ZARA
Introduction and e- Business background
A Spanish group known as Inditex found ZARA in 1975. ZARA is a Spanish clothing manufacturer and the world’s largest and successful clothing retailer. It is a fashion label and a fashion chain store that operates in many countries. The expansion of the company in the international market started in 1988 by opening its store in Portugal. The company has more than 2000 stores in different parts of the world. It is a part of ZARA’s policy that it reinvests a certain percentage of the company’s revenue to open new outlets .
Unlike its competitors, the company has all of its production units in Europe. By keeping the entire production unit in Europe, the company is able to bring new products to the market faster. It is a part of ZARA’s strategy that they take one week to complete the entire process (manufacturing to distribution) of bringing their clothes to the market. The competitors of the company are unable to compete with ZARA when it comes to launching new products. It is mainly because most of the competitors have their production units in China. The efficient strategy of the company enables them to differ from the trend of the industry, which is to launch new products in every six months.
Approach to Strategy Change and its Relevance in the Industry
ZARA worked exceptionally well in the industry as compared to its competitors but it lacked in the use of technology to increase its market share. The company did not have any online stores that restricted the company to capture a larger proportion of the US and Asian markets. Although the company had several outlets, they were not able to fulfil the demand because of no access in certain markets. To overcome this issue, the company planned to bring a change in its traditional system by providing its products to customers through its e-commerce website.
The approach of the company towards implementing the change was a part of the company’s strategy as they realized that the company is not able to reach a larger audience. Therefore, can be obliterated from the markets where it has limited or no access. Initially, ZARA launched its online services in six countries in 2010. The change initiative of the company proved to be beneficial as after providing such services the company offered to extend these services to five more countries within a month.
The strategic change implemented by the company had great relevance in the industry because all the competitors of the company were providing these services to the customers. E-commerce had a significant impact on the customers, and it allowed them with ease of purchasing goods and services from their homes or offices. The apparel industry was adopting changes according to the preference of the customers as more customers were interested in shopping through online stores. Almost all the clothing brands understood its benefits at an early stage and started providing services of e-commerce to its customers, and it also allowed them to reach to the customers in the markets where they had no stores. ZARA realized this strategy later started its commencement late as compared to its competitors. There was a significant need for online shopping store of ZARA as it aimed to capture larger market share and perform effectively in the global market.
Internationalization
The decision of ZARA to provide online shopping services to its customers can be termed as internationalization. Internationalization is a pervasive force that has reshaped the competitive environment. It is a process through which the company enters a foreign market, and ZARA did the same when it provided the service of online shopping to its customers. There are two main factors that result in the internationalization of the firm. The two factors are push factor and pull factor. The push factor for ZARA was competition as all competitors of the company were providing online shopping services. In order to remain in the competition and increase the market share, the company had to implement this change in its activities. The pull factors that influenced ZARA to internationalize was high growth and low cost. The low-cost factor was very beneficial for ZARA because it had to open its stores in different countries to make its products available but with the help of online shopping services, the company can easily offer its products in different markets. The company, before this change, was already performing internationally, but the areas were limited. The online shopping services of the company allowed it provide services in several areas and cover a large part of the global market.
It is necessary to analyse the change that is taking place or has taken place. In the case of ZARA, the change taken place by the company can be analysed with the help of McKinsey’s 7 S Framework. The framework is based on four soft elements and three hard elements (Cummings & Worley, 2014).
McKinsey’s 7 S Framework
Hard Elements
Strategy
The main strategy of the company was to make increase its market share in order to remain competitive in the market. As the company developed the online shopping stores in 2010, it is believed that the considered themselves as a strong brand which is far better than the competitors. The company soon realized that all that competitors have easily reached different markets through online shopping stores and have captured a huge area of the foreign market. Therefore, ZARA planned a strategic change in the activities of the company, which allowed them to provide their products and services in several parts of the world. The strategy of the company was also cost effective because in reaching different markets, the company had to reinvest some part of its profit to open a traditional store in a different market but through e-commerce the company is able to reach different markets at cheap rates.
Structure
It is necessary to build a proper structure of the change that is about to take place. The company developed a proper e-commerce structure before making it available for the customers. In order to check the potential in the change plan, the company initially started with only six online shopping websites and within a month, the company realized the potential of the plan and started providing these services in five more countries. The change initiative of the company was limited to a particular department and did not affect the activities of others departments, and therefore, it was easier for the company to implement the change (Burke, et al., 2010).
System
The main idea of this factor is to provide a formal design and procedure that can help the company in reaching its aims. ZARA wanted to increase the market share. Therefore, it planned to make the change. The strategic change was systemized as the company did not directly utilize all of its resources and started performing in the market. It took its time and took a small step to avoid any loss or damage to the company. From the initial testing of six online shopping stores, the company realized that by increasing its e-commerce services in different parts of the world will help the company to increase its market share and outperform its competitors.
Soft Elements
Skills
Skills are the capabilities especially of the key personnel to ensure that the change is implemented properly. The skills of the management and the leaders can help the company to adopt changes. As the company is opening a new department, there will be a need for skilled employees who can work on the new software of the company and can actively coordinate with the customers. The company must also plan training programs to increase the skilled and abilities of the employees, which are beneficial for both the employees and the company.
Shared Values
The shared values of the company help the employees to understand the nature of the wok and allow them to learn the manner in which the work carries around in the enterprise. The company has adopted changes that are very effective. It takes care of its online customers by updating its website according to the trends at its traditional shops. All varieties of clothes are made on the available plane. The price tags are also visible and discounts are also offered to the customers. It is the strategy of ZARA that it shares the same values with its entire customer in all parts of the world.
Staff
The staff plays a key role in the managing the change in an organization. The staff, especially in the case of internationalization of a company, must be according to the demographics. The staff must be able to communicate with the customers properly and must be able to guide them. ZARA was on the verge of rapid internationalization and wanted staff that can understand and perform to cater the needs of different markets. The company planned to train its employees and also hired new people to ensure that the company can perform efficiently.
The style of doing the business at ZARA was like most of the organizations. The information flow was from top to bottom, which is more like a bureaucratic style. The lower level of management and labour is supposed to follow the instructions provided by the senior management of the company. So far the company has not faced any issues with the staff as the employees of the company are working in a healthy environment. The style of the upper management plays a very important role in bringing the change in the company. If the management is effective, then it is easier to convince the employees to work. The change that took place in the company was not very difficult as far as the staff of the company was concerned. The upper management had to take a decision to increase the growth of the company in the foreign market and the change adopted by the company had less or no concern with the lower staff. The upper management made a decision of providing services of online shopping store for which they had to deal with new people and to implement the software. Therefore, the company did not face any challenge from the employees during the change initiative.
Analysis of Management, Resources, and Core Competencies
ANSOFF Matrix
Challenges
Every organization has to face challenges that if not dealt properly with the help of proper leadership can be a loss for the company. Some of the common challenges that are faced by all the international business are that of barriers to entry. ZARA does not face challenges of such barriers because it mostly operates in the European countries. Moreover, the new change of e-commerce would allow the company to reach the customers in different markets without barriers to entry because ZARA will not be physically present there. The export of good is not a big issue that can trouble the functions of ZARA’s e-commerce.
The biggest challenge that the company faced was to update its website and reach a larger audience. As per the company’s policy of customer-centric approach, the biggest challenge was to deal with different types of people, understanding their needs, and providing them with the right product. The company is expanding by working in different regions. The Asian demographics and culture are different from Europe and to fulfil the needs of the Asian market, the company needs to have the knowledge about their people, trends, and cultures.
Effectiveness of Strategic Leadership
The organizations that adopt change in their business activities require effective strategic leadership to implement changes that result in beneficial outcomes. The effective leadership helps the company to bring changes and ensures that all stakeholders agree to the change and are willing to accept it. At times, change is avoided or repelled by employees as it affects them to a certain level. In such condition, the leaders must convince the employees and make them realize that the change is not only good for the organization, but it is also beneficial for the employees as it helps them in increasing their skills and abilities.
Importance of Strategic Leaders
Strategic leaders and personnel belong to either the top level of management or are CEOs. The leaders are able to lead a strategic work in the organization, which helps the company in growing its business. These leaders have a vision and direction to lead the entire organization on the path of success. The leaders help in converting the objectives of the company into action. Before implementing the change at ZARA, the upper management of the company planned the entire change process and its impact on the business. The management of the company was aware of the main objective of the company and knew that providing online shopping services will help them in increasing their market share. The interpersonal skill helps them in communicating effectively with the employees. There are five different levels of leadership as discussed by Collins (2001).
5 Levels of Leadership
Level 5- Executive
A combination of modesty and professional will builds a great leader who is able to execute the work efficiently.
Level 4- Effective Leader
An effective leader commits to, pursue and compel vision, which stimulates the members of the group or employees to perform with high standards.
Level 3- Competent Manager
A competent manager is able to utilize the resources of the company efficiently.
Level 2- Contributing Team Member
A team member who works efficiently to ensure that the group is able to meet its objective.
Level 1- Highly Capable Individual
Knowledge, talent, skills, and good working habits make an individual capable of being highly productive.
The management of ZARA reflected five different levels of leadership. These levels of leadership are reflected at the time of implementation of change. The management was able to execute the change within a given time period and effectively inspired others to be a part of this change. The management of ZARA is highly competent as they were cost effective in reaching to foreign markets .
It is very important for the leaders to determine strategic direction as it helps the group member follow the direction and reach the objectives of the company. The goals of ZARA were well directed which helped the company to attain its aim within a short period. It is also necessary to maintain the core competency of the form because it helps in giving an edge over the competitors. The core competency of ZARA was to launch a new product in a short period as compared to its competitors. The company maintained their policy after the change to help them provide better facilities to customers.
The primary aim of every organization is to develop and manage the human capital as it helps in increasing the skills and abilities of the entire workforce. The workforce at ZARA is highly skilled and very well managed. It allows the company to meet the goals in time by manufacturing the new products within a week. The organizational culture is very helpful in creating a good working environment. The shaping and sustaining of organizational culture help in implementing the changes easily. The working environment at ZARA is healthy which reflects a sustainable organizational culture of the company.
It is very important for the firm to practice their activities ethically both inside and outside the organization. It is the duty of strategic leaders to create an environment in which all the employees are able to perform their work effectively. The management at ZARA has developed ethical activities, which allow best practices of the firm. The employees perform their duties in the best manner by following ethical practices. The organizational control helps in implementing strategies and allows the company to take corrective actions. The management at ZARA is able to create a balanced organizational control, which has helped the company in implementing the change effectively.
Conclusion
List of References
Burke, W. W., Hyder, A. & Faizan, S., 2010. Organization Change: Theory and Practice. Thousand Oaks: SAGE.
Collins, J., 2001. Good to Great: Why Some Companies Make the LeapAnd Others Don't. New York City: HarperCollins.
Cummings, T. G. & Worley, C. G., 2014. Organization Development and Change. 10th ed. Mason: Cengage Learning.
Meldrum, M. & McDonald, M., 2007. Marketing in a Nutshell: Key Concepts for Non-specialists. Oxford: Butterworth-Heinemann.
Stanford-Smith, B. & Kidd, P. T., 2000. E-business: Key Issues, Applications and Technologies. Amsterdam: IOS Press.
ZARA, 2010. Company- Info. [Online] Available at: <http://www.zara.com/us/en/info/company-c11112.html> [Accessed April 2016].
