Strategic Audit

Strategic Analysis (STRA 704)

Prof. Saneya El Galaly

Submitted By:
Ahmed Anas - Farida Gasser - Lamyaa Mahmoud - Marwa Ads - Marwa Salah
 Agenda
Organization Overview
Financial Analysis
Company Evaluation
Lamyaa
Corporate Governance Review
Scanning PESTEL Environmental Analysis
Porter’s 5 Forces Marwa Ads
Company External Scan
Company Internal Scan
Analyzing Strategic Factors (SFAS) Farida
Matching IE Matrix
TOWS matrix
Corporate Strategies Ahmed
Business Strategies
Recommendations Functional Strategies
Corporate Programs Marwa Salah
Evaluation and KPIs
Inditex: Ownership Structure

Ortega Family Key Stakeholders Employee Ownership

The Ortega family, led by Amancio Institutional investors like BlackRock Inditex's employee ownership
Ortega, is the largest shareholder, and Vanguard hold a substantial program offers discounted shares,
holding a significant stake. minority stake. aligning employee and company
success.
Inditex: A Global Fashion
Pioneer

1 Fast Fashion 2 Integrated Operations

Revolution
Inditex pioneered fast Integrated design,
fashion with its agile, two- manufacturing,
week production cycle. distribution, and retail
maximize efficiency.

3 Omnichannel Strategy
Its seamless online/offline sales boost reach and customer convenience.
Bershka: Targeting the Youth Market
Age Gender Income Lifestyle
Gen Z (16-24) & Millennials Men & Women (focus on Moderate income, Social media active, trend-
(25-35). women's). affordable fashion. conscious.
Bershka's Product
Offering: A Diverse Range
Apparel Footwear
Offers diverse clothing styles: Features trendy sneakers,
casual, streetwear, party, and sandals, and statement shoes.
sustainable options.

Accessories
Includes bags, jewelry, and other accessories to complete outfits.
Inditex Financial Performance
Key Financial Metrics (2021-2023)
• Net Sales (€M): 27,713 (2021), 32,603 (2022), 35,937 (2023)
• Gross Profit Margin (%): 57.30% (2021), 58.50% (2022),
59.20% (2023)
• Operating Profit Margin (%): 16.90% (2021), 17.70%
(2022), 18.40% (2023)
• Net Profit Margin (%): 12.30% (2021), 13.10% (2022),
13.70% (2023)
• Return on Equity (ROE) (%): 21.70% (2021), 24.10%
(2022), 25.60% (2023)
• Debt-to-Equity Ratio: Consistently below 0.5, indicating
low financial risk.

Inditex demonstrates consistent financial growth and profitability, surpassing projections.

Bershka's Financial Performance: Steady Recovery and Growth

Net Sales (€M) Gross Profit Margin (%) Operating Profit Margin (%) Net Profit Margin (%)
€2,315 (2021), €2,530 (2022), 55.7% (2021), 56.9% (2022), 12.3% (2021), 14.7% (2022), 7.8% (2021), 9.5% (2022), 10.7%
€2,648 (2023): Consistent 57.8% (2023): Upward trend. 15.3% (2023): Improved (2023): Increasing profitability.
growth. efficiency.

Return on Equity (ROE) (%) Debt-to-Equity Ratio

20.8% (2021), 22.4% (2022), Consistently low: Strong financial position.
24.1% (2023): Strong returns.
Inditex & Bershka: Vision, Mission, and
Philosophy

Vision Mission Philosophy Objectives

Inditex: inspiring global Inditex: Empowering People Innovation, sustainability, Net-zero emissions by 2040;
fashion. Through Fashion customer focus. continuous innovation;
enhanced customer
Bershka: Youth-style leader.
experience; SDG
Bershka: make fashion
contributions.
accessible, expressive, and
meaningful for young, style-
conscious individuals.
Corporate Governance

Board Oversight Risk Management Compliance Stakeholder Engagement

Inditex's diverse board ensures Proactive risk management Robust compliance ensures legal Inditex engages investors,
shareholder alignment. mitigates key threats. and regulatory adherence. employees, customers, and
suppliers.

Sustainability
Sustainable practices minimize
environmental impact and
promote social equity.
PESTEL Analysis: Political and Economic Factors
Political Factors Economic Factors
- Adherence to global trade regulations and labor laws - Growth opportunities in emerging markets like China and India.
reduces risks but requires compliance.
- Impacted by currency fluctuations and rising inflation costs.
- Operating in politically stable regions minimizes supply
chain disruptions.
PESTEL Analysis: Social
and Technological Factors

Social Factors Technological Factors

- Adaptability required for rapidly - Investments in digital tools
changing fashion trends. (RFID, AI) enhance efficiency and
customer engagement.
- Growing importance of e-
commerce and demographic - E-commerce expansion and
diversity. automation lower costs and scale
operations.
PESTEL Analysis:
Environmental and
Legal Factors
Environmental Legal Factors
Factors Compliance with
Focus on sustainability consumer protection,
and waste reduction to environmental laws,
meet consumer and and tax policies is
regulatory essential.
expectations. Safeguarding
Climate change risks intellectual property
necessitate robust protects competitive
adaptation strategies. advantage.
Porter's Five Forces Analysis
Rivalry Among Competitors
1 High Impact

Bargaining Power of Buyers

2
Moderate Impact

Threat of Substitutes
3
Moderate Impact

Bargaining Power of Suppliers

4
Low Impact

Threat of New Entrants

5
Low Impact
External Analysis
SWOT Analysis: Opportunities

E-commerce Growth Emerging Markets

Expanding digital presence to
Expansion
capture wider audiences and Growth potential in markets
enhance engagement. like India with rising middle-
class populations.

Sustainability Demand Technological

Aligning with eco-friendly
Advancements
consumer preferences to Leveraging AI, RFID, and
build loyalty and reputation. digital tools for improved
customer experience and
efficiency.
SWOT Analysis for Bershka:
Threats
High Market Competition
Intense rivalry from global brands and online retailers
with competitive pricing.

Economic Conditions
Vulnerability to reduced spending during economic downturns.

Regulatory Challenges
Compliance with labor laws, trade tariffs, and environmental
regulations adds complexity and costs.

Shifting Consumer Preferences

Need for continuous adaptation to rapidly changing fashion trends.
EFAS Matrix for Bershka
External Environmental Factors Weight Rating Weighted Score Comments
Opportunities
Growth in E-Commerce 0.15 4 0.60 Opportunity to expand digital presence and attract a wider
customer base.
Expansion in Emerging Markets 0.10 4 0.40 Growth potential in markets with rising middle-class populations.

Demand for Sustainable Fashion 0.10 4 0.40 Growing eco-conscious demand enhances brand reputation.

Technological Advancements 0.10 3 0.30 Need for digital innovation to meet evolving shopping behaviors.

Threats
High Market Competition 0.20 3 0.60 Intense rivalry from global and online fast-fashion retailers.

Economic Conditions 0.15 2 0.30 Susceptibility to reduced spending during economic downturns.

Regulatory Challenges 0.10 2 0.20 Compliance with regulations adds costs and complexity.

Changing Consumer Preferences 0.10 3 0.30 Adapting to evolving fashion trends is critical for relevance.

Totals 1.00 3.10 Balanced opportunities and challenges;

focus on e-commerce, sustainability, and
competition.
Inditex Internal Scan
Analyzing the company’s resources, capabilities, and processes, which contribute to its competitive position.

Brand Portfolio & Marketing Position Vertical Integration & Supply Chain
Management.
A diverse range of brands, various market segments,
Vertically integrated business model (Design,
customer preferences, enhancing its market reach and
Production, Distribution and Retail )
resilience.

Technological Innovation & Digitalization Financial Performance & Resource Allocation

Invests in technology to enhance operational Resources to invest in expansion, innovation, and

efficiency and customer experience. The sustainability initiatives.
implementation of RFID.

Organizational Culture & Human Resources Sustainability and Corporate Responsibility

A culture for creativity, flexibility, and customer focus. Commitment to sustainable practices is integral to
Ability to attract and retain talent. Inditex's strategy
Internal Analysis – Strengths & Weaknesses
STRENGTHS WEAKNESSES

S1 Strong Brand Portfolio W1 Dependent on Europe for Revenue

S2 Diversified Product Portfolio W2 Sustainability & Ethical Practices

S3 Global Presence W3 Ethical Concerns
S4 Vertical Integration Model
W4 Limited Online Presence
S5 Technological Innovation

S6 Efficient Supply Chain Management

 Internal Factor Analysis (IFAS)
Bershka’s
Internal Environmental Factors
Performance
Strength Bershka Weighted
Strengths Weight Rating Score

S1: Strong brand portfolio 0.15 5 0.75

S2: Diversified product portfolio 0.12 4 0.48

S3: Global presence 0.09 5 0.45
S4: Vertical integration model 0.12 4 0.48
IFAS SCORE
3.77
S5: Technological innovation 0.11 4 0.44
S6: Fast fashion expertise 0.08 5 0.4
S7: Efficient supply chain management 0.10 4 0.4
BershkaRati Weighted
Weaknesses Weakness Weight
ng Score
This score reflects the company's strong internal position,
W1: Dependence on Europe for revenue 0.12 2 0.24
driven by several key strengths that provide a competitive
W2: Sustainability and ethical practices 0.06 1 0.06 edge in the fast fashion industry.

W3: Ethical concerns 0.03 1 0.03

W4: Limited online presence 0.02 2 0.04
Totals 1.00 3.77
Strategic Factor Analysis Summary(SFAS)
Strategic Environmental Factors Bershka

Bershka
Code # Opportunities Oppor. Weight Weighted Score
Rating

O1 Growth in e-commerce 0.12 4 0.48

O2 Expansion in emerging markets 0.12 4 0.48
Bershka
Code # Threats ThreatWeight Weighted Score
Rating

T1 High market competition 0.10 3 0.3

T2 Economic conditions 0.12 2 0.24
Strength Bershka
Code # Strengths Weighted Score
Weight Rating
A numerical SWOT matrix (SFAS) for Bershka:
S1 Strong brand portfolio 0.10 5 0.5
• Results of IFAS and the EFAS matrixes. factors
S2 Diversified product portfolio 0.10 4 0.4
with highest weighted score only are carried S4 Vertical integration model 0.12 4 0.48
on to the SFAS matrix. Bershk
Code # Weaknesses Weakness Weight Weighted Score
• Ratings are as is from the IFAS and EFAS to aRating

SFAS. W1 Dependence on Europe for revenue 0.12 2 0.24

• weights regenerated for the SFAS matrix, all W2 Sustainability and ethical practices 0.10 1 0.1
Totals 1.00 3.22
weights add up to 1..
Internal External MATRIX
Internal Factor Analysis Score
Strong Strong
Average Weak
4 3.77 3 2 1

BUILD
External Factor Analysis Score
High

3.10 Build and Grow

3 AND
Medium

Hold and Maintain

GROW.
2 Harvest and
Divest
Low

• Strong internal position and a high external

score,therefore, capitalize on its strengths and
1
external opportunities.

EFAS SCORE IFAS SCORE • Adopt aggressive growth strategies, including

3.10 3.77 forward, backward and horizontal integration,

market penetration, market development, and
product development.
 TOWS Matrix: SO Group

Strengths
S1: Strong brand portfolio
S2: Diversified product portfolio
S4: Vertical integration model

• S1O1: Leverage the strong brand portfolio (S1) to

enhance e-commerce presence (O1).
• S2O2: Utilize the diversified product portfolio (S2) to
Opportunities
O1: Growth in e-commerce target emerging markets (O2).
• S4O1: Exploit the vertical integration model (S4) to
O2: Expansion in emerging
markets streamline e-commerce operations (O1).
 TOWS Matrix: ST Group

Strengths
S1: Strong brand portfolio
S2: Diversified product portfolio
S4: Vertical integration model
• S4T1: Leverage the vertical integration model (S4) to
counter high market competition (T1).
• S1T1: Use the strong brand portfolio (S1) to differentiate
Threats
in competitive markets (T1).
T1: High market competition • S2T2: Deploy the diversified product portfolio (S2) to
T2: Economic conditions
cushion the impact of economic downturns (T2).
• S1T1: Expand market presence by acquiring or merging
with competitors.
 TOWS Matrix: WO Group

Weaknesses
W1: Dependence on Europe for revenue
W2: Sustainability and ethical practices

• W1O2: Reduce dependence on Europe (W1) by

expanding into emerging markets (O2).
• W2O1: Address sustainability and ethical practice
Opportunities concerns (W2) by leveraging e-commerce growth (O1).
• W1O2: Mitigate revenue concentration risk (W1) by
O1: Growth in e-commerce
O2: Expansion in emerging launching region-specific collections in emerging
markets markets (O2).
 TOWS Matrix: WT Group

Weaknesses
W1: Dependence on Europe for revenue
W2: Sustainability and ethical practices

• W1T2: Reduce dependence on Europe (W1) to safeguard

Threats against economic volatility in the region (T2).
T1: High market competition • W2T1: Strengthen sustainability practices (W2) to align
T2: Economic conditions with market trends and address competitive pressures
(T1).
 TOWS to Corporate Strategies
Corporate Strategy 1: Market Development

• S4O1: Expanding into new markets or

channels (e-commerce) using existing
strong brands to attract more customers.
• S2W1O2: Entering new geographic markets
(emerging markets) with tailored products
to meet local demands, diversifying
geographic revenue streams by entering
new markets outside of Europe.
 TOWS to Corporate Strategies Cont’d
Corporate Strategy 2: Integration

• S4O1: Enhancing control over distribution

channels (e-commerce) to improve
customer experience and operational
efficiency. (Forward integration)
• S4T1: Using control over the supply chain
by acquiring raw material suppliers to
reduce costs and improve responsiveness,
gaining a competitive edge. (Backward
Integration)
 TOWS to Corporate Strategies Cont’d

Corporate Strategy 2: Integration

• S1T1: Expand market presence by

acquiring or merging with competitors.
This will increase market share and reduce
competition. (Horizontal Integration)
 TOWS to Corporate Strategies Cont’d

Corporate Strategy 3: Unrelated

Diversification

• S1T2: Explore opportunities in unrelated

industries, such as opening trendy co-
working spaces under the Bershka brand in
major urban areas.
 Corporate Strategy Analysis

Corporate Strategy 1: Market Development

Market Development Pros Market Development Cons

• Revenue Growth • Cultural and Market Barriers
• Risk Diversification • High Initial Investment
• Leveraging Brand Equity • Operational Challenges
• Customer Base Expansion • Competitive Pressure
• Adaptation to E-commerce Trends • Regulatory Risks
• Economies of Scale • Potential Brand Dilution
 Corporate Strategy Analysis Cont’d

Corporate Strategy 2: Integration

Integration Pros Integration Cons

• Cost Reduction • Significant Capital Expenditure
• Supply Chain Control • Integration Complexity
• Improved Customer Experience • Regulatory Challenges
• Increased Market Share • Decreased Flexibility
• Operational Efficiency • Management Strain
• Competitive Advantage • Potential for Reduced Innovation
 Corporate Strategy Analysis Cont’d

Corporate Strategy 3: Unrelated

Diversification

Unrelated Diversification Pros Unrelated Diversification Cons

• New Revenue Streams • Lack of Expertise
• Risk Mitigation • Brand Dilution
• Leveraging Brand Recognition • Resource Diversion
• Market Opportunities • Higher Failure Risk
• Innovation Catalyst • Investor Concerns
• Operational Complexity
Market Development: Justification

• Alignment with Global Trends

• Revenue Growth Potential
• Risk Diversification
• Customer Base Expansion
• Economies of Scale
 Corporate Strategy to Business Unit Strategy

Low Cost (SO Strategies):

• S4O1: Leverage vertical integration to enhance e-
commerce operations, reducing costs and improving
efficiency.
Differentiation (SO Strategies):
• S1O1: Utilize the strong brand portfolio to differentiate
and enhance the online presence in new markets.
• S2O2: Customize and diversify product offerings to meet
the preferences and needs of emerging markets, making
use of the strong and diverse brand portfolio.
 Corporate Strategy to Business Unit Strategy Cont’d

Focus (WO Strategies):

• W1O2: Target specific high-growth emerging markets
with differentiated products to reduce dependence on
Europe and diversify revenue streams.
• W2O1: Address sustainability concerns by focusing on
environmentally conscious consumers in new markets
through e-commerce growth.
Functional Strategies for Market Development

Marketing Operations Human Resources Finance

Localized campaigns, Regional distribution Local talent Investment in new
influencer centers, logistics acquisition, cultural markets, risk
partnerships optimization sensitivity training mitigation strategies
Bershka's Corporate
Programs for Strategy
Implementation
Digital Transformation Sustainability
Mobile-friendly design, AI-
Initiatives
powered recommendations, Eco-friendly collections,
social media integration "Bershka Green Line"

Market Penetration Product

in Youth Markets Customization
Program
Pop-up stores in urban areas
Limited-edition customizable
and university towns,
clothing lines, embroidered
experiential marketing
and patched denim
campaigns
Key Performance Indicators (KPIs) for Bershka

10% 40%
Youth Market Sales Growth Online Sales Contribution
Annual growth in sales from Percentage of total sales from e-commerce
Gen Z and Millennials

50% 15%
Sustainable Product Ratio Customer Engagement Score
Percentage of products using Social media metrics like
sustainable materials likes, shares, and comments
Analysis of Bershka’s KPIs
Youth Market Sales Growth 1

2 Online Sales Contribution

Sustainable Product Ratio 3

4 Customer Engagement Score

Store Conversion Rate 5

6 Custom Product Sales Percentage

Inventory Turnover 7

8 Employee Training Completion

Key Insights from the KPI
Analysis
1 Strategic Alignment 2 Risk Mitigation
Each KPI directly supports Monitoring KPIs like
Bershka’s goals of being youth- sustainability ratios and
focused, trend-driven, and inventory turnover helps
sustainable while improving address critical risks such as
digital and operational reputational damage or
capabilities. operational inefficiencies.

3 Growth and 4 Operational Excellence

Engagement Metrics like inventory turnover
KPIs like online sales and employee training highlight
contribution and customer areas where Bershka can
engagement ensure Bershka improve efficiency and
remains competitive in the readiness to meet future
digital space while fostering challenges.
brand loyalty.
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