External Environmental Analysis Of The Zara Company

Answer 2: The quantitative management approach and data analytics could help Zara in more ways than one. For instance by paying close attention to the numerical data varying from sales by store, what product sells by each store, keeping track of inventory, and always having an idea if you’re making more than you’re spending. The quantitative management approach will help executives always be up to date on sales and what the public is buying. Generating more designs that will continue to sell.

The different stakeholders that affect ZARA are the owners, employees, customer, suppliers, government and the investors. All these stakeholders play a big role in the business. Without them, ZARA will not be as successful as it is right now.

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

There vertical integration allows small batches of produce to be distributed and tested out allow them to save more money and cut inventory backlogs. Zara maintains a low cost by avoiding outsourcing (where possible) and producing all its merchandise and produce in home soil in Spain. Also Zara own many fabric dying, cutting and processing equipment that provided Zara added control and flexibility to adopt new trends on demand. Effectively Zara is able to design and manufacture products as well as deliver them in less than two weeks in contrast to competitors such as Benetton and H&M which require at least between five weeks and 4 months lead time to fill orders from its retail operations. One major unique characteristic was that Zara own its in house production which gives Zara the flexibility of quantity, variety, and the frequency of the designs they produce.

No business in this type of industry has total control over the market price and there are no barriers to entry and exit. Because of its monopolistically competitive playing grounds, Zara’s conduct is to increase its market power by producing demand for its heterogeneous products. Through differentiation and cost leadership, Zara attempts to increase market demand by offering new items weekly while keeping a low inventory, thus making its products unique and attractive to consumers. Because of its backward vertical integration model, Zara creates a strong synergy throughout its production process. Zara has sustained a competitive advantage globally by expanding into new markets and becoming more efficient. In a monopolistically competitive industry, Zara is expected to make profits in the short run but will break even in the long run because demand will decrease as average total costs increase. This means in the long run, a monopolistically competitive firm, such as Zara, will make zero economic profit (AmosWEB, 2001).

by reducing the manufactured quantity of each style, Zara creates artificial scarcity and lowers the risk of having stock it cannot sell.

Zara 's combination of cutting-edge fashions and culture lends itself well to a European-style, fashion-conscious consumer. While this type of consumer can be found in New York, this is not representative of the entire US market. Retailers in small towns and urban sprawls rely more on a shopping mall atmosphere. Adapting that strategy would undermine Zara 's image. It is therefore recommended that Zara target only major metropolitan areas which would likely have higher concentrations of fashion-minded individuals.

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).

In comparison to competitors, Zara’s business strategy, in regards to strategic partnerships and cost of production, provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton, and H&M, does not use Asian outsourcing. Eighty percent of Zara’s materials are manufactured in Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters. Most of Zara’s competitors have 100% outsourcing to cheap Asian countries. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution. To make this happen, the company designs and cuts its fabric in-house and it acquires fabrics in only four colours to keep costs low. The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behaviour. It also decreases costs of holding inventory. Zara’s competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labour and production costs.

Quick response of Zara leads it to be successful in the fashion clothing industry. Zara adopts international strategy for its operation. With vertical integration, it benefits Zara in cost aspect, however, it involves some risks. Due to our anaylysis on Zara’s operations, some of the recommendations are made to facilitate its further improvements.

However, its distrubution system is advanced and that there is a few human participation required for the process. For an example, Zara uses optical reading devices to achieve the task, which leads to a tremendous cost savings in the form of labor.

Zara available cost leadership strategy and additionally differentiation system, combined this to win its competition. Zara play at fair price because they build cost authority strategy, consequently even they set for reasonable price they nonetheless could gain reasonable perimeter. And developing differentiation tactic enables Zara to design and end products in a much reduced time as opposed to the competitors.

Zara was first came into existence and well established in the year 1975 and it is under the control of Spanish owner Amanico Ortega Gaona. Firstly the store which is local based manufacturing company was dealing with Zara products which include outlets especially for orders which are cancelled related to lingerie and women wear. These relationships slowly lead to develop into strong relationship between retailer and producer of the products (Ferdows et al, 2003). The Company Zara was in collaboration with parent company called Inditex, both these companies mainly focused on customer demand and supply products as per needs of customers and able to establish supply chain

The company’s vision as stated on the website: “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”.