Porters Analysis of Zara Essay

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MGT136- Management Themes and Perspectives Strategy MGT136-1 Provide an analysis of an organisation explaining the relative importance of each of Porter’s Five Forces for the organisation’s strategic position. You should support your arguments with evidence from the company and/or the relevant literature. Zara has been the major pioneer of ‘disposable’ fashion; which makes up over 12% of the UK clothing industry. Zara outperforms its rivals in profitability, brand identity, and its successful business model. I have used Porter’s five forces model (Porter, 1995) to analyse the industry and Zara’s strategic position. I have applied the theory of this model and its determinants to my research of Zara; providing evidence to form…show more content…
(Inditex, 2010). Zara has also aimed to mitigate substitutes by introducing extra products such as its fashion catalogue. It is essential to understand the buyers’ power in the market in order to find a competitive strategic position. Reducing buyer’s propensity to switch is a determinant of buyer power. Focusing on buyer information can help improve customer service and consumer loyalty. Zara’s business model ensures that all store managers know when deliveries are made and what stock will be reordered. This gives Zara customers superior buyer information over other firms’ consumers. The introduction of online shopping has enabled Zara to match its rivals but also to provide extra services; complimentary product ideas and free returns. These determinants reinforce brand identity and help reduce buyers’ propensity to switch; therefore increasing Zara’s strategic position in the market. At January 31st 2010, Inditex held a network of 1,237 suppliers (Inditex, 2009). Zara has two main suppliers; Li&Fung and Reuters. Reuters, based in Morocco, has close proximity to Spain and ensures demand can be supplied quickly; meeting its customers’ demands. There is little differentiation in the clothing market and so there is limited power of suppliers in terms of the uniqueness of the product they supply. Zara are very focused on sourcing a high quality, local supplier, rather particularly cheap ones;

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