keep in mind the above scenario while designing the objectives for the firm. (Pre-

submission: 30/04/13)

MISSION STATEMENT OF ZARA:

The mission statement of ZARA is about that “ZARA walks at the pace of society, dressing

ideas, trends and tastes that society itself has matured.”

VISION STATEMENT OF ZARA:

The vision statement of the ZARA is “to give the customer an exclusive choice of fashion by

providing a quicker turnover of new stock than other fashion retailers”.

GOALS:

Goals of the ZARA are mentioned as;

● ZARA wants to create a community around brand while allowing individuals to feel

connected to ZARA fashion and values.

● ZARA through its unique business models and stores has proved its business can be

successful with little or no advertising.

● They always innovative their products to enhance shopping experience and provide new

designs at affordable costs made from quality materials which follow latest trend.

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Objectives:

● ZARA as a foreign clothing brand retail brands wants to start a successful operations in

Pakistan in December 2013.

● They will decide their future direction while look into stakeholder, national and global

environments and the effect it has on business.

● ZARA wants to develop a consumer focused product line and marketing strategy.

● ZARA wants to reinforce customer focus as the key driver of the ZARA brand.

● Zara should focus on increasing potential consumers and frequency of current consumer.

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Conduct an environmental and organizational audit (resource audit) for the firm. Perform

PESTLE, Porter five forces, and resource audit for the firm.

PORTER FIVE FORCES:

1. Bargaining Power of Suppliers:

The bargaining powers of suppliers of ZARA are such as given;

Its computer controlled the cutting machine which cuts up to 1000 layers at a time. It

then sends the cut materials to suppliers who sew the pieces together. The suppliers work

is relatively simple and many suppliers can do the swing.

Thus, the pool of suppliers is expanded and Zara has greater flexibility in choosing the

sewing companies.

Further s because Zara dyes 50% of the fabric in its plant, it is less dependent on

suppliers and can respond more quickly to mid season changes in customer color

preferences.

2. Threat of Substitute Products:

The threats of substitute products of the ZARA are given below;

Zara forces on meeting customer preferences for trendy, low cost fashion. It has the

highest sales per square foot of any of its competitor.

It does so with virtually no advertising and only 10% of stock is unsold.

It keeps the inventory levels very low and offer new products at an amazing pace for the

industry.

Zara has extremely efficient manufacturing and distribution operations.

The Threats from substitutes such as new fashion designs of ZARA are controlled

through offering all range of clothing and customer loyalty.

Further it has bring online trading it is noted that the competition is low than in other

industries.

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3. Threat of New Entrants:

The threats of New Entrants of the ZARA are given below;

The ZARA IT supports is strongly join group of designers, market specialists, production

managers and production planners so the New entrants are unlikely to provide IT to

support relationships that have been built over time.

Further it has rich information about customers that would be hard to imitate.

4. Bargaining Power of Buyers:

The bargaining power of buyers of Zara are such that;

Zara boasts more than 11000 new designs a year where as competitors typically

offer only 2000 to 4000.

Further because of the low inventory that the Zara stores stock, the regulars buy

products they like when they see them because they are likely to be gone the next

time they visit the store.

More recently Zara has employed laser technology to measure 10,000 women

volunteers so that it can add the measurements of real customers into its

information storage. This means that the new products will be more likely to fit

Zara customers.

Since the ZARA Company offers new and fashionable products the bargaining

power of the customer is low.

5. Rivalry Among Existing Customers:

The ZARA Company faces severe competition from competitors such as M&E, GAP. Due to the

low growth in the fashion industry in Europe this competition has become more severe. So there

are two kinds of competitors existing among the customer that is Global competitor and local

competitor.

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PESTEL ANALYSIS:

Political:

The political factors have also affected the ZARA Company. Some Political factors are given

below;

Reduce of restriction of import quotes to Europe and USA

The civil unrest in the middle east region

Free trade policy in European union

Import tariff are four times high when goods are imported from developing countries to

developed countries.

Economical:

The Economical impact of the ZARA is such as that the ZARA should have to reduce the

following;

Interest rates

Taxation changes

Economic growth

Exchange rates

Tariffs.

The higher borrowing cost and the financial crisis exist in the European region.

With increase in the interest rates the inflation will increase and buying power of the

customer will decrease.

Increase of fuel prices due to the civil unrest in Middle East may increase the transport

cost and affect to margins of the company.

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Social Culture:

The culture around the ZARA business is so modern and the consumers are also updated. So it is

a competition market but it is very easy to launch the new product in the market.

The ZARA would have to work accordingly to the trend and satisfy customers demand

due to changes in the generation choices.

New trend among younger generation in Europe and USA for fashion.

Low growth in the population in Europe.

Technology:

ZARA is base on the use of technology from the year 1970. So ZARA have the following

technology;

● Coping with the change.

● Just in time manufacturing system.

● High tech distribution system.

● Online shopping

● Bar coding

● And Computer Aided Designs

● Auto CAD & Auto CAM

Environmental:

The Group environmental commitments of Zara have a direct impact on their shop, products and

policies. So they have to improve the following things include as;

High demand for environmental friendly garments.

Effect of global climate to organic cotton production.

Attention of areas such as sustainable development.

Carbon footprint of the company.

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Legal Factors:

The Legal Factors of the ZARA is given below;

Laws and regulation relating to fashion and clothing.

Child labor and rules and regulations relating to labors.

Resource Audit of the ZARA:

Tangible Resources:

Physical Resources:

1. Stores: 1,688 in 77 countries

2. Factories: 20

3. Total selling area: 488,400meter/squares

Financial Resources:

Invested capital: 1050 million (Euros)

Human Resources: 92,301 from more than 140 nationalities

Intangible Resources:

Brand: is amongst the three most recognized brands in spain.

Image: ZARA is a fast fashion clothes company.

Economic goodwill: Excellent reputation in quality and price.

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Apply SWOT, Ansoff and BCG matrix techniques to define the strategic position of the

given organization.

SWOT ANALYSIS OF ZARA:

STRENGHT:

● Vertical systematization of Product Process.

● Ability to recreate fashion

● High turnover of Product.

● Active use of Stores.

● Brand Loyalty

● Brand Awareness

WEAKNESS:

● Middle Priced Goods

● Repeated Sales of Out of Stock

● Low Quality

● Lack of E-commerce

● Limitation on service

OPPORTUNITY:

Global Fashion Product.

Growth of Fashion Market.

Diverse cultural Area.

Online marketing.

Brand Image.

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THREATS:

● Emerging Newcomers

● Competitor

● Natural disaster or power shortage

● Limitation of Design copies

● Fluctuation in exchange rates.

● Market entry barriers

● Design challenges

ANSOFF MATRIX OF ZARA:

The Ansoff Matrix of the ZARA is given below;

1. Market Penetration:

ZARA should have to expand the operations of the Market in Europe and other Continents where

company currently carrying out the operations.

2. Market Development:

The ZARA can develop its Market through expanding the operations to the new countries or

areas where the company sees more potential.

3. Product Development:

The ZARA can develop its product through other new fashionable cloths to existing market

including Europe and other countries. They should expand it in to the new businesses such as

other consumer goods using existing market operations.

4. Diversification:

The Diversification of the ZARA is that as moving to new markets with new designs for cloths.

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BCG MATRIX OF ZARA:

When analyzing the of the ZARA it can be concluded that the ZARA is in the cash cow stage as

its existing operatons generate sufficient cash flows to expand operations to new markets.

● Demonstrate your ability to think strategically by designing a strategic plan for your

business. This strategic plan should include;

STRATEGIC PLANNING OF ZARA:

The strategic Planning of the ZARA Company is considering of Multi format global. The ZARA

has taken steps to grow its store location around the world. According to the annual report of the

ZARA in the financial year 2010 ZARA has opened stores in 45 countries across the world.

The Strategic Planning of the ZARA is given below;

Increase consumer Satisfaction and decrease dissatisfaction of the plus size consumer.

Increase purchase frequency among plus size customers.

Continue to grow by extending the ZARA fashion brand.

Increase brand awareness and favorable attitudes among consumers.

Number of store opened during the year.

Turnover.

Net profit After Tax.

Earnings before interest & Tax.

Return on Capital Employed.

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1 Keeping in view all the circumstances, suggest future growth strategy for your selected company (substantive growth, limited growth or retrenchment) by giving reasons to

defend the selected strategy.

Task: 02

Future growths Strategy:

The Future Growth Strategy for ZARA is given below;

New product in a new category

New product in an existing category

Redesign of business value chain

Research or discovery of knowledge

Roll up of existing players

Governmental, regulatory or political change

In summer season the ZARA Sales of winter stock decreases so if we design a strategy for the

winter season it will be good for ZARA clothing and redesigning of the product.

Substantive Growth:

The ZARA Company has successfully offers about how to create and sustain a break through

strategy. The ZARA company can be differentiated itself from its competitors through their best

performance of key activities and its supply chain. So ZARA plays a key role in the sustainable

of its position and image.

Market entry strategy

Retail entry strategy for

Sales and marketing strategy

Limited growth:

The ZARA clothing brands need to double its domestic revenue this will increase definitely its revenue. So ZARA Company also wants to increase its revenue per store. The Zara company can be negatively affected by the current economic condition and consumer confidence rarely.

Some limited Growth strategy such as;

Currency and exchange risks from doing business in foreign markets.

Inability to innovate can lead to a decrease in market share.

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1 Identify and evaluate any alternative strategy for your company from the above given strategies. Reasons are mandatory to support your reply.

Alternative strategy:

The growth strategy for the ZARA Company will be good enough to keep it as an alternative strategy because if the ZARA retailer fails to sell a stock in one retail shop then it can also send it to another shop or an appropriate shop where its demand is high.

This will definitely decrease the risk level of a new product and also the redesigning of the product.

1. Suggest an overall business-level strategy. Include necessary information about all the

elements of marketing mix for the new strategy. Make sure the strategy is complete and addresses all the requirements to make your strategy clear and understandable, e.g.

Customer segments (products) you’ll focus, Market Location and Timing tactics, etc. Also make sure that the new recommended strategy is in accordance with the company’s vision and mission statement and it will benefit the organization to achieve its goals.

Design a complete marketing (4P's, marketing and sales objectives etc) and financial plan

(overall budgets, marketing budget etc). (Outcome 2.2)

The overall business Level strategy:

Strategic Level:

The customer demand is more for the new product so the ZARA Company have plan for the

future demand of the customer such as the development of the new product and the competitor analysis. So the government new policy and the population demographics will be consider in the strategic level of business.

Tactical Level:

The Tactical level of the ZARA Company includes its information on difference analysis of ZARA Company such as the stock turnover and the average class sizes of clothing of the ZARA

Company.

Operational Level:

The Operational level strategy of the ZARA Company includes such the Materials, labor and stock.

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Elements of marketing mix for the new strategy:

The elements of the marketing mix for the new strategy include such as given below;

1. Customer segmentation: The ZARA Company has successfully targeting mainly the middle class of people and the lower class of people.

2. Market location: The Market location will be considerable in all provinces of Pakistan and specially the major cities such as like all the capital cities in all provinces. So this will definitely increase the future

growth and we should also invest and open our franchises in other neighbor’s countries and provide the opportunities for the neighbor’s countries such as Afghanistan and India in order to

increase the demand level of our product.

3. Timing tactics:

The ZARA Company mostly generates enough revenue especially in the two main seasons such as summer and winter. In each season we have different variety of products. So we should be attentive and sales more and more in these seasons. Therefore it should be clearly mentioned to

the company operational management. For example summer starts from End of March while the winter season starts from the end of the October month.

The Company Vision and Mission Statement:

The Company Vision and Mission for the new strategy of the organization will developed a differentiation between the product price and quality. So therefore the quality should be standard

but the price should be moderate so that the middle class customer can also afford it.

Marketing 4P's: Product:

The ZARA Company sales its products such as paints and shirts. Price:

The ZARA Company should keep the moderate price for the middle class of customer in order to

afford it and the price should be set on the cost.

Place: The ZARA Company product will be available in all the major cities of Pakistan. And also will

open the branches in Afghanistan and India where the ZARA clothing demand is high.

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Promotion:

The ZARA Company will used new product in new market where the demand of the product is high and ZARA will also do advertisement through which it will attract the customer towards

itself. The ZARA will provide all necessary facilities to the customer and make the customer satisfy.

Marketing and sales objectives:

The marketing and sales objective of the ZARA Company is to increase customer equity. Such

as given below;

Increase consumer satisfaction, decrease dissatisfaction of the plus size consumer.

Increase purchase frequency among plus size customers.

Continue to grow by extending the ZARA fashion brand.

Increase brand awareness and favorable attitudes among consumers.

Financial plan:

The financial plans of ZARA Company include the owner of capital and bank loan.

Overall budgets: The Overall Budget for the ZARA Company is keep up to 30 million rupees.

Marketing budget:

The marketing Budget of the ZARA Company will be kept approximately 30% from the total

budget.

Supply chain budget:

The 5 million of the financial budget will be our supply chain cost which usually includes the cost of the suppliers.

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1 Identify roles and responsibilities for strategy implementation then compare these roles and responsibilities with a different organization.

Roles and responsibilities for strategy implementation:

Owner:

The ZARA retailers brands is a sole proprietorship business so it is the responsibility of the owner to see the investment is safe or not.

The main roles and responsibility of owners are:

Hiring and firing of employees.

Creating good image of the stores.

Dealing with governmental matter rules and laws.

Keeping the same standard of ZARA retailer’s products.

Area manager:

The roles and responsibilities of the area manager are given below;

The managers should assess the owner to achieve the targets.

In order to check the ZARA Company following the rules and regulation or not it should deal with the government officer and also the ZARA upper management officer.

They should reduce the complaints of the customer and give satisfaction to the customer

not to repeat it again.

They should do the work on time with the employees.

Account manager:

The account manager is responsible to keep all the record of cash flows.

Sales manager:

The sales manager should have to keep the record of total sales and also the increase of sales so it is the responsibility of the sales manager.

Marketing department:

The Marketing department is responsible for the advertisement, promotion and distribution.

R&D department:

The research and the development department are responsible for the performing their services in research, design and production of ZARA clothing that should be innovative.

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Labors: The responsibilities of the labors are given below;

The labors should be carefully working during the operation and running of the machines.

The labors should perform their duties as according or assessed by the supervisor or

director.

The labor should perform their work in all conditions of weather.

TASK 3:

1. Evaluate the resources required for the implementation of new strategy; finance, human,

material and time.

Resources required for Implementation of new strategy:

The Resources required for the implementation of new strategy are given below;

Finance resources:

We should have enough funds and time for implementing of our new strategy we should have the finance at least 1 million dollars which is equal to 98520000.00 Pakistani rupees.

Human: For the implementing of the new strategy we need 100 employees, 200 sales man, 500 labors and 10 honest managers etc in the organization.

Material:

For material we are collecting different kinds of raw materials, plastics, cotton, large machinery etc which are required for the organization to prepare the best quality products for our customer

desired and supply to the market with respect to the customer demand. The company designs and cuts its cloth in house and it acquires cloth in only four colors to keep costs low. ZARA

postpones coloring and printing designs until close to manufacture, thereby reducing waste and minimizing the need to clear unsold inventories.

Time:

For Implementing the new strategy we need at least one month in order to implement the strategy successfully for example there are some time spend in the manufacturing, ordering , supplier etc.

so it will be take carefully every step of implementing the strategy.

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2. Perform stakeholder analysis for your organization and explain its importance.

Stakeholders Analysis of ZARA:

Lists of stakeholders of ZARA are given below;

1. Manager

2. Financers

3. Directors

4. Customers

5. Sales man

6. Suppliers

7. The local community

8. Employees

9. Owners

10. Customers

11. Suppliers

12. Funders

13. Governments

14. Media

Importance of Stakeholders of ZARA:

Without continuously participation of stakeholders it is hard for a ZARA company to

survive as a company because stakeholders are mutually interdependent.

Thus stakeholder and their appointment are important in helping a company express its

values, carry out its mission, develop strategies, implement processes and improve

relationships.

The financers for a business would be interested in getting money back that they are

payable with a good profit.

Customers in a business are interested in benefiting from services or goods.

Suppliers want to get a good price for their supplies but need to be at a competitive price

to make customers buy from them. They want also to sell large quantities of stock with

further orders.

The local community is concerned with the way the business affects them for example

the traffic problems will occur.

Employees are interested in getting a good regular wage with job security.

The manager can better managed relationships.

They can make better strategies and decisions.

The stakeholders can provide feedback to the organization.

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Summary:

First when I start my assignment of Business Strategy it seems to be difficult to complete the

assignment but when I start then it was become little I use to collect the data of Zara Company it

preliminary I mention the Mission and Vision of my selected Company Zara then I mention the

goal, objective, porter five forces, BCG matrix and PESTEL Analysis which was little hard to do

then finally I have write the business level strategy and stakeholders Analysis of Zara which lead

me to complete my final Assignments. It was a really good assignment and full of learning and

specially it seek me how to make a strategy for a company. This is a good symbol in my future to

make an effective strategy for any organization.

Limitations:

I was so bored because of load shading which make me late to complete my assignment.

The Zara Company as a foreign company not gave me full detail about its company.

There was shortage information available in net about the company which makes it

difficult to collect the full information of Zara Company.

I used to contact to the company but they not allowed me.

It was hot weather which create little problem while doing assignment.

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REFERENCES:

HND BOOK OF BUSINESS STRATEGY

http://www.ukessays.com/essays/business/the-environment-where-the-zara-clothing-line-will-be-

marketed-busines-essay.pht#ixzz2SbS7o67Y.

http://www.businessweek.com/globalbiz/content/aug2009/gb20090826_715608.html.

http://www.slideshare.net/anusaj/zara-ppt http://www.slideshare.net/jauhari_akash/zara-fashion-marketing-strategy-and-mis

http://www.businessdictionary.com/definition/stakeholder.html#ixzz2VQ2yWf1x

The Importance of Stakeholders | eHow http://www.ehow.com/info_8704286_importance-

stakeholders.html#ixzz2VQ6PxS92