Zara Strategy

Zara is one of the retail sale format of Inditex group and well-known an international fashion clothing brand which is very famous for its apparel and accessories. Zara is a place where we can buy all the latest fashionable clothes in the world as they launches 10,000 designs every year. Zara is one of the Spain famous fashion clothing brand which is located in 70 countries in the world. Zara company is started earlier in 1975 by Amancio Ortega, a famous business person who planned to enlarge his small factory by opening a big store. In 1988 the Zara Company started to enter in to the international market to expand their business globally. Zara opened first international store in Portugal. Portugal store got a big success and then Zara decided to open a store in USA. By the next year they opened another store in Paris. These all made a tremendous growth to Zara and it became as an iconic representation of Spanish fashion. Zara began to enlarge their business quickly in 1990s. Around the world there are 1763 stores in 2013. In this assignment we are going to discuss about Zara’s strategy structure, infrastructure and process development, work scheduling and its reward products.

The bargaining power of customers determines how much customers can impose pressure on margins and volumes.

Threat of new entrants is not the primary focus for Costco at this point of time. However, it stays as one of the important for many reasons. There are various possible new entrants into the industry, which can cause threat to superstores, wholesale clubs and hypermarkets. Current wholesale clubs such as Walmart and Target could raise their market share by taking over10 small companies, so entry of small companies pose threats to existing wholesale clubs in various ways. Conversely, high obstacles to entry into the superstore or wholesale club’s business exists due to the presence of large companies with already established infrastructure, facilities and distribution networks. In addition, existing companies generated a brand name and high

Competition from Mass Merchants - The rapid expansion of mass merchants like Wal-Mart and Target has pressured clothing retailers at the lower and middle segments of the market. By selling stylish clothes and accessories at low prices, mass merchants attract consumers looking for fashion and value.

The western fashion market is making a rapid move toward the eastern hemisphere and into Chinese territory. While activewear is becoming highly popular in the United States, expensive jean producers are looking toward broadening their consumer market. Brands such as American Rag Chie, RtA, and AG are quickly developing strategies to sell high quality jeans to China’s large economy.

Also more and more clothing industries are moving overseas like in the New York Times article states “Today, most U.S. clothing companies manufacture their merchandise in countries like China, Bangladesh, and Vietnam, where factory owners earn a fraction of what U.S. workers make”. Today, everybody buys excessive amount of clothes and shoes so companies need to keep up with the people who want their clothes fast like in the article High Price of Cheap Fashion says “ Fast Fashion is like fast food. You go in all the time for a quick, cheap fix”. These are the changes that have affected today's clothing

Bargaining power of customers: Customers in the industry can be identified as the music listeners who purchase music either online or offline. The bargaining power of the customers has been rising because of piracy.

Certainly luxury products like the clothes Next offers are still in danger of substitute products, as seen by Porter (1985) as one of the five key threats to a company’s competitive advantage. This threat is more so in the case of Next as the products they produce are fairly standardised and so are replicated by competitors such as Topman and River Island. Porter (2008) cited how strategy “rests in unique activities” and so the issue the company faces is that with low priced clothing manufacturing available globally, how can it make its products unique to ensure future sales. As the clothing retail market is based primarily on price competition, any aspect of customer loyalty to a store or brand is severely diminished. Next’s reliance on its competitor’s prices showcases a kinked demand curve scenario, which was identified by Maskin et al (1988) as problematic for companies as their power over their own profit margins is reduced. It could be argued therefore that Next has little power to change its own profits as the company cannot control either the price or demand for their products. In addition, Padmanabhan (1997) acknowledged that retail clothing is a particularly uncertain market, due to the disposable

2. Richard M. Johns (2006). The Apparel Industry. 2nd ed. UK, London: Blackwell Publishing Ltd.. 1-124.

Buyers (customers) have bargaining power when they are strong enough to be able to put collective pressure on the companies producing a product or a service. This power is highest when buyers are able to gather together and amount for a large percentage of the producer’s sales revenue or when there is a number of suppliers providing the same type of product. In short buyers with strong bargaining power can limit industry profitability by demanding price concession, better payment terms, or additional features and services that increase industry. Because Walmart is known for being one of the largest retail organizations, it has high bargaining power and can insist on lower prices, higher-quality products or additional services. Walmart has been known to demand that suppliers alter their distribution systems to accommodate their desire to reduce the inventory it holds in its warehouse. Because of high competition among suppliers, they will have a long-term positive impact on this entity.

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.

In conclusion, the bargaining power of individual buyers is weak. But retailers possess a strong bargaining power over consumer goods producers.

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

Zara’s successful fast - fashion business model also refers to its push-pull strategy in which the customer plays an active role. Zara’s design and production activity begins with customer demand in retail stores. The trend information and feedback are sent back continuously to the headquarter where designers create new designs based on the real-time data. This strategy enables Zara to get access to real demand and leverage the responsiveness to customers. A very fast and highly responsive supply chain is needed to make certain that deliveries are sufficiently frequent (Ferdows et al., 2004).

Benetton’s major competitors include: Inditex, H&M and GAP (Maguire, 2003, p. 16). The three firms’ are Benetton’s competitors because they target similar consumer segment in the marketing environment. Evidently, its competitors in the market do not exist exactly in the same industry since Inditex and Benetton produce fabrics, clothing, retail fashion goods, and design, while H&M designs and retails its own goods and GAP just retails.