Zara's profile
Zara is a fashion brand which was established in 1975 by the Spanish Inditex group which was owned by Amancio Ortega. The brand is supported by other sister companies like Bershka, Massimo Dutti, Pull and Bear, Stradivarius, Oysho, Zara Home, Zara kinds and Uterque. Zara has made huge profits during the last two decades and is now ranked the third biggest retailer world-wide (Zhang, 2008). Unlike its competitors, Zara produces more than half of its products in Europe and not in Asia or South America as most companies do nowadays(Bruce and Daly, 2006).
Average markdown ratio of Zara is set at approximately 50 per cent according to Sull and Turconi (2008) and as opposed to similar brands Zara sold out only 15 per cent of its products on sale basis. All these factors have enabled Zara to expand its sales and profits over 20 per cent per year. Zara is credited by its Agile Supply Chain and most market researchers attribute the success it has made thus far to its success with its efficient Agile Supply Chain (Dutta, 2002; Tiplady, 2006; Sull and Turconi, 2008; Zhang, 2008). Zara’s success can be summarized into four factors.
1- Owning a professional group of designer.
2- Operating 9 garment factories by itself, so that the new apparel can be completed from planning, designing to production within a week.
3- Thirdly, Zara has a fast delivery.
4- Zara adopts a strategy of “limited collection and new design”. This means every three week all of the clothing products should be updated and parceled. (Zara 2010.)
Zara’s designers have unique creativity with tendency and enthusiasm towards young people. They often visit New York, London, Paris, Milan and Tokyo, to have ideas about latest female fashion and trends in order ...
... middle of paper ...
...get group
- Expand assortment
Threats
- Lots of competitors
- No advertising campaign
- Potential oversaturation
- Manufacturing base in Spain may become expensive
- Competitive market despite lower prices
- Consumer distrust by lower prices
- Changing consumer preferences
- Lower cost competitors or imports
Comparison between H&M and ZARA
The differences between H&M and Zara have been shown in this chapter. They have something in common which is easy to compare with. Both of them are successful apparel company and have a huge popularity in the same industry. However, they have different business strategy to carry out their businesses. Benchmarking here is aimed at evaluating H&M’s strategic management and learning some experiences to better improve their strategy and performance.
However, Zara are usually compared to premium brands for instance Armani, Hugo Boss and others because of this Zara have some stores which are premium and others which are affordable. Zara mostly have a premium pricing strategy the pricing is made by optimising development and training costs (Hitesh Bhasin, Marketing mix of Zara) looking at pricing as portion strategy Zara are looking into high quality and high price. Zara pricing approach in my opinion is value-based for example a detail in a product and the quality of the product will mean the cost will be higher for instance a well designed detailed leather jacket will cost more compared to a basic design leather jacket because the difference of producing the detailed jacket which takes time to designing and material being used compared to the basic quick to make
I chose to research two very different apparel retail stores. The GAP, Inc. and Nordstrom, Inc. are very interesting companies to me because they deal with something that is very important to me and a lot of people, clothes. Everyone buys and wears clothes, and these are two companies who have succeeded in this venture. They both started out with the same intentions, to sell apparel through specialty stores, but at this point Nordstrom’s has been more successful.
Each article of clothing would be fashioned from a list of options to include preset patterns, styles, button and shoe colors etc. The customer would feel as if they were creating a one of a kind design personalized to their taste. Stylish designs could even be posted on the company’s website along with the creator’s name to promote this individualization of the tradition. Mass customization has its benefits in consumer markets. According to (Pollard, Chuo, & Lee, 2013, pg. 102) “Mass customization means that manufactures are able to customize products on large scale and at high speed, as well as lower cost.” Key to the success of this venture is maximizing the number of stock components across all forms of the clothing line. Offering 20 different clothing patterns, 3 fur lining colors and up to 10 different accessories of which you pick 3, say shoes, belt and scarf allows for the possibility of approximately 14,500 different combinations or "20×(" ■(3@1)")×(" ■("10" @"3" )")"
The line “Zara Women” mainly target the white collar working woman aged 25+. The style has amore haute couture appeal and consist of many business and workplace related pieces that complement each other and can be worn as formal suits. Zara’s “Basic” line is more self-explanatory. The pieces found here are very versatile and can be worn by any Zara female customer aged 18+. This consists of selling casual everyday t-shirts, evening party gowns, to business attire, at very affordable prices. It is the largest of the three sections found in Zara’s women’s clothing. The “Zara TRF” line focuses more on the urban appeal for the Zara customers aged 13-25.Trendy denim as well as graphic t-shirts can be found in this section
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.
1) With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them?
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.
Being a market leader and in addition to being in one of the most competitive fields of business, Gucci is likely to face stiff competition from new and already existing companies. The fashion industry is one of the most competitive industries due to its large market size. Additionally, trends change very rapidly thus for a company like Gucci to remain relevant, the company must be able to identify what the market wants to gain a competitive edge. Other high end companies that are giving Gucci a run for its money include Prada, Channel, and Hugo Boss (mbaskool). Prada specifically is posing a major threat to the market share controlled by Gucci by offering almost similar products (mbaskool). Increase in competition has also led to the emergence
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.
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.
The business model that sets Zara apart from other clothing retailers is how rapidly the company changes stocks and releases new product lineups. The company averages 12-16 collections annually which equates to more than one lineup a month. Due to stock being limited and the rapid production Zara brings forth, their items are viewed as exclusive promoting further business. Their customers are happy knowing that their specific article of clothing is more “rare” due to only having an average of a two-week window to purchase the clothing. The company specifically targets current trends and has them in the store within 30 days. This maintains the brand’s uniqueness and relativity in fashion.
store managers and frontline personnel, play a critical role in the context of Zara’s business model. Using customised PDAs, store managers constantly communicate customer feedback, either hard data such as orders and sales trends or soft data like customer reactions to a new style or the “buzz” around a new design, to Zara’s HQ where the feedback is used by designers to quickly develop new garments based on customers’ wishes (Ferdows et al., 2004). Frontline employees assist their superiors in collecting the feedback. Zara’s store managers and shop assistants thus close the communication loop between shoppers and Zara’s HQ (Ferdows et al., 2004) and therefore contribute hugely to Zara being able to first understand what customers like and then design and produce it (Buck, 2014). Accounting for their key role, Zara pays store managers an above-average salary and up to 100% of their salary in bonuses if they hit sales targets (Ruddick,
Business strategy and model: Zappos.com had a differentiation strategy with which they had differentiated themselves from the rest of the market. They had use a unique corporate culture in their company which was one of the major competitive edges of the company. According to the CEO of the company, Tony Hsieh, that everything that they had done at Zappos such as their relationships with 1,200 to 1,500 brands, policies and website style could be copied, however, the only thing that no one could copy from them was their unique culture. Zappos had 10 unique core values as a basis of their company’s culture, employee performance and their overall operations. They were hiring and firing people on the basis of their abilities that whether they were living up to these core values or not.