Case Analysis Of Zara Case Study Usa

The world 's largest clothing retailer has been able to cope with the financial crisis better than most of its rivals, helped in part by the expansion of shops in fast, growing commercial centres and also by offering affordable fashion at a fraction of the cost of designer fashions. This case provides information on Zara and its major rivals in the industry to highlight the challenges and opportunities facing companies who are competing on a global basis. Zara is the biggest player in the clothing retail sector and leads the way in sales and consumer growth whilst being recognised

Following is an analysis of Zara 's current expansion strategy into the US retail market and recommendations on future tactics to ensure a successful expansion. Zara 's expansion strategy thus far has been quite successful; however, with every new store opened, its ability to maintain an efficient centralized production system and a strong, unique culture will be diminished.

Zarawas able to catch a trend while it was hot thus customers were willing to pay a higher premium for the product increasing their gross margin. In addition, Zara did not have to commit to its suppliers several months in advance of a season on the style and amount needed unlike its competitors. Zara was able to create in smaller batches, thus decreasing risk by limiting the amount of inventory on hand. The downside of owning and controlling production is that it often leads to higher costs of labor compared to labor in developing countries (south-east Asia). To lessen the costs, Zaradecided to outsource the main commodities of apparel such as the undyed fabric, buttons and zippers. Because these were basic ingredients to any apparel it did not affect the final product and cut down cost. Also, 85%-90% of their styles were standard across stores and countries which benefited from economies of scale. Lastly by playing both role of manufacturer and retailer Zara is able to get profits on both sides. The short-lead times provide flexibility to Zara; however, Zara needs to provide the consumer with the latest trends in order to increase profitability. Therefore, Zara invests heavily in their product development teams compared to their competitors. Extensive continual market research was performed on current trends from fashion shows, universities and key trend

Information Technology: Zara was able to balance convergence and divergence within the company that provided a great platform for its expansion into other countries. They followed standard procedures in selecting the market that closely resembled the Spanish market, had a minimum level of economic development and relatively easy to enter. The decision of an “oil-stain” approach in entering made it easier to scale operations by opening up a flag-ship store to fully understand the local environment and culture, then after additional stores would be added. This is similar to the approach Amazon.com is taking in expanding its operations abroad by targeting easy to enter countries and limiting the amount of categories before expanding. In addition because many of the markets they entered were similar to Spain they were able to use basic/standard designs to make up 85%-90% of the product mix. Zara’s expansion procedures also left room for customization for each market and store that wasrequired for different cultures and countries. Some of the areas that had to be tailored between countries were the type entry mode (franchised, owned, joint), product mix and offerings that fit their market (decided by the store owners), pricing (some countries are more price sensitive like Germany; however, France was more fashion sensitive) and brand positioning (based on purchasing power and taste). Zara’s open culture amongst headquarters and the

With annual growth of around 20 percent in both sales and number of stores, Zara was finding that strategy increasingly difficult to execute. Part of the Inditex group of fashion distributors, it currently has more than 1,100 stores in 68 countries. With so much volume flowing through the supply chain, the

Zara International was a retail shop originated in La Coruna, Spain in 1975. It was clothing and accessories shop and imitated the latest fashion trends and sold them at a lower cost. It became Zara International after entering Portugal in 1988 and then the United States and France in the 1990s. The distributor for this brand is Inditex and is considered the most successful retail chain in the world. Zara has a business strategy that is very different from the retailers nowadays. If a customer orders a product Zara’s distribution centers can have the items in the store within 24 to 48 hours of receiving the order, depending upon the country. The business plan that Zara’s executives made was very innovative and played a great part in the

Barriers to Entry: Due to the recent recession and weak economic market, many new players have avoided entering the retail industry. Zara has taken advantage of this opportunity to be the first to enter into many markets across the world before its competitors. With the economic future improving, Zara will be facing more and more competition especially in the United States. Rather than implementing new strategies on

The political factors have also affected the ZARA Company. Some Political factors are given below;

While moving to USA, Zara is faced with its competitors, GAP. With this opportunity, Zara can learn firsthand about its competitors and its customer in huge global market of fashion. USA is a risky market with vindicated retrospection (Martinez 1997). According to Zara, International expansion is study procedure which cannot be postponed; it can augment the knowledge and idea of the global market. Finally, internationalization comprises the risk and cost of different markets (Martinez 1997; McGoldrick

Zara’s value proposition is that it offers its customers cutting edge fashion at very affordable prices. It actively seeks out what styles are “hot” in the fashion world. After Zara has identified the latest trend it can have the

What makes the middle aged mother to buy cloths in Zara while the daughter aged in mid 20s buys Zara clothing? Because it is fashion able and up to trend. By collecting data and focusing on shorter response times, the company ensures that its stores are able to carry clothes that the consumers want at that time. Zara can move from identifying a trend to having clothes in its stores within 30 days. That means Zara can quickly and catch a winning fashion trend, while its competitors are struggling to catch up. Catching fashion while its hot is a clear recipe for better margins with more sales happening at full prices and fewer discounts. In comparison, most retailers of comparable size

The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of

The basic strategy for fighting competition is to attract buyers at lower prices, more unique designs, high-quality design, efficient customer service and solid image brand. Thus bargaining power of buyer for apparel industry is high as the products falls under the basic needs in human lives. There is no much difference in terms of products offered by the apparel company, so if buyer is unhappy with the product or service they can easily switch to another brand. Thus, Zara are trying to strengthen its position in the market by using their unique strategy by giving priority to buyer to meet their special needs.

Zara’s product differentiation strategy is based on high quality and low prices. The company wants to be fashionable and desire for everyone. This is the reason of their strategy (low price and high quality).

Zara is a clothing company that was founded in 1975 and came from Spain. Its under Inditex group which owns other brands such as Massimo Dutti, Pull & Bear, Oysho, Uterques and many more companies. Zara grew very fast and currently in 2012 has 1,617 stores worldwide. With a large name in the fashion industry, besides that, Zara faces tough competition internationally including H&M, Benetton, and GAP. In order to keep up with the speed chic, Zara need to keep up also with the information system to run their business.