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CASE STUDY ANALYSIS: ZARA- FAST FASHION IN THE DIGITAL AGE
Table of Contents
1.Zara’s Strategy    3
2. Competitive Advantage    3
3. Financial Performance    3
4. SWOT Analysis    4
5. Social Responsibility    5
6. Management at Zara    6
7. Expansion of International Operation    7
8. Strategic Aspects    8
9. Strategic Management    10
SWOT Analysis of Netflix    10
10. Strategic Consideration    11
11. Porter Five Forces Model    12
12. Vision & Mission Statement    12
13. Core Values    12
14. Value Proposition    12
15. Production in Different Regions    12
16. Generic Strategy    13
17. Weapons of Competition    13
18. Diversification Strategy    13
19. Report on Diversification Strategy    13
20. Business Model & Strategy    13
21. Company Values    14
23. Change in the Fashion Industry    14
24. Strategy Execution    14
25. Long-term Goals    14
26. Driving forces of Fashion Industry    14
27. Ethical Issues    15
28. Cost of Unethical Business Practices    16
29. Porter Five Forces Model in South Africa    16
30. Overall Level of Attractiveness    17
31. Resources of Zara    17
32. Weakness of availability of Resource    17
33. Competitive advantage of Zara    17
34. Success of the Strategy    18
35. Competitive advantage in Fashion Industry    18
36. Report on Porter Five Forces Model    18
37. PEST Analysis    19
38. Recommendation on PEST Analysis    20
39. Business Model & Competitive advantage    20
40. Competitive Advantages of Market Segmentation    20
41. Position Strategies    21
42. Advantages & Disadvantages of Positioning Strategy    21
43. Strategy leading to Competitive Advantage    21
44. Orientation of Operation    22
45. Resource Based View    22
46. Mistakes made by Competitors    22
47. Action taken by Zara    23
48. Stakeholder Analysis    23
49. Strategies to Improve Operation    23
50. Challenges Faced by Zara    23
51. Addressing the Challenges    24
52. Competitive advantage over Competitors    24
53. Manufacturing & Distribution Startegy    24
54. Physical Stores    25
55. Online & Offline Marketing    25
56. Profitability VS Responsibility    25
57. Globalisation VS Localization    25
58. Global convergence and international diversity    25
References    26
1.Zara’s Strategy
The generic strategy of Zara is a relevant aspect of cost leadership. This has the capability of holding a competitive advantage in the market by providing products that are high-end fashion. The company also offers designer brands times at very relevant modest prices that differentiate the company from the other companies in the industry. This particular strategy is immensely helpful for the organization to differentiate itself in the industry and perform beyond the company's expectations and situation. The strategy contemplates the aspect of the complete cycle of life which comprehensively creates value for the products and acts correctly with an effective consideration of each stage in the fashion process. Hence, it can be contemplated that the strategy fits the company situation in which Zara is operating.
2. Competitive Advantage
The strategy has a significant competitive advantage in the market as it offers several available products than its competitors at modest prices. This has extensively provided a broader market base for the company and is largely driven by its ability to keep the rapidly changing function trends and showcase its collection with very little delay. The company found that there is a significant gap in the market which has been addressed by its strategy that effectively provides a competitive advantage to the company. The company is able to keep pace with the changes in fashion trends and offers a collection that is of high quality and affordable. This aspect of keeping high-quality products at a modest price has extensively expanded the market base and the potential customer base of Zara. And this contributes to the competitive advantage that is company enjoys in the fashion industry.
3. Financial Performance
The business strategy of Zara allows the company to sell more items at full price because of the sense of scarcity and the effective exclusiveness of the Company excludes. This is often contemplated by the minimization of the total cost because the merchandise that is marked down is dramatically reduced as compared to the other competitors in the market. The company had made 85% of the full price on its clothes while the industry average was about 60 to 70%. This was addressed by the fact that the unsold items of Zara were around less than 10% of its stock which was 10% load and the average of the industry. This has to be addressed in terms of the financial performance that can be contemplated by effective infantry management. The company can quickly increase and decrease the production rates and hence they have to maintain a very less inventory in the supply chain and need less finance than inventory with working capital. This is apparent from the fact that they do only 50 to 60% of their manufacturing in advance against the competitors who do mostly 80 to 90%. This reduces the cost and keeps the profitability higher than the market average.
4. SWOT Analysis
Strength
The company Zara has got multiple strengths which had made the brand one of the most popular and profitable subsidiaries in Inditex. The significant point is the presence of the company in the fashion and Retail Industry. The company has a high degree of vertical integration and addresses 54% of the factories in Spain. The company has a strong supply and retail network chain and the use of its technology has effectively enhanced the communication system within the company. The use of technology has also increased the production capacity of the company and the marketing analysis with proper use of data has made supply chain and distribution an effective context for the company. The company also in using the latest designs that end on the market in less than 15 days and the little collection is refreshed twice a week. The company also has its logistic operation dedicatedly searching that it can make its product available within 48 hours through its logistics centres. The company has more than 2000 stores in 200 marketplaces which puts them at the top of the fashion retail stores globally. A skilled workforce and a high fashion enthusiastic customer base break the bank for the company. The strategy of providing the latest at an affordable price drives popularity and loyalty amongst customers.
Weakness
Despite being the leading fashion company in the market it possesses certain weaknesses in terms of business. Despite developing new trends more quickly than its competitors Zara retains its old designs and styles. Moreover, the aspect of commitment towards sustainability is a matter of question with the aspect of how Zara operates. The brand is often questioned in terms of honesty and the aspect of carbon emissions during manufacturing is a questionable matter for the company. Certain products of the company lakhs specification and focus. The offerings of the company are generalized to some extent and a dependent on what is currently trending. The customers in search case me turn to other brands that concentrate on what they are looking for. The pandemic of 2019 serious impact as sales significantly dropped by more than 89%. Several physical stores were closed down on the account of lockdown issues and other crises relating to the spread of the pandemic. Compare to the industry players some companies have driven awareness through social media and public relations. This cut-throat competition needs to be addressed with a solid marketing strategy which is a weak aspect of Zara.
Opportunities
The brand has excellent growth opportunities. The growing income of the middle class in developing countries has contributed to the expansion of the customer base of the company. The business model needs great attention and Zara has an effective opportunity to improve the customer experience. In the digital age, Artificial Intelligence is known to disrupt the entire operation of the fashion industry. This must be effectively addressed for expanding the revenue. The application of Artificial Intelligence and Technology would significantly create a new shopping future for buyers. The capitalization of the advancements can effectively offer a greater Collection of data to personalize the consumer's experience and even create a virtual reality. The company mostly depends on its online stores but the effective aspects of digitization can be enhanced with a potential emphasis on raising brand awareness and revenue by shifting its focus more on the online segment. The brand can also expand its customer base in more shopping by investing more time to market itself on digital platforms and improve the e-commerce sector's functionality.
Threats
The biggest threat to Zara is the competition and the level of competition that has been significantly increasing in recent periods. This contemplated the increase in the new entrants by offering similar products at a lower price. The rising popularity of fast fashion and the influx business of branches like Shien and Romwe copy Zara and the fashion designs and offer them at a very lower price. The international brand is presently competing in more than 200 markets worldwide. Trade policies and other business policies are different which is a considerable threat because the policies must be compliant with the policies of the country. The lockdown and the other traveling restrictions have disrupted the entire supply chain which had a significant impact on the business.
5. Social Responsibility
The social responsibility of Zara is based on the Company's code of Conduct to the manufacturers and the suppliers which when created may have been a part of whitewashing the strategy and are combined with the other elements that need to be achieved with the effective improvement in the supply chain and compliance to the standards of the company. The code prohibits child labour, that ends to protect the rights of the workers and they need to be treated with dignity and respect. The policy is fair wages and safe and healthy workplace laws. Compliance with the standards is monitored through quality control and the company performs audits for a range of suppliers. If proper documentation is not met then the suppliers are expected to submit and subject to collective plans. The company also corporate with the United Nations and the International Labour Organisation to promote better practices of the Global Union respecting the rights of the workers in the factories. The company is also effectively working with transparency and publishing annual reports that are verified by the external stakeholders and provide information about the relevant aspects of the business-like suppliers, employees, revenue, countries they operate, audits, and so on.
6. Management at Zara
Leadership
Drivers of international strategy in terms of leadership must be contemplated with effective democracy in order to sustain in the present business context. Leadership skills are effective aspects that contributed to the success of Zara. The success of Zara is depicted by the founder Amancio Ortega who depicted the organization with a strong vision and was clear about its purposes all the time. It is obvious that he was an autocratic leader in the initial stages where the concentration of power was focused on him. But it must be effective to consider as business ascended his reputation must be superior along with his leadership style that must be effectively transformed into a democratic way of leadership. This will enhance the business propositions and the team management, especially for a fashion-related industry as productivity and quality are extremely significant.
Organizational Culture
Organizational culture is an effective consideration that has influenced the culture of Spain. Zara is the success story of Spain and the global expansion has contributed to the spread of an effective organizational culture. It is apparent that the organization's culture is determined by centralized distribution and must be contemplated by selling its clothing in almost 104 seasons instead of the normal four seasons that every other retailer and company sells for.
Organizational Structure
The structure of the organization has the effective context to oversee the entire process and interact with the designers, planners, and buyers. Each store keeps track of what is bought and what is tried. This also focuses on the habits and trends that are coming in or dying out. The individual store managers also place orders to headquarters twice a week which are then walked on to the commercial team and the in-house designers to send the appropriate amount of each product. It is apparent that the company operates on vertical integration however it is able to have horizontal differentiation where there is an easy flow of communication between the stakeholders within the organization and outside the organization.
Resource Allocation
Zara is effectively operating its flexible manufacturing system for a quick change over the operations. 50% of its item are manufactured in Spain and 26% is manufactured in rest of the Europe. On the other hand, 24% of the item is manufactured in Asia and Africa. The highly responsive supply chain of the company is the central aspect of the business's success. The heart of the company and its supply chain is large enough that complies with the highly automated distribution centre called the Cube. The large quantities of fabric are obtained from the fabric manufacturers that make quick delivery of bulk quantities of fabric directly to the manufacturing centres of Zara. The company purchases raw fabric from suppliers in Italy, Spain, Portugal, and Greece.
People Management
The fast fashion philosophy of Zara is a unique one that creates demands and leads the trends in the garment market. They effectively respond quickly to the demands of the target customers and focus on young fashion. Human resource management has got an important consideration that has gone dramatically with the recognition of effective recruitment for enhancing productivity in the organization. The department considers effective propositions and strategies for enhancing the productivity of the employees and affecting the productivity of the entire organization.
7. Expansion of International Operation
Zara can significantly focus on international expansion and growth which are effectively determined by several related factors that are significantly associated with the situation of the global textile industry and in general the fashion market. The latest distinctive feature of the European textile industries and clothing production has a significant impact on small and medium size companies. This company is very in the degrees of how natural their appeals are and how successful their products are outside the country of origin. This has another significant aspect that considered the merging and acquisition by consolidating its production in the Global market or foreign countries. The democratization of the market in the global economy has also enhanced the aspects of internationalization and consolidated production and survived significantly in the competitive global market. The first aspect which has to address in Zara for becoming an international brand is the tendency of consolidating the production process of clothing in the street when small and medium size companies merge to join the global market and sustained the Global competition in the fashion industry. The aspect of democratization has also resulted in the growth of demand for fashion clothes which are immensely influenced by the aspects of digitalization and the popularity of the internet.
8. Strategic Aspects
The strategic objectives of Zara contemplate the aspects that are reluctant about the expansion of the business and the internationalization of the business to enhance its popularity in the Global market.
· Enhance the production in the international market.
· Enhance the profitability of the company.
· Enhance the sustainability of the company.
· Enhance the creativity in the company.
· Increase the functionality of the company.
· Increase the marketing and the branding strategies of the
The financial objectives of Zara that can be contemplated in terms of its operation are:
· Expand the financial growth of the organization
· Expansion of the profitability
· Increase the revenue and the sales of the company
· Increase the overall production of the company
· Increase the annual expansion of the company
· Expansion of the business growth.
The...