Business Strategy of Zara and H&M

Business strategy is a crucial aspect of management and marketing of the organization. It is necessary for achieving the organizational specific goals and objectives. Moreover, a proper business strategy is a way to increasing the performance and productivity of the company. Without a doubt, one should constantly improve the business strategy to achieve the competitive advantage and efficiency. To identify the business strategy, one should analyze factors leading to success and failure. The company should apply the appropriate strategic tools necessary for creating the objective picture of the organizational activity. The current paper intends to reveal the peculiarities of Zara and H&M business strategies and peculiarities of their business.

Background, Mission, and Vision

Zara Company was founded in 1975 by Rosalia Mera and Amancio Ortega. It is a Spanish accessories and clothing retailer. It refers to the Inditex group that owns such brands as Bershka, Stradivarius, Uterque, Pull and Bear and Massimo Dutti. Zara Company operates in the USA and European markets. In the present time, Zara has 1, 751 stores worldwide. Zara’s mission is to provide the development of the society and environment through eco-friendly items and saving energy strategy. The vision of Zara is to be committed to its employees and make them committed to the company (About Zara, 2015).

H&M Company was founded in 1947, but it had another name, Hennes. It was opened in Sweden. However, in the present time H&M is a group that unites such brands as Cheap Monday, Weekday, Monki and COS. Moreover, the company operates worldwide offering its qualitative and not very expensive clothes and accessories. The mission of the company is to provide better fashion future making fashion more affordable, desirable and sustainable. The vision of H&M is to make all its operations running in the way that is sustainable, environmental, social and economical. H&M wants to meet the needs of both present and future generations (About H&M, 2015).

It is evident that backgrounds, missions and visions of Zara and H&M are different. However, both companies orient their business strategy at the expansion of the market and achieving the competitive advantage.

The Rationale behind Zara’s and H&M’s Strategic Decision

The rationale behind Zara’s strategic decision is related to its marketing and management. The leading operations of the company include manufacturing, finance and distribution. It is evident that organizational strategic decision-making is logic when it comes to manufacturing some items in-house, as it saves costs and brand reputation. One should understand that such decision will contribute to Zara’s capability to adapt to customers’ changing demands and offer them what they want. Zara produces the most fashion-sensitive items to be always in trend and differ from its competitors. Another rationale of Zara’s strategic decision is the investment in IT-technologies that benefits marketing-mix variables.

The rationale behind H&M’s strategic decision is related to the online expansion as a way to increase the number of consumers, sales and profits. Another rationale of H&M’s strategic decision refers to sustainable growth with the help of a strong financial position. H&M is growing with high profitability, sustainability, and quality through offering an inspiring fashion for everyone. Opening new stores and online shopping are the methods of decision-making process of H&M. Moreover, the strategic decision of H&M includes expanding the target market through increasing stores by 15% per year (About H&M, 2015).

It is evident that H&M and Zara apply different rational steps for their strategic decisions. Zara’s strategic decision is based on the product strategy that is necessary for making the company different from its competitors. As to H&M, distribution and promotion strategies are more crucial for the company as the ways of growth and expansion.

Factors that Lead to Success or Failure

It is evident that Zara, as well as H&M, deal with the factors that may lead to success or to failure. First of all, such factors include leadership, strategic decision, resources, competitiveness, strategic mindset and strategic planning. The leadership of Zara is successful due to the fact that the company has been operating since 1975. The ability to manage Zara stores in 81 countries proves the proper strategy and exemplary leadership. Strategic decisions of the company can lead to success, as well to failure. Consequently, Zara should innovate its strategy adapting it to the city-specific trends.

As to the resources of Zara, they can lead to failure of business strategy. First of all, Zara should develop its human resources through the additional learning and training. Secondly, the company needs the additional investments for the implementation of new products and services. Competitiveness is another factor that can be a restraining force for Zara Company. For example, Mango, H&M and Atmosphere are the key competitors that are not less successful than Zara. Poor strategic planning and strategic mindset can also lead to management mistakes that are inevitable while making spontaneous decisions. Zara is a mass brand, but it should offer the items of the luxury clothing to differ from its competitors.

The leadership of H&M is successful, as the company is profitable and successful in its product strategy. 2014 is a peak of H&M success. The strategic decisions of the company are related to the expansion of products, consumers and locations. One can say that H&M succeeds in it. Convincing suppliers, sustainable influence, and fair wage method are the basis of the success of H&M. It is evident that the proper choice of management and marketing techniques can provide the success of leadership and strategic decisions. Comparing with Zara, H&M is similarly successful. However, the difference between them refers to their directions of development and growth (About H&M, 2015).

Resources, competitiveness and strategic planning can lead H&M to failure as such aspects can be driving and restraining forces at the same time. First of all, H&M should pay more attention to its financial and human resources to increase profits and sales. For example, online shopping demands employment of IT-specialists or training and learning of already employed workers. Competitiveness can also lead to failure, especially to loss of consumers, sales and profits (Ferrel & Hartline, 2010). Zara is one of the competitors of H&M, therefore, H&M should show high results to remain successful and competitive. As to the strategic planning, H&M needs to make its marketing and management activities smoother and better-organized (About H&M, 2015).

Assessment of the Relevancy of H&M and Zara’s Strategies

One can analyze the relevancy of H&M and Zara’s strategies according to the SWOT technique that is necessary to determine strengths, weaknesses, opportunities and threats.

SWOT of H&M

Strengths

1. Being one of the largest international retailers.

2. Many stores worldwide.

3. The items are trendy and affordable.

4. Strong brand image.

5. Huge variety of customers.

Such strengths of H&M enable the company to meet customers’ needs. First of all, they prove that H&M takes care about their customers and tries to adapt its products accordingly. The strengths of H&M reveal that the company has all the opportunities for the further development and is different from its competitors.

Weaknesses

1. Following after luxury brands.

2. Lack of control over the production.

3. Low quality.

Such weaknesses can prevent H&M from meeting customers’ needs as the prices can be considered too high by the customers. In regard to complaints, they can damage the organization`s reputation. The weaknesses do not negatively differentiate H&M from its competitors as they are characteristic for any kind of organization.

Opportunities

1. Online shopping.

2. Emerging at the international markets.

3. Emerging of organic clothing line.

4. Collaboration with luxury designers.

The opportunities serve customers’ needs as they presuppose extension of the product strategy. Consequently, the short-term strategies should be implemented during one year. The opportunities of H&M are endless since the company has a successful product strategy. The main goal is to improve marketing strategy in order to implement all the opportunities efficiently and, consequently, receive profits (Ferrel & Hartline, 2010).

Threats

1. No typical customers.

2. Rising labor cost in Asia.

3. Always changing street style.

4. Many strong competitors.

The threats are related not only to customers’ needs but also to competitors as they can be both driving and restraining forces for the company. High competition is a threat that refers to a long-term perspective. On the contrary, the lawsuits refer to a short-term aspect. The threats of the company show that the organization should reevaluate the profitability and reconstruct its strategy.

SWOT of Zara

Strengths

1. Efficient distribution.

2. Cost leadership strategy.

3. Fast delivery of new trends and products.

4. Information technology.

Such strengths of Zara prove the innovative approach to marketing and opening future perspectives for the organization.

Weaknesses

1. Does not spend much money on advertising.

2. One manufacturing and distribution center.

3. Centralized distribution system.

Such factors of Zara only reinforce the necessity of business strategy improvement through the change management process and innovation.

Opportunities

1. Online marketing.

2. Global market penetration.

3. Distribution center in the USA.

The opportunities prove the globalization and modernization of Zara Company through the integration worldwide.

Threats

1. Local and global competitors.

Such threat can become a driving force for Zara Company.

The Major Strategic Issues

Despite success and efficiency Zara, as well as H&M, can face many strategic issues. As to Zara, it can deal with the challenges related to development and innovation. Moreover, the company can face political issues that prevent strategic planning. As the company functions in many countries, it should adapt to laws and regulations and be ready to any changes. Zara should be especially sensitive to labor laws. Another strategic issue is related to the product strategy. For example, in Europe Zara clothes is based on three leading colors. However, Indian customers demand more colors to feel themselves more comfortable. It means that Zara should study carefully national peculiarities and reflect them in its clothes manufacturing. Moreover, the company can deal with the social strategic issues, such as expensiveness and weather conditions. Consequently, the company should adapt its products to the financial possibilities of the population (About Zara, 2015).

H&M can deal with such strategic issues as inability of employees to adapt to the innovation processes. The policy of the company was rigid as they did not want to change even those points that were not beneficial for them. As a result, they had many failures. Rigidity and standing are the barriers of an effective strategic policy. At present time, it is very risky to be static as there are many competitors and changes at the market and H&M should be ready to avoid any risks and take a leading position at the market. It is impossible to predict all risks but there is an opportunity to be ready to them with the help of marketing planning. H&M should be ready to implementation of new products and new marketing strategies and should not be limited by a marketing planning. One should demand from employees a good intuition, logic thinking, and creativity, as such qualities help define the main points of strategic policy.

Critical Appraisal of Strategic Approaches and Decision-Making

The strategic approach and decision-making process of H&M are successful due to their orientation on modernization and improvements. H&M uses BI system and Balanced Scorecard to record and report progress towards its goals. The total estimated initial investment in the Franchise is $970, 195. Enforcement is done according to the legal regulations and requirements. The main policies of H&M are finding appropriate locations and hiring and training of personnel according to the standards of the company. Monitoring of H&M performance is done through innovative technologies and management information systems. Accountability is done not only for personal reasons but to comply with the legal regulations (About H&M, 2015).

The strategic approach and decision-making process of Zara Company are similar to the ones of H&M, as both organizations specialize in clothing. Technologies are applied for all operations and processes to make them more efficient. The main goals of H&M are: studying the market of clothing business and investigating the current tendencies in the clothing industry in the USA, Europe and Asia; investigating the company offering franchise cooperation and its requirements; finding the appropriate location for the stores, taking into consideration local competition, potential demand and target audience.

H&M uses the following techniques to monitor the marketing audit: SWOT analysis, 5 Porter’s analysis, and management information systems like Business Intelligence. The managers and HR managers should be responsible for evaluation and control of the marketing policy in H&M. It is possible to distinguish such area of improvement of H&M as organizational improvement. It is crucial for the company to promote the diverse environment that provides higher productivity. The company can change the recruitment methods to implement the innovative approach to the hiring process. Low employee satisfaction can also provoke challenges as the company can suffer from decrease in sales and profits. One should motivate the employees to be more productive through rewards and bonuses.

Conclusion

To sustain its business,m Zara should increase employee productivity through training and learning. Low employee engagement can lead to the poor productivity and failure of communication due to possible misunderstandings and conflicts. Moreover, the company should follow ethical principles in the attitude to the customers and employees. High conflict level and team-related issues can be solved only with the help of ethical and moral decision-making processes. All the challenges described above are important because they can negatively influence the organization`s efficiency and success.

Similarly, to sustain its business, H&M should be more severe to the operations within the company. Schedule and timeline will oblige the company to do everything in time and implement strategic planning. Informal control in H&M includes customer feedbacks, self-control, cultural and social control. Formal control refers to administrative monitoring of practical skills and cultural competences. It is possible to distinguish such area of improvement of H&M as organizational improvement. It is crucial for the company to promote the diverse environment that provides higher productivity. The company can change the recruitment methods to implement the innovative approach to the hiring process. In addition, low employee satisfaction can provoke challenges as the company can suffer from decrease in sales and profits. One should motivate the employees to be more productive through rewards and bonuses. Change management process that presupposes improvement of marketing and increasing of profits is a must for H&M. Employees can be dissatisfied with the changes in the processes. However, additional training and learning can change the situation.