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Ortega and his business partner Rosalia Mera opened them access to a market that which would otherwise

be closed. Substitution across the whole industry is

their first store in the city of A Coruna, close to extremely high, as individual consumers can choose
Arteixo, in 1975. They wanted to call the shop Zorba, alternative providers for their fashion needs. When
after their favourite film, Zorba the Greek. However, looking at taking the mass-market competitive
approach, substitution may simply be down to price
a bar further down the street had adopted the same
issues, whereas designer boutiques may be able to
name, so Ortega and Mera were forced to adapt. offer a different type of product, which again will
Given that the Zorba name was already on the store, offer a competitive substitution for the consumer
they tried to think of a name that would still use most (Moran and Riesenberger 1994).
of the letters. They settled on Zara, a brand now Linked to this point of substitution is the large power
present in every corner of the globe.now runs 6,500 that buyers have within this industry. Customers
shops in 88 different countries and includes seven now have wide access to a broad range of retailers,
with internet purchases extending this even further.
other brands, including Bershka, Pull & Bear, and The recent price war has also increased availability
Massimo Dutti. of fashion items to the general public and this allows
The business model built by Ortega is unique. Zara buyers to have a huge influence on the market, by
selecting new products, on a regular basis. Buyers
stores around the world receive deliveries twice a
demand continuous change, particularly within the
week and products designed at the headquarters in fashion industry; therefore, it is necessary to
Arteixo reach stores three weeks later. This is a continuously provide new and innovative fashions,
staggering pace, helped by the fact that between 51pc on an on-going basis. Failure to do so is likely to
result in customers turning away from a particular
and 55pc of clothing is manufactured in what the brand, until they renew their product ranges.
company describes as proximity markets, Spain,
Portugal, Turkey and Morocco, instead of Asia. At the other end of the scale is the fact that the power
They keep the high turnover rate of its products. In of the suppliers within the fashion industry is low,
order to obtain the first hand information from with many organisations outsourcing their
markets, it is so smart of Zara to predict trend by production to developing countries, in order to keep
actively listening to what customers like and dislike. costs at a critically low level. Organisations such as
Recalling from my experience, if a line is selling Zara have a substantial opportunity, when it comes
well, Zara will re-launch it in a different color that to changing suppliers, and this enables the company
has been selling well in other lines. Zara always takes to drive down costs. Although this offers
good care of fresh customer opinions and opportunities for reducing costs, it can also
preferences. Unlike other fashion chains that predict potentially create difficulties where there are
the trends all ahead and thus have a higher risk of concerns over the ethical behaviours of these third
failing, Zara gets all the fresh feedbacks from its party providers.
stores and immediately work toward these Drawing on the four forces above, it can be argued
feedbacks. This customer-to-production strategy will that, finally, there is a large amount of competitive
be an inevitable trend for fashion producers. rivalry within the industry (the fifth and final force).
Firstly, when looking at the threat of entry, it can be This suggests that the competitive rivalry is
seen that there are relatively no entry barriers for increasing rapidly within an organisation such as
those looking to enter the industry. However, Zara need to look towards establishing themselves
although it is not necessary, at a low level, to invest with a competitive advantage during these difficult
large amounts of capital, the issue of economies of times, with particular reference to the fact that the
scale is playing an increasingly important role, with buyers have a large amount of power, yet costs are
consumers constantly demanding cheaper prices. critical to the situation, as there are economic
This makes it hard for the smaller new entrant to pressures on the industry, as a whole, in the wake of
compete, from a price point of view, but still allows the global international crisis.
them to offer unique designs, which may then give