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 ...
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- Expand assortment
- 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.
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