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ZARA CASE STUDY

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by

Catarina F.

on 3 October 2013

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Transcript of ZARA CASE STUDY

Issue Identification
Background
Alternative 1
Zara keeps her total control strategy of the business
Recomended Solution
Implementation
Strong human resource team
Index
Inditex Group
Offers the Latest Fashion
Affordable Prices
Upscale Locations

The Issue
How could this small firm become internationally present?

In the future, what would be the best method and strategy to keep or improve its position in the market?
1975

90's
2002

Zara’s success story starts in 1975 in Spain, La Coruña
The big step up arrived in the 90’s, when Zara started an important foreign expansion in Europe, America and Asia
Zara is the largest division of Inditex with 76% of total retail sales with 507 stores worldwide: 31 of them were franchised and 12 were joint ventures
Strategy
Retail location

Very low expenses in advertising

Zara proposes fashionable clothes with quality, at a reasonable price, and always has something new in store and of limited supply

Great product variety

Low level of inventory


Management Operation
Flexibility and reactivity

Control of all the stages of its supply chain

Vertical integration

Collegial atmosphere and cohesion between headquarters and the store network

Production
Localized production

A little part of his production is made in Asia, for “basic” products and those for which the region had a clear advantage

Zara was able to gain flexibility thanks to its Spanish subcontractors network

Distribution
All products passed through Zara’s major distribution centre in La Coruna

Distribution strategy very fast and planned in advance to reduce the transportation cost

When the products arrive in the store, they are ready to sell because they had already been labelled and priced

Logistics
Stores order and receive shipments twice per week

Most products did not stay in the stores more than two weeks

It incites the consumer to buy on the spot

The Question Is..
In 2001 Zara was opening new stores at an average rate of one per week.

There is a real interest for Zara to improve its joint ventures and franchised.

For example: Benetton

What could be a good alternative for Zara, continue its old strategy or change it like the Benetton strategy?
Total control of the supply chain
Flexibility in the decisions
Higher risk
SWOT ANALYSIS
Strengths
Vertically Integrated

Cutting edge fashion

Upscale Locations

Global Outreach

Market oriented strategy

Free and easy returns

Environmental and animal welfare policies

Weaknesses
Limited Stocks

Inditex overdependence on Zara

Zara's in-store advertisement model may not work going forward.

The more cutting edge the design, the greatest the risk

Opportunities
Increase the overall profitability of the business

Improve the mobile apps

International Expansion especially in emerging markets

Demand for high fashion at affordable prices

Designer collaborations could expand the company into new markets

Threats
Emerging newcomers

Competitor H&M is doing great with designers collaborations

If one area of the supply chain has a problem, all the others will be affected

Increase in Euro Rate

Expansion strategy regarding market entry barriers

POLITICAL
Interactions with governmental policy for intervention in the economy and legal aspects in decision making processes

There are restrictions in different countries, which have to be considered before forcing a market entry.

ECONOMIC
Different duties and levels of tariffs in different countries and this can cause the prices of products to vary in different countries


SOCIAL
Regarding the social media trend development it’s a must for Zara to establish a social media relationship to satisfy customer’s demands due to change in generation choices.
TECHNOLOGY
Zara has invested in technology and it has to keep improvising because if they don’t then their competitors will get a head start on them
PEST ANALYSIS
Alternative 2
ZARA follows a strategy like Benetton
Strategy that involves less risk
due to the stock and to the things that not sell
so the risk of this belongs to the franchisers,
SWOT ANALYSIS
Weaknesses
Stock Turnover

The client wait so much time for the promotional campaigns
Opportunities
Atraction of new consumers due the effective response of their needs
Threats
Loss of interest in the store due the lack of turnover

Excess of unsold merchandise

Loss of costumers due the lack of product variety during the various stations
Strengths
Doesn't pressure the buyer on his buying decision

Create the capacity to respond to a high flow of demand
Comparing Zara and Benetton
Strengths
ZARA
BENETTON

Doesn´t pressure the buyer on his buying decision (4)
Create the capacity to respond to a high flow of demand (4)
Benetton is the most global of all high street fashion brand (4)
High technological capacity (3)

Vertically integrated (3)
Excellent quality (5)
Market oriented strategy (4)
Total control of the supply chain (5)
Environmental and animal welfare policies (2)

So the winner is..
ALTERNATIVE ONE!
Alternative 1 is the most indicated one

Total control of their stores

Zara’s strategy has more key-factors to success

Weaknesses
Benetton
Week stock turnover (5)
The client waits too much time for the promotional campaigns (3)
Decline in sales (5)
Loss of costumers to competitors (5)

ZARA
Limited stocks (3)
Inditex overdependence on Zara (3)
More cutting edge design, more risk (4)

Issue identification
Background
Alternative one
Alternative two
Recommended solution
Implementation
POLITICAL
Benetton following some international regulations like “ Regulation for Markets Organised and Managed by Borsa Italiana SpA” and is also listed on the Frankfurt Stock Exchange where obeys a general regulation.
ECONOMIC
With the actual economic recession the consumers have less capacity to purchase Benetton products and so prefer the products of their competitors.
SOCIAL
This is one of the most important force, the communication of Benetton is very controversial and many times some marketing campaigns are controversial and in some countries Benetton is required to remove these campaigns
TECHNOLOGY
Benetton renewed all the systems and equipments every five years to stay ever in the top of the innovation.
PEST ANALYSIS
Catarina Chloé Hortense João Ricardo
Continuous and consistent representation of company

Develop more distributions centers
Full transcript