Sample SWOT Analysis on Clothing Store Zara

Zara is one of the largest retailers of apparel in the world. The company is part of the Inditex group, which is a large multinational composed of mostly clothing companies, with headquarters located in Arteixo in A Coruna, Spain. Along with Zara Home, Zara is Inditex’s largest brand. Inditex’s financial statements show that Zara brought in revenue amounting to €19.564 billion ($23.59 billion) in 2019, an almost 8.5% increase from the €18.021 billion ($21.73 billion) earned in 2018 (Inditex, 2019). But while Zara has been vastly successful since its founding in 1975, the company is not in peak shape, largely on account of the economic issues brought by the ongoing COVID-19 pandemic that began in late 2019. Inditex’s sales for the first quarter of 2020 were down by 44% compared to the first quarter of 2019. Inditex was also forced to shut down over 1,200 stores as part of its reorganization efforts (Jolly, 2020). While the losses mostly come from Inditex’s other brands like Bershka and Stradivarius, Zara’s fate may not be far-off, as the pandemic rages on and threatens to cause more problems. It is therefore opportune to conduct a SWOT analysis of the brand in order to determine strengths and opportunities that can be harnessed as well as weaknesses and threats that require addressing. This research paper presents a SWOT analysis of Zara. It will look into the strengths, weaknesses, opportunities, and threats facing the company as well as offer recommendations where appropriate.

Strengths

A number of strengths made it possible for Zara to dominate the clothing industry, and one of these is its highly efficient supply chain. As a fast fashion company, Zara is under intense pressure to bring fashion trends to consumers as fast as possible. This is why Zara developed a supply chain capable of taking designs from drawing boards to retail stores within four to six weeks. Zara also has a rapid response system capable of altering designs based on consumer preferences within a week. Meanwhile, economies of scale and the establishment of factories in key regions such as Turkey and North Africa give Zara logistical advantages (Burgen, 2012). Zara’s creative teams also serve as a strength. The company employs over 700 designers who constantly produce tens of thousands of designs (Inditex, 2020). Finally, Zara’s popularity as a brand is also one of its strengths. The company is known for not running ads; it simply is well-known enough for consumers to flock to stores in anticipation of new products. The brand has over 2,200 retail stores around the world as of 2019 (Statista, 2021).

Weaknesses

While Zara’s strengths made it one of the most valuable apparel companies in the world, it is not without weaknesses. For one, its business model still largely relies on physical stores. Although the company has an online presence, the number of products featured is nowhere near that present in actual shops. Online shopping also cannot replicate the complete experience of being in a physical store. But as the current pandemic showed, having stores closed can seriously hurt sales. For another, Zara is fast fashion, which means its products have high turnover rates. These products are based on ever-changing trends and are usually of lower quality, and thus consumers dispose of them once they go out of style or show signs of wear. All these results in the use of a great deal of resources and the generation of massive amounts of waste. In fact, the apparel industry generates 8.1% of greenhouse gases, and fast fashion companies like Zara and its competitors are among the biggest contributors (Chua, 2019). Zara’s sourcing practices have also been under scrutiny for years. The company conducts business with suppliers from around the world, but some of these suppliers have been criticized for subjecting workers to long hours, unjust wages, and sweatshop conditions (Jha, 2020). While Zara does not directly employ the workers of these suppliers, the company is under pressure to take action by refusing transactions with businesses with unethical practices. And as the effects of global warming worsen, Zara will have to find ways to integrate more sustainable measures.

Opportunities

Zara’s weaknesses naturally present opportunities that could help ensure Zara’s longevity as a brand. Firstly, the company can start expanding its sustainable product lines. The call for more ethically produced apparel is gaining momentum. For instance, the majority of Generation Z (54%) and around half of Millennials (50%) are willing to pay a little more for sustainable products (Petro, 2020). Since Zara’s main market is composed of young people, the growing ecological awareness of these age groups should serve as an impetus for expanding sustainable product lines. Zara can also emphasize how these products are distinct from their regular offerings. Sustainable products basically market themselves. Ecommerce also serves as a new avenue, especially since the pandemic has given people more reason to avoid going out unless completely necessary. Leisurely activities such as shopping, therefore, have taken a backseat. The company already has a strong ecommerce infrastructure in place, but the bulk of the revenue still comes from physical stores. Zara can improve its online shopping experience not only by featuring more products on its app and website but also by utilizing the latest technologies that allow for seamless transactions. One example is the use of radio frequency identification (RFID) in business.

Threats

Finally, external threats also present new challenges to Zara. One such threat is the advent of stricter policies with regard to practices that impact the environment. Governments are clamping down on emissions, and most multinationals are facing uncertainty over the way policies will change. Policy changes meant to address the future of the greenhouse effect will have a negative effect on Zara’s business model and operations. Curbs on the apparel industry’s emissions, for instance, may force Zara to abandon some of the practices that allow it to dominate the market. Another threat is tight competition. Competition in the fast fashion industry is notoriously tight, and even the biggest companies may suffer massive losses should they fail to stay ahead of the game. But staying ahead is not always about expanding. Forever21, once a major player in the fast fashion industry, filed for bankruptcy in 2019. Analysts believe that overly aggressive expansion was to blame (Kahn and Cesario, 2019). Forever21 simply tried too hard to open too many stores and sell too many products as quickly as possible. Given the current demand for sustainability, Forever21’s breakneck-speed business model became its own downfall. Zara may eventually find itself in the same dilemma should its reputation and designs become discordant with consumer behavior and expectations. Finally, the economic recession resulting from the ongoing COVID-19 pandemic also means people are spending less, and its impact has already been seen as Zara’s sales tumbled last year. Again, these threats can be mitigated by promoting sustainability and encouraging ecommerce.

Zara already has key advantages that allow it to dominate the fast fashion industry. It is a well-known brand admired for its designs and it has a highly-efficient supply chain. Its business model, however, presents significant risks that may compromise its longevity. The COVID-19 pandemic, in particular, exposed vulnerabilities such as the company’s dependence on physical stores. The social and environmental cost of conducting fast fashion business is also a concern, especially given Zara’s clientele’s shifting perspectives on consumerism and the rise of ethical consumption. If Zara is to stay strong for long, it needs to start offering more sustainable products and encourage ecommerce.

SWOT analysis is a framework often used in research studies, especially in Business. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This framework helps the researchers to identify which aspect or aspects of a business need improvement. As a result, most thesis statement or objectives are targeted toward addressing a concern (Weaknesses and Threats) identified through the use of SWOT analysis. It can also help the researchers identify the business aspect that are already good, thus must be reinforced (Strengths and Opportunities). The SWOT analysis, although straightforward, is tricky because it is easy to confuse strengths with opportunities and weaknesses with threats. Because of this, one of the issues with SWOT analysis is the possibility of redundancy. The good thing is CustomEssayMeister has hundreds of writers who are experts in business research and paradigms, including SWOT analysis! Ask our operators now on how to get assistance for your paper.

References

Burgen, S. (2012). Fashion chain Zara helps Inditex lift first quarter profits by 30%. The Guardian . https://www.theguardian.com/business/2012/aug/17/zara-inditex-profits

Chua, J. M. (2019). The environment and economy are paying the price for fast fashion — but there’s hope . Vox. https://www.vox.com/2019/9/12/20860620/fast-fashion-zara-hm-forever-21-boohoo-environment-cost

Inditex. (2019). Annual reports . Inditex. https://www.inditex.com/investors/investor-relations/annual-reports

Inditex. (2020). Design. Inditex. https://www.inditex.com/en/how-we-do-business/our-model/design

Jha, N. (2020). Zara’s billionaire owner was praised for helping in the coronavirus crisis. Workers in Myanmar paid the price . BuzzFeedNews. https://www.buzzfeednews.com/article/nishitajha/coronavirus-zara-spain-inditex-myanmar

Kahn, B. and Cesareo, L. (2019). Fashion fail: Where did Forever21 go wrong? Knowledge@Wharton. https://knowledge.wharton.upenn.edu/article/where-did-forever-21-go-wrong/

Petro, G. (2020). Sustainable retail: How Gen Z is leading the pack. Forbes . https://www.forbes.com/sites/gregpetro/2020/01/31/sustainable-retail-how-gen-z-is-leading-the-pack/?sh=2b1224822ca3

Statista. (2021). Number of Zara and Zara Home stores worldwide in 2020, by region. Statista. https://www.statista.com/statistics/674434/number-of-zara-stores-worldwide-by-region/