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ZARA STRATEGIC PLAN 2015
Transcript of ZARA STRATEGIC PLAN 2015
This report will serve as an instrument to learn more about Zara's Strategic Business Plan, and what they do within the industry that makes them so successful, To do so we will first start by learning more of the companies overview, and the approach they use within the industry.
Second we will conduct an external, and internal analysis, to help us better understand the environment Zara stands within, and last we close the report by putting all our knowledge together and providing a plan we have predicted for the company to expand into China.
Based off this report we then will be able to see how the factors studied will either help, or serve as a threat when expanding into the respective country. Overall by researching the external environment and competition, we can see what influences business decision making, which will then serve as a tool to develop these global strategies.
Image by Tom Mooring
STRATEGIC PLAN 2015
SOCIAL, CULTURAL, DEMOGRAPHIC
MICHAEL PORTERS FIVE FORCES ANALYSIS
MARKET SHARE ANALYSIS
CURRENT LONG-TERM OBJECTIVES
TECHNOLOGY AND OPERATIONS
RESEARCH, DEVELOPMENT, AND INFORMATION SYSTEMS
PRODUCTION AND OPERATIONS
CRITERIA FOR STRATEGY EVALUATION & RECOMMENDATIONS
CURRENT GLOBAL STRATEGY AND POSITION
GLOBAL POTENTIAL & ORGANIZATIONAL CAPABILITIES
THE INDUSTRY ENVIRONMENT IN CHINA
This strategic plan expresses Zara’s continued commitment to its mission and vision, “To give the customer an exclusive choice of fashion by providing a quicker turnover of new stock than other fashion retailers.” By creating this strategic plan, Zara has shown its recognition that its corporate strategy is key to future success. The challenge will be to keep expanding globally while having centralized distribution centers.
The plan does not reflect everything that Zara hopes to do over the next five years, it does not represent a fixed set of numbers, however serves as the framework according to which we will make decisions, focus our resources, and thereby advance on being number one in the fashion retail industry. This plan should be viewed as the first step in a long-term process.
Presented by Grisell Rodriguez
Largest international fashion retailer
Founded by Amanecio Ortega in 1975
La Coruña, Spain.
Belongs to Inditex
The Inditex Group consists of eight brands
In 1980 Ortega wanted to improve store design, manufacturing, and distribution process
1980 it expanded internationally
1989 it expanded to US, France, 73 other countries around the world
2,000 stores, strategically located in leading cities across 88 countries
“TO GIVE THE CUSTOMER AN EXCLUSIVE CHOICE OF FASHION BY PROVIDING A QUICKER TURNOVER OF NEW STOCK THAN OTHER FASHION RETAILERS”
Save energy, "The eco-friendly store"
Produce less waste
Increasing awareness among the team members
Use ecological fabrics, organic cotton
1.Vertical integrated approach; design, source & manufacture, and distribute
2. Fast Fashion model
3. Stocking little, updating collections more
2. Fast Fashion Model
2. Short lead-time
3. Low store quantities
4. Unique styles
5. Customer centric approach
Using the external audit to our favor we will identify how to work with each factor towards our advance, it will also help us identify, and minimize threats.
Economic factors play an extreme effect on the companies operations
Zara faces currency risk
Zara being headquartered in Spain has a stable, and predictable demand market.
Key strategies, openness to the society
Cultural differences are also a key factor to keep in mind between regions, as well as the purchasing power of customers.
Advancements and high technology is essential
All information flow goes through the central server at La Coruña, in Spain
Managers are able to get information ..
All managers are notified 24 hours ..
The following is the Five Forces Model for fast fashion with further analysis relevant to Zara.
Retail chains have increased trade globally
Industry that is attractive
The threat of new entrants also varies on specific location, due to legal barriers, additional fees, and expenditures.
Companies can offer the same quality, or better at a lower price
Zara’s rivals include H&M and Gap
Consumer is the focal point of Zara’s business model
Zara plays with consumer’s mind
Buyers tend to have a wide selection of fashion apparel to choose from various companies.
High percentage of internal production and manufacturing
Control their manufacturing capabilities
Few fast fashion shops such as H&M, and Gap
But Zara’s uniqueness, and brand recognition helps them with profit
Two main competitors of Zara pose the biggest threats
Number one competitor
More attentive when entering markets
Enter one at a time
Builds distribution centers in International locations
Sells similar merchandise
Lack fashion ability
January 2015, 20.31 billion of dollars in sales
Leader in rapid development of fast changing fashions.
In fiscal 2014 the company had sales of $19.7 Billion while H&M $20.2 Billion, Gap $16.4 Billion
The past year Inditex sales increased 8%
With 2,000 stores in 88 countries
Inditex is known to have good corporate governance, where directors, and officers proceed diligently, ethically, and with transparency in performing its duties.
What makes the team a unique, and quick response system.
Employees are highly motivated
Zara tends to hire young people
Employees play a vital role in the business model, whether designers, buyers, logistics, and sales staff.
Right to Wear is divided into the following initiatives:
Clear to Wear & Safe to Wear
Where Zara strives to guarantee that all products comply with health and safety standards.
Teams to Wear
Where Zara displays its corporate culture, and philosophy, that encourages business ethics, respect, diversity, honesty, transparency, and professionalism.
Tested To Wear
Zara works with a production process audit and monitoring methodology designed to ensure that all products are made of ethical criteria, and human labor and environmental rights.
Social To Wear
Zara socially invests in communities in which they do business with, which strengthen ties with the communities.
Green To Wear
The strategy Zara designed to ensure they make and sell environmentally friendly products.
Target audience consists of women, and men
18-40 years of age
Highly sensitive to the latest fashion trend
Well educated, and professional
Apparel, footwear, and accessories, for men, women, and children
Reflection of immediate reactions to trends.
Well-made designs, made of high textile quality
Not too pricy, must sell quickly
Treats its prices the same in all countries.
Headquarters in La Coruña
Zara has over 2,000 stores in 88 countries
Continuing to expand
Rent/purchase locations that are in mid areas
“Zero investment in marketing” approach
Use .3% of their revenue on advertising.
Promotions should be done through their strategic retail locations, at traffic-based locations.
Investments should be made through store openings, rather than advertising.
Key marketing strategy consists of exclusivity, experience, differentiation, and affordability.
Zara owes its success to its Hybrid Model Information:
Store managers input requested order
Another group of commercials decide whether to allocate the inventory
Decisions are based on calculations from an application that tracks theoretical inventory of each SKU available
IT is used for large computer-controlled cutting equipment that cuts fabric
Operations in the firm are technology enabled
Information systems one of the drivers of the quick response communication strategy
Designers send their design suggestions to factory
Designers input the design patters into CAD systems
Leading retail store in the fashion industry
It incorporates three main business strategies to stay successful in the highly competitive industry:
Customers are central
Technology is key
Manufacturing controls balance, where manufacturing plays a key role in the industry.
Global potential is narrow
Limited by the extra transaction costs
For now, Zara’s strategy is globalization through localization
-Short time cycle
- Efficient design process
-Ultra Prime locations
- Cost leadership strategy
- Efficient distribution
- Fast delivery of new products and trends
- In house manufacturing
-Information flow between stores, strong IT system
- Stores are tailored to local markets
-Reduced price sales twice a year
- Dependency on centralized distribution centers
- Lack of advertising
- Recent e-commerce
- Growth of apparel industry
- Growth in brand loyalty
- Global market penetration
- Online market
- Distribution center in the US
- Dependence on high frequency information
- Design imitation
- Local competitors
- Global competitors
-Potential oversaturation in Europe
- Currency value in euro may hurt global competiveness
Controls on scope particularly horizontal and geographic and the rate of growth as well as product variety can help in this regard.
Move more manufacturing to Asia
By opening manufacturing factories in Asia it will benefit in labor costs, opportunities reducing material and supply costs, you can save equipment costs.
: Continuous attention has to be paid to making sure that decision about whether to standardize or not are based on what makes economic sense.
Expanding into China
Highest GDP in the world
Opened its stores in Shanghai in 2006 the grand opening itself produced 800,000 RMB.
- GDP per capita - $11.212 trillion
- Country of two speeds urban vs. rural
- New middle class with purchasing power
- Cultural shift in urban areas
The Natural Environment
- Free access to natural resources for textile clothing
- Easy Access, financial benefits
Demographic Structure -
1.3 billion people 85.2% literacy rate, skilled labor available
Government & Policies - S
table communist country
The marketing strategy we will incorporate in China will include the following:
Flexible supply chain system
“Multi-style, small batch”
Closely follow fashion trends/fast fashion
In order for the strategic management process to begin, managers are required to conduct an internal analysis.
Present in all five continents
Key market is Europe, following Asia-Pacific, America, and last Africa
By countries lead market:
Spain with 452 stores
China with 165 stores
France with 128 stores
Italy with 102 stores
Japan with 95 stores