Zara Case Study
Inditex, popularly known as Zara, is the world's largest clothing manufacturing company. A Spanish luxury clothing and accessory brand owned by Rosalia Mera and Amancio Ortega, established in 1975. Its headquarters is based out in Arteixo, Spain, and its business model revolves around its specialization in fast fashion. It comprises clothing, accessories, shoes, swimwear, beauty, fragrances, and more. Here we will delve deeper into the internal and external factors concerning the Zara case study for better analysis.
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The Business Model Of Zara
Zara started as a humble, small clothing shop but turned out to be one of the most recognized brands worldwide in the fast fashion industry. It is known to manufacture more than 840 million products annually and is distributed across 6300 stores in over 85 countries around the world. The business model of this brand is impeccably structured, and it efficiently encompasses all the factors that contribute to the sustenance of its worldwide venture.
Before starting to analyze the business model of Zara, it is vital to understand the primary concept on which the company is mainly based. It deals with fast fashion, and the idea is quite similar to FMCG. Fast fashion is usually required to target an audience that comprises both young adults and middle-aged consumers. Moreover, one thing with fast fashion is that it never goes out of style but goes out of stock.
Products that form an integral part of the Zara business model comprises women’s and men’s clothing, children’s clothing, lifestyle and beauty products, and accessories. In addition, there is an amalgamation of activities responsible for the brand's success. It includes business strategy, vertical integration, efficient supply chain management, etc.
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SWOT Analysis Of Zara
Zara is one of the stores that give marketers lessons about how to keep making customers come back. Out of all the subsidiaries Inditex has, one brand is bagging a lot of revenue. The brand is known for its fresh designs and keeping its designs on rotation so that customers always get baffled with new designs whenever they walk into the stores. If there were an epitome of pulling strategy based on strategic and product design, then Zara would be among the top 10 contenders.
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Some of the strengths identified by the Zara business case study are as follows:
The first and foremost advantage of Zara lies in its design abilities. It has a myriad of designers on board who are aware of the brand requirements and the psyche of the customers who visit the stores. As a result, the clothes designed by this brand are of superior quality, elegant, and have a flawless finish. Moreover, their ensembles come in many varieties like office wear, party wear, casuals, etc. Their accessories also have a lot of types and designs.
Zara keeps expanding its presence all across the globe by establishing several franchises. Until 2015 Zara had almost 2100 stores worldwide with an average sale of 15.9 billion per year. In 2016, it expanded even further, and if it needs to survive in the retail industry, it has to keep up with the expansion technique to get the most of the revenues.
Zara is ranked number 53 in its brand ranking and has a whopping net worth of 10.7 billion dollars. Several positive points lead to the excellent brand equity, and the performance over the years, along with its consistent quality, has boosted the brand in recent years. Besides, the brand stays away from controversy and tries to remain humble. Such a healthy culture results in the brand being loved and adored by the customers.
Zara is known to get its design to the stores from the inception stage in just 2 weeks. Whereas its rivals take a minimum of 6 weeks or more. The quick turnaround time automatically makes Zara the trendiest store containing the latest fashion. On average, over 450 million items are designed by Zara every year, and this naturally pushes the consumers to visit the store multiple times to check out the latest collection.
The weaknesses, as pointed out by the Zara case analysis, are as follows:
No Personalized Collection
Zara does not personalize or specialize in anything and has everything for everyone. One of the reasons customers shift to its rival companies is that it focuses on more than one thing. The items can be a shirt, a pant, party wear etc., but such immediate focus is lacking in Zara, and it only has excellent daily wear or trendy wear.
Cost is one of the strengths of Zara. However, there is a lack of advertising, which turns out to be a weakness of this brand. Despite having a high influx of profits, it does not invest time, money, and effort in advertising its collection, which somehow reduces the customer rate. Nevertheless, it is a trendy fashion outlet that can gain a lot of potential buyers if it promotes correctly and can generate a lot of positive word of mouth for the brand.
Zara's significant regret is that the fast-moving stocks do not have a safety buffer behind them. As a result, the brand generally keeps a low inventory as a part of its strategy to keep customers coming back for the latest designs. However, this sometimes backfires as a potential design that customers like is often out of stock, and it sometimes disappoints the customers that they stop visiting.
As a case study of Zara, here are some of the opportunities that the brand can cash in:
Zara can take advantage of the online buying trend and make its clothes available in stores and on e-commerce platforms. Since customers love online shopping more than scouting options through stores as it is hassle-free and time-saving, getting full availability of the catalogue on the online stores will bring a hike in sales.
One of the common traits of most popular brands is to have some flagship designs for their stores. This strategy is lacking in Zara, and this is why it can be used as an opportunity to grow and expand more. There should be some flagship designs to be sold from a Zara store. This will bring in great demand and build more identity for the brand.
Zara is becoming more popular wherever it is currently existing, resulting in growing market potential. Furthermore, an increase in the earning potential of customers results in the demand for status symbols. Zara is one such status symbol of the clothing industry that customers love to own. Hence, the brand should capitalize on the growing market potential of the existing markets.
The retail industry is a big market to expand and mark their presence. New markets will always allow new businesses to flourish, and it will be a profitable business for Zara. To grow its businesses, it needs to keep a constant eye on the emerging markets, the people's spending power, and what demographics of people wish to spend on stylish clothing. These insights will allow the clothing brand to insure itself against saturation in the developed countries where the competition is too high.
These are some of the threats as identified by the Zara fast fashion case study:
Zara already makes the mistake of not advertising the unique brand proportion, which puts it at risk of losing its market value. The way Zara keeps rotating its design, it can rope in more consumers if it advertises correctly. However, if its consumer base increases, it might be tricky for them to come up with new designs to keep differentiating itself from other brands. This is why Zara debates whether Zara should start advertising or not.
Zara is not the only one designing chic clothes when it comes to competition. Brands such as mango, Vero Moda and H&M are also known for their unique designs. However, Zara has an advantage in that it offers better designs at affordable rates compared to rival brands. But this competition sometimes leads to saturation, affecting their margins.
Zara must increase its reach tremendously as it operates exclusively through its stores and does not have smaller displays. This is why the competition gets higher. Most other popular brands gain tremendous volumes from such stores, while Zara misses it, which eventually affects the brand equity due to sheer penetration.
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PESTLE Analysis Of Zara
PESTLE is one of the most popular marketing tools that help brands analyze the external factors that affect the organization. Being one of the hottest fast fashion brands, students are often asked to write papers on Zara strategic case study management. This is when they consider using the PESTLE tool. It is mainly used to identify the factors that pose a threat to the organization or highlight the opportunities that the company can use to climb the ladder of success. If you cannot create a Zara case study summary, here are the factors involved in a PESTLE analysis.
Zara is a Spanish brand that enjoys all the benefits of being in business in the European Union. However, one of the biggest pros of running a company in the EU is the country's excessive trade union in a political context. So, if you are writing a Zara business case on the PESTLE analysis, here are some political issues to take care of.
Whenever Zara plans to expand its roots in any other country, it needs to know the country's entire system before taking any permanent step. This is because the government of a particular country can easily change its policies that might affect the company’s operation.
Whenever Zara plans to expand its roots in another country, it needs to know the situation and the policies before trying out something new. Most countries do not allow foreign brands to flourish or impose high taxes on them before getting established.
Expanding Business In Europe
Zara plans to expand its business in the European Union because of its predicted and safe economic circumstances. This will help the company predict market growth as Europe's economy rarely changes.
Economic factors are the external conditions that affect the economy, including the tax rates, policies, laws, interest rates, wages, governmental activities etc. If you are writing Zara strategic management case study, here are the political factors you should consider:
Zara has been witnessing fluctuation in the last few years. However, it has been drawing revenues successfully. The recession caused in the year 2011 did not affect the company as such, and this is because it deals in dollars and other safer currency for its transactions. The company continuously evaluates the economic and currency rates of the country before moving into business.
Varied Prices In Different Countries
There are several custom duties and levels of tariffs in many countries. This is why the prices of Zara products vary from country to country. This factor can hugely impact the sale of the brand as in some countries, Zara can be considered a super expensive brand and people might refrain from buying.
Social factors are familial relationships management that serve as significant risk and protective factors for all companies. However, it might often mean cultural factors as well. Here are some of the socio-cultural factors affecting the brand as per the Zara business case study:
Zara is a fashionable brand for many customers despite its affordability. This is only because of the company's hard work as it delivers good-quality clothes at affordable rates and for all sections of society. Moreover, thanks to the brand's clever marketing efforts, it feels rather exclusive for the buyers. Overall, this allows the brand to have a strong, positive presence that collects healthy margins from its shareholders.
Online shopping is the major trend of the 21st century undoubtedly. Even though clothes shopping might not be best fitted for the web, consumers somehow want to buy clothes with a click. Since customers of today's era want everything at their fingertips, it is not necessarily a bad thing for Zara as it already owns its e-commerce store. However, Zara needs to pay close attention to the performance of its online store as consumers' preferences are definitely changing.
Technological factors refer to the new ways and practices by which an equipment cab affects businesses. It includes research, automation and development. While writing a Zara strategy case study, here are some political factors you should keep in mind.
Zara is one of the brands that use technology to expand its reach. As one of the world's popular fashion retailers, the company has the money and the audience to get the most out of data. As a result, Zara looks at big data to study and analyze its audience and their references. This is how they find better ways to reach and appeal to the consumers. Zara can pull some successful data analysis with both the online and in-person customer touchpoints to propel their business even further.
Interactive Maps To Locate Sores
Zara creates innovative apps for the feasibility of their customers. They have created interactive maps that allow the customers to locate their nearby stores. Zara projects a store locator on their website to quickly find a store by entering just the desired location and region. Moreover, the locator will also show you the nearest store. Hence, it is one of the easiest ways to discover the store's exact location.
5. Legal Factors
Legal factors pertain to any legal forces that define what a business can or cannot do. These factors involve the relationship between the government and the business. If you are studying Zara case study business studies, you must know about the legal aspects that influence Zara as a brand.
Inditex has about 7108 factory units worldwide, and the brand deals with over 1520 worldwide suppliers. Zara has laid down several laws and regulations for the employers and their labour wages. But when it is time to implement them, critics have found several contradictions.
Zara as a brand has a very complex history with copyright laws and patent rights. Several brands like Adidas and Balenciaga have accused Zara of stealing their clothing and other designs. However, Zara is an old brand that follows the old ideology where copying designs and ideas were not such a big deal. Even the brand still does that to date without considering anything else. Therefore, Zara must consider implementing patent laws and copyrights as this would help them save their intellectual and digital assets.
6. Environmental Factors
These factors describe the trends or impacts of the literal environment itself. It ranges from natural disasters to climatic change and environmental regulations to the rising demand for eco-friendly green products. While writing a Zara analysis, here are the environmental factors to look at.
The fast fashion industry has a straightforward rule of using disposable products that tends to be used and thrown away. The fashionable products are usually not long-lasting, and people only use them to look good and click pictures in them. Moreover, some designs and clothes are not practical to wear in day-to-day life. Fast fashion is all about making people follow the trends. Nowadays, customers are becoming increasingly aware of selecting environmentally friendly products as they want sustainable products. Customers no longer run after trendy clothes as they want something more than just increasing wastefulness.
Zara has pledged to produce environmentally friendly and sustainable products on its platform. The brand also shows commitment to animal welfare, clean water, biodiversity, sustainable material and other environmental issues. If the company manages to keep this up and take environmental issues seriously, it will be sure to win the hearts and loyalty of several customers.
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Marketing Strategy Of Zara
Zara handles almost 7000+ stores across the globe and successfully popularises 8 fashion retail brands globally under its umbrella. While it is becoming the fastest-growing fast-fashion brand, several marketing techniques apply to hold its position. When students are asked to write a paper on the Zara innovation case study, they are often flustered as they have no idea.
This is when they reach out to our professionals to understand the Zara outsourcing case study samples and gather the best insights. If you are also writing a Zara case study for business studies, here are some of the factors you should include.
Positioning, Segmentation And Targeting
Zara uses a seamless blend of geographic, demographic and psychographic segmentation strategies in its marketing technique to serve the growing needs of the customers. Zara also has limited stores across the world, due to which it uses selective targeting strategies to make its products available in the retail market.
Moreover, by using usage-based positioning strategies, Zara highlights its customer-centric approach to satisfy the changing fad needs of customers across the globe. Zara is aware that its customers require new and updated trends and targets its potential audience exclusively based on its designs.
Inditex is the parent company of Zara and has a solid portfolio of 8 brands that helps the company in nurturing each brand with its experience and strong financial base. In comparison to other retail industries, Zara has a quick turnaround time and makes all its products available to its stores just 2 weeks after launch. Additionally, all its stores of Zara are strategically located in the major cities of the world, which makes it a go-to for all customers compared to its peer companies.
Zara typically deals in product lines such as accessories, clothes and lifestyle products for men, women and kids. Among all the three categories, the women's segment is the star on the BCG matrix. The men's segment also has the potential to be the star. However, it faces tough competition in the market. The kid's section of Zara is not extremely popular as there are many brands for kids that are much more famous and has an excellent variety.
From distribution to design to sales of its products across 2100+ stores worldwide, Zara operates all the business. It makes the newly launched products available for two weeks and brings fresh collections with every trend. Apart from this, Zara also has exclusive stores and many multi grand retail chains that sell Zara's accessories and clothing, helping the company penetrate the leading nations and cities globally.
The supply chain of Zara is one of the most significant competitive advantages as Zara takes comparatively less time to make new designs available in the stores. In contrast, other brands take about 21 days to 2 months. Additionally, the stores also have unique designs only for a destined period of time and are only available till the stock lasts; hence the movement of resource material is crucial for a brand like Zara.
Zara Case Study Questions & Answers
Zara case study has been an important research subject for many business management students. Students ask a lot of Zara case study questions like-
- What is Zara’s Business Strategy? The Journey from Zorba to Zara
When Amancio Ortega founded Zara, he initially named it Zorba after the classic film ‘Zorba the Greek.' However, when he found that a nearby bar had the same name, he modified it to "Zara."
Zara began its operation with low-priced alternatives to popular and higher-end fashion brands. Post-1980 things, it changed its approach. Zara underwent a total change in its design, manufacture and distribution process. Here are some of the notable milestones of Zara from 1975 till date.
1975- Zara was founded, and the first store opened in Arteixo, Galicia, Spain.
1980- Zara changed its approach to instant fashion to react to new trends quickly.
1990- The company expanded to multiple countries like Portugal, the United States, France, etc.
2010- It launched its first online boutique across multiple European countries.
2014- Zara introduced RFID technology in their apparel for the first time.
2015- Interbrand ranked Zara in the top 30 lists of best global brands.
2019- Zara modified their logo from spaced letters to overlapping letters.
- How Did Zara Revolutionise the Concepts of Marketing?
Zara is one of the pioneering brands to revolutionise marketing concepts. They have modified the traditional 4Ps of marketing to 4Es of marketing. The new marketing concept states –
- Experience replaces product
- Exchange in place of price
- Evangelism takes over promotion
- Every place instead of a place
You can go through such Zara case study papers to know how they used these new marketing concepts to stir up the market and make a name for themselves in the fashion industry.
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Zara Problems & Solutions
You can ask the experts at MyAssignmenthelp.com about Zara case study problems like-
- Can Zara’s Low Stock Strategy Backfire?
Zara always focuses on fast fashion and prefers to move their stocks without enough buffer stock. This is because they expect the customers to get a new design every time they visit the stores. However, this strategy often backfires for them.
According to the Zara case study solutions, customers often love a design but fail to buy it immediately for some reason. When they return after some time, they find those designs out of stock. This results in frustration among the customers, and they stop visiting the stores after some time.
- Lack of Advertising Can be a Problem for Zara
Although Zara offers their apparel at a much lesser price tag by controlling their costs, it proves to be a weakness for them. If you go through the Zara case study solutions, you can learn in detail how the lack of advertising costs Zara millions of dollars.
Despite their global presence and online stores, a lack of advertisement means less public awareness. So, many people tend to forget about the brand and buy similar apparel from other brands. Relying only on word of mouth limits their growth despite offering trendy outfits.
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Most Popular Questions Searched By Students:
Q1: What is the 4ps marketing for the Zara case study?
Ans: The four marketing mix strategies of Zara are:
- Product: Zara offers a vast amount of clothing, accessories, and other trendiest style items for men, women, and children.
- Price: Despite being one of the high-end brands, Zara uses fantastic pricing schemes to attract customers of competitive brands and provides products at a low price.
- Place: Zara has enormous distribution channels that follow a unique business model to bring the latest products to the market in the shortest time.
- People: Zara targets young customers who want trendy clothes at an affordable price.
Q2: How well does Zara perform compared to its competitors?
Ans: While most of the competitors stay stagnant with a fashion line, Zara chooses to operate a seasonal basis and pushes the trendiest designs as quickly as possible. The company manufactures in low quantity and supplies them scarcely to meet the high demand. Unlike the competitors, the brand can make a variety of choices in the latest styles, which in turn increases the success ratio. They rely on customer preferences and feedback for the production of the new line.
Q3: What are the sources of Zara's competitive advantage?
Ans: Zara has 200 designers who turn the latest fashion into products. Some of the sources of Zara's competitive advantage are:
- Intense research and development capabilities
- The firm holding of the intellectual properties
- Exclusive logistics and global distribution rights
- Ownership of capital equipment
- Superior product or customer support
- Low cost production for high volume sales and turnover
- Economic factors
- Superior database management and data processing capabilities
- Strong marketing strategy
- Excellent management team and operations
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