Zara. Global Fashion at Local Prices


Seminar Paper, 2014

24 Pages, Grade: 2,0


Excerpt

Table of contents

List of Abbreviations

List of Figures

1. Introduction
1.1 Problem and Goal Setting
1.2 Course of Investigation

2. Basic Information and Theory
2.1 Zara company information
2.2 The Fashion Industry
2.3 Strategic Management

3. Zara Competitive Strategy Analysis
3.1 Customer Analysis
3.2 Porter’s Five Forces Analysis
3.3 Generic Strategy Analysis
3.4 PEST Analysis
3.5 SWOT Analysis
3.6 Competitor’s Analysis

4. Conclusion and Outlook

Bibliography

Internet References

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Competitor’s Analysis

Figure 2: Perceptual Map

1. Introduction

1.1 Problem and Goal Setting

The Apparel Industry is segmented and a market, a lot of players are competing with their products. Some of them are the industry leaders and their names are well known to everyone but there are also a large number of niche stores and private businesses that supply to specific demographics. Thus, apparel companies have to be skilful and very efficient to survive in this highly competitive industry. It is not only about having a great product but the right one. Nowadays, fashion trends change quickly and companies have to adapt to changing customer tastes soonest possible.

Further, although fashion, respectively garments, is a basic need, there are big differences to when customers buy new clothes and how much money they spend for that. Therefore having apparel stocks is economically very sensitive. There are good times for the fashion industry but in periods of economic uncertainty and contraction, people tend to save money on clothing first.

Zara is one of the most renowned and famous fashion icons of our time. It is not only generating the highest profit margins for organization but also is the most famous and recognized by customers in market.[1] “With some 650 stores in 50 countries, Spanish clothing retailer Zara has hit on a formula for supply chain success that works by defying conventional wisdom.”[2]

This case study on Zara should explain which Internationalisation Strategies and Strategic Management Zara is using in order to compete successfully on the global market and how it is able to deliver to their customers’ global fashion at local prices.

1.2 Course of Investigation

First of all, the company is introduced followed by some basic insights into the Fashion Industry and a general explanation of Strategic Management and its aim. Afterwards Zara’s competitive strategy is analysed conducting a SWOT- and PEST-Analysis, Porter’s Five Forces Analysis, Generic Strategy Analysis as well as Customers and Competitors are looked at closely. Finally, this term paper will give a Conclusion and an Outlook on which points Zara could ameliorate in future.

As the process of Internationalisation as well as Strategic Management is very complex and this term paper limited, each chapter only gives a short and simple overview of the single topics summing up important facts and figures submitting general conspectus.

2. Basic Information and Theory

2.1 Zara company information

Armancio Ortega founded a small company in Spain in 1963 that manufactured woman’s pyjamas and lingerie products targeting garment wholesalers. However, in 1975, a substantial order was cancelled by a German customer and this prompted the company to open its forts Zara retail shop.[3]

Initially, the idea of the retail shop was purposely for providing a way of profitably disposing cancelled orders. But the experience acquired taught the firm of the importance of a union between manufacturing and retailing, the lesson was later to become the basis for the evolution of the company.[4]

The company began expanding by opening 6 stores in 1979. During the 1980’s the company had launched retail operations in all the major Spanish cities. In 1988, Zara opened its first international store in Porto, Portugal, trailed by New York in 1989, and Paris in 1990. The greatest boost in international expansion was experienced in the 1990’s when Inditex Corporation entered 29 countries in Europe, Asia and America. In congruence with the international expansion, Inditex Corporation spread out its retail proposition by adding and purchasing new brands with the intention of reaching different customer segments. All brands under Inditex Corporation are independent in their operations: each has its own stores, subcontractors, organizational structure, ordering system, and warehousing and distribution system.[5]

Today, Zara is Inditex Corporation’s flagship chain store, of the total Inditex sales, it accounts for more than 75 percent. Further, the chain had grown enormously with almost a 1000 stores globally and a remarkable sales record. Zara’s success can be attributed to the attractive men’s, women’s and children fashion and accessories that exhibit distinct style but at reasonable, global prices.[6]

2.2 The Fashion Industry

The Fashion Industry is made up of various products and markets where a short-lived element of style prevails. The following characterizes the fashion industry:

Low predictability – due to the volatility of demand it is tremendously difficult to accurately project even total demand within a period, leave alone item by item or week by week demand.

High Impulse Purchases – many consumers of these products make buying decisions at the point of purchase. This denotes that, the shopper is stimulated to bay a product by the sight of that; hence availability is vital.

Short Life-Cycles – the product is intended to capture the mood of the moment and hence is designed to be short-lived. Thus, the period from which the product hits the shelves is short and seasonal and measured in months or even weeks.

High Volatility – stability or linearity in the demand of these products is unusual. It may be affected by the unpredictable weather, celebrities, icons and the media.[7]

Globalization has immensely changed the clothing industry further. Among the significant changes is the elimination of the import quotas that has unlocked opportunities for big exporters such as India and China. The textile and clothing industry especially in Europe is distinguished by disintegrated production with a huge number of small and medium sized companies mainly situated in Greece, Italy, Spain, France and Germany.[8]

In Europe, the textile and clothing industry is becoming more international and competitors internationally are presenting profound threats. Delocalization or sub-contracting of the textile and clothing production to countries where transport and labour costs are lower is becoming more prevalent amid European retailers as it decreases lead-time and costs. Changes in customer demands and taste have also influenced the European retailers and manufacturers to alter their business models so as to keep up with those changes. This is evidenced by brands such as Topshop from the United Kingdom, Hennes & Mauritz from Sweden, Esprit from Hong Kong, Zara and Mango from Spain, Gap from the United States, Uniqlo from Japan and United Colours of Benetton from Italy. These clothing retailers are pursuing the internationalization process of the US retailers chiefly aiming at the youth market.[9]

Today’s fashion industry is extremely competitive and the relentless need to rejuvenate products positioning indicates that there is an unavoidable attempt by many retailers to prolong the number of ‘seasons’.[10]

2.3 Strategic Management

Strategic Management commences with Strategic Planning. The success of the strategic planning process depends heavily on the accurate analysis of the external and internal environment. It is vital for a company to carry out a futuristic outlook of its environment since variations in the conditions may occur from the time of commencement of the strategic plan.

An analysis of the environment discloses an organization’s health, utilization of technology and resources, values, political climate, competitive rank within the industry, areas requiring improvement and its overall image.[11] An organization’s environment is made up of external forces or institutions that possibly influence the performance of that organization. This normally comprise of public pressure groups, customers, suppliers, government regulatory agencies, competitors etcetera.[12] Due to uncertainty, the external factors are quite significant in ascertaining the success of the organization. The dynamic environments facing organizations today include new competitors, rapid changes in government regulations, difficulties in acquiring raw materials, and changes in consumer preferences.[13] Taking external and internal environmental factors into account, the following will give an analysis of Zara’s competitive strategy.

3. Zara Competitive Strategy Analysis

3.1 Customer Analysis

Zara’s consumers are young, value conscious and highly sensitive to the latest fashion trends. Zara portrays itself as the optimal designer-boutique for the price-conscious but trendy consumer.[14] Consumers nowadays are opting to spend less on clothing, but spend more of their non-refundable income on electronics, education, travel, leisure and healthcare. In addition, they can now choose from a wide variety of reasonable priced products which makes it hard for retailers to continuously attract customers’ attention and brand them.

The vision is: “ZARA is committed to satisfying the desires of our customers. As a result we pledge to continuously innovate our business to improve your experience. We promise to provide new designs made from quality materials that are affordable.”[15]

Zara deliberates on the customers as the beginning and end of its business. Nonetheless, Zara has proceeded to give the customer an active role from the commencement of the chain and turned it into the main drive for its whole business model.[16] Customer’s requests, suggestions and comments are pondered upon by the design team which founded on this, produce some proposals that are immediately send to the stores. The store is the beginning of the company’s business model. Its importance is due to the information received and collected first hand from the customers.[17] The information is later sent to the design centres and commercial departments in real-time. The process is initiated by new requests from the customers. Zara stores give quick response to the customers since they receive new products twice a week.[18] That way, Zara manages to attract and hold their customers loyalty and attention.

[...]


[1] Cf. Murphy, R. (2008), p.4

[2] Ferdows, K. et al. (2004), pp. 98-111.

[3] Cf. Badia, E. (2009), p. 15.

[4] Cf. Badia, E. (2009), p. 34.

[5] Cf. http://www.inditex.com/en/downloads/annual_report_2012.pdf, Date: November 24, 2013.

[6] Cf. Julian, C. C. (2004), p. 115.

[7] Cf. Cravens, D. W. et al. (2000), p. 34.

[8] Cf. Nordås, H. K. (2004), p. 28.

[9] Cf. Stone, M. A. et al. (2004), p. 78.

[10] Cf. Brennan, R. et al. (2008), p. 55.

[11] Cf. Jerry, W. et al. (2000), pp. 68-69.

[12] Cf. Sims, R. R. (2002), p. 276.

[13] Cf. John, D. et al. (1998), p. 112.

[14] Cf. Cohen, S. et al. (2005), p. 19; Christoper, M. et al. (2004), pp. 367-376.

[15] Cf. http://zarafashion2013.wix.com/zara#!brand-position/c1q1p, Date: November 24, 2013.

[16] Cf. Barlow, J. F. (1999), pp. 95-96.

[17] Cf. Tungate, M. (2008), p. 51.

[18] Cf. Dawson, J. et al (2006), pp. 75-76.

Excerpt out of 24 pages

Details

Title
Zara. Global Fashion at Local Prices
College
University of applied sciences Dortmund
Course
Module: Strategic Management
Grade
2,0
Author
Year
2014
Pages
24
Catalog Number
V287557
ISBN (eBook)
9783656877745
ISBN (Book)
9783656877752
File size
794 KB
Language
English
Notes
Es ist ersichtlich, dass Sie sich bei dieser Arbeit viel Mühe gemacht haben. Ihre Arbeit entspricht im Wesentlichen den formalen Anforderungen, sie weist einen ausreichenden Umfang und eine sinnvolle Struktur auf. Ihre Literaturrecherche ist umfangreich. Die Zitierweise ist korrekt. Es finden sich einige sprachliche und stilistische Fehler, die sprachliche Darstellung ist aber gut verständlich. Die Gestaltung der Arbeit macht einen sehr guten Eindruck. Inhaltlich ist Ihre Arbeit m.E. als gut einzuordnen.
Tags
zara, global, fashion, local, prices
Quote paper
Madeline Gremme (Author), 2014, Zara. Global Fashion at Local Prices, Munich, GRIN Verlag, https://www.grin.com/document/287557

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