Company analysis for Zara
“Zara is an extremely powerful manufacturer and influential in overseas marketplaces as America, Asia, European countries and Africa” (according to article Best Global Brands 2010, 14 Sep 2010).”Zara needs 2 weeks to design a new product and to generate retailers by meeting costumers tastes, meantime its competitors will need 6-8weeks”(chapter11-The technique of international organization). Competitive benefit of Zara is because didn’t transfer all production to low cost countries, but kept the majority of them in Spain and Portugal where wages will be lower than Western Europe. With this, it cuts shipping and delivery costs, and has additional flexibility to reply the consumer’s demands for new products in quick way because of location than its rivals that have factories in low priced countries. Relating to a affirmation by Louis Vuitton Zara is usually “Possibly the most innovative and devastating retailer on earth”. The company applied “Instant Fashion” as a way to meet costumer’s requirements by new patterns and new trends in developing and distribution, also by keeping rates low. “Zara used band of designers rather than individuals in comparison with GAP, H&M and others. Zara’s shops are company owned, in fact it is vertically integrated retailer. It does designs, creation and distribution alone and controls everything. In comparison to competitors it doesn’t promote its models via fashion shows, but is delivering they direct to costumers through the retailers to understand their need, that is why the business doesn’t do advertising” (article-the Key of Zara’s Success, Retailer Magazine, fall 2004).
Another gain is that the company has one of the highest numbers of products on earth that produces annually 11.000 and its own key rivals 2000-4000.”The company maintain low inventory in inventory because each new item is meant to be purchased within 10 days, if not really is replaced after 14 days. By this measure the company keeps low priced of inventory. Every retail store in Spain is supposed to be visited typically 3 times a year, but Zara 17 times”(according to article Zara a Spanish Victory Tale, CNN, 15 June 2001).
Also this year the company will enter Australian marketplace. “The company includes a core concept in information technology to support its international logistics program and online advertising where return and exchange is the same as the retailer system”(Wikipedia). Also in some location people can buy Zara products by IPod, I Phone request. “Zara model have more flexibility in production sales, and stock management and its own store’s managers report again every day to designers in La Coruna for offers which shows a good coordination between departments in order to meet costumer’s needs”(Zara website).
“Zara is part of Spanish group Inditex is definitely expanded worldwide in 77 countries with 5000 stores. Net Income was increased by 42% for the first 9 weeks of 2010 and show selling price 57.60 euro” (Inditex Group). The company has Strong marriage between wholesalers, stores, supervision and costumers. Also, the application of the best quality of resources for clothing.” Zara income for 2009 was 7.071 billion Euros and operating profit is 15% higher than H&M and GAP, but working capital may be the lowest”(Wikipedia).
Zara is among the largest clothing retailers on the planet and this could cause its weakness in various elements of business, and is too difficult to control.” The company is global but has presence in 77 countries” (Wikipedia).Also “Zara’s greatest gain lies in its ability to provide the most interesting cutting-edge products, without risk. Normally the more leading edge the design, the best the risk. Clothes do not always last prolonged” (Zara 2.0- Vogue index.com). Zara has a reputation for new design product development and imagination, but is the risk that their creativity may stumble in future. Costs to do business with Albanian stores, while the Zara is situated in La Coruna Spain. Although ZARA has a successful business model in addition, it have some weaknesses which could limit its scalability and ambitious progress.
“ZARA constitutes around 80% of Inditex organization (8 companies) this means a failure in ZARA can set the complete group at a risk” (Inditex group).
Advertisement is becoming an important part of the business and it reflects directly to the product sales. “Zara’s in-store advertisement model may not work going forward” (Zara). Another weakness for the company in Albanian market is that, the majority of persons are low income and may be problematic for the Zara to keep carefully the growth.
“Merge with Inditex group has created more possibilities to purchase emerging markets” (Wikipedia).
“Zara stores are found in 77 countries and so are lot of opportunities to get and expanding the market as in India and China” (Inditex). Albania is usually a nice opportunity for the company to open shops because persons like high fashion brands. New location and retailers offer the company opportunities to exploit market advancement.
Grow into new marketplaces/consumer segments Albanian Client Taste
Albanian consumer check out ZARA as fashionable home. If ZARA must grow in Albanian it needs to address essay topic particularly the Albanian desires and perception of trend.
The most significant threats are its rivals as H&M, GAP and Benetton and innovative entries in market that want to recapitalize their gains in new marketplaces as Albanian. Rising creation cost as a result of labor and recycleables. As economical crisis is striking back costumers are trended to spend less.
Imitation of company’s logo by people that do not have permission to utilize it.
– Increase in Euro Rate
An upsurge in Euro rate will boost the consumer selling price, consequently Zara will lose price gain against relative rivals outsourcing in Albanian lek.
Zara product sales are increasing 25% in the last 5 years it is becoming among the world’s speediest growing retailers, also to keep this growth has to spend money on emerging markets.
“Zara strategy is expansion narration essay through diversification with both horizontal and vertical integration, and brings latest fashion” (Zara website). The company controls all distribution channels, and invests a lot in Real Estate business so as to buy prime places for new stores. This risk for Zara because its net cashflow is less than its competitors.
“Although ZARA has a successful business model it also has some weaknesses which could limit its ambitious development, Inditex over reliance on ZARA” (Wikipedia)
Zara’s business model is situated by bringing new models models in marketplace every two weeks. For countries like Albania, where people are less fashion frontward, it could be a challenge for Zara to maintain its occurrence. Other threat for the company in Albania may be the politic stability that’s still fragile due to disagreements between two primary political forces. Petrol rates are very expensive in comparison to other countries and can affect the price of products by increasing their
Situational Analysis (TOWS)
Weaknesses and Threats (WTH)
“The weaknesses of Zara is to be part of Inditex group which includes 8 corporations and means failure of 1 of them can put Zara at a risk too”(Inditex group). The business has to discover a strategy so that you can overcome weaknesses and produced them into strengths. As you discover from the chart the route shows the strength- option position (so). The technique is to reduce the competitive threat by developing in marketplace flexible new designs so as to meet costumer’s preferences promptly.
Weaknesses Opportunities (WO)
Another weakness of Zara can be raising creation costs in Spain and Portugal with introduction of Euro in 2002. Products became more costly for export. To conquer this Zara started to invest globally and different mergers to keep rates down as its rivals. If Zara enters in Albanian market segments, it doesn’t have knowledge with Albanian laws and regulations and their tradition for clothing but could conquer those barriers by creating franchise with local partners.
Strengths Threats (ST)
One of the greatest threats to Zara may be the continuing an appreciation of the Euro against additional currencies this implies higher prices for the buyer and less competitive position. To lessen threats of competition and exchange rate Zara has built factories in North Africa and emerging markets. Economic crisis that started in 2008 and still goes on has obliged costumers to invest less on clothing products, and the company must bring new designs with affordable prices as a way to handle this situation.
Strengths Opportunities (SO)
In order to be always a successful retailer Zara has to build on its strengths and to take benefit of opportunities by using its R&D. It brings in market each year 11.000 services more than its competition and this evident by its growth rate by 25% each year. In order to keep that growth level Zara is trading its profits to buy new real estate location, technologies and also to open new crops in low costs countries.
1) Good R&d and designers.
2) Strong revenue and global network.
3) Efficient products.
1) Solid reliance in Europe.
2) Rising costs in Spain because of Euro.
3) No experience with Albanian laws.
1) Growing market demands for fashion.
2) Will open fresh retailers in Australia in 2011.
3) Low costs items to deal the competition.
1) To build up and produce new styles with different prices.
2) To go global through the use of its R&D and capital.
3) Increase efficiency by using new technologies in production.
1) To develop existing products for several price model.
2) To cope with rising costs in Spain and Portugal because they build new plants and shops in emerging markets.
3) To stay in touch with new technologies.
1) Exchange rate risk, devaluation of euro with regards to other currencies.
2) Competition from H&M, GAP, Benetton work.
1) To reduce the effect of exchange rate because they build plants in countries outside the euro area.
2) Meet competition with advanced designs.
3) Bring new designs in industry with lower prices.
1) Overcome weaknesses by producing them strengths.
2) Reduce threat of competition by developing flexible product lines.
3) Engage in joint procedure with other companies.TOWS Matrix for Zara
Zara marketing strategy for Albanian market will include the use of targeted print media advertising and direct advertising to Tirana and Durres place. The business will also use a website to keep costumers in touch with new designs and to sell products online. To become successful as a fresh Zara retail outlet in Albanian market we must beef up our romantic relationship with corporate headquarters. As well we have to put our franchise constantly in place to provide the highest quality of garments in Albania market by bringing new manufacturer and new models. Our online marketing strategy is to talk this to our customers and to create a good marriage with them.
The potential clients for Zara are:
Albanian costumers of Zara goods: Market research shows that there are approximately 50% of populations which are trended by manner. All goods for our franchise that would be in a position to handle the levels of Zara’s shipments and so are in their target market.
Inditex group wholesalers: This market serves as a safe practices for our import business. By maintaining relationships with Spanish wholesalers we have an alternative market with established distribution channels.
As Zara techniques in Albanian market ought to be more aggressive in order to target this audience.
Zara will standing as the high end quality manner distributor in Albanian industry. “Zara will only sell the best quality of models and recognizing that style is a commodity. The business will leverage their competitive edges to attain the wanted positioning” (Inditex group).
We have established interactions with Zara, and Inditex group, so that you can sustain our competitive advantage. Our franchise offers received affirmation of the demand for their product in the kind of requests from Zara for bigger product shipments.
Our designs will be superior as a result of the larger ordinary size of the Zara items 11.000 a time and low price and shipping expense will be significantly less because Albanian industry is too close from Spain.
The single objective is to position Zara in our market as the premier in fashion field, and also to create customer awareness in connection with designs offered, and also to build good relationship to costumers in order to have their loyalty.
The message our store seeks to communicate can be that our name is synonymous with the best quality Zara designs available in Albanian market. This message will be communicated through a number of methods. The first method will be the utilization of printed sales material. The materials will detail most of the different goods that Zara sells.
Another method of conversation is through the production of strategic associations with buyers and retailers of our (Zara) products. As we know a nice communicative relationships with this clients is essential for our organization. Our franchise may also use advertisements, in Television set, radio, papers, magazine and Email to increase brand awareness.
The make use of the website allows different people around Albania to see a lot of data regarding Zara’s products inside our store, their production methods, and other information.
Marketing mix is comprised of the following approaches to pricing and distribution, marketing and promotion and costumer’s service.
The product can be distributed through the entire Tirana and Durres area. Several different methods will be used to promote and promotions; we use the same advertising methods as I intended it above.
With regard to advertising we will offer you as discount value, rebate Zara bank cards and other methods to keep loyal customers and also to get new ones. Customer support is our priority in order to build good relationship with them.