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A Case Study On

Submitted by: Ciabal, Ranci Kyle DS


Ersando, Christine
Danielle B.
Submitted to: Ms. Ana Maria Pabayos
Subject: Production/Operations Management
Schedule: 1:30 pm 3:00 pm / Monday and Wednesday

l. Time Context
Present time in 2015
ll. Viewpoint
Pablo Isla which is the newly appointed CEO of Inditex and its major
stockholder, Amancio Ortega Gaona.
III. Statement of the Problem
In what ways can the company expand its brand and acquire international
recognition around the world?
Zara has adopted a different marketing strategy form beginning which is not
to advertise through traditional media which affected their sales and brand
recognition in other countries and their demand in the US. Zara is not known
to other countries especially the US and Asia that is why it lacks international
recognition of its brand due to its same and typical design and products that
only attracts those in the European region. Zara is known to have a slow
operating system which is why its exports from other countries are
decreasing which is also affects their brand image and recognition.
lV. Statement of Objective
Short Term:
>To Increase Profits
>Cut Down cost
>Improve its Service and relations with its customers
>to establish its brand locally
>improve export sales through improvement of operation strategies

Long Term:
>To become a well-known fashion retailer that would not only offer high end
products but top of the line fashionable clothes to EVERYONE around the
world by being an established international brand.

V. Overview of the Business


a Ownership
Is a Spanish clothing and accessories retailer based in Arteixo,
Galicia, and founded in 1975 by Amancio Ortega and Rosala
Mera. It is the flagship chain store of the Inditex group, the
world's largest apparel retailer. The fashion group also owns
brands such as Massimo Dutti, Pull and Bear, Uterqe,
Stradivarius, Oysho and Bershka.
b History
Amancio Ortega opened the first Zara store in 1975 in a central
street in downtown A Corua, Galicia, Spain. Ortega named his
store Zorba after watching the classic film Zorba the Greek, but
apparently there was a bar that was called the same, Zorba, two
blocks away, and the owner of the bar came and said, "this is
going to confuse things to have two Zorbas." They had already
made the molds for the letters in the sign, so they just
rearranged them to see what they could find, and they found
Zara, which leaves fans wondering where the additional A came
from, but there is speculation that they had more than one set of
letters. In addition, the price for the letters "B" and "O" were
double the price as it costs more to make them round and at the
time this presented a significant cost for the new company. The
first store featured low-priced lookalike products of popular,
higher-end clothing fashions. The store proved to be a success,
and Ortega began opening more Zara stores throughout Spain.
During the 1980s, Ortega started changing the design,
manufacturing, and distribution process to reduce lead times and
react to new trends in a quicker way, in what he called "instant
fashions". The company based its improvements in the use of
information technologies and using groups of designers instead
of individuals.
Zara's previous logo
In 1988, the company started its international expansion through
Porto, Portugal. In 1989 it entered the United States, and in 1990,
France.[citation needed. This international expansion was
increased in the 1990s, with Mexico (1992), Greece (1994),
Belgium and Sweden (1994), etc. until reaching its current
presence in over 88 countries. Zara stores are company-owned,

except
where local legislation
forbids foreigner-owned
businesses; In those cases, Zara franchises the stores.

c Vision/ Mission/ Objectives and Values of Business


Vision:
Zara mission and vision is to give the customer an exclusive
choice of fashion by providing a quicker turnover of new stock
than other fashion retailers.
Mission:
Through Zaras business model, we aim to contribute to the
sustainable development of society and that of the environment
with which we interact.
Objectives:
[AT THE STORE]
>We save energy.
>The eco-friendly store.
>We produce less waste, and recycle.
>Our commitment extends to all our staff.
>An environmentally aware team.
>We save energy. The eco-friendly store.
>We are implementing an eco-friendly management model in
our stores in order to reduce energy consumption by 20%,
introducing
sustainability
and
efficiency
criteria.
This
management model sets out measures to be applied to all
processes, including the design of the store itself, the lighting,
heating and cooling systems and the possibility of recycling
furniture and decoration.
We produce less waste and recycle. Recycling hangers and
alarms, which are picked up from our stores and processed into
other plastic elements, is an example of our waste management
policy. Millions of hangers and alarms are processed each year
and both the cardboard and plastic used for packaging are also
recycled.
Our commitment extends to all our staff. Increased awareness
among our team members.
We hold In-company awareness campaigns and specific
multimedia-based training programs to educate our staff in
sustainable practices, such as limiting energy consumption,
using sustainable transport and modifying behavior patterns.
[WITH THE PRODUCT]

>We use ecological fabrics.


>Organic cotton.
>We use ecological fabrics. Organic cotton.
>Zara supports organic farming and makes some of its garments
out of organic cotton (100% cotton, completely free of pesticides,
chemicals and bleach). They have specific labels and are easy to
spot in our stores.
[IN TRANSPORT]
>We use biodiesel fuel.
>Zara's fleet of Lorries, which transport more than 200 million
items of clothing a year, use 5% biodiesel fuel. This allows us to
reduce our CO2 emissions by 500 tons.
Values:
Utilizing shops actively creating value from
differentiation
The principle of small quantity production
Utilizing the advantage of geographical conditions

product

d Nature and Main Activities


Zara is a vertically integrated retailer. Unlike similar apparel
retailers, Zara controls most of the steps on the supply-chain,
designing, manufacturing, and distributing its products. It is
claimed that Zara needs just one week to develop a new product
and get it to stores, compared to the six-month industry average,
and launches around 12,000 new designs each year. Zara has
resisted the industry-wide trend towards transferring fast fashion
production to low-cost countries. Perhaps its most unusual
strategy was its policy of zero advertising; the company
preferred to invest a percentage of revenues in opening new
stores instead. This has increased the idea of Zara as a "fashion
imitator" company and low cost products. Lack of advertisement
is also in contrast to direct competitors such as Uniqlo and
United Colors of Benetton. Zara set up its own factory in La
Corua (a city known for its textile industry) in 1980, and
upgraded to reverse milk-run-type production and distribution
facilities in 1990. This approach, designed by Toyota Motor Corp.,
was called the just-in-time (JIT) system. It enabled the company
to establish a business model that allows self-containment
throughout the stages of materials, manufacture, product
completion and distribution to stores worldwide within just a few

days. Regarding the design strategy, an article in Businessworld


magazine describes it as follows: "Zara was a fashion imitator. It
focused its attention on understanding the fashion items that its
customers wanted and then delivering them, rather than on
promoting predicted season's trends via fashion shows and
similar channels of influence, which the fashion industry
traditionally used. Zara in Santo Domingo, Dominican Republic.
50% of the products Zara sells are manufactured in Spain, 26%
in the rest of Europe, and 24% in Asian and African countries and
the rest of the world. So while some competitors outsource all
production to Asia, Zara makes its most fashionable itemshalf
of all its merchandiseat a dozen company-owned factories in
Spain and Portugal, particularly in Galicia and northern Portugal
where labour is somewhat cheaper than in most of Western
Europe. Clothes with a longer shelf life, such as basic T-shirts, are
outsourced to low-cost suppliers, mainly in Asia and Turkey. Zara
can offer considerably more products than similar companies. It
produces about 11,000 distinct items annually compared with
2,000 to 4,000 items for its key competitors. The company can
design a new product and have finished goods in its stores in
four to five weeks; it can modify existing items in as little as two
weeks. Shortening the product life cycle means greater success
in meeting consumer preferences. If a design doesn't sell well
within a week, it is withdrawn from shops, further orders are
canceled and a new design is pursued. Zara relies on
sophisticated information technology, such as PDAs with wireless
transmission capabilities, in the hands of store managers, to
monitor customers' fickle fashion changes. Zara has a range of
basic designs that are carried over from year to year, but some
fashion forward designs can stay on the shelves less than four
weeks, which encourages Zara fans to make repeat visits. An
average high-street store in Spain expects customers to visit
three times a year. That goes up to 17 times for Zara.
On 6 September 2010, Financial Times reported that Inditex
launched the first online boutique for its best-selling brand Zara.
The website began in Spain, the UK, Portugal, Italy, Germany and
Francesix countries that were among the most important of the
company's 76 markets. When asked about the company's late
arrival to internet retailing, Pablo Isla, chief executive, said they
had been waiting for online demand to build before launching

into cyberspace. All items on sale at Zara outlets are available


online and at the same prices. Customers can choose from the
usual range of paying methods and opt either for a free store
pick-up or paid-for postal delivery. The online return and
exchange policy is identical to the store system, with shoppers
given 30 days to change their minds. Queries are handled by
customer service operators or via e-mail or chat messaging.
Mobile applications exist for iOS and Android.
On 4 November 2010, Zara Online extended the service to five
more countries: Austria, Ireland, the Netherlands, Belgium and
Luxembourg. Online stores began operating in the United States
and South Korea in 2011. The simple website allows shoppers to
filter a search for garments by; type of garment, colours, sizes,
prices, reference number, etc. Customers can view products in
precise detail from different angles and use a SuperZoom feature
to get an exceptional close-up look at the details of each item.
In 2011, Zara entered the Australian market with a three story,
1400sqm store in the Westfield Sydney complex opened on 21
April 2011 and a second three story 1800sqm store at Bourke
Street Mall Melbourne which opened on 15 June 2011.]Zara will
open its third Australian store in November 2011 at Burnside
Village Shopping Centre in Adelaide, South Australia. It will be
Australia's largest at 2,300sqm, and modelled on the design of
their Fifth Avenue, New York store.
In November 2011, Zara entered the South African market with a
flagship store in the upmarket suburb of Sandton, in Sandton City
Shopping Complex, Johannesburg. In March 2012, Zara opened
their second store in South Africa, at Gateway Theatre of
Shopping in Durban. Later in 2012, a third store was opened in
Cape Town at the Victoria & Alfred Waterfront mall.
e Customers/ Target market
Zaras target market is young, price-conscious, and highly
sensitive to the latest fashion trends. They have an advantage
over traditional retailers because they do not define their target
by segmenting ages and lifestyles giving them a much broader
market.
Their customers and their branded clothes targeted at younger
consumers (15-35) with medium to low budget and in pursuit of

style/fashion segment and their product line by womens (60%),


mens (25%) and the fast growing childrens (15%) department.
f

Location
There are over 2000 Zara stores located across 88 countries.
Some Zara stores operate as Lefties stores instead of Zara, a
brand for low-cost fashion.
Zara stores are located in shopping malls and in the most
important retail streets worldwide. Zara usually selects the best
located and most expensive real state locations in the world to
open its flagship stores. Zara has flagship stores on Fifth Avenue
in New York, Oxford Street in London, Calle Serrano in Madrid,
[41] Via del Corso in Rome, Champs-lyses in Paris, Nevsky
Prospect in Saint Petersburg, GUM in Vladivostok, Shibuya and
Ginza districts in Tokyo, Myeongdong in Seoul, among many
others.
Zara
sells
its
goods
online
in
29
markets
in
http://www.zara.com/ offering its customers a total omnichannel
experience, as they can have delivered the goods purchased
online in any Zara store as well as by courier delivery in their
desired address.

g Current Stage in Business Life Cycle


Zaras business cycle starts with customers judgments on the
new designs, as well as information collected by staff members
who travel to fashion cities, observing people on the streets,
browsing publications and visiting venues frequented by their
potential customers. But in 2015 Zara is already on the
Prosperity stage wherein there is an expansion of output,
income, employment, prices and profits, there is also a rise in the
standard of living. This period is termed as Prosperity phase. This
involves the High level of output and trade, High level of
effective demand, High level of income and employment, Rising
interest rates, Inflation, Large expansion of bank credit with
Overall business optimism and high level of MEC (Marginal
efficiency of capital) and investment. Although they are in the
Recession stage in Spain.
h Past Performance and Key Achievements

According to AT Kearney, the consultants, for the past three


years India is at the top of the list of the most attractive market
for retail investment. According to Tehnopak, the retail
consultants, the revenues of corporate retail sector in India will
grow 20-fold from 7bn ($14.1bn, E10.3bn) to 140bn over the
coming decade. This will reduce the market share of the small
family-owned stores that dominate Indian retail.
Zara's entry is a test of whether its "fast-fashion" concept will
catch on in India. Zara's trademark is its ability to design,
manufacture and deliver a new clothing design to its shops
within just two weeks, compared with a nine-month industry
average. It takes roughly four weeks to ship a container from
Spain to India. Zara already has shops in 74 countries of the
World.
The financial year 2009 ended with a growth rate of 9% at
constant exchange rates. Inditex has also maintained
comparable sales over the course of the year. The gross margin,
which has increased by 7% to 6,300 million Euros, meaning a
57.1% on sales, 27 basic points more than in the previous year.
Operating expenses remain under strict control, with a growth of
7% mainly due to the new retail areas. The contribution of sales
in stores located outside Spain has reached 68% of the total
figure, and all chains have increased their sales percentages on
international markets, demonstrating their desire and ability to
expand at a global level. The scale of this effort is clear if we
recall that during 2009 alone, we increased our overseas
presence to a total of 46 countries. Zara's sales have seen a net
growth from 4% to 6% at constant exchange rates, with a 5%
growth in EBIT.
Zaras original stores were in Spain, today it has stores
throughout Europe, the Americas, the Middle East, and Asia. The
company opened their first store in Russia on August 28, 2013. In
fiscal 2012 Inditex reported total sales of 15.9 Billion ($20.7
Billion); Zara represented 66% of total sales or 10.5 Billion
($13.6 Billion) with 120 stores world-wide. Other, smaller,
divisions include Pull & Bear, Massimo Dutti, Bershka,
Stradivarius, Oysho, Zara Home and Uterque.
Zara has focused teams of designers and product managers.
They oversee the design, sourcing and production of a specific
classification such as dresses or womens sportswear. They are

responsible for both the initial collection and in-season response.


Importantly to its success, Zara produces where it sells. This
achieves short lead times for new fashion ideas. Zara broke the
traditional fashion supply chain rules by cramming the entire
production process into a 10- to 15-day time span. The Spanish
company uses its arsenal of automated factories located in its
home country as well as a network of over 300 small finishing
shops through the Iberian Peninsula, North Africa and Turkey. The
automated factories constantly create unfinished greige goods.
As soon as Zara pulls the trigger on a new design, the greige
goods are sent to the finishing shops and turned into products
ready to ship. Zara was described by Louis Vuitton Fashion
Director Daniel Piette as "possibly the most innovative and
devastating retailer in the world." Zara has also been described
as a "Spanish success story" by CNN.
Today, Zara can replenish existing items in as little as two weeks.
The company spends almost nothing on advertising and uses the
savings to support higher cost of producing in Spain. This
enables the company to produce what the customers want. The
tight integration of design, planning, merchandising and
production in La Coruna enables the company to be flexible and
therefore able to respond quickly to any market need.
i

Relationship with Key Stakeholders


Zara is well known because of the relationship that it establishes
with their Stakeholders, they treat them as a vital element in the
company, this is done through the Horizontal Method. The
Board of Directors is responsible for the key communication
messages on all levels. Through a Stakeholder approach, all the
people interested in the company are taken into consideration
starting with the shareholders and employees and including the
clients, suppliers, distributors, mass media, credit institutions,
neighborhood communities, and non-lucrative organizations and
associations. The horizontal approach allows anyone inside the
company the opportunity to offer valuable information, and their
opinion is taken into account. In this type of company the
organizational structure is usually less complex than in others, as
a result of possessing just a few levels of structured
communication and shared responsibility. This model even
affects the physical organization of the offices, meeting rooms,

and common areas. The communicative flow is simple and, even


though there are adequate channels to organize communication,
it is possible to exchange information with high and mid-level
management and intermediate leaders quite easily. In these
types of companies, a hierarchy exists, such as the one in the
pyramid model, but the communication circuit is bi-directional
and communication between departments is fluid. With this
model, the director of the communication department is always
on the same level as the other area directors. Inditex decided to
incorporate the second communication model which is easier to
practice than it appears. In part, this is due to the workforce of
the company that grows exponentially every year, because of a
deliberate decision not to create a Complex organizational chart
with an infinite amount of tasks and people to manage. They
utilize their Communication Model like the pyramid model which
reflects a one-way flow of information. In this model
communication is understood just as a tool that assures the
efficiency of the company. Communication is not present at the
managerial level in the same way as the rest of the directors
decisions.
j

Industry and Competitors Factors using Porters Five Forces


Framework
Zaras rivalry position can is viewed to have a dual edge over its
main rivals; the company generates the most top level earnings
(as evidenced in 2008 when the company emerged the top
biggest fashion retailer globally coming on top of GAP), sustains
low cost distribution and manufacturing retail connections
globally. The company shifts from concept to store on an average
of 15 days which is about 10-12 times quicker than its nearest
competitor GAP and H & M which bears a factor advantage of
17.4 in costs of advertisement.
Porters five forces is a common model applied by
organizations to evaluate the weight of the five forces in the
market that influence the quality and feasibility of the industry.
This five forces model by Porter comprises of the buyers power,
the supplier power, rivalry amongst the existing firms, threats of
new entrants and substitute products. This model is applied to
show that the rivalry forces that influence the garment industry

feasibility extend beyond competition amongst the existing


sellers and comprises of forces from the other four factors. These
forces enable people to evaluate the viability of the industry in
relation to realization of profits. In the garment industry,
competitive rivalry is so high where the market is taken as a
cutthroat field of battle. In contrast, the alternative product is a
feeble force, even though it widens their liberty of alternative for
strategic course of action, considerably they position power in
the jurisdiction of the companies that make up the industry.
Industry with strong forces is less attractive compared to the
industry with weak forces.
1.) Buyers Power: Moderate pressure
In spite of the existing world economic crisis, the garment retail
industry has continued to grow strongly at a commendable rate.
Coupled with lack of costs for switching by the buyers and the
high differentiation of the product, there is an implication that
competition existing within the industry is not more than
average. Customers of Zara in general range from middle class
to upper class who considerably posses a high buying power as
they seem to have more income at their disposal. There are also
other garment retail suppliers who distribute considerably same
line of products to Zara; as a result the buyers might finally call
for more innovative or fashionable line of products i comparison
with the present products offered.
In the fashion industry there is a high rivalry amongst the sellers.
Fundamental strategies of fighting the competition is attraction
of the buyers with lower prices, more designs that are unique,
high quality designs, efficient customers services as well as a
solid image of the brand. Therefore, Zara being amongst the
market leaders as well its closest rivals such as Gap and H & M
all make efforts to solidify their position in the market by making
use of their unique strategies. The preferences by the buyers
form the centre of focus for the business which entails satisfying
their special needs.
It is notable just like Zara, most firms react rapidly to the up to
date trends of fashion which are found in the business reports,
published in magazines and made available to the public through

internet or in printed form. This strategy of assessing the latest


data enhances the companys ways of upgrading its market and
performance of the business. For instance, the philosophy by
Zara is to capitalize on the competitive advantage of the new
fashion trend. The company has a motto to have precise fashion
at reasonable prices within the right time. The company true to
its word is faster compared to its rivals in obtaining the right
designs into the market and improving its sales revenues
considerably. As a result its reputation has gone high among its
competitors.
In addition, given that there are a considerable number of retail
outlets which offer similar products, there is low customer loyalty
to the companys products which places more weight on
innovation. The demoralizing factor in this case is that demand
by the buyers goes down hence firms could end with excess
inventory at their disposal. The buyers have been found to make
comparisons amidst the retail shops which force the firm to
differentiate its products by putting into account the economic
aspects and environmental changes. Therefore a huge battle
exists for the sellers given that the buyer has relatively more
power to decide where to buy. The companies have craft
strategies that will attract the customers to their products. As a
matter of fact most companies such as Gap and H & M are
pursuing the Chinese market to follow the steps of Zara.
2. Suppliers Power: Moderately high
As there is continued liberalization of the global trade, the power
of the supplier in the industry goes down through rivalry from the
producers in low wage boundaries such as China. Furthermore
suppliers are weakened by the absence of dynamism which
makes the apparel industry increasingly significant to their
operations. Zara organizes the various licenses offered to all
suppliers and hence with the existing licensing contract, the
power of the suppliers is further weakened as they are required
to stick to particular provisions which minimize variation or
manipulation of the designs.

Suppliers as one of the forces in this industry has been noted to


be considerably high hence it consumes more time to establish
quality partnerships. The supplier power of bargaining is more
solid when the members in the industry experience higher costs
by switching to a new supplier since the suppliers are well
knowledgeable on standards of safety and quality hence firms
have a tendency to sustain a strong and stable supplier network.
Therefore suppliers tend to have a more arbitrage by exercising
monopoly power in price setting based on limited inputs which
firms seem to prevent. In addition, as stated in the case the
company has 1,398 suppliers to which they get their raw
materials, even though there are doubts on the supplier quality.
3. New Entrants: High pressure
The world garment retail industry has developed diffidently i
value in the recent years, which constrains its attraction of the
new entrants. Hidden costs of switching for the consumers imply
that they are at liberty to transfer their tradition to new entrants.
Reprisal by the present players, like initiation of price war, is
potential, particularly where the new player shifts into a more
focused segment in the market. Even though Zara has a long
background and wealthy heritage, similar products from new
entrants that have reduced price has a great effect. The force of
new players is high since the apparel and retail industry is very
attractive. It pools more new entrants to the fashion market
which poses a strong probable threat. The present players in the
industry such as Gap, Zara and H & M are currently the
strongest. Zara for a start has a reputable brand and supply
strategy which makes it rigid for new players with intention of
reaching out to new geographical markets. A new player must
have adequate resources to enhance development of new lines
of fashion and make them make use of technological gadgets in
the efficient innovation to trigger demand from the existing and
new markets.
4. Substitutes: Moderate pressure
Clothing has a diverse use compared to simply keeping the
wearer warmer. It does act as symbol of the socio-economic class
and a way of demonstrating personal identity. Duplicate fashion

can be considerable threat to the revenue realization in some


market such as India, China and Indonesia. In this case the
substitute products are a weak factor in the clothing industry.
This is because good alternatives are not available or rather they
are costly with poor quality. For instance Zaras products are
more affordable and made with exceptional high quality natural
materials. Another aspect is the less stiff the rivalry pressure
presented by the substitute products the higher the cost of
switching. Nevertheless, consumers from a dynamic culture have
unique tastes and might have preference to visiting tailors to
make their design with the cost determined by the tailor.
Nevertheless, most tailors might be good enough or yet might
not be accessible. In this scenario, the consumers have no option
but to buy from the retail shops. Therefore, the low threat of
substitutes is uniquely based on the popularly branded firms
potential to enhance high fashion clothing which attracts to
different tastes and preferences by consumers.
5. Rivalry: Moderate pressure
There is a segmented apparel and retail industry globally. Hence
there is allowance for a considerable number of smaller firms in
this industry. Over the past five years there has been an industry
performance of not more than average. Even though Zara has
very many direct rivals such Gap and H &M its brand has still
considerable loyal consumers. The chances of buyers cost of
switching to other brands are relatively high in case they do not
like the price setting. They are more concerned about the
reputation of the brand. For example, there was an investigation
that was initiated by Brazil in the year 2011 where Zara was
alleged of global labour infringements. Immediately Zara made
to efforts to stop the claims. It is notable that buyers tend to be
influenced by certain news through a word of mouth which
impact greatly to the sales revenue. As a matter of fact, the
image of the brand is a vital aspect for popularly known firms
hence they normally inspired to scale to the top of the game. The
buyers purchase in small quantities which imply that they have
no power to bargain based on the small quantities. Besides, an
increased demand establishes a market for the seller and moves
the power of bargaining to the sellers. Therefore a company such

as Zara offers quality which makes the buyers to lack other close
options.
Vl. Areas of Consideration
A. Internal Environment
Strengths
Global Outreach
With over 2,000 branches located in 88 different countries, this can be
considered as a great strength because as an international brand, Zara
could reach many parts of the world that some competitors may not be
able to. Inditex, as the head company, expands Zara in a large amount
of scale. Currently they have more than 1,700 stores in exactly 86
countries around the world. This condition is one of a good strength
that Zara has because as an international brand company, especially in
apparel industry, Zara should reach every part of the world. Reaching
global market is a foundation to step for an international brand to
dominate the industry.
Faster Production Time
Ordinarily it takes three to five months before a fashion brand can
produce their seasonal collection but Zara can do it in only two weeks.
The reason for this is that instead of guessing on whats going to be in
next, they ask the customers what they want to see and offer it to
them faster than any other fashion label out there.

Strategic Location of Branches


Zara locates their stores strategically and in a very well-thought
manner since direct communication to promote their products. For
example, in Indonesia, they place their stores in almost every major
shopping mall, while in France they locate it downtown and main
streets because this is where people usually go shopping. Zara chooses
where to locate their stores carefully because they are aiming for a
direct communication strategy to promote their products. They have a
unique approach in locating their store in each countries, and even
cities. For example in Indonesia, Zara locates their stores in almost
every big shopping mall because it has a high traffic everyday and it is

the main place for people to go shopping. In France, Zara locates their
store in downtown and main streets as the local people usually walk
down the street to go shopping.
Store Image
Zaras store image is trendy yet cheap. This is the image Zara has
worldwide and this can really help them gain more customers since a
good store image makes buyer consider a store when they want to
purchase items. Zara is a trendy yet exclusive fashion store. This is the
image of Zara from around the world. A unique concept of fast fashion
might become a trendsetter in international fashion industry. A good
store image also drives people to consider Zara when they want to
purchase fashion items. In addition, their excellent customer in-store
services result a loyal behavior from consumers. In the industry with a
high level of competition, consumer loyalty is crucial;
Environmental Friendly
Zaras mission statement is Through Zaras business model, we aim
to contribute to the sustainable development of society and that of the
environment with which we interacts. This is one of their strengths
because nowadays, people are now getting more conscious about
where they buy products and whether the company is helping take
care of the environment.
Distribution Channel
In the distribution system, Zara control most of the supply chain and
distribution of its products from the headquarters. Zara has their main
manufacturing place in three different contingents. 50% of the
products are produced in Spain, 26% in the rest of Europe, and the rest
24% percent is outsourced in Asia and Africa. Then the products were
transferred to Zaras distribution centers located in Spain to be
exported to Zaras stores around the world. We can see that their
distribution strategy is vertically integrated. This requires a high
concentration and control form the headquarters in Spain, and that is
exactly what Inditex does. Since the distribution strategy is integrated,
combined with their high technology, the products can be distributed
globally in just a short amount of time. This is the uniqueness of Zara.
They are able to adapt to the latest trend in limited time, using the

Hybrid Communication system, then produce those latest trend with


available materials to cut production time and cost, and after that the
products are immediately transferred to all the stores. We found out
that this is strategy has become their strength.
Fast Changing Collection
This factor is one the specialties and uniqueness of Zara. Every 2
weeks Zara published brand new fashion items. This strategy exists to
stimulate and refresh consumers curiosity about Zaras products. This
is also the strategy to strengthen the image of Zara as the designer
teams always work to find out what the new designs should be. The
aim is to be the trendsetter of fashion business. However, in the
apparel industry, it is easy to copy the style of designs.
Responsive Employees
Employees presence is important inside the store to control, rearrange
items, and also to give information to the customers. Therefore Zara
also concerns about Employees responsiveness, especially because
they claim to have direct communication as their prominent marketing
strategy. Customer control and satisfaction sometimes depend on the
service and Zara want to optimize those satisfactions in order to get
the customers loyalty. On the other hand, sometimes consumers do
not really care about the customer service. Sometimes they care only
about the product and price.
Brand Image
We do think that this is the back bone of every player in apparel
industry; again, considering the amount of competition in this industry.
One of the proofs would be the fact where consumers still buy the
product from certain brand even though many claim it uses bad
fabrics, or the price is sometimes too high, and so on. Eventually, they
would still come back because of the image that they will get when
they purchase the product. In other words, this symbolic brand benefits
do exist and they are important. The brand of Zara is famous for their
exclusivity and trendy product. Zara would never have a not up to date
image as they always publish new items in every 2 weeks. The strong
brand image is admitted around the world. This is what helps Zara to
keep improving and reach the sustainability.

Weaknesses
Repeated Out of Stock and Limited Stock
One of Zaras weaknesses is that since stocks run out faster than a
blink of an eye, Zara cannot cater to the needs of their customers
which may make some of them choose another store which can make
Zara lose. Even though Zara has a fast fashion concept, which is
publishing new items in every 2 weeks, but some of the items are
limited. So for some items, they might not be available in every store.
Even though this is actually intentional, but for consumers, this can be
included as a weakness as some customers will not be satisfied if they
did not get the items that they want when they want it and where they
want it. Customers dissatisfaction quite have an effect for Zara.
Lack of Advertisements and Marketing
Since the fashion industry is a very cutthroat business, being able to
produce goods faster than other competitors is only half of the battle.
Zara also needs to be known more to the public in order to gain more
profit and increase their revenue. Zara is lack of marketing such as
promotion and advertisement. In Indonesia it is very rare to see Zara
logo and advertisement outside the store and in public area. In fact,
Zara in different countries also does not have that much of
advertisement. They only depend on the strong brand image that they
already have. This can be a tough weakness if the competitors keep on
increasing their marketing strategy, especially in emerging countries.
Price
In its country of origin, Zara is categorized as a low-end product.
However, Zara is included in a high-end product in Indonesia and in
many other countries, 1 item of long sleeve shirt can be priced at
600,000 Rupiah. This is one of the weaknesses for Zara as the
customer will think twice to purchase if price is a big consideration for
them. This problem occurs mostly in developing countries, where the
GDP per capita is still relatively low. Even though the middle class
segment is growing, but not all of them are used to spend hundreds of
thousand rupiah just to get a T-shirt.

Brand Image Closely Tagged to Competitors


As mentioned earlier, the problem in apparel industry is that it is very
easy to copy each others designs. This weakness is one of the
toughest to deal with. Beside Zara, there are a lot of other brands that
reach the international market that also build an exclusive image for
them self. Therefore sometimes public cannot differentiate product
from Zara and their competitors. In other words, it is going to be easy
for them to switch from one brand to another. Moreover, this will affect
peoples judgment that all the brands that in the same level as Zara is
actually the same or similar in term of types and products, or in other
words, no clear differentiation between those brands. As a player in
this industry, Zara needs to obtain consumer loyalty despite the
existence of problems in the designs differentiation, a brand can
develop a strategy to build consumers loyalty, just like what Inditex is
trying so hard to do to its brands, including Zara.

Internal Strategic
Factors
Strengths
Global Outreach

Weight

Ratin
g

Weighte
d Score

0.2

Faster Production
Time

0.04

0.1
6

Strategic Location
of Branches

0.05

0.2

Store Image

0.04

0.1
2

Environmental

0.04

0.2

Comments

Not
known to
other
countries
Due
to
slow
operation
strategy
Found in
every
mall
Design
and
fixtures
Shopping

Friendly

Distribution
Channel
Fast Changing
Collection

0.06

0.05

Responsive
Employees

0.08

0.2
4

Brand Image

0.15

0.7
5

Weaknesses
Repeated Out-ofStock and Limited
Stock

0.0
6

Lack of Advertising
and Marketing
Price

0.1

Online Shopping

0.3

0.5

0.4

0.0
5

B. External Environment
Opportunities

0.0
8

Brand image
closely Tagged to
Competitors
TOTAL

0.1
8
0.2
5

4
1

0.2
4.5

bags not
made
from
plastic
European
Markets
Monthly
Change of
items
(items of
the
month)
Improved
Customer
Service
Internatio
nal
recognitio
n
Due
to
slow
operating
system
Limited
billboards
High price
Customer
s loyalty

With the rise of popularity of online shopping, Zara should offer online
shopping to customers in order to cater to those countries which they
do not have stores located in. Online retailing has been growing in the
last decade. More than $14 billion has been spent on online shopping.
Zara should try to open online retail shops to satisfied the audience
who need to shop for standardized version of Zara's products. This also
presents an opportunity to display the entire product lines from Zara
and can be easily searched.
US Market
Since Zara is mainly based on Europe, targeting the US Market is an
amazing opportunity because with regards to the Fashion Industry it
roughly makes about 30% of the whole market.
Making Product Lines More Specific
Zaras product range is loosely classified into three sections. e.g.
clothes of young girls have not been separated from that of 40+. By
being more specific, Zara has the potential to attract more customers
of varying ages.
Expansion plans
The group has invested more than 2.8 billion to open new stores
internationally. The rate of growth of stores has been as high as 640
stores per year. Zara fashion will be made available in Korea, Egypt
and Montenegro. Growing apparel retail market in China, India,
Malaysia, Taiwan and Indonesia According to the growing population of
affluent household, higher incomes, consumers knowledge of
international brands, it presents an opportunity for Zara to expand in
Asian market.

Threats
Limitation on Designs to Copy
Since Zara relies heavily on recreating higher end fashion labels and
making them more affordable to the general public, if the time comes
that there will be lesser fashion brands to copy this could be a threat to
Zaras clothing lines.

Natural Calamities
Since Zaras only manufacturing plant is located in Spain, when a
major calamity strikes, this can really be detrimental for the fashion
brand since they are known for producing clothing faster than their
competitors.
Fluctuation of Exchange Rates
Since Zara is a European based company, although they may gain a
great amount of profit in one of their branches, if the exchange rate for
that currency is lower, then that would cause a loss to the company.
Competition
The competition is always on the lookout for cheaper manufacturing
location such as China, India and Eastern Europe. The benefit of lower
costs of procurement can be passed on to the customers through low
prices. The competition is also working on reducing the lead times,
which if successfully implemented could lead to reduction in revenues.
Counterfeit goods
The counterfeit goods in the new markets and existing ones adversely
affect sales of branded accessories. Widespread counterfeiting reduces
the brand value and exclusivity, especially in cases of high end fashion
products, through customer dissatisfaction.
Rising Labor cost in European region
Since Inditex group focuses most of Zara's designing and
manufacturing activities in the European region, the increasing labor
costs drive down the profits as it increases the operating expenses.

External Strategic
Factors

Opportunities
Online Shopping

Weight

0.0

Ratin
g

Weighte
d Score

0.3

Comments

Facebook,

8
0.1
5
0.0
9
0.0
8

US Markets
Making Product Line
more Specific
Expansion Plans
Threats
Limitation on Design
to Copy
Natural Calamities

5
3
5

0.0
8
0.0
6

Rising Labor Cost in


European Region

0.0
9
0.1
5
0.0
7
0.1
5

TOTAL

Fluctuation
Exchange Rates
Competition

of

Counterfeit Goods

Strategic
Factors
S1 Global
Outreach
S2 Brand Image

Weig
ht

Rati
ng

0.2

Weight
ed
Score
1

0.15

0.75

4
2
3

2
0.7
5
0.2
7
0.4

Twitter etc.
In
malls
and
kiosks
Classification of
customers
Expand in other
countries

0
0.3
2
0.2
4

High end
Only
manufactures in
Spain
Recession
and
inflations
China, India and
Eastern Europe.
Brand value

0.2
7
0.6
0.1
4
0.4
5

Increased
operating
expense

3.7
6

Sho
rt

Intermed
iate

Lon
g

Comments

Not known to
other
countries
International
recognition
Limited
Billboards

W2 Lack of
Advertising &
Marketing
W3 Price
O2 US Markets

0.1

0.5

0.08
0.15

5
5

0.4
0.75

O3 Making

0.09

0.27

High Price
In malls and
kiosks
Classification

Product Line
more Specific
T4 Competition

T3 Fluctuation of
Exchange Rates

of customers
0.15

0.6

0.09

0.27

VII.

China,
India
and
Eastern
Europe.
Recession and
inflations

Assumption

Since ZARA has adopted a different marketing strategy form beginning which
is not to advertise through traditional media. There are not many businesses
which are running without any marketing in this age of communication and
technology. If some business is doing good without marketing it does not
mean that the business has captured maximum market and there are no
more opportunities to grow. If some business is already doing well, it can do
better by launching a marketing campaign and can get more market share.
Their Political view are at conflict because the India's democracy system has
all ability to qualify for "illiberal democracy". So that is why the political
system is volatile and takes any positive or negative impact on economy on
day to day basics. Major political and local political powers plays important
role in major city's economy. Foreign investor Zara has very sensitive about
its liberal policies due to its main origin of business in Europe is facing very
illiberal policies of government in its labour law. And also media the forth
pillar of political system play an important part to rock the economic system
by flaring up political issues and lastly what we noticed from ZARA that was
not highlighted from the case was their dilemma with Climate, the India's
weather is totally different from Europe because of its five extreme seasons
(summer, Monsoon/rainy, winter, spring, autumn) in a year. The winter is of
very short duration and not too much cold as compared to Europe and
summer (April, May and June) is warmer than Europe. Variation of season
requires rapid fashion change according to local weather. At Zara store you
will find most of the cloths for normal weather and not for extreme weather.
These assumptions could help us determine other issues that ZARA might be
facing nowadays.
Vlll. Alternative Course of Action
ACA 1: Change completely Operating System

By changing the operating system to a more technologically advanced one,


Zara can become faster with regards to their IT Department and they can
further get news of emerging trends faster than before which can make them
gain more profit in the long run. Thus through this exporting to other
countries can improve which can increase their brand image and recognition
around the world because of the fast and effective exports.
ACA 2: Outsourcing manufacturing to Asia
By outsourcing their some of their labor force to Asia, Zara can cut down
their prices and thus gain more customers. It would also promote its brand to
the Asian region in which they lack recognition. If you outsource you only not
cut cost but also advertise and promote it in the state where it was outsource
because since it is a foreign brand, it would capture the interest of its citizen.
ACA 3: Proper Advertising and Marketing:
It would only not increase sales but attract customers WORLDWIDE! Making
the brand known to all and acquiring that international recognition that ZARA
deserves. Unique approach of advertising and marketing within the business
model of Zara adds an additional factor to their success. A 0.3% of total
income is spent on marketing and advertising. This amount is significantly
less than the competitors of Zara who are spending 3-4% of their total
revenues on advertising and marketing. The main competitors of Zara like
next, Bhs, Debenhams, New Look, H&M, John Lewis, M&S, asos, peacocks
and topshop are the main stores which are more focusing on marketing
specially on online presence and are among the top list stores on search
engines in fashion and clothing search results. Because Zara is not in putting
any effort for online marketing, that is why we do not find it in search results.
In this age of communication and technology it is very hard to run a business
without marketing and interaction with existing or potential customers. In my
point of view Zara should now develop its own IT and marketing department
and should launch an online marketing campaign through search engine
optimization, social networking websites like Facebook, twitter, bebo etc.
Email marketing is another highly reliable and reachable idea to convey the
message to maximum number of customers in no time. The list of emails can
also be used to keep the customers update with latest offers in the store. By
using Zara's own website and these social networking website people can
keep in touch with store without coming to store and this thing will increase
the market share with the help of low cost solution of online marketing.
Interactive websites are the main source to attract more traffic and keep in

touch with customers which helps to improve and change in products


according to the requirements of the customers. This is also the quickest way
to get feedback from our valuable customers around the globe. At the
moment Zara is more focusing on the development of its stores on the prime
locations on the high streets which is also a good strategy but it cannot be
replaced with a well-organized professional marketing campaign which can
bring thousands of customers to the store in days. With the help of fully
functional interactive website customers can give feedback immediately
after using the product and we can improve our products quickly. In the big
countries like India where the presence of physical stores is not feasible in
every city because the buying power of the customer is not equal and to
open a store for small number of customers can not add anything other than
heavy losses. In situation like this online store is the best idea to serve the
customers who do not have physical access to the store but can afford and
buy from online store. Because in India we can find our customers in many
cities but the number of the customers will be low, so online marketing and
online store will be more helpful to satisfy that market.
Mass media Advertising
It is one of the basic requirements of a company to promote the sales of its
products. In addition to this, it works as a building block in the process of
building of brand identity. Furthermore it plays important role in
communicating changes or changes or new arrivals to the customers.
Advertising is considered to be one of the essences of fashion industry.
Advertising if properly planned would increase the buzz-value of Zara. For
achievement of our objectives following branches of advertising would be
utilized. When these media will come into play every member of the society
would be having awareness to Zara.
Print Advertising
The print media remains one of the cost effective source of advertising.
Advertisement of products can be carried out via newspapers and
magazines. Additionally promotional brochures and fliers would serve the
same purpose. The selling price of advertising space in newspapers and
magazines is directly related to the position attained by advertisement and
the readership of the publications. Our advertisement would be published on
the most popular and glossy supplement of magazines and newspapers to
catch the eye of customers.
Billboards

Billboard advertising is very common in Delhi and Mumbai and this trend is
going to be followed by Zara to grab the attention of the passers by. This
would be supplemented by other outdoor advertising methods to capture
larger portion of market.
Kiosks
It is not difficult to find malls and railway stations in cities like Mumbai and
Delhi. Keeping this thing in mind provision of kiosks can also provide easy
outlet for the products of company. Zara would use this marketing strategy
as well.
Tradeshows and Events
We have plans to organize trade fairs, exhibitions and events to draw
attention of customers. It would be achieved in collaboration with different
local companies which promote fashion industry.
Advertising in Movies
All of us know that India is famous for its movie production. We would use
this tool as covert advertising as a unique kind of advertising. Almost every
weekend a new movie is released. Thousands of people come at one
platform and the same platform can be sponsored by Zara to gain the
advantage of grabbing customers.
Celebrity Advertising
We know that audience in India follows the trends adopted by celebrities'
over there. Celebrities like Amir Khan and John Abraham have already played
their role in Zara's promotion campaign. To keep the pace with this strategy
is still the part of our marketing layout.

ACA 4: Market Growth Expansion


The best way for Zara to maintain their sustainable growth is to seek new
opportunities in the apparel market. With changing consumer behaviors as a
result of globalization, and U.S. department stores suffering, there are growth
options available for specialty retailers like Zara. Zara has the opportunity to
be one of the trendiest/low priced retailers that America has seen recently.
Zara should most likely develop a second central distribution center in the
Americas to decrease logistics in order to deliver fashionable goods in a

faster manner. Their second central distribution facility should be an


expansion of one of their smaller distribution centers located in Argentina,
Brazil or Mexico. The close proximity of the distribution center to the
American market will allow them to effectively interpret the particular
American fashion. The distribution center will also allow them to have
additional funds to spend in other areas of business such as advertisements:
a necessary feature to penetrate the American market. Another market
opportunity for Zara is to invest in Internet retailing especially directed
toward the U.S. market. Though Zara is wary of overexposure, Americans like
to be able to purchase all goods including apparel from the comfort of their
own homes at any time they chose. Therefore, since Zara is looking to
expand in the U.S. market they could realize the potential for a direct
Internet selling strategy. That form of direct marketing will reach more
consumers faster and easier. Though it may be difficult to display all of
Zaras ever-changing fashions online, it may prove profitable for shoppers to
purchase a moderate selection of trendy Zara pieces along with some of
their staple basics.
ACA 5: Offer Specialized Products
This is for different geographic locations within the same city. Zara already
does this to an extent for different international preferences but more
specialization will increase consumer demand and will motivate them to visit
more Zara locations within their own region. In some cities the company is
possibly experiencing cannibalization because there are too many Zara
stores that carry the same product within one city. Zara could differentiate its
product from location to location to increase shopper traffic. This would work
because shoppers would hear about new/different products (possibly from
word of mouth or increased advertising) that another Zara store is carrying
across the city and they would be intrigued to pay a visit. That way sales
wouldnt be stolen from their own Zara stores, decreasing cannibalization for
the chain. This would attract foreigners to buy their products which would
match their preference and standards.
IX. Analysis of ACA
ACA 1: Change completely Operating System
Advantage:
An Advanced Operating System has a lot of great benefits to Zara. It will be
the company's unique way of doing things--how it operates, goes to market,

produces and deals with its customers. An effective Operating System


transcends the people who are doing and managing the work, and is more
valuable as a result. A business that effectively operates without it is always
more attractive to public and private sources of capital. ZARA would improve
its performance with ease if they upgrade their operating system.
Disadvantage:
The main disadvantage is the cost. Higher cost for the company because of
hiring IT people and improving its Database. Another issue that might arise is
from the IT themselves because they will begin to show symptoms at the
retail sites due to the many manual processes involved with having to walk
around the stores and determine whats been selling by counting garments
and talking to sales people. Store personnel could not track inventory in realtime because there was no direct link from the retail sites to the
warehouse/distribution centers. The management issue is one that will
prevent Inditex from maximizing their potential earnings from the Zara retail
chain. Zara is currently working with an in-house customized POS solution
that runs on an outdated operating system that no longer receives vendor
support. The system does not include all of the features and functionality
currently available in the market, and therefore is not the optimal solution for
Zara. There is no link between Zara HQ and the chain stores to share
inventory data in real=time. Zara uses a very decentralized approach, and
allows store managers a great deal of autonomy when deciding which
clothing items would go on sale based on their interactions with customers,
employees, contractors, etc. This approach leads to unique orders of custom
sizes for each location and higher manufacturing costs. This approach misses
out on the potential sales based on certain geographic data that is biased to
the region, i.e. if a certain t-shirt design sells well on the East Coast, whos to
say the fashion wouldnt translate to the West Coast, or over in Europe
perhaps? In-line with Zaras ideology, intending for clothes to have a fairly
short life span, both within stores and in customers closets, this idea of
having a group of commercials decide on which clothes are designed and
produced for each store, then customized and adapted over time, overlooks
the potential for mass-production and increased sales to a broader market.
ACA 2: Outsourcing manufacturing to Asia
Advantage:
The first one is Lower Costs hey may store and ship your products as well,
and charge either for the space you use or the services you buy. The

availability of cheap overseas labor is one of the biggest advantages of


outsourcing. Another on is the Skilled Workforce Outsourced labor especially
overseas labor often includes technically skilled, highly educated and
multilingual workers The advantage of having support workers who can
respond to your global customers in many languages is a significant asset
Your company may also enjoy a market advantage locally out of an
appreciation for the jobs it provides. The last one is Security which when
Conducting your manufacturing overseas will also present problems. Zara
could benefit a lot from these advantages especially for the reduction of cost.

Disadvantage:
Outsourcing your production, particularly overseas, usually means that you
cede a certain amount of daily control to your contractor. Entrepreneur notes
that this may result in you having to compete with the factory's other
customers for job priority. The Small Business Trends website cites an InfoTech Research Group Study that lists the availability of quality local vendors,
missed signals concerning job requirements and substandard product quality
as possible negative outcomes of choosing to outsource your production. If
Zara would only outsource then they would lack control over the Asian
Country and they might overtake the business especially China.
ACA 3: Proper Advertising and Marketing:
Advantage:
Simply advertising would be a great help to Zara because it would bring
Information to the customer. Advertisement about new products keeps the
customer informed about the new developments in the industry. They help to
provide them information regarding the newly launched products and will
take care of customers. Advertising takes care of customers. It helps in
holding on to the loyal customer, decreasing the number of lost customers
and enlisting new customers. Thus the overall effect of advertising is
increase in the number of customers that will gradually become loyal to the
product. Advertising facilitates a noticeable increase in the sale of the
product. It thus helps reduces per unit cost of the product and help the
businesses to earn profits and will improve sales of Zaras products. An
effectual advertisement results in a swift change in the attitudes and habits

of the people. Zara would not only expand its brand but also inform people
around the world about it.
Disadvantage:
It would be expensive because of the cost of advertising the brand. It has a
lot of benefits but also has several bad effects to it like it Undermines Social
Values, Advertisement is a sort of day-dreaming for the people. These days it
is taking the people away from reality and into the realm of artificiality.
Through its medium people get information about new products. Only very
few products are of any use for them. The brilliance of new products really
gets on their nerves. They want to buy them but have no resources at their
command. Consequently, they start feeling upset with their present status.
Taking it as a social evil, it can be said that advertisement undermines social
values. If Zara would advertise skinny woman then people might think it
promotes body issue and if it uses racy photos, then conservative people
would attack it. Advertising it would also Encourages Sale of Inferior Products
in which Every manufacturer projects his product as superior one in the
advertisement. Therefore, the buyer is unable to decide as to which product
is really good. Consequently, it is difficult to get good quality product even
after paying a handsome price for it. If a seller gets good price for some
inferior product, it becomes a habit with him. It affects other sellers also.
Therefore, it is said that advertisement encourages the sale of inferior
products. Zara could face these consequence it proper advertising is not
met.

ACA 4: Market Growth Expansion


Advantage:
It would attract New Customers from around the world, A primary benefit of
business expansion is the ability to attract and retain new customers. When
ZARA add new products to their portfolio or move into new markets, it can
bring in previously untapped customer markets. Reaching out to these new
customers with expansion is one thing, but capturing them for long-term
relationship building is primary. Growing a loyal customer base is the best
way to achieve stable and growing profits over time. It would also utilize
Economies of Scale, When ZARA expand its business, it would often spread
the risks of doing business and reduce the potential of one product or one
poor decision damaging its business. Operating in multiple markets or in

many product areas also allows companies to spread the costs of doing
business across more markets or customers. This makes the costs of doing
business less on a per-customer basis, which improves the potential to profit
by adding new customers. If Zara would expand its market to all countries
even those that are not known, they would be considered as a recognized
brand by all.
Disadvantage:
Zara might face consequence if they expand their market because A
drawback of business expansion is that when a company invests money and
other resources to expand, it has less capital available for other business
transactions. This makes it especially important that it carefully weigh the
market potential of expansion before making the investment. Consider the
potential return on investment from each product or new market you could
expand into before investing your capital into a path of expansion. Another
risk of business expansion is that it could spread your company's resources
and expertise too thin. Often, company leaders think they have to expand if
things are going well. However, getting involved in too many markets or
products can cause the company to spread its abilities out to the point that it
does not perform well in any area. Business expansion only makes sense if
the company has adequate people and resources to cover the new area with
expertise. If Zara would keep on expanding it would put risk in the company.

ACA 5: Offer Specialized Product


Advantage:
This is referred to as the Niche Marketing, which there would be Less
competition Unlike in generalized marketing where market competition is
still, niche marketing has quite less competition for the viable customers
purchasing the products. Zara can establish Brand loyalty Niche marketing
makes it possible for businesses to build their brand loyalty. This marketing
approach lets you provide customers with products and services they need
and desire. You end up having a leg up on the competition because items in
a niche market are difficult to find in general products. Zara would be Best
for giving marketing insight Where it is all about selling to a segmented
market. It is about taking your products to people who have an interest in
receiving them. This can help you redefine your business, leading it in a new
product directions and services. You will end up creating new opportunities

for your business by selling similar or support products. Once you begin to
concentrate fully on niche marketing, you will learn about new products,
innovations and ideas about the market. Zara could offer specialized
products to open a segment in the market and also to attract people with
different preferences.
Disadvantage:
Because of the smaller market size, this marketing approach is not suitable
for a company that is small and intends to grow in the current market. The
smaller market makes it difficult to enjoy a larger profit margin in the market.
Among the advantages and disadvantages of niche marketing is that there is
limited growth because there is a small group of customers to buy products.
Zara could also put itself at risk because people might not get attracted to it
so therefore a loss could arise.

X. Conclusion
CRITERIA
ECONOMY
EFFECTIVI
TY
ACCEPTABI
LITY
TIME
EFFICIENC
Y
TOTAL

ACA 1
3
4

ACA 2
4
3

ACA 3
4
3

ACA 4
4
4

ACA 5
4
4

13

14

13

19

14

ACA 4: Market Growth Expansion


We Decided that if Zara would expand their business then it would offset
some but not all of their problems. It would create Diversity in the workplace,
it would open the doors to different types of people, it brings a different
perspective to projects. This is an essential function if we want to compete
and excel in an increasingly global world. Zara would improve their Global
Employment Capabilities in which they select to expand its global reach
which really open the door to finding amazing talent beyond just its local

area. They can add team members from any county in the world. That is
HUGE. When they select to bring in people from different countries and
cultures, it offers a different perspective to our projects and environment.
This could act to give a wide variety of unique, creative and diverse views
within their organization. A fresh approach in business will give them a
competitive edge and that is beneficial to organizational growth and
increased sales. It would also be Expanding Global Reach Where they expand
our employment capabilities this allows them to expand their global reach.
This is a direct result of the growth of technology, which allows us to reach
beyond just its local tri-state area. it can now extend our organizational
capabilities to many other areas. This could increase their company reach,
expose its brand to new clients, increase sales and allow them to explore a
totally different market. The world is an ever changing place and we are
becoming a much more global world. It is very beneficial to embrace these
changes for the greater good of current employees, future employees and
the organization as a whole.
To sum up, the apparel and retail industry has a very stiff rivalry and all the
five porters forces have a great influence to the attractiveness of the
industry. Amongst the five forces the competitive rivalry for the current
players is most high followed by the threats of new entrants which reduce
the attractiveness of the industry. These two aspects trigger a company to
respond aggressively but morally to guarantee customer loyalty in offering
substitute choice in the garment industry. Generally, the combined force
makes it very hard for majority of the firms to make considerable returns.
The pressure from these forces demonstrates that firms which maintain costs
as low as possible to make profits. The prospects by Zara are efficient, even
in the early phases of growth, the company has shown resilient faster rate of
growth over its rival which is evident in its profit growth. The garment
industry is a feasible industry for the intention of investment. With continued
innovations, market pattern movement and dynamic response from the
customers. Based on the estimates in the case, the industry has a successful
outlook as firms diversify their area of comfort in attracting new players. The
main concerns experienced in the industry include economic downturn,
fluctuation in the personal income, dealing with customers prefers, stern
regulations in the less developed nations in connection operation and the
ability to be innovative and creative in the industry. All these must be
regularly reviewed by the company to remain competitive in the industry.
Zara has the competitive advantage among other competing brands
available in the market. Zara choose to handle design, production, and

distribution in-house and concentrate the whole production close to their


headquarters in Spain. By entire process, Zara can react much faster than
its competitors do to both the ephemeral trends in the world of fashion and
the capricious tastes of its customers. Zara have achieved their success by
thinking out of the box. 6. Their success is directly related to their ability to
understand their customers most innate needs and desires and tie these to
successful innovation strategies, which ultimately lead to these new and
unique approaches to their business.

XI. Action Plan

Activities
1. Domesticmarket
establishment
(must first make
it an established
brand within its
locality)

Persons
>CEO/ Executives
>Top
Management
>Stockholders
>Operations
>Marketing
>Finance

Time Frame
Depends on how
established the
company is

Budget
Depending on the
budget Zara
spent to establish
within its locality.

2. Export
research and
planning
(adequate
research of
insights of the
country where it
would be
expanded)
3. Initial export
sales
(testing the
country, how
people would
react to the
product)

>Marketing
> Corporate
Analyst

1 year (because
of sudden
changes)

$500,000

>Operations
>Marketing

5 months

$2.5 Million

4. Negotiations

>CEO/ Executives 2 months

$1.5 Million

With the foreign


country and other
compliance with
administrative
regulations
5. Expansion of
international
sales
(international
trade shows and
other marketing
activities and
finding market
partners or
entering into
cooperative
strategies)
6. Investment
abroad
(open a local
office, tighten
relations with
local partners,
buy an existing
local company,
form a joint
venture or invest
in R&D or
production
facilities.)
7. Growth of
international
Markets
In that foreign
country

>Top
Management

>CEO/ Executives 1 year


>Top
Management

$5 Million

>CEO/ Executives 1 year


>Top
Management
>Stockholders
>Finance

$4 Million

>CEO/ Executives
>Top
Management
>Stockholders
>Operations
>Marketing
>Finance

$4 Million

2-3 Years
(Depends on how
the company
would succeed in
that country)

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