Zara, from Spain to the big wide world. Company analysis, markets and competition

Table of Contents

Executive Summary

Table of Contents

List of Abbreviations

List of Figures

List of Tables

1. Introduction

2. ZARA Company Description
2.1. Facts an Figures
2.2. Goals and Objectives

3. External and Internal Analysis of ZARA
3.1. PEST Analysis
3.1.1. Political Analysis
3.1.2. Economical Analysis
3.1.3. Social Analysis
3.1.4. Technological Analysis
3.2. SWOT Analysis
3.2.1. Strengths and Weaknesses
3.2.2. Opportunities and Threats

4. Market and Competition
4.1. Market Segmentation and Target Customers
4.2. Rivalry among Competitors
4.3. Differentiation Strategy

5. Conclusion and Outlook

List of Literature

Declaration in lieu of oath

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Purchase of selected fashion brands among women in Germany by age group in 2013

Figure 2: Forecast of the number of members in social networks in Germany till 2015 (in millions of members)

Figure 3: ZARA Website

Figure 4: Positioning-Map ZARA

Figure 5: Comparison of a ZARA Boutique and a PRADA Store

List of Tables

Table 1: Fashion-Stores of the Inditex-Group Worldwide

Table 2: SWOT-Analysis / Combination of Situations

Table 3: The best Global Brands in Apparel in 2013

Executive Summary

Inditex is one of the largest fashion companies in the world and owns eight different store formats: ZARA, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, ZARA Home and Uterqüe – with over 6.249 stores in 86 markets.¹ This Assignment deals with ZARA, which is the most important and profitable subsidiary of Inditex.

One main reason for ZARA´s success is the company’s right marketing strategy, which is based on defining and analyzing a certain target market. This assignment serves to define and to analyze ZARA´s market from a global point of view.

After a short introduction into the topic the company is presented in chapter 2 in-cluding the facts, figures, goals and objectives of ZARA.

Chapter 3 concerns the external and the internal analysis of ZARA -using the theo-retical approaches PEST- and SWOT-Analysis. These analyzing techniques are necessary in order to obtain detailed information about the company, which is a prerequisite for the subsequent definition and analysis of the market presented in chapter 4.

Chapter 4 deals with the market and the competitors. The analysis and definition of the market are based on facts and figures concerning the market segmentation, target customers, competitors and ZARA’s strategy.

The conclusion is presented in chapter 5, along with a personal, critical statement and the outlook on future studies.

1. Introduction

The 2014 Berlin Fashion-Week is just about to end. The next destinations are New York, London, Milan and the grand final will take place in Paris. Clothing lines can be shown on the catwalk today, appear in the World Wide Web seconds later, and emerge on the mass market by tomorrow: fashion is moving at an extremely fast pace and the hunger for novelty seems insatiable.² Many companies in the clothing industry have already recognized the huge demand for the latest fashion pieces and have responded by expanding their offer. Some mass clothing chains release up to twelve collections per year and thus stimulate demand: if you do not buy im-mediately, the needed piece will probably not be in the store one week later.³ The competition is as tough as never before. This is the reason why it is so important to develop an appropriate marketing strategy that meets the fast changing needs of demand and that might stand out from the crowd in the fashion business.

The purpose of this assignment is to define and to analyze ZARA´s market in order to critically evaluate if ZARA´s marketing concept is appropriate in order to fulfill the requirements of the market nowadays and in the future.

After presenting the company´s profile, an external and internal analysis of ZARA is performed, using the PEST- and SWOT-Analysis. Chapter 4 contains the determi-nation and the analysis of ZARA´s market. The conclusion and the outlook are summarized in chapter 5.

2. ZARA Company Description

The following chapter gives an overview of the company ZARA, including its facts and figures as well as its goals and objectives. Hereby, the aim is to obtain a first insight into the company, which will be important when ZARA´s market is analyzed and defined later on in this assignment.

2.1. Facts an Figures

Zara is a quickly expanding fashion-company and has its headquarters in the northwest of Spain, in a city called La Coruna.⁴ Amancio Ortega founded Zara in 1975 (in order to better understand world markets for his fashion merchandise) and a decade later, he created Inditex as a parent company for Zara, along with several other fashion brands such as Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe.⁵ But not only the fashion brands play an important role within the Inditex-Group, in fact Inditex unites more than 100 companies oper-ating in textile design, manufacturing and distribution.⁶

Inditex has been listed on the Spanish Stock Exchange in May 2001. The interest among investors all over the world was so immense that shares have been over-subscribed for 26 times because many investors wanted to be part of the success story of Inditex.⁷

The Inditex group has expanded in the recent years, achieving consolidated turno-ver of 15,946 million euros in 2012, and net profit of 2,361 million euros. As of 31 January 2013, Inditex had 120,314 employees globally. The table below shows the company’s fashion-stores worldwide (last update 31.10.2013).

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Table 1: Fashion-Stores of the Inditex-Group Worldwide⁸

2.2. Goals and Objectives

ZARA´s approach to fashion is creativity, quality design and rapid turnaround in order to adjust to changing market demands.⁹ The key element for the company’s success is the store with carefully designed shop windows and décor designed to make customers feel comfortable while they shop for the latest collections in the major shopping areas.¹⁰ The stores are also the place where ZARA obtains useful information for adapting its collections to its customers’ tastes in the shortest time possible.¹¹

Speed is its No. 1 priority, above and beyond production costs.¹² Information trav-els from stores to the design teams and vertical integration enables ZARA to short-en turnaround times and to achieve greater flexibility while keeping merchandise stock and fashion risk at a minimum.¹³ The conclusion from this information is that the company's main goal, even if not clearly stated, is to provide the latest fashion to its customers in order to meet their demand as quickly as possible and in order to maintain and even to expand market shares.

In contrast to the fast fashion approach, ZARA wants to contribute a sustainable development of the society and the environment with which it is in direct ex-change. This commitment refers especially to the areas of environmental policy and animal welfare. ¹⁴

3. External and Internal Analysis of ZARA

The following chapter presents the external and the internal analysis of ZARA, us-ing the theoretical approaches of the PEST- and the SWOT-Analysis. The PEST-and the SWOT-Analysis provide data that will be necessary in order to define and analyze the ZARA’s market in chapter 4.

3.1. PEST Analysis

The PEST-Analysis is a tool used by companies in order to identify and analyze the external environment and the driving forces that may affect the respective com-pany.¹⁵ This method serves to examine the macro environment systematically from a p olitical, e conomic, s ocial and t echnological point of view and is part of the stra-tegic plan. The overall goal is to identify important factors that had an influence on the business in the past and to predict what impact these factors may have in the future.¹⁶

3.1.1. Political Analysis

Government decisions can contribute to a company’s success when the political environment is shaped in a way that is positive for the business situation. However, governments can also contribute to a company’s failure when profit margins are negatively influenced, e.g. by tightening regulations regarding import and export.¹⁷

Nevertheless, government decisions do not only have a direct impact on the fash-ion industry, there is also an indirect impact that influences the customer’s purchas-ing power. This indirect impact arises when taxes and social security contributions are leading to a lack of financial resources within private households.¹⁸

3.1.2. Economical Analysis

The International Monetary Fund (IMF) predicted a global growth of up to 3.6% in the year 2014, so that the global economic recession has come to an end.¹⁹ Con-sequently, today’s business environment provides better conditions, so that price-sensitiveness and the caution that was shown by many customers during the crisis in the last years may have been overcome. This new situation could be problematic for ZARA if customers would switch from their needs for mass-production fashion (as sold by ZARA) to pricy high-end luxury brands according to their higher finan-cial capabilities.

Looking at figure Nr.1 below, it seems that this scenario is unlikely to evolve quickly because of the brands’ popularity (even if H&M has the leadership ZARA is ranked 2nd). But nevertheless it is important to know that ZARA must continue to meet the demand of its customers in time and that it should stay focused on its younger cli-ents who are unlikely to move on to high-end fashion labels because they have less financial resources.

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Figure 1: Purchase of selected fashion brands among women in Germany by age group in 2013²⁰

3.1.3. Social Analysis

Regarding the social media trend, ZARA has successfully managed to establish its brand within the social media platforms Facebook, Twitter, Pinterest, YouTube and Flickr.²¹ It even offers apps for its online shop that are compatible for the iPhone, the iPad and Android devices.²² Its presence within the social media has enabled ZARA to gain the attention of a wide audience (see figure 2).

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¹ Cf. http://www.inditex.com, accessed: 15.01.2014

² Cf. http://www.spiegel.de, accessed: 15.01.2014

³ Cf. ibid

⁴ Cf. http://www.forbes.com, accessed: 15.01.2014

⁵ Cf. http://www.inditex.com, accessed: 15.01.2014

⁶ Cf. ibid

⁷ Cf. Press Kit Inditex, http://www.inditex.com, accessed: 15.01.2014

⁸ Adapted from http://www.inditex.com, accessed: 15.01.2014

⁹ Cf. http://www.inditex.com/en/who_we_are/our_group, accessed: 15.01.2014

¹⁰ Cf. Press Kit Inditex, http://www.inditex.com, accessed: 15.01.2014

¹¹ Cf. ibid

¹² Cf. ibid

¹³ Cf. Riekhof, H. (2008), p. 439 ff.

¹⁴ Cf. http://www.zara.com, accessed: 15.01.2014

¹⁵ Cf. Pfaff, D. (2004), p. 95

¹⁶ Cf. ibid

¹⁷ Cf. Bauer, E. (2003), p. 174 ff.

¹⁸ Cf. Kampmann, R., Walter, J. (2013), p. 37

¹⁹ Cf. http://www.bundesbank.de, accessed: 15.01.2014

²⁰ Adapted from statista.de, accessed: 15.01.2014

²¹ Cf. http://www.zara.com, accessed: 15.01.2014

²² Cf. ibid