ZARA Case Study Solution

1. Introduction
Zara, a well known reputed fashion designing and manufacturing company has been
declared most efficient and market responding enterprise in UKs fashion industry. Mr. Amancio
Ortega, the creator and initial organizer of Inditex is appreciated for his strategic decisions as
well as his market competition winning strategies have been accepted and followed by his
competitors now.
Zara, one of the brands of Inditex, founded in 1975, is the most renowned and famous
fashion icon. It is not only generating the highest profit margins for organization but also is the
most famous and recognized by customers in market (Murphy, 2008). The majority of captured
market by Inditex is for Zara. An estimated share of Zara in total revenue of group is 80%
(Brand Watch Zara, 2004, p.2). Its a Spanish based company, and has successfully proven itself
as a leading company which is successful in positively providing service to their customers. It is
the fashion icon which is serving industry since decades and still its customers are so satisfied
that it is going to be even better in future. Management has taken decisions that were
entrepreneurial at that time and still most of the companies in industry are not deciding on same
fronts. Such decisions that lead to success are possible after a deep thoughtful process that
requires environmental analysis (both at macro and micro level), external and internal analysis
and a rational logical decision making process provides plans and objectives. Zara has already
reached its objectives and is a leading company and now further expansion of company is under
consideration (Sull and Turconi, 2008). In this document, we are going to analyze the market
environment and making some achievable plans for future. This process would be critical and

crucial because it leads to decisions that are basis for future actions and these critical decisions
for future flow of activities will decide future of company in industry, i.e. a success or failure.
Decisions taken hastily may leads to great losses as we may observe in Sainsburys case. They
have changed supply chain and gone through a series of problems that takes the company years
back. Zara has already used technology in its manufacturing plants, where complex process are
required to be simplified but such decisions that to which extent we may incorporate technology
in process and tools are to be taken after concise measurements and analyzing. There are existing
domains where the company may progress and we are going to explore such opportunities in
environment.

2. Present Objectives and Mission

Inditex group has clear and definite concept and plans for future. In their mission
statement they have described their priorities and general processes that are selected for
organization. The founder has chosen a set of strategies that ensures a long lasting, promising
successful career. The groups mission statement for Zara, under the head of Environmental
Policies says; Through Zaras business model, we aim to contribute to the sustainable
development of society and that of the environment with which we interacts. At every store
level, the mission has been defined as, At the store

We save energy.

The eco-friendly shop.

We produce less waste, and recycle.

Our commitment extends to all our staff.

An environmentally aware team.

For features and formation of products, the mission is as follows, With the product

We use ecological fabrics.

Organic cotton.

We manufacture PVC-free footwear.

Distribution channel, i.e. after formation the transportation of finished products from point of
production to point of sale has been defined to be environmental friendly as In transport, we use
biodiesel

fuel.

(http://www.zara.com/webapp/wcs/stores/servlet/category/uk/en/zara-

/OurMissioStatement)
A business vision for specifically Zara, a fashion based products offering company is, ZARA
is committed to satisfying the desires of our customers. As a result we pledge to continuously
innovate our business to improve your experience. We promise to provide new designs made
from quality materials that are affordable. (zara.com)
So far, the company has satisfying progress towards completion of defined goals. Inditex as a
group has been recognized more co-friendly than competitors and now has gained a repute of
being sensitive and rational towards the community and environment welfare issues.
Zara is offering products (clothes, shoes and furniture) in 68 countries. A range launched in a
country is followed in all the stores and same culture of rapid sale and removal of older
inventory is followed. A general concept followed by Zara so far is to offer variety of clothes in
a short quantity and for a shorter time period, customers being aware of this flow of items in
stores, choose and buy the items right away rather than waiting for some sale. Products offered
by Zara are not very highly priced and a common acceptance for prices and quality of items has
been observed. As Folpe (2000), a market observer said that fashions introduced by Zara are
more like Banana Republic and prices are like Old Navy. Men, Women and children section
have duly served for and targeted the potential customers. Its products are capable of satisfying

shoppers needs. Demand management is done by supplying directly from Zara, Spain. A fast
and responsive system for shipments have been developed that is satisfying current needs.
Currently Zara is working on its environment friendly program and launching stores with
technology that supports its approach. At recent annual general meeting, deputy chairman of
group has said that Environmental issues are a key component of Inditex's global strategy,
moreover he mentioned that this would be the strategic target for 2020, to be implemented in all
new stores launches.

3. Situational Analysis
Zara has satisfied the customers and has implemented strategies that made it possible to
become dominant in fashion industry. Zara has been in market since two decades and has
developed its brand image in shoppers. All the 68 countries are following same concepts that are
associated with the original brand. Zara has an efficient and continuous communication system
with its customers and thus changes in markets and streets flow directly to the designers and this
information is depicted to be used in next range of designs. This continuous steady market
communication has enabled Zara to get know and respond to its customers and ultimately
meeting their expectations cause the success. Such demand management was lacking in Mark &
Spenser and to some extent with Sainsbury in 1990s, they did not match their products with
customers expectations and this caused problems (Gluyas, 2004). Sudden supply changes may
cause wastage of resources, as done by Sainsbury. There should be an optimal combination of
demand management and supply chain management to cope with market trends and to earn
advantage over competitors (D. Walters, 2006).
For retailers, the main objective is to ensure delivery of product to end-user at reasonable
prices and providing consumer satisfaction, this is done by value chain emphasis and controlling

the flow of products. Zara has managed this by supplying the products from Spain directly and
reduce the intervention of third parties. Zara has always emphasized on customer and end-user
satisfaction based marketing i.e. word of mouth it has never used intensive marketing campaigns
to influence sales. As Waller (1998) suggests that customer driven logistics are current
dimension for businesses to be successful, ...as businesses begin to understand that their future
existence depends upon the loyalty of the end-users of their products.
Conventional marketing trends are never followed by Zara. Strongly attractive windows
displays are the only marketing and promotional tactic used by Zara at stores. Regular customers,
visiting 17 times a Zara store in a year, are habitual of such displays and potential customers can
know current trends about fashion in market just by looking at these displays.

3.1

Environmental Analysis
Zara is working dominantly in Spain till now. The working environment, industry
surroundings, competitive pressures and other effective factors will be discussed now. This
section will analyze the existing choices i.e. opportunities and potential risks prevailing in
environment.

3.1.1 Industrial Analysis

Successful organizations conduct a deep assessment of environment before expansion
and making decisions or setting goals for future. So is for Zara, we are going to discuss on
PESTLE analysis for Zara.

3.1.2 Political Factor

Government and political parties in a country are responsible for developing political
environment. Government is the major and silent factor in a business; in form of policies they
may support an industry. Zara has been in Spain till now and only one more major distribution

centre for Europe. For expansion of business in more countries, political support provided should
be evaluated critically. Zara has options to expand its business in European countries because of
their safe and predicable economic circumstances.

3.1.3 Economical Factor

Zara has been dealing in a single currency since its origin. The economical conditions of
overall world have been fluctuating in last few years but Zara is successful in getting market
share and has not been affected by the recession. The main reason behind was that Zara is not
currently dealing in dollars and is using a relatively safer currency for its dealings. Before
entering new markets, the currency rates and the economical condition of that country is
evaluated. Spain has a stable market and predictable demands in market.

3.1.4 Social Environmental Factor

Zara is currently operating in a single county and thats why faced a social influence that
was already coped by Inditex group for its other brands. Zara luckily got a country based on
independent cultural roots. Spain has a long history, with fabulous contributions in artistic and
designing domain. This country has a calm social environment, attracting tourists on large scales,
having lots of bright cultural events. Strong tourism exchanges enables retailers like Zara to get
obtain customers and then retaining of customers is done by quality satisfying customers needs.
Zaras strategy of higher turnover encourages sale of items in a single visit and thus tourists
become customers. Fashion at lower prices makes it easy to purchase for shoppers.

3.1.5 Technological Input

Spanish retailing companies have often gone through technological improvements. Many
of the competitors of Zara have brought new technological concepts in market in sales point
atmosphere and manufacturing processes. Zara has launched its technological growth in form of

eco friendly stores openings. Moreover, manufacturing processes have been made easy and
simple by breaking process into simpler tasks and then done by machines and final assembly is
done by workers.

3.1.6 Legal Factor

Spanish government has rules that support and promote industrial development in
country. Logistics of country provide generic supportive and productive rules for safer business
transactions.

3.1.7 Environmental Issues

Business environment is a combination of customers, competitors and internal corporate
factors. Overall business growth is favorable for new businesses but for Zara its time to invent
new domains and to cross boundaries.

3.2 Internal Analysis

Here, we will discuss the strategic implementations of Zara under the context of Porters
three generic strategies. As the generic strategies have three parts i.e. segmentation strategy, cost
leadership and differentiation strategy. Zara has followed an optimal combination of all these.
Products have been characterized into three major parts i.e. male, female and children but
extensive distribution of products is avoided, e.g. clothes of young girls have not been separated
from that of 40+. Product has got differentiation on base of fast fashioning concept, a high
turnover rate i.e. 10,000 single products in a year. Moreover products are manufactured on day to
day varying trends in market. Zara has offered products at lower prices in market and has
developed skills to produce items at lower prices as well yet it is has not got leadership in cost
management, a minor operating capital has been gained.

4. Current Situational Analysis

A SWOT analysis of Zara has shown that organization has motivated and satisfied with
organizational structure staff and achievable objective settings and vertically integrated structure
are the major strengths. All the success attained by organization, over competitors and a getting a
leading market position has been made possible by rationale decision making. Current
weaknesses may be lack of communication of products i.e. less stress on promotional activities
which is necessary to attract more customers and Euro-centric model approach.
Opportunities are welcoming Zara to enter new markets geographically and dividing
product line into new more segments offering specialized and more customer oriented products.
Another prevailing opportunity is to get advantage of low cost labor but this need management
of workforce and corporate identity. US have a potential for Zara to grow and expand its
business as it has its customers and communication in US. Threats identified include, potential
oversaturation of competitors in current markets, exchange rates may fluctuate and cause a major
setback, and any natural disaster may physically affect the only manufacturing plant.

5. Strategic Options and Choices

Manufacturing tasks i.e. major assembly of components are done at a centre in Spain and
concept of cheap outsourcing is denied by Zara. This is a good approach towards owned working
force and not to get involved in activities that may lead to unethical concerns. Organization has
developed a smooth image for quality management process implications in industry and now it is
time to unleash new domains for organization. It is not recommended that company should start
activities in outsourcing that may led to questions and confusions in current quality management
and employee relationship management, but a healthy process that leads to internationalization
should be considered.

Another option that has been followed by management in last years is to become eco
friendly and development of such sales points. The Inditex group has achieved eco-efficient and
friendly certificates; a major one is LEED (Leadership in Energy and Environmental design).
LEED is a famous and one of the acknowledged certificate and Inditex had got it for Zara
Barcelona. Inditex management has mentioned this in its mission statement and following this
objective will create a competitive advantage. Competitors are in process of getting this
milestone and the group has to make new plans and create more benchmarks in this eco
friendship race.
Zara has spread a common concept of fast fashion. New style ranges are frequently
introduced in market and thus Zara is moving parallel to market trends. Sales persons at stores
with PDAs communicate and inform The Cube so fast that enables Zara to respond market in
two weeks. Team of designers, including 300 stylists take the information and feedback from
stores directly, analyze and propose new designs, which take less than ten days to reach market
and customers see their realisation of their ideas in a practical form. Ideas are not present in
sketches before three weeks of their production (Surowiecki, 2000). Such rapid and fast paced
response has created competitive advantage and other companies that take six months to take a
design from idea to realization form are now moving towards this continuous and consistent
communication with market. The basic concept behind this strategy was to stay in contact with
the customers, the real target of a company, taking their feedback and then changing the products
according to the demands. Zara is successful in creating an edge for itself and dominating its
competitors as no other firm can reach this level of fast delivery of inventory in store. Zara has
focused customers with short term needs and the reason behind was to minimize the operating
capital. Now, it is time to think of introducing long-lasting and ongoing styles in market. Such

items have not yet tried by the company and are a domain where customers are still willing to
pay. There is a market segment that needs stylish fashionable clothes over a longer period of
time. That is same style, with a brand name and renowned design of that particular brand. So,
introducing some designs that change over a period of a year or six months and that remain
available throughout the year can open a new dimension for business.
Becoming international brand is an aim that has been satisfied by the company but this
has been done to the extent of opening store in different countries. Now the expanding markets,
people with different high rated skills and countries offering favourable terms to invest should be
considered. All activities from design till shipment of consignments are performed at single plant
in La Corua. Management should take into account the increasing risks of survival and security
and business should be partly divided among other favourable countries as well. This will cause
HR issues and other policy making issues. This will lead to new ideas and introduction on new
designs in products. New cultures and new responses from different markets will led to
development of new innovative ideas that will cause progress and knowledge development of
employees as well. This will increase the targeted market and designs may flow form a domain
of countries to another. Customers from different countries have different preferences and hence
a design not appreciated in one country may get a welcoming response by customers from
another company.
Strengthening corporate identity of brand in market is another option that can be
implemented to get better market response. Corporate identity has been defined by van Rekom
(1997) as the set of meanings by which an object allows itself to be known and through which it
allows people to describe, remember and relate to it. Thus a better image in market ensures
sustainability and survival in market. The establishment of a consistent identity of retailing

organization is helpful in getting competitive differentiation (Burghausen and Fan, 2002;

Kennedy, 1977). Corporate identity, well established and well communcated, makes emotional
ties with organization and produce more loyal and trusting customers (Balmer and Gray, 2003).
Thus a strong corporate image should be emphasised and marketing is an option to get the
desired results, as Zara is going to be much more expanded in coming years.

6. Implementation Issues
Opportunities identified and discussed above are not easily achievable. Zara needs strong
management and leadership skilled individuals in management team. The founder of group has
already taken the best possible decisions and has implemented them successfully. Now it is time
to enter new expanded world markets and target new potential customers.
Strong human resource management team will be required if Zara enters in new markets
for making lower cost products. A continuous and consistent representation of companys
perspective in market will be required to balance the image in market. Workforce diversity if not
handled properly may eventually lead to wastage of resources and companys image.
Entering new markets for increasing captured market will cause supply management
issues as Zara has not developed many distribution centres. Quality management of both
products and processes will be difficult and eco friendly sale points development may increase
costs incredibly.

7. Conclusion and Suggestions

Zara is currently enjoying competitive leadership in fast fashions. It has made its founder,
the richest man in Spain. So far, strategies implemented by Zara provided a firm base to
organization. The changing or introducing change in strategies is a difficult process to conduct,
but to excel in business and cope with current expanding markets Zara has to introduce some

new objectives and strategies. No single strategy can serve the purpose. Like before, Zara has to
decide an implementable combination for future. It is recommended that, not to implement all
the decisions in a single step, rather act and wait for response and then decide for further actions
to be taken. Detailed assessment of scenarios is to be done before finalizing any decision because
fashion market changes frequently that rough estimates may lead to undesired results.

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