Zara is one of the world’s largest fashion retailers; it’s a Spanish clothing and accessories retailer. It is the flagship company of Inditex, a holding company which includes seven other brands, and was founded in Artexio, Spain in 1975 by Amanico Ortega and Rosalia Mera. Just this year Forbes named Ortega the 3rd richest man in the world. “Zara contributes about 80% of Inditex's revenues, which have grown by 27% per year on average since 1998,” (Zara’s). As of 2012, the retailer boosts a whopping 1,925 stores and just 120 were opened in 2012. These stores are also in 86 markets, and entered 5 new markets in 2012. They employ 120,314 people. Annual revenues equal €10,541,000 as of 2012. Zara has been around since 1975 but has shown no signs of slowing down. They are globally expanding into new markets yearly and have found success in adapting their business to these new markets. Zara does extensive research before entering a new market and decides on a method best suited to each region. Zara’s motive when globally expanding was they wanted to reach more fashion conscious consumers and become known for its fast fashion. When Zara first entered markets they entered markets that were culturally or geographically close. They also looked at the behavior of consumers; the French are more fashionable and quality oriented while Germans are price sensitive, Americans are less trendy, Japanese consumers are trendier, and the British shop at stores based on social affinity. The fact that like Germany some countries are price sensitive is the reason they have different prices for different regions. Zara keeps about 80% of its inventory the same for all regions with 20% of it changed for each market. They adapt their strategies to different cultural, administrative, geographical, and economic factors.
Zara uses two different strategies adaptation by variation and adaptation
Due to the good establishment of the business, it has huge market national. The company has therefore opened many retail shops and stores all over the country to ensure that their products are accessible to the customers. The entity provides a favorable environment, and many clients view the place as a fun shopping place to be. The retailer has targeted a big pool of customer because of the variety of products it sells. The stores products vary from kitchen goods, jewelry, and electronics clothes to hardware
Due to the various options of distribution channels their prices vary. Consumers take that into consideration when purchasing their products.
Zappos is an online shoe and clothing store. The idea of an online shoe store originally came from Nick Swinmurn in the year 1999. He then pitched the idea to Alfred Lin and Zappos’ current CEO Tony Hsieh. Zappos quick rise to success is mostly attributed to their ten core values. These values vary from creating fun and weirdness to being humble. However, the root of this company’s success lies only on one important thing: their regard for customer service. They value the quality time spent with customers over the phone rather than the quantity of customers.
Zara sources fabric, other inputs, and finished products from external suppliers. It has purchasing offices in Barcelona and Hong Kong. This gives Zara a competitive advantage towards the costs of goods sold, as it can purchase from both Europe and Asia according to prices. Buying more from China in the future might reduce even more the costs of goods sold.
Analysis & Recommendation: Zara’s main strategy is the ability to respond very quickly to the demands of target customers which called for identifying trends of the customer in advance. The company has been able to identify the trends and meet the demand with the help of its autonomously organized structure and its effective value chain systems. The present system followed by Zara has been very effective and very easy to maintain, which as a result has persuaded the company to continue without any change in the present system so far. The problem that Zara faces right now is that the system that they use, P-O-S (Point of Sale terminals), runs on DOS which Microsoft does not support anymore and any hardware change in the POS terminal will not be compatible with the current POS software. Although the sense of urgency for the change may not be that high, investing in IT infrastructure is a must as MS Dos is an obsolete technology and there is no contract or guarantee from their POS terminal vendor that they will continue supplying the same terminal with out much changes in the hardware for any specific period of time, therefore change is unavoidable. The other main issue that Zara faces is that the stores don’t share inventory information electronically and hence inventory management becomes highly difficult and manual. The decision making process is based on the judgment of employees throughout the company instead of relying on a small set of decision makers; the majority of the decisions were made by store managers and as a result they placed orders for the items rather than simply accepting and displaying what headquarters decided to send them.
For example, occasionally M&S has products shipped to Asia to be created, then back to the UK for packaging and labeling, and back once again to Asia to be sold in their retail stores. This increases production costs and time, placing them at a disadvantage to Zara. Zara uses two main centers for their products, a supply center in Beijing and it’s manufacturing center located in Spain. M&S also creates collections in mass numbers compared to Zara, therefore, failed designs cost the company far more money. Zara’s success in inventory turnover lies in the process of creating far less product, keeping its exclusivity, and decreasing its risk of profit
The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly.
The organization has had to ensure that it has retail stores in many countries globally and website options in more than 100 countries. The company further enhances access of online stores in more than 37 countries which is accessible all the time and people are able to access the services regardless of their location. Globalization further affects the organization in the sense of international market management which requires it to engage in strictly global decision making. The organization’s production networks have been geared to enhancing global competition (Lüsted, 2012) .The Company is further good when it comes to seizing the opportunities available in global market. For the organization to find efficient as well as cheap means of production, it has to bargain hard so as to allow its contractors to have low profits. This mostly is consequential to the suppliers cutting corners with the use of cheap
The marketing team of International Consultants Inc. (ICI) began an analysis of the feasibility of expanding the sales of American Training Incorporated (ATI) products into international markets. Mexico and Canada appeared to be the logical initial markets; however, the study showed that other Latin American country should also be considered further
H&M is the world’s second largest retailer, only behind its main rival Zara of Inditex (Petro, 2012). The company currently has 3006 stores in 53 countries. The company does not own any factories. H&M outsources production to network of 800 independent suppliers; 75% in Asia and 25% in Europe. In order to increase the efficiency and productivity of its supply chain, the company strategically locates its network of 20 to 30 production offices close to its suppliers. According to Stockholm Newsroom, the pretax profit of the company for the month of June to August of 2013 is $907 million, which indicates an 11 rise in turnover (Pollard, 2013). The company continuous development plan facilitates its goal for both brick and mortar, and online stores expansion worldwide. The target segments for H&M, a category specialist store, are trendsetters and fashion/money conscious males and females ranging from 16 to 40 years old with income ranging $15,000 to $60,000 annually.
2.4 Segmentation: Some of the important bases for segmenting consumer markets are Demographic, Geographic, benefits, Psychographic and Usage rate segmentation. Geographic segmentation is the priority of Zara. It is a global brand and its supply chain management is very much perfect. It helps Zara in getting the latest trends into stores in three weeks’ time, based on consumer preferences. It’s a Spanish brand, so it would be a better option for Zara to open more stores in European countries.
Miuccia Prada once said that “What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language”. Miuccia Prada and the Prada brand have grown from humble beginnings making quality leather goods to a public traded company with a current market capitalization of over $26 billion (USD) . With the development of Prada as one of the world’s premier luxury brands it provides an excellent case study to examine how strategy paved the way for the success of the Prada brand. First, an examination of Prada’s strategic positioning against luxury brand rivals Louis Vuitton Hennessey Moet (LVHM) and Kering (Gucci). The acquisition history of Prada will be reviewed, where some preliminary conclusions can be made about what has been contributing factors to both the successes and failures. Then finally, an evaluation of what the future holds for Prada and the sustainability of its competitive advantage.
Facilitating functions are those which make the process easier for both, the manufacturer and consumers. Zara is a proud owner of 90 percent of its stores in brick and mortar, located mostly in popular and dense traffic locations, which is meant to be an efficient advertisement technique.
On the other hand, most factors prove otherwise. The retail industry does not have high Economies of Scale to be exploited in general . Yet, it is impossible to run department stores like Metro on a small scale . A large retail space, inventory, and warehouse are necessary to host a specialized portfolio of brands and products to better attract both customers and suppliers. Heavy capital requirements and operational expen...
This paper describes the various aspects of the Zappos case. The objective is to evaluate the depth analysis of the Zappos strategy. It enables to determine the Zappos strategy, business model & marketing strategy, and smartness of the Zappos acquisition.