Zara Essay Example | Topics and Well Written Essays - 1250 words

Zara - Essay Example In order to evaluate the changes in the retail clothing industry and the position of Zara, an analysis of the external environment has been carried out with the help of five forces as described below. The forces which are favourable for Zara are attractive for their future prospects whereas the forces which are less attractive poses threat to the business of Zara. There other three major external forces that have substantial impact on the business of activities of Zara. These are social factors, technological factors and economic factors. In case of social factors, changing trend of people’s choices and preferences about their clothing and apparels is one of the major issues. The company has to keep high focus on this trend so that they can come up with new designs according to the new trend in the market. In case of technological factor, most important issue to look on is adoption and use of advanced technology i.e. hi-tech machineries and techniques of production and designi ng of clothes and apparels. In case of economic factor, the volatile economy of every developed and developing market is one of the major issues to look on. This factor has high impact on price of raw materials, operating cost of the company and lastly the price of finished products. External Environment analysis of Zara (Porter’s Five Forces Analysis) Competitive rivalry in the industry The retail market in the clothing industry is highly competitive due to the presence of the Big 4 in the apparel industry, namely Zara, The Gap, Benetton and the H&M. All these companies have adopted the strategy of expanding in the global markets which has been reflected in the tight competition for market share (OaShaughnessy 57). The financial performance of Zara in 2011 denotes that the company has performed exceedingly well as compared to its competitors. The profits of Zara have increased by 12% whereas the profits of Benetton, The Gap, and H&M have changed by only 1%. The competitive s uccess for Zara is an attractive external force for Zara which has been attained due to its responsive marketing, efficient supply chain and human resource management. Threat of new entrants The retail clothing industry is highly competitive with the increasing presence of clothing companies at the regional, national as well as in the global level. The new players are also targeting the apparel industry due to the shift towards the online mode of business. Although there is threat of new entrants, Zara is comfortable in the short term as the company has developed a brand image in the international marke