Essay on Porter Analysis of the Zara Fashion Chain

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Porter Analysis of the Zara Fashion Chain

The Zara fashion chain, with 546 stores in 30 countries today ?from which 340 are outside Spain- and ?2914,3 millions of total sales in 2002, is undoubtedly the group?s locomotive (Inditex, 2003). In 2002 it represented 33% of the group?s total stores, accounted for 72% of the group?s total sales and contributed to the holding?s total profits for ?540.4 millions (Inditex FY2002 Results Presentation, 2003). Moreover, Zara with 75-90 new stores within 2003 takes the lion?s share in group?s current year store openings (total openings for 2003: 260-315). The purpose of the Porter analysis is to analyse the competitiveness of the market.

Threat of entry
Threat of entry to the apparel industry
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Power of suppliers
Power of suppliers on this market is moderate/high because there is limited amount of suppliers, switching costs are high, suppliers? brands are not usually powerful, there exists the possibility of forward integration and supplier?s customers are not fragmented.

Competitive rivalry
Rivalry is high/moderate because of the several factors: Competitors are of different size (Zara and H&M), market is growing (Mintel), fixed costs are moderate (compared to airline industry), threat of extra-capacity is high (H&M), differentiation is very high and exit barriers are moderate.

To summarise global apparel industry shows medium threat of entry, medium threat of substitutes, moderate power of buyers, moderate/high power of suppliers and high/medium rivalry.

Bibliography

Books:
Philip Kotler et al (1999) ?Principles of Marketing? (2nd European Edition), Prentice Hall
Philip Kotler (2003) ?Marketing Management? (11th Edition). Prentice Hall
Gerry Johnson and Kevan Scholes (2002) ?Exploring Corporate Strategy? (6th Edition) Prentice Hall
Robert M. Grant (2001) ?Contemporary Strategy Analysis? Prentice Hall

Web Sites http://www.questia.com ? on-line library http://www.google.com ? search engine http://www.britannica.com/ - Encyclopaedia Britannica http://www.business.com - Business Search Engine http://www.emerald.co.uk ? On-line journals

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