Zara Corporate Strategy

What is the Zara “business model”? How is it different from the business model of other large clothing retailers? What weaknesses, if any, do you see within this business model? Is it scalable?

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

Zara and Benetton: Comparison of two business models. 2010. [e-book] p. 10. Available through: Google Scholar [Accessed: 25 Nov 2013].

The case study is upon on the resource based view. First, the firm resources were divided into three major parts: tangible resource, intangible resource and human resource as Grant suggested. The main body of the essay will also be divided into three parts according to the resource classification. Then, a VRIN test would be carried after listing different types of resources to inspect whether they are able to provide a sustainable competitive advantage for Zara. Finally, Zara’s dynamic capabilities will be discussed to state how Zara used the resources based on their organizational culture.

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).

Let us first consider Zara 's main competitive advantage before analyzing how current and potential future strategies will affect this competitive advantage. Zara currently employs a "design-on-demand" retail model allowing the company to bring the latest fashion trends from

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.

Operations management is concerned with all operations inside the company related to activities, which include overseeing buys, stock control, quality control, stockpiling and logistics. A great deal of center is on proficiency and effectiveness of such procedures. A case of successful operations management in retail segment is evident in Zara’s business model (Tanuwe)

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.

An interesting fact is their supply chain for the majority of their product is located close to their distribution centers. Their distribution centers are located in Spain and the designer ware is produced in Morocco, Portugal, and Turkey (“Case 3-4. Continued Growth for Zara and Inditex,” 2013). This ensures that new designs are produced and shipped quickly to their stores. This plan is reasonably different from their competition.

All operation processes have one thing in common , they all take their 'inputs' like raw materials , knowledge , capital , equipment and time and transform them into outputs (goods and services ) . They do this in different ways and the main four are known as the Four Vs, volume, variety, variation and visibility.

The companies can mostly deals with the chain of supply, unlike the other kind of competitor retailers of the very same market; around the half of the Zara clothing products are can be produced in Spain, and one third in the rest of the Europe, and some in the Asian countries and the rest of the whole world.

Zara is a clothing and accessories retailer selling stylish apparel at affordable prices, and it is also the most profitable brand of the Spanish clothing retail group Inditex SA. Ortega planned for this new Zara outlet, located near his factory in La Coruna in northern Spain, to sell this overstock merchandise himself. Since then, Zara has expanded into 500 stores in 68 countries as of January 2007 and has become a leader in customized fashion retailing. This assignment presents core competencies to help Zara achieve competitive advantages in fashion industry. Besides, we also offer five competitive objectives about quality, speed, flexibility, dependability and cost to evaluate

Until now, every garment that is product in Zara’s factories around the world has to travel back to Spain in order to go through quality controls, and is then send to its distributors. But the continuous flows of goods from all the productions sites to Spain and from Spain to the markets of sell, as well as the relative communication flows necessary to such a business model will inevitably slow down as Zara will have to deal with a constantly growing number of customers. Thus, the highly centralized information system of Zara seems not to be easily applicable in Asia, in addition to being time and money consuming.