Zara Company Analysis

Zara social club depth psychologyI selected Zara to be the topic of my strategic management individualist assignment. Ive chosen this topic because Zara is one of the leading companies in the panache industriousness and they follow strategies that induce them competitive advantage over other competitors alike(p) MANGO, NEXT, GAP, HM. In this paper Im going to discuss the companys background and history, the SWOT analysis, the strategies that select in the company, ch all toldenges, opportunities, and the mission vision and objective.Background of the companyZara is a habilitate retailer who has haven a forward-looking approach in the industry. It was founded by Amancio Ortega in 1963 in Spain. Its p bent company is owned 60% INDITEX by the Ortega family and Inditex has carried out in 2005 to 6.741 billion turnovers. Zara has nigh 2000 thousands branches most the introduction. Zara is a distributer of apparels. It go games a wide range of choices the collections for wome n, men and children. However, the brand launched a mental strain of cosmetics, perfumes and household products.Since the beginning of its establishment, the main idea of Zara is to make luxury products cordial to e very(prenominal)(prenominal)one. Thus, they managed somehow to democratize luxury manufacturer of products inspired by the ontogeny of fashion. With this policy, Zara is now an industry capable of offering trendy products at low-priced prices. On the other hand, it is a company that wants to be close to progeny people. Also, this desire is felt in its recruitment policy. Zara young employees with styles very pronounced fashion. However, Zara understands what exactly the customers need and respond to their needs very quickly. Thats the main conundrum of Zara, which gives them a competitive advantage.Vision, mission, and objectivesVISIONTo be number one fashion retailer.MISSIONThe instauration is getting smaller we want the whole world to dress in style, class, and experience eccentric designs weekly.ObjectivesThe main objective is to sum up the customers demand and satisfaction, by giving them the chance to experience recent unique designs weekly.Spread widely and unsolved more than branches in the main cities around the world and cover 80% of them by the end of 2011.SWOT AnalysisZaras schema has some(prenominal) opportunities and strengths of threats and weaknesses. The following section will describe the foursome dimensions of Zaras agile approach.(S)trengthsZaras value mountain range is vertically integrated, which offers many advantages. It ass play off quickly and it may be in possession of high reassure over the ideal process from design to final product. Supply chain is efficient when they have a smooth use of distributions centers and warehouses. Its dodge in any case allows distributing the products in spite of appearance a wide geographic range within a very short circuit m. The other thing to a fault is that the pr oducts are close to market demand. Their products are made only in limited editions consequently, they must sale their products in short period of time so they tin be change at full price without having them to be returned. This responsive approach involves both dismay marketing be, and higher profit margins for the company. IT integration is also an meaning(a) aspect of Zaras strategy which is prodigious as it enables information sharing between different joints within the company.(W)eaknessesZaras business model is certainly well qualified to todays needs. But it has a significant weakness, which is that it is difficult to exploit the scalability of a go on expansion. Zara accounts for 80% of consolidated gross revenue Inditexs, which means that the entire group is very dependent on Zaras sales figures. The vertical integration of supply chain has its limitations in scalability. Zara cannot produce clothing in larger quantities for a lower personify, and then the whole concept is based on insignificant quantities as quickly distribute to the stores. The rapid processes can thus compromising the timber in some cases. To always be close to market and mystify the latest trends and translate them into clothes that are ready for sale within a short time requires outstanding effort from the employees and the management. Zara fails to implement online shop which leads to lose ordinates to their competitors.(O)pportunitiesOnline shopping became huge and significant market customers can go online and order what they need. If Zara allows customers to purchase online, that would attach their sales. Pablo Isla is the first Deputy Chairman and promontory Executive says we view our entry into the Indian market to be of significant strategic importance.(T)hreatsThe first threat is that the rent is continuously increasing in malls, Zara need to unfold the high cost of rent, which means that they have to increase prices or cut other cost.The main competitors of Zara are HM, GAP,NeXT, and Uniqlo. These companies compete with Zara in several categories like valuation. , sales, financial ratios, and profitability. Moreover, there is competition with the Asian clothing industry, which starts brands can earn price premium over the competitors in this industry.Challenges go about the companyThe clothThe fabric industry is undergoing outstanding changes. This is an area that requires incapable labor, which many relocation of yield abroad (mostly in Asia) in order to lower costs. In addition, there is a certain paradox. Lower costs can certainly develop a competitive advantage, but if all companies do so, they may not have a competitive advantage. Thus, excogitation plays a detect role in building the advantage against competitors. The foreland now is how to gain time in order to be more responsive to customer requests. Zara has understood this need and its strategy, is essentially based on the time savings.The dickens risks in the te xtileDemandThree adjectives can describe the demand part. First, it is unpredictable, which means studying the market may give an indication of demand characteristics. Second, it is a variable it follows the fashion trends. Demand is also volatile, remain loyal to a brand is not the objective of the consumer. The two classic things to the customer are the aesthetics and the price no guinea pig who proposes, as long as it pleases the customers and the prices are reasonable, then they will buy. controversyThe textile domain is hyper competitive. The competition is twofold that of basic products from countries with low output signal costs, and global companies that offer products high-end.Moreover, competition depends on costs but also on bore, image, responsiveness and, logistics company. Today, off shoring does not only to piss a competitive advantage. Other factors should be taken into account.New marketsThe sales area is centered in Europe. The desire to penetrate a new marke t is ready for any enterprise. However, in the case of Zara, this conquest is hampered by the centralization of management and deed. It appears as the first drawback of the strategy of the company. Therefore, they should revise the strategy to integrate the North American market, one of the largest markets in the world. Thus, they planned to open a distribution center in Mexico to serve the U.S. market.Competition with chinaThis country is the largest producer and exporter of textiles. The lifting of EU quotas (in place since 1974 with the Multi-Fiber Agreement) the 1janvier 2005 has completely destabilized the textile sector (liberalization of world trade). The entry of China into the WTO in 2002 had already had a dramatic impact on the textile sector. According to the European Apparel and Textile Organization (EURATEX) in 2004, 165,000 jobs have been lost and it is anticipated the loss of a million jobs. A major advantage of China is its low production costs (for the violation o f workers rights). More generally, Asia alone accounts for 75% of global textile production. China produced in 2003 17% of global textile and with the abolition of quotas, its piece of ground reached 50% within three years.Strategy of ZaraAll functions are centralize at Zara in La Corua (design, marketing, and communication), enabling cost control and responsiveness. The competitive advantage of the company based on three factors quality items, reasonable prices and very short response time.Creating and marketingThe degree of maturation of Zara is quite low, they copy the haute couture models 40 researchers to attend fashion shows around the world and retain the ideas of top designers to fit the model Zara.About 11000 models are obtainable per year, while other competitors have around 3,000 models. The Spanish firm has 12 collections a year, which is huge in this sector. Communication is minimal because Zara is about 0.35% of its turnover, in contrast to other textile companies who spend 3-4% on average. This reflects the lack of publicise campaigns and the consolidation of the communications department at Corunna. The groups websites are in incline or Spanish, you cannot buy over the internet which reduces the cost of site management. Their ism is No Marketing, no communication.TimeTime is more important than costs. It is a primary fact in the world of fashion. Design, manufacture and delivery can be done within fortnight, while the market average is about two months.It is interesting to quote the remark of one analyst Manufacturing exercise is Inditex a cost center that has for vocation to better serve the sales activities. The cost is certainly higher than 20% of outsourcing but it is more than source by increased reaction rate and a lower risk. The time strategy is the dominant strategy, because as I mentioned above, time is a cost itself for the company, so when Zara manufacture and deliver the products in two weeks while the others take months t o finish this process, this means that Zara will have the chance to reduce costs and increase revenues, also increase the intangible and tangible assets of the company.CompetitionZara cannot afford to operate in an extremely competitive market. So it must offer products of superior range by responding quickly to customer requirements and desires. Therefore, the distribution is important because it represents up to half the cost of the product, which means that the competitive advantage is created by low distribution costs.Marketing and salesSigns are open in the inner cities in order to compete with more expensive brands, be present in the very neighborhoods merchants in large cities. Stores are decent name, there are no deductibles Zara. The level of inventory turnover is very high the shops are stocked twice a week, which creates a certain image of scarcity that can attract customers who do not oscillate to come to Zara quite frequently in order to discover the new collections of articles.ConclusionAfter we saw this issue appears, the disadvantages and advantages of Zaras strategy. First, it is important to note the bizarre degree of it, since it is totally different from that established by the other competitors. The strategy worked to some extent but in the long run, it seems impossible to act up because as we saw in Part III, it is a barrier to entranceway new markets. In a context of globalization, it seems completely incongruous. If Zara wants a ground in the U.S., it must decentralize its production, or need to relocate its production factors.The time factor can nevertheless still be the key to the European market but to enter the U.S. market, another strategy is to be considered. But, will they be sufficient to counter the Chinese giant?