ZARA STRATEGIC ANALYSIS
For them to gain the competitive advantage, they have adopted the JIT (Just in Time) manufacturing system which has made it possible to implement a high quality in-house manufacturing (Melville, 2004). One of Zara’s main competitive advantage is the quick response to their customers based on trending fashion. Another fundamental factor that has contributed to the success of this company is its high marketing speed. INTRODUCTION Zara is a clothing brand that has Spanish roots and was founded by Rosaina Mera and Ganoa Ortegain the year 1975. Zara has a reputation of being one of the biggest fashion retailers and a major selling brand. OBJECTIVES Zara has stated on their website about the long term objectives that are put in place for the company: To save energy through eco-friendly stores: Zara is implementing a management model that is based on having eco-friendly stores with the aim of reducing the use of energy by up to 22% (Aaker, 2010).
It will also promote both sustainability and efficiency. For this to be possible, Zara will design their shops with efficient lighting, air conditioning and heating and cooling systems and also recycle their furniture to make this objective possible. Recycle and minimize waste production: currently, Zara Company is recycling alarms and hangers which they later process in to plastic products. This is one example of how the company tries to manage their products. Here are the Five-Forces Model in relation to Zara Apparel Company. Barriers to Entry: HIGH 1. A business that incurs high cost must have economic of scale in order to sustain their profitability levels. High SG&A comprised of promotions and advertisements takes an average of 3. 5 % of the company’s total revenue despite how Zara minimizes the finances used in advertising their products (Liu, 2008).
Regular clients are easily attracted by trendy apparel and they won’t mind purchasing expensive but quality products. Consumers of these apparels have a wide range of choices when it is about trendy accessories and clothes though it can be influenced by their price tags. Supplier power: LOW 1. Low fabric prices 2. Absence of labor unions and contracts by the operatives who are on the local level. Competition Zara has always been the pioneer company with a reputation of bringing new styles in to the shelves within short periods. However, they are currently facing a big problem from other fast fashion companies. Their competitors have adopted Zara’s strategies of developing and distributing apparels within the shortest time possible. Fast fashion companies such as Boohoo, ASOS and Misguided are specialized in producing affordable but fashionable clothing for the young adults who are obsessed with the social media.
This way they are marketing their products while at the same time increasing their clienteles. The reason behind the latter is because of the actual layout of their online shop or rather their website. They have gone ahead to create a side bar on the site with a dropdown list. This feature has made it easy for the visitors to easily find whatever products they are looking for. Moreover, they have removed the fast changing images on the website’s homepage to give visitors enough time to look in to their products. Also, they are planning to offer the information of their company on their website in order to give their buyers Promoting Zara Home Zara home, a newly introduced product of Zara has not been advertised adequately.
Moreover, wages have also been increased courtesy of the tight conditions in the current labor markets. “ Marketing Zara Company has been facing issues on product marketing for a while now. All through these years, Zara has been working hard towards strengthen the corporate identity for its fast fashion brand. To survive in the market, they have been working towards expanding globally by opening stores in different countries all over the world. One of the main strategies used by Zara is competitive differentiation with the purpose of improving the identity of the organization (Burgelman, 2013). Strengths Weaknesses Global Outreach Limited Stocks Strategic Location Price Distribution Strategy Brand image closely tagged to competitors Store Image Lack of Marketing Fast Changing collection Responsive Employees Brand Image Opportunities SO Strategies WO Strategies Increasing middle class in Asia Open new stores in developing countries in Asia (S1, O1) Charge products at competitive price in Asian countries’ standards (W2, O1) Opportunity to build distribution center in developing countries to lower costs Build distribution centers in Asia to lower distribution costs for Asian countries (S3, O2) Produce a signature collection (W3, O3) Cooperation with new designers Be the trendsetter (S5, O3) Enhance the current brand image and company’s image (W4, O4, O5) Rising environmental issues Promote the company’s vision to be an eco-friendly company (S7, O4) International Recognition Threats ST Strategies WT Strategies Fierce Competition Expand in new market and be the first player in the market (S1, S2, T1) Increase spending for marketing campaign (W4, T1) Lawsuit related to sweatshops Produce the new trends with higher turnover (S5, T3) Enhance ZARA’s differentiation through its unique designs (W3, T4) Possible imitations of goods Increase the brand equity through better service (S6, S7, T4) Dilution of Brand Equity The SO strategies comprises of aggressive strategies whereby Zara Company takes advantage of the opportunities within the market that match their strengths.
Given the current threats and weaknesses of Zara, they are in the best position to implement the SO strategies (Manolopoulos, 2008). At present, Zara has already established new shops in Asia and are the ones who set trends and not the ones following trends. Moreover, they have set aside enough finances to cater for the advertisement and commercial projects. SPACE MATRIX Stability Position Ratings Inadequate infrastructure and IT in developing countries (especially India and Indonesia) -4 Counterfeiting in developing countries -2 Possible increase in labor costs -2 Total -8 Competitive Position Ratings Increasing threats from new competitors such as Uniqlo and H&M -3 Zara provides unique concept -2 Zara has the largest market share -2 Total -7 • Financial and Industry Position: +1 (worst), +6 (best) • Stability and Competitive Position: -1 (best), -6 (worst) • Average: ◦ SP : -2.
Those with a low market share than Zara are placed at the question marks. Since Zara is a big brand, it must have a considerable amount of investment in order to strengthen or maintain its position in the market. QSPM MATRIX It is necessary to rank these strategies to come up with a list that is entirely based on the relative attractiveness of feasible alternative actions. The matrix indicates the strategies that should be best applied in this situation (Bonache, 2011). Based on the QSPM matrix, it is fair to conclude that Zara’s expansion to developing countries in Asia must be prioritized because they have the topmost ending score. 32 Strategic locations 0. 24 Distribution strategy 0. 48 Store image 0. 36 Fast changing collection 0. 18 Responsive employees 0. With this in place, Zara will cut off its cost of operations by a huge margin and in turn increate profits margin.
Management information system is another factor that must be considered by Zara. Currently, they are using the Point of Sale (POS) system all over their stores. The point of using this system is to capture the intentions of their clients and also to easily process the transactions. POS system has made it easy for Zara to identify the purchasing power and behavior of their clients accurately. , Kraemer, K. and Gurbaxani, V. Information technology and organizational performance: An integrative model of IT business value. MIS quarterly, 28(2), pp. Bonache, J. and Swinney, R. Purchasing, pricing, and quick response in the presence of strategic consumers. Management Science, 55(3), pp. Liu, Q. and Van Ryzin, G. Cambridge University Press. Hill, C. W. , Jones, G. R. A model of the interaction of strategic behavior, corporate context, and the concept of strategy.
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