Assignment Sample on Global Strategy and Sustainability Assignment Sample
Introduction
Part A: Business report
The assessment of global strategy and sustainability provides opportunities for how organisations in a range of contexts look to create values for the stakeholders through more sustainable and equitable approaches. The report is based on the Zara organisation and it will be discussing the external and internal environment through the use of relevant models. Zara’s current source of competitive advantage will be examined followed by a discussion about strategies that persist in the global business environment. Motives for Zara’s global expansion and their impact on the overall company strategy will also be discussed within the report. Implications of justified recommendations will be examined to discuss diverse approaches that Zara can use in a better way to enter and strive in the worldwide environment. Corporate strategy for Zara will be eventually examining their supply chain and how it helps them in growing their operations. Strategic purpose ethics and overall CSR for Zara will also be laid down within the study.
Task 1: The external and internal environment
Analyse the external and internal environment for Zara
External analysis
Pestel analysis
Political
The current political condition of the UK is unstable due to Brexit as it has increased the tax rate by 25% followed by a growing inflation rate of 3% during the year 2023 (Forbes, 2023). Covid-19 has increased trade restrictions and strict guidelines for Zara that increase challenges to operating their firm in the UK.
Economic
The progressive economy of the UK by 4.4% annually unlocks up the door of chances for the establishment to set up their business in the UK. FDI investment on the country throughout the year 2022 grew by USD 25.1 billion which sets up the commercial opportunities for Zara to achieve high revenue in the UK (Ceicdata, 2022).
Social
UK’s society comprises multicultural people who belong to different ethnic backgrounds, where their demands and preferences are also different which enables Zara in designing new fashion clothes matching the expectations of the customers. The growing average annual income of the UK people by GBP 33,000 also grows the buying competence of the people (Statista, 2022).
Technological
The technology sector of the UK is increasing at the rate of CAGR 22.2% which lays down opportunities for Zara to take advantage of AI, data analytics and ML to secure customer information and reduce cybersecurity issues (Grandview research, 2022). Technology also helps Zara in improving its operations and maintain efficiency.
Environmental
Zara’s operation in the UK follows by Environmental Protection Act 1990 which enables the establishment in eliminating the issues of carbon emission along with global warming that negatively affects the sustainability and reputation of the establishment (Legislation, 2022).
Legal
Zara operating in the UK complies with Health and Safety Act 1974 to provide better employment circumstances and facilitating tools to the employees to enable them in working in a challenging business environment (Hse, 2022). Zara also conforms with Consumer Protection Rights to protect personal information.
Internal analysis
Vrio analysis
Figure 1: VRIO analysis, Source: Author
Value chain analysis
Primary activities
Inbound logistics
Inbound logistics activities for Zara include sourcing new materials to design new clothes and fashion wear for the customers. Inbound logistics of Zara comprise allocating products, maintaining inventory and dispatching the final products to the stores (Businesslogisticssite, 2017).
Operations
The operational activities for Zara encompass processing the raw materials into the end products and then introducing the same in the market to gain the attention of customers towards the organisation. Besides, the operational activities for Zara also comprise packaging, assembling and testing the products to see if it matches the expectations of the customers.
Outbound logistics
Examining the outbound logistics of Zara comprises materials handling, warehousing, preparation and order processing (Mmh, 2022). Outbound logistics for Zara includes maximizing the gratification level of the customers along with increasing the growth chances for the organisation.
Marketing and sales
Marketing and sales actions of Zara include advertising, advertising actions, pricing and assortment of channels. Marketing and sales activities for the organisation help Zara in maintaining high efficiency and effectiveness within the establishment.
Service
Services that are being offered by Zara to its customers comprise pre-sale and post-sale services that help them in attracting the attention of customers towards the organisation along with growing the loyalty of the customers.
Secondary activities
Firm infrastructure
Firm infrastructure for the organisation comprises keeping quality management, handling legal matters, accounting and financing along with effective infrastructure management that allows Zara to optimise their overall value chain process.
Human resource management
HRM within Zara plays a vital part in managing the employees and directing their actions. HRM activities for Zara comprise employing, choosing, training and designing rewards and performance efficiently to attain organisational victory.
Technology development
Development of technology helps Zara in protecting the information of the customers by using data analytics techniques and blockchain technology allowing them in keeping the personal information of the customers safe (The industry, 2023). Technology growth for Zara also helps in growing effective efficiency and productivity.
Procurement
Procurement activities for Zara encompass buying inputs that range from apparatus, machinery, raw materials and other necessary items that help in manufacturing their clothing.
Determine Zara’s current sources of competitive advantage from the environmental analysis and critically evaluate how they maintain and build on this competitive advantage.
The present sources of competitive advantages for Zara include their strong supply chain and technological growth that benefits the firm in procuring their resources on time so that high-quality products can be manufactured that are being offered to the customers to gain their care towards the administration. The supply chain for Zara also helps them in eliminating the concern of resource wastages that not only increase the cost but also negatively affect the overall operations of the organisation (Supplychain247, 2022). Technological advancement for Zara allows them in adopting centralized design and product development processes that assist the firm in meeting customers’ demands. Technological advancement within the organisation also benefits in scheduling and preparation the actions to automate production and warehouse amenities to grow the SCM procedure which assists Zara in accomplishing competitive advantages over their competitors (Harvard, 2022). Technological development for the organisation also helps them in increasing their overall efficiency a result of which earns them high revenue and profitability that subsequently add to their competitive advantage.
Task 2: Strategy in the Global Environment
Critically evaluate the motives for Zara’s global expansion
Based on the evaluation of the Yip Model it has been identified that Zara accepts market drivers that assist the firm in growing its standardization procedure to the market. Globalisation also benefits Zara in knowing about the likeliness and choices of the fashion wear customers helps Zara in scheming and manufacturing clothes that match the expectations of the customers and also helps in building their excitement (Andreoni & Yip, 2020). The standardization process that has been considered by Zara benefits them in making their company felt among global customers which grows the business chances for themselves to enjoy high revenue and profitability over the period (Benevolo, et al., 2020). Zara’s failure to consider the process of standardization increases the challenges for them in upholding uniqueness within the fashion wear clothing decreasing their ability to attract a large number of customers and make them loyal. The standardization process that is being considered by Zara helps them rationalisation different varieties of products alongside helping them in declining the volume of products in the store and also the overall manufacturing cost that is related with it (Peng, 2021). The standardisation procedure for Zara benefits them in working in a global platform by simplifying the growth and marketing of products followed by streamlining the procuring management. The standardisation process considered by Zara assists them in ensuring high quality and safety levels for the development of services and products (Abubakre, et al., 2021). The motive of Zara’s global expansion is that it helps them in knowing about the changing dynamics of the environment and prepare themselves accordingly to tackle challenging situations.
Figure 2: Yip framework of Zara, Source: (Andreoni & Yip, 2020)
Provide justified recommendations for the different strategies
The three most justified and appropriate global market entry strategies that are being considered by the organisation comprise exporting, joint venture and company ownership. The recommended strategy that is being considered by Zara while operating in the challenging UK business environment comprises exporting which enables them in gaining access to more customers and businesses helping them in achieving high growth and profitability (Bogers, et al., 2019). Furthermore, developing a positive relationship with the customers also assist Zara to know about the choices and preferences of the customers which enables the organisation in designing fashion wear clothing to gain the attention of customers (Cassia & Magno, 2022). Exporting strategy for Zara also allows them in diversifying its market opportunities which opens up new business opportunities for them.
A joint venture partnership for Zara allows them in forming a relationship with other strategic firms that allows them in performing the activities in a coherent and well-structured manner. Joint venture partnership for the organisation also benefits them in understanding the local market of the UK and look forward to developing their fashion wear clothing accordingly to match their expectations and contribute to their overall development (Henry, 2021). Company ownership is also a form of strategy that can be undertaken by the organisation to grow its business in the UK (Alon, et al., 2021). Zara adapting to this strategy will be looking forward to acquiring any small clothing firm in the UK such as Asiana clothing so that they can use the brand name under which they can sell their product ranges to satisfy the demand of customers.
A brief justification of the Global Entry Strategies suggested
The most appropriate and justified entry mode method for Zara will be a joint venture partnership that will be helping the organisation in growing its business operations that contribute towards organisational growth. A joint venture partnership for Zara helps them in gaining access to new market and distribution network that allows them in growing their operations (Paul, 2019). Knowing about the local market also benefits the organisation in designing the fashion wear clothes based on the specific requirements of each of the customers so that their trust and loyalty towards the organisation can be increased. Gathering knowledge regarding the market Zara wants to venture into also helps them in identifying the opportunities and limitations it presents that help the organisation in devising its strategies accordingly which helps them in generating high revenue and profitability (Audretsch & Link, 2019). A joint venture partnership for Zara also allows them in gaining new knowledge and expertise that assists the staff working within the organisation to perform in a well-coordinated and organised manner that contributes towards the overall development of the organisation (Paley, 2021). Joint venture partnership also allows Zara to share their resources and capabilities with other organisations which helps it manage its resources efficiently to reduce the overall expenses of the organisation.
Task 3: Corporate strategy
Improving the Global supply chain
At the Global level, Zara will need to increase the production of the service as a part of its strategic supply chain (Jiang, 2022). Zara currently has different options like merger and acquisition as well as internal expansion for horizontal integration. Compared to internal expansion, mergers and acquisitions will be more effective for the organization to implement horizontal integration (Cui and Fan, 2021). Not only the company will be able to capture a vast market but will also create a brand Monopoly as merger and acquisition with the third-party service provider and local supply can provide the organization with the opportunity to enhance its sustainability measure as well as help the organization to grow in revenue and size. The product range and offering for example can be increased. The personalisation service is a significant opportunity that exists for Zara (Tomaszewska, 2021). In addition to improving the traditional in-store shopping experience of the customer, it can collaborate with companies like Costa Coffee and KFC. People will not only have the ease of choosing a wide range of products but will also enjoy the in-store shopping experience.
Strategic Alliance will allow Zara to reach a broad audience without putting in extra capital and effort. To gain the opportunity to enter new markets strategic Alliance to Zara can improve competitive Positioning (Cui and Fan, 2021). The strategic allowance can be made with the local suppliers in new markets which will allow the organisation to reduce the cost and investment of sustainable manufacturing of the products which will complement its brand product and at the same time it will have reduced cost and investment.
Increasing business profitability
Kapferer’s brand identity prism is a suitable Framework that can be taken into consideration by Zara to increase its profitability (Submitter and Ross, 2020). Zara is an international brand and already has a loyal base of customers. According to the Framework, the brand is represented by a company based on the way the customer perceives it. This model can be effective for Zara to build a strong brand image which will reflect the core values of the company. Physique is an important element of the model which highlights the characteristics of the brand (Kapferer, 2009). The sleek and stylish Pantone of Zara already highlights the luxurious feeling that customers can have while wearing the brand. The personality element of the model highlights how the brand communicates with the customers. For the range of a product in the kids’ section or swimsuits, the company can incorporate happy and playful scripted font which will highlight the brand messaging to the customer to have a joyful time wearing the product with friends and families. The outlets of Zara can be made more colourful and inspired which will help in attracting more customers (Dodo et al., 2016). The core value of Zara encourages Innovation and creativity in the fabric quality and design of the products. In different outlets, the relationship and cultural elements of the model can be utilized by the company to connect with the customers.
Task 4: Strategic Purpose-Ethics and CSR
CSR strategies of Zara
The fashion industry with the changing demands and expectations of the customer is becoming more polarised. Transparency and sustainability are what the customers are expecting from the brand (Lee and Lee, 2018). Responding to the demand and changing trends in the industry Zara along with other fast fashion company uses are incorporating CSR strategies. Inditex, which is the parent company of Zara reportedly announced to improve the sustainability measures of the company. The company is focusing to ensure that all the types of fabric used in the manufacturing like cotton, polyester and linen which are used by all the eight brands including Zara will be produced organically. Among all other brands of Inditex, Zara is the most visible and popular brand. Initially therefore the company is planning to stop the use of synthetic fibre for the production and manufacturing of products of Zara. The synthetic fibres that are used in clothing accessories and shoes globally the company is focusing on eliminating the use of synthetic fibre (Coombs and Holladay, 2015). In 2020 Zara already attend a milestone in terms of sustainability in the business operation as the use of plastic bags for the shopper was eliminated by Inditex, from all its companies and brands. The customer say also the company is further focusing on eliminating all single-use plastic by 2023.
Ethical issues and recommendations
Like any other High Street fashion retail company Zara is also working towards sustainability. However, due to the ethical issues faced by the organisation, it still has a long way to go. The animal welfare policy of Zara highlights that in the first production of the products and accessories, it is not used, angor, fur or animal testing. However, there is no direct tracing in the company which highlights the elimination of the company to use of wool, exotic animal hair and Leather (Perry and Wood, 2018). It makes the company to be represented the customer as an overlapping implementation of the policy. The customers considered the green and sustainable practices of Zara to be not considerate yet enough due to lack of transparency and cases of using animal fur and hair.
The company will need to focus on and implement the policy of closing the loop more efficiently. It will need to leverage the practice of reusing and recycling the used customer products for designing and supply of the material and creating a new version of the same product. It will need to encourage the return policies for the use of products and enlighten the consumer (Jiang, 2022). Offers and discounts can be provided to the customer to encourage them in returning Zara products. It will not only encourage the customer to directly participate in the sustainable program but will also enable the company to implement the closing the loop program more effectively.
Conclusion
The report was based upon Zara where in the introductory stage it explained the external and internal environment. Pestle and value chain analysis have been examined to determine the same. Competitive advantages that are being enjoyed by Zara have also been explained within the report helping Zara in earning high growth and profitability. Yip’s framework of globalization has also been subsequently discussed within the report followed by explaining of the standardization strategy. Proper evaluation of market entry modes for Zara such as direct exporting, company ownership and joint venture partnership. The choice of proper joint venture partnership has been explained in regards to Zara helping the organisation to grow exponential
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