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DECLARATION
This is to certify that Report entitle study of marketing strategy of zara which is submitted by
Neha Arora in partial fulfillment of the requirement for the award of degree BBA(Gen.) to
GGSIP University, Dwarka, Delhi comprises only my original work and due acknowledgement
APPROVED BY
Teacher/Guide
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CERTIFICATE
This is to certify that Report entitled which is submitted by study of marketing strategy of
ZARA which is submitted by Neha Arora in partial fulfillment of the requirement for the award
of degree BBA(Gen.) to GGSIP University, Dwarka, Delhi is a record of the candidate own work
carried out by him under my/our supervision. The matter embodied in this thesis is original and
has not been submitted for the award of any other degree.
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ACKNOWLEDGEMENT
I offer my sincere thanks and humble regards to Chanderprabhu Jain College of Higher
Studies & School of Law, GGSIP University, New Delhi for imparting us very valuable
professional training in BBA.
I pay my gratitude and sincere regards to Ms. Hema mam, my project Guide for
giving me the cream of her knowledge. I am thankful to her as she has been a constant
source of advice, motivation and inspiration. I am also thankful to him for giving her
suggestions and encouragement throughout the project work.
I take the opportunity to express my gratitude and thanks to our computer Lab staff
and library staff for providing me opportunity to utilize their resources for the
completion of the project.
Students Signature
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Executive Summary
Zara is one of the largest international fashion companies. It belongs to Inditex, one of the
worlds largest distribution groups. It has overtaken Gap as the largest apparel retailer in the
world. The main competitive advantage of Zara is its quick response to the customer fashion
trends and producing clothes often with short life spans and Zaras mission mainly focuses on
domestic manufacturing.
In order to sustain its competitive advantage, Zara adopts Just-in-time (JIT) manufacture system
to implement high quality in-house manufacturing and conducts JIT inventory approach to
maintain inventory level. Meanwhile, Zara conduct EOQ model to control setup cost. Moreover,
Zara should make sure its worldwide retail store network running well by conducting JIT
inventory approach, so Zara conducts an inventory distribution process involves a forecasting
demand model and an optimization model to determine weekly shipment quantities from
warehouse to every retail store and solve some problems about inventory coordination among
retail network. Due to the success implementation of its current inventory management strategy,
Zara gains the capabilities that quick response to customer trends and high speed to market,
which is the fundamental factors to Zaras success in the fast-fashion industry.
Industria de Diseo Textil S.A., also known as The Inditex Group, is the worlds leading and
fastest growing fashion producer and retailer, headquartered in Arteixo, Spain. The Inditex
Group is made up of more than 100 companies operating in textile design, manufacturing, and
distribution, and is responsible for producing 840 million garments a year, with eight retail store
formats: Bershka, Massimo Dutti, Oysho, Pull & Bear, Stradivarius, Uterqe, Zara, and Zara
Home. These retail formats collectively occupy 6,009 stores in 86 markets.
Inditex faces competition from companies such as H&M and Benetton, but is set apart by its
unique business model. Inditex controls the entire fashion process as well as retail. In the
variable and fast changing fashion world, Inditex prioritizes time-to-market through vertical
integration,making them the pioneer of fast fashion. Competitors traditionally prioritize
production cost and outsource manufacturing to China. This strategy is cheap but creates a long
supply chain. Inditex, on the other hand, sources more than half of its products from Spain,
Portugal and Morocco, creating a short, manageable, and more responsive supply chain. Despite
the higher costs, in the fashion world the ability to react quickly is key. Other companies must
predict trends, while Inditex can observe and respond. Inditexs computerized inventory system,
state-of-the-art production an warehousing, and a short supply chain cut lead-time to 10-15 days
between design and distribution,compared to the 5-6 month industry average.
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Zara, Inditexs flagship retail format, generated 66% of the companys overall sales in
2012.
Currently, Europe accounts for 66% of group sales, though sales in Spain accounting for
22% of
revenue have stalled due to the poor economy, causing the company to aggressively seek
new
markets. Inditex has doubled its store count from 3,000 to 6,000 since 2007 as it expanded
its store
space by between 8% and 10% a year. Recently Inditex has opened more than a store a
day, or about500 stores a year. It is reported that this growth rate is to be maintained for
the next three to five years, with an emphasis in Asia.1 Sales also benefited from a global
rollout of online stores, starting with Zara Home in 2007 and each additional retail format
in 2010. Zara is the most prominent online concept currently receiving more than 1.3
million unique visitors per day.2 Though Inditex has yet to provide more information
about online sales, Credit Suisse estimates online purchases will generate over $782.5
million by the end of 2013, almost doubling 2012 levels.3
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Table of Contents
Student declaration i
Certificate from Guide ...................ii
Acknowledgement ......................................................................................................... .iii
Executive Summary ... iv
CHAPTER- 1: INTRODUCTION
1.1 About the Industry
1.2 About Organization/ Company Profile
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INTRODUCTION
Zara is a Spanish clothes and accessories brand, it is the flagship brand of the
Inditex group. Few clothing brands keep up with the latest fashion, are of high
quality and yet, affordable. It is probably the amalgamation of all these
qualities that made Zara, the Spanish clothing brand become the go-to fashion
brand for all.
It is the world's largest apparel retailer. The fashion group also owns brands such
as Massimo Dutti, Pull&Bear, Bershka, Stradivarius, Oysho, Zara Home, and
Uterqe. Zara as of 2017 manages up to 20 clothing collections a year.[4]
Zara the brand which is described as possibly the most innovative and devastating
fashion retailer in the world was originally the brainchild of The Inditex Group
owned by Spanish business Tycoon Amancio Ortega.
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The group is headquartered in A Corua, Galicia, Spain, where the first Zara store
was opened in 1975, the city which saw the Group's early beginnings and which is
now home to its central offices.
This Spanish success story encompasses many different styles, from daily clothes,
to casuals up to formals, thereby providing a complete one stop fashion solution
for women, men and children.
Starting with a single store, today Zara has as many as 1,520 outlets bringing
exclusive fashion to all over the world and churning out annul turnovers of 6,824
millions Euros. Most important of which is to note that 75% of these total earnings
are a part of there international sales.
Stores had always been the key to Zaras system: the face of the brand to the world
and its main source of information on what consumers wanted. Built with a
minimalist environment and big windows; stores were comfortable and designed to
create an atmosphere of chaos and excitement24, always located in prime,
highly noticeable locations that were fully-owned by Zara (with a few exceptions
where cultural and political factors could act as obstacles). Stores averaged at a
size of 1,400 square-metres, and were furbished with clear lights, white walls and
ceilings in order to draw all the focus on clothing. Store refurbishment occurred
every 4 years and window displays were changed every month.
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Marketing Strategy
Meaning:-
Zara has limited stores across the globe due to which it uses selective
targeting strategies to make their products available in the market.
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and updated trends and accordingly it targets customers based
exclusively on its designs
Stronghold in the parent nation: Zara gets 60% of its sales (2015
data) from the European nation out of which 18 % comes from Spain.
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Mens segment is also star due to high demand of the products yet
tough competition in the market.
Kids section is question mark because there are many brands for kids
which are much more famous.
Apart from the Zara exclusive stores, many multi-brand retail chains
sell Zaras clothing and accessories items which are helping the
company in penetrating in the leading cities of the nations globally.
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Brand equity of Zara
Valued at $ 10.7 bn (May 2016 data) this fashion industry retail giant
has bagged 53rd position in Forbes list of worlds most valuable
brands.
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HISTORY OF ZARA
Amancio Ortega opened the first Zara store in 1975 in downtown A Corua,
Galicia, Spain. Ortega initially named the store Zorba after the classic film
Zorba the Greek, but after learning there was a bar with the same name two
blocks away, they rearranged the letters molded for the sign to 'Zara.' It is
believed the extra 'a' came from an additional set of letters that had been
made for the company.[5][6] The first store featured low-priced lookalike
products of popular, higher-end clothing fashions. Ortega opened additional
stores throughout Spain. During the 1980s, Ortega changed the design,
manufacturing, and distribution process to reduce lead times and react to new
trends in a quicker way, which he called "instant fashions". The
improvements included the use of information technologies and using groups
of designers instead of individuals
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scar had been Zaras director for years, witnessing the opening of stores in over
10 new markets6, the continuous expansion of Zaras e-commerce stores (available
in 21 countries by the end of 20137) and the 2012 cutting-edge refurbishment,
design and implementation of Zara stores worldwide. He knew that the stores were
the key to Zaras business model; the millions of euros invested annually in
locating stores and designing each interior carefully explained why Zara needed no
further advertising the stores were the voice of Zaras offer.
Inditex Timeline
1963 -Amancio Ortega, founder of Inditex,
launches a clothing manufacturing
business. Over a decade the business
steadily evolves to a number of owned
textile factories, selling merchandise
across Europe.
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1985 Inditex is founded as the head of the
corporate Group.
1986 Group manufacturing companies sell all
their output to Zara and lay the
groundwork for a logistics system
capable of addressing expected rapid
growth.
1988 Opening of first international Zara store
in Oporto.
1989-1990 Zara expands to US and France,
opening stores in New York (1989) and
Paris (1990).
1998 Launch of new chain, targeting a
younger female market
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Interbrand's list of best global brands.
ZARA Indutsry
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Size of the industry In INDIA
Domestic market size of the clothing and fashion industry: 68 billion dollars.
Geographical distribution
Mumbai, Delhi, Kolkata, Bangalore
ZARA MUMBAI - PALLADIUM
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ZARA NEW DELHI - SELECT CITYWALK
Type:
COMPANY PROFILE
Industry Retail
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Arteixo, Galicia (Spain)
Founded
(24 May 1974; 43 years ago)
Products Clothing
Parent Inditex
Website zara.com
VISION
Our stringent commitment to Global standards of Quality has seen us grow phenomenally over
the last decade, to create a niche of our own, in the highly competitive world markets. ZARA
Textile has been the name of one of the most innovative and leading textile producers. Our
technical perfection, quality standards and innovative impacts are unique. ZARA Textile has
become one of the leading symbol of quality products in the textile industry.
Behind all this success, Directors and their team have a complete vision in thier mind to make
their organization as one of the top ranked company. Following is our vision statement.
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MISION
ZARA Textile is devoted to achieve consistent improvement in the system of providing
products & services to the customers through On Time Delivery & Enhancing Customers
Satisfaction by means of Quality and Value."
Key Objectives
Zaras aim is to make fashion accessible for all by offering the latest fashion in medium
quality at prices, affordable for everyone. Zaras business model operates on having a
very low turnaround time, and reducing the advertising spend by using its store as the
point of information.
Zaras vertical integration of design, JIT manufacturing system, delivery and sales;
flexible organizational and work structure, management of stocks on as-needed basis;
quick response policy to fashion trends and advanced information technology to support
operations combine to enable quick response to customers changing demands.
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Zara Values
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Engagement: The Trust aims to use the power that having
independent money gives us and to work with all our partners
respectfully in the interests of our shared goals.
Independence: The Trust sees a strong civil society, of which we are
a part and which we will nurture, as a key mechanism for holding the
powerful to account.
Learning: The Trust seeks to learn from all the work we undertake
and support and to share that learning widely to increase impact.
Innovation and evidence: The Trust will work over a sustained
period of time to find and build an evidence base for new solutions to
old problems
Quaker values: The Trust respects its historical roots in Birmingham
and in Quaker values, although now embracing all faiths and none
ZARA Logo
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ZARA SWOT ANALYSIS, USP &
COMPETITORS
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Zara
Parent Company Inditex Group
Zara STP
Segment Clothes for people with a combination attitude of work and play
Positioning Zara offers classy high quality clothes based on consumer trends
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vertically integrated
2, High competition for Zara means limited market share and high
Weaknesses brand switching
4. Fake imitations can decline the sale of Zara products and hurt
Threats business
Competition
1.Chanel
2.Christian Dior
3.Burberry
4.Ralph Lauren
Competitors
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5.Prada
6.Gucci
7.Louis Vuitton
8.Hugo Boss
9.Hermes International
10.Versace
11.Valentino S.P.A
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Zara includes variety of products under these
categories :
Womens
Mens
WOMENS
1. TOPS
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2. TROUSERS
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4. HIGH HEELS
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MENS
JEANS
SHOES
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SHIRTS
JACKETS
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BUSINESS OPERATIONS
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TOTAL 1925 1830 1723 1608 1520 1361
Channel Of Distribution
This is the oldest, shorter and the simple channel of distribution. The
producer sells the product directly without involvement of any middle man.
The sale can be made door to door through salesman, retail stores and direct
mail. Certain industrial and consumer goods such as clothes, shoes, books,
hosiery goods, cosmetics, household appliances, electronic goods etc., may be
sold through direct contact. Perishable goods such as vegetable and fruits can
also be sold directly.
All 1,900 Zara stores received shipments with new items twice a week;
centrally managed in Arteixo and ordered by store managers worldwide. Zara
had, like all Inditex chains, its own Distribution Centre (henceforth DC): a
40,000 square-metre building located in Arteixo paired with smaller facilities
in Southern America. Regardless of origin, all merchandise passed through
Arteixos DC before being shipped to their respective locations. The
warehouse was known as a place to move merchandise and not store it21,
most garments only stayed for some hours and none would stay for more than
three days. 75% of shipments were made by truck to stores across Europe and
arrived typically between 24 and 36 hours after the order. Countries outside
Europe received merchandise 48 hours after ordering, typically by airfreight
or boat.
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Introduction Of Department
There are many different functional departments all create the prime of object of
production is its consumption. The movement of product from producer to
consumer is an important function of marketing. It is the obligation of the producer
to make goods available at right place, at right time right price and
in right quantity. The process of making goods available to the
consumer needs effective channel of distribution.
Therefore, the path taken by the goods in its
movement is termed as channel of
distribution. The goods may be sent to the
consumer directly or indirectly through
middlemen.
Contrarily to the rest of the industry, Zara opted to keep around half of its
merchandise production in-house under the operations of 20 fully-owned factories.
Inditex purchased undyed garments from countries such as Italy, Turkey, India and
China with the help of two purchasing offices, one in Barcelona and another in
Hong Kong. Fabrics, and non-core items, were purchased as a finished product in
small quantities through frequent orders, allowing Zara to quickly react to
consumer demand by manufacturing and distributing at a high speed to stores (a
new item could be in store shelves only 3 weeks after its need was detected).
Moreover, outsourced production came as no obstacle for Zaras quick response
system: 80% of all outsourced manufacturing was done in Europe and 20% came
from Asia and low-wage countries, where only the less fashionable and basic items
were ordered.
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There are many different departments involved with ZARA
Finance
Operations
Human Resources
Cutomer Services
Zara is known as the Coca Cola of fashion. Such is the craze of this brand
among the fashion enthusiasts. One of the major strength of the company
is that it is able to respond very quickly to the changing needs of the
customers.
The company does not outsource its manufacturing process, making it fully
in control of the products it produces. Its unique selling preposition is to
create the latest trends. In most cases, new styles are normally available
on the sales stores within two weeks, four weeks maximum. If a product is
not selling in the stores, it is immediately pulled from the stores.
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2. FINANCE
This is where Zara, with its highly responsive supply chain, excels. Although the
companys flexible supply chain means its price points are slightly higher than its
competitors, it allows it to be the most responsive to chabegan as a small Spanish
clothing company, founded by Amancio Ortega in 1975, has transformed into a
global business and market leader. Boasting over 6,000 stores, it has a presence in
nearly 88 countries, with total net income rising to 2.5bn ($2.8bn) in 2014 nging
fashion trends.
Administration and IT support department have been keeping things clean, taking
orders, ensuring all material is of a good quality. Zara was, curiously, a late
bloomer in the online business. Having had a website since 2010, the brand only
began to sell online almost one year later. The brands managers had always been
hesitant in entering the online realm but with the increasing user activity on the
internet, and due to Zaras high reliance on word-of-mouth, they believed that
creating an online site would help increase channels for consumers pre-purchase
interaction.
4. OPERATIONS
Zara is a spanish chain store in Inditex group, one of the worlds biggest retail store
in the world who are also owners of zara home. Zara is a fast industry bt its unique
business model is based on innovation and flexibilty. they design and distribute a
garment to the market in just 15 days. they always have new products but in
limited supply. the customer feels there is an 'exclusitivity', since only a few items
are on display even though stores are planned spacious; they feel they have to buy
it because they wont find it again. Zara's designer create approximately 40,000 new
design annually in which 10,000 are produced. these design resemble lateset
couture creations of classic piece.
6. Human Resources
One of the key roles of this department is the ability to keep everyone happy; they
are concerned with the welfare of the staff, people whom come in contact with the
company and welfare of the business by following employment laws and ensuring
health and safety. When you have happy staff you have motivated staff and this
helps to achieve the objectives. HR is also responsible for all training that has to be
taken to ensure the company are up to date with the way the company functions
and that all health and safety is being met.
7. Customer Service
About 75 million people, or one-third of the total Internet population, buy
goods online to be shipped to them over the course of a quarter. Of those, about
one-third make 1 transaction and half make 1-2 transactions. About a quarter
make 3-5 purchases, and the other quarter make 6 or more. Zara provide vast
customer service 24/7 as they treat customer satisfaction as an major factor.
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LITERATURE REVIEW
Zaras innovations in IT, supply chain management and merchandising has pushed
it to become one of the most recognizable names in the world. The brand has set
the industrys norms and become a miraculous exception in the world of fashion.
However, in the beginning of 2013 the brand faces severe pressure in its sales due
to the ever-changing dynamics of its industry, the economic constraints set by the
European recession and the force of its competitors, specifically the Swedish
fashion retailer H&M. Unlike its competition, Zara had never pursued an intensive
advertising-based strategy, focusing more on consumers demands and their
experience with the brand in its points of sale.
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Research Methodology
Research methodology, selected in view of the research objectives, pros
and cons as well as details on its use will form part of this chapter. We will
also outline the research method used, information collection procedures,
information sources, and how this information will be analyzed in light of the
research objectives
This chapter presents how the image developed by a brand, corporate or
stand-alone over-the-years impacts consumers behaviour, specifically
answering the question concerning factors customers look for in a brand,
prior to purchase in the apparel industry. Based on these factors, we can
narrow down the facets available with these two companies and how they
succeed / fail in the overall strategy to attract or carry along positive
consumer behaviour, in influencing their sales
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PREPARING THE RESARCH DESION
Research Design
Young Designers (26 average) draw the design sketches then
discuss it with market specials and planning & procurement staff.
Designs inspiration is copied from different sources (trade fairs,
catwalks, magazines) from all around the world. It is worth to
mention that out of 40,000 designs only 10,000 are approved.
This illustrates the flexibility of ideas generation and on the other
hand the huge number of designs reflects the ability to meet
almost all the fashion requirements by customers of all ages (up
to 55).
ZARA business is organized around processes not functions, to
close the information loop. All team is involved in all processes.
This method minimizes the time as decision is conducted in one
room, and in direct proximity to the information.
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RESEARCH PLAN
ZARA is a member of the INDITEX group, a Spanish group. ZARA
have established its stores all over the world, Europe, America, the
Middle East, Asia Pacific and among its 5000+ stores (from the
INDITEX group), Hong gong 8ZARA stores from the whole wide world.
Zara offers the latest trends in international fashion in an environment
of thought-out design. Its stores located in the main commercial areas
of cities across the Europe, America and Asia, offer fashion inspired in
the tastes, wishes and lifestyles of today's men and women. Zaras
clothing has identified a significant underserved segment within it.
Zaras clothing is uniquely positioned to serve this segment of the
market because of its fast paced fashion ideas, its latest technology,
its efficient business strategies and its affordable prices.
Due to the growing of the clothing industry and the enormous unmet
need in the clothing market we see the long-term exppotential of Zara
throughout the world. We are visionaries who see Zara as an extreme
financial launch. By achieving its sales targets, Zara will position itself
for exceptional profitability and self-funded growth.
ZARAs Plan is to maintain and develop its position in the market by
giving well in time response to changing trends in consumer tastes
through creating new designs that are suitable for all customers at an
affordable price.
Zara constantly updates its range. The company takes its inspiration
from the catwalks, targeting the fickle, fashionable young, one of the
riskiest parts of the clothing market. Unusually for a clothes retailer,
Zara designs all its own clothes, makes most of them in Spain and
distributes all of them itself.
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LIMITATIONS OF THE STUDY
Zara excels by targeting technology investment at the points in its value chain
where it will have the most significant impact, making sure that every dollar spend
on tech has a payoff
The facilities move about 2.5 million items a week, with no item staying in-house
for more than 72 hours. Ceiling-mounted racks and customized sorting machines
patterned on equipment used by overnight parcel services whisk items from
factories to staging areas for each store. Clothes are ironed in advanced, packed on
hangers, with security and price tags affixed.
Would you advise WalMart or Target to move in the direction of Zaras Fast
Fashion approach to manufacturing, distributing, and selling clothing? Why or
why not? If so, what specific tactics should they adopt? How disruptive would
this be to their business? Why? If not, are there parts of the Zara approach they
should learn FROM?
or a small fashion startup founded by four recent CMU grads that sells mass-
customized clothing online.
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SECONDARY DATA
The secondary data is mainly concerned with raw data and published
summaries (Saunders et al. 2007). Secondary data used in this study, mainly
from books in the university library and academic weekly online through
keyword search, such as differences in marketing strategy in order to gather
more material, the researchers ZARA in china , brand loyalty to obtain
more comprehensive data, and compare the data obtained from multiple web
pages to determine the authenticity of the information about ZARA business
model, sales conditions. In addition, ZARAs official website is also important
way to market data. Particularly, Saunders et al (2007) argued that when
researcher conducted a qualitative research in an organization, secondary
source would facilitate a triangulate finding depended on the primary data
collected. If two or more sources explained a phenomenon as well as it would
conclude that the information is reliable (Stokes, 2000).
Fututre Strategy
Zara is the meaning of "instant fashion". Instead of creating demand for
new trends and using fashion shows- Zara uses another method. They
study the demands of the actual customers in their stores and then delivers
that design at very high speeds. They saves tons of money on their delivery
methods(you can find in the article link). I would say they are very much
ahead of the fashion market in terms of production and sales.Zara is the #1
most profitable out of 8 other companies in the Inditex Group. Their
production cycles are much faster than H&M! In 1 year Zara launches
11,000 new items compared to 2,000-4,000 from H&M!
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This all sounds like Zara is doing just fine, right? Yes, that is right but they
want to do even better! Over the next 4 years the brand plans to double in
size opening over 4,000 new shops! They plan this expansion to mostly
start out in Europe before pushing anywhere else. They have already
opened a new distribution center to get the ball rolling with expansion
plans!
I believe this will be a great successful for Zara and they are profitable
enough now I think they should grow. That is 1,000 stores every year
for 4 years. That is an extreme goal and even if they make half of it,
they will still be successful. You can view much more information
from this article, just click on the link below
Segmentation
Zaras segmentation of customers who are most appreciated is on
a demographic point of view, a female women up to 35 years of
age, who prioritize fashion as lifestyle, who earns up to $60k per
year and graduated school. Furthermore, on psychographic
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aspect Zaras customers are ambitions and want to demonstrate
it by fancy trends, have dreams in life and want to look as a V.I.P
Targeting:
One of the target markets will be China, currently 3.2% visitors by country for
Zara.com and based on the GDP growth in Asia, it will increase. The market
target defined by the visitors from China has to achieve 8% by end of 2013.
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Positioning:
ZARA SWOT analysis ZARA is the main success factor of Inditex's growth and plays the
leading role of the group's sales and profit. For this reason, we will go into details with the regard
to ZARAs success factors or rather its strategic advantages, before we start to analyse ZARAs
issues concerning its supply chain and its possible opportunities and threats in the future. ZARA
is not has not only a different market positioning as to its direct competitors (see figure 1.1) but
also has a unique business model which is one of the worlds most successful. ZARA is
positioned more fashionable compare to its competitors but surprisingly with a relatively low
price behaviour. Unlike H&M or GAP chasing low production costs by outsourcing its complete
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production, ZARA produces nearly half its merchandise in-house. Rather than utilize its factorys
capacities to maximize their output, the company leaves some capacity left on purpose. Instead
of take the benefits of economies of scale, the retail giant does manufacturing and distributing in
small batches. Not relying on extern service providers, ZARA manages design, distributing and
logistic operations by itself. It leaves even empty shelves in its retail shops allows occasional
stock-outs and waives the advertising completely. In short, ZARAs business model defies the
past and current conventional practised supply chain operations. Even because of that some of
Zara's practices concerning its supply chain activities seem to be questionable. 1.1 Strategic
advantages (Strength) As already mentioned, Zaras strategy seems first to be a disadvantage
regarding to their competitors. Zaras most interesting and at the same similar successful
competitor is H&M. Both companies are European based, are leading fashion retails in the
middle-low price segment and have a strong and global expansion strategy
Possibilities for failure (Threats) European production facilities Like Zaras direct competition,
the company has some threats for failures what can stop its future growth. If the European
common currency becomes stronger concerning the US dollar, the production costs will increase
generally for European manufacturers and thus Zaras production costs. The increased costs will
and must be covered by the customers what may decrease Zaras sales because the new prices
will be too high for a typical Zaras customer. Another fact threatens Zaras success is the quota
elimination under the World Trade Organization agreement in 2005 on textiles and clothing
expiring. Retailers using the outsource strategy will benefit from greater access to cheaper
production opportunities. Zara will have its difficulties to counter a high euro impact and its
competition lower prices for merchandise. Direct competition Zara's largest threat is of course its
direct competition, especially when entering new global markets. Due to Zaras broad field of
merchandise offering almost every retailer can be a threat especially when offering only one
certain category of products. Very quick and effective due to international expansion, allowing
the company to gain successfully sales outside Sweden is Zaras most threatening competitor
H&M.
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4 Ps of ZARA :
Product:
Zaras position in the affordable fashion industry clearly states its not a luxury
brand. The target customers are eager to purchase fancy fashion while still
sensitive to the prices. They want to be different and unique. The most important
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thing is (instead of more quantities per style) that Zara produces more quantities
of styles. Zara will also consider new product and develop features such as a
product line for a charity or VIP presents in its collection
Price:
Zara is providing fashion for people with a lower income, therefore the prices
are very reasonably that everybody can afford it. Cost effectively influences also
the supply chain management which requires a fast decision making process.
Place:
The constant flow of updated data mitigates the so-called bullwhip effectthe
tendency of supply chains to amplify small disturbances. A small change in retail
orders, for example, can result in wide fluctuations of factory orders after it's
transmitted through wholesalers and distributors. In an industry that traditionally
allows retailers to change a maximum of 20 percent of their orders once the
season has started, Zara lets them adjust 40 to 50 percent. In this way, Zara
avoids costly overproduction and the subsequent sales and discounting prevalent in
the industry. However, it will not allow having all products online. The decision
making process, of which products will be distributed online, needs to be defined
up front. The supply chain has to evaluate the stock availability by forecasting
sales and consider the needed production capacity.
Another important point is the shipment process to the customers and the return
handling process. As a high priority, the shipment costs have to be above a
minimum ordering volume free and the return guarantee has to be customer
friendly oriented. An additional service for express (24 hours) delivery, which will
be charged correspondently, must be installed in addition.
Promotion:
In the competitive clothing industry, Zara has successfully built a worldwide
famous brand by a unique management system of design, production and supply
chains. The fast fashion concept and operation allow Zara to always provide the
most fashionable clothes to their customers and the always renewing collections
definitely help build a brand loyalty.
Zara is focussing on internet online marketing opportunities such as e-commerce
strategy and social media to promote traffic on Zara.com as well as attracting
visitors to the online shop. From the original focus on the central European
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market Zara is expanding to the Asian market.
.
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focuses on the optimization module. The optimization module is
beyond the reach of this thesis.
INCOME STATEMENT :
Regarding the financial objectives we defined merely the sales as a key
performance indicator because of the low-budget investments of online sales
compared to the expensive flagship stores.
The financial objectives are based on the first half year of 2012 on global level
and presented a positive trend in sales of +17% compared to 2011. Our
estimated share on online sales was in the first half year of 2011 approx. 5% and
rose in the first half year of 2012 to approx. 6%.
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( MILLIONS EUROES) CHANGE12/11
SALES (PRESS 7239 6209 +17%
RELEASE)
ONLINE 434 310 +40%
SALES(ESTIMATED)
FINDINGS :
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We provided an interesting read regarding Zaras main business
strategies and the challenges it faces to sustain its
competitiveness and success in the next years.
In conclusion, we found an example of how companies,
regardless of industry, do not always follow strategies that are
academically taught. We found out that zara has a wide product
range on street fashion for the fashion street.
Zara is a way a fashion could be described it includes integrated
strategies and the development of departmental at even basic
material is of best found quality.
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