Zara Inc, Key to Succes - Essay Example

MARKETING MANAGEMENT: A CASE OF ZARA PLC Introduction The essay would deal in developing the strategic marketing approaches of Zara Plc., the fashion retailer from Europe. The various marketing and brand development strategies, marketing mix and justifications for the brand development decisions in context of existing theories and models would be critically analyzed. Company Background: Zara Plc. Zara was founded in 1975 in Spain by A.O. Gaona and Rosalia Mera under the fashion retailer Inditex. Today the business has expanded to be a multinational brand in 86 various nations with over 2000 plus stores worldwide with an employee strength of 890000 plus professionals. Zara specializes in ‘Fresh fashion’ unique collection of fashion-conscious products for men, women and children along with fashion accessories. The business of Zara is based upon creating ‘fresh fashion’ affordable by a larger audience with a vibrant stock, fifteen day period of new stock delivery at a very competitive price. This attribute of Zara has made 12000 new designs each year with a one week average of product development to the industrial average of six months. Various news agencies and market survey has admitted Zara to be the biggest successful Spanish brand globally (Zara.com, 2014). Zara unlike its competitors maintains a direct control over supply chain design, manufacturing and distributions. It is interesting to observe that Zara maintains a Just In Time (JIT) delivery model for its products that is very close to the Toyota Motor’s Lean Production techniques. In this process Zara could maintain its model in all stages of product development and distribution all over its global stores within a few days. Businessworld in its article of 2011 suggested Zara to be a ‘fashion imitator’, understanding consumer’s wants and delivering them in their stores in shortest possible time (Inditex.com, 2015). Therefore the consumer’s of Zara gets fresh fashion in their stores each time they visit. Thus the shopping experience and repeat visits are significantly prominent over other brands (Richter, 2002). The attributes of Zara’s product in the market is well known for its fashionable statements, assortments of its apparels and accessories at moderate cost with high quality linen. Fashion oriented production, trendy upmarket looks with a customer centric product development has made Zara very unique and highly favoured by urban working class globally. The customer focus of product development and design has made the business very street fashion oriented and attractive for consumers. The marketing mix that has developed the brand to be so vibrant globally, would be critically analyzed, herein. Justification of Brand Development Decisions The business of Zara has formulated its vision and mission statements to guide its business model. The vision statement states that the brand is committed to serve its consumers with the best of fashion products that satisfied their desire. The business emphasises on innovations and improvements to the consumer’s buying experience with new designs with quality linen and affordable prices. The mission statement of Zara suggests that the business model of Zara aims to serve the sustainable development of society and environment that it interacts (Adamczyk et.al. 2015). The Mission statement for the brand demonstrates the attitude and outlook of a business (Kolberg, 2010). Therefore the mission of Zara suggests that the brand aims in achieving development and environment sustainability. The eco-friendly production processes are therefore given priority in achieving consumer satisfaction. However, the utility of the production or product in enhancing eco-friendly aspects is not present in the statement. The social responsibility and sustainable development is part of its mission, developing emphasis on operation models followed by Zara. The vision statement of Zara suggests the following: Consumers: The consumers of Zara are men, women and kids who are fashion conscious and love to wear latest trend of cloth and accessories, especially the urban population (Zara. Product: The clothes and accessory of Zara are competitively priced with good material of fabric making the product very competitive in the market. Markets: Zara have 2000 plus outlets globally. Combined with its own stores, franchisees and third party retailers across 86 nations along with E-commerce channels, Zara is the largest clothing brand today. Stores: The stores of Zara get an average of 17 visits per year from its consumers compared to the industry average of 4. Well designed stores with excellent consumer services make the outlets of Zara very attractive to its consumers. Growth and Development: Zara is one of the leading brand of the globe in fashion having a 22% increase in its revenue in 2013 by expanding in emerging economies like India and China (Malvia, 2014). Employees: Communication and team work are the primary aspects of fresh fashion model, followed by Zara. The business has designed and aligned its practices based upon a strong base of information technologies for fast delivery of information. Organizational resources Organizational or the internal resources of Zara permits the business to keep up with its diversified and huge operations globally. Physical resources like presence in prime location, attractive fashion, stock, up street trends and the IT infrastructures combined with the internal resources build the strengths for the business of Zara. Added with it are the employees of Zara in its different European and Asian Production units to act as the resource behind the fast delivery and fresh fashion strategies of Zara. Market Orientation: The market oriented strategy of Zara has built its business around its consumers. The business has developed a special strength of understanding the needs of the buyers and delivering them likewise (Cavinato, Flynn and Kauffman, 2006). Based on the consumers taste and demands, the brand has developed the operational strategies. This trend of Zara has kept the business to have a huge loyalty of consumers that is higher than any substitute brands. Therefore the trends of market or market orientation that picks up fresh high street fashion and trends to its design and produce “Fresh Fashion” is incredible, making market orientation a success for Zara. Employee Development: Zara started its business with its production units in Portugal and Spain. However today with diversification of the business the employees for the brand is diverse too. The employee grooming and training of Zara focus on developing a closer relationship with consumers to give best of services and in the process get the feedback needed for further product development (Gronroos, 1994). Eco Friendly Operations: Global warming is the key issue that has been incorporated in the Zara’s business Environment strategy. Special attention needed by the brand to deal with this issue has been undertaken in response to the social concerns. The Greenpeace initiative of using eco friendly dye and linen for production is one for example to suggest the moulding of operations on environment friendly lines. Production Strategy: The production strategy of Zara is very interesting where the production managers investigate the fabric stocks in the inventory prior to product designing. Therefore the lead time reduces and thereby the cost for goods decreases too. Value Chain: The value chain of Zara is entirely different to that of its competitors. Each element of production to design and distribution are aligned to achieve the best value chain for the brand. The lead time of Zara in creating a design to its appearance in the market takes only 2 weeks (Zarahome.com, 2015). Therefore in analyzing Zara’s business decision making, Porter’s five force model is used. Porter’s 5 Force Model The model of Porter’s five forces describes the forces in the market that affects the competitive structures of a business and allows the business to take appropriate strategic decisions (Vanak et al. 2012). Barrier for New Entrants in the market: The markets where Zara is present, entrance of a new business or competitor would be highly competitive. A high fixed cost is needed for the new entrant to develop the market competencies in a new market due to its oligopolistic nature. Therefore the higher the scale of economics the higher is the barrier for new entrants in a new market (Wood, 2002). Zara has invested 450 million Euros in the promotional activities along with logistics development getting a 6% rise to 7.7 billion Euros in 2013. Again the concept in the fashion industry suggests that the new fashion have a six month average product life cycle which for Zara is probably a week or two. This has a very positive effect upon the fashion loving consumers building the brand equity for Zara (Zara.com, 2014). Substitutes to Consumers: The consumers in the market have a wide variety of clothing brand to choose from, especially in the fast fashion brands. However, Robinson (1988) suggests that the cost of switching a brand is also a factor that may affect the consumers. The loyalty of Zara’s consumer has made the repeat purchase significant for Zara’s business. Nevertheless, reports of counterfeit products or lookalike products and apparels in South East Asian markets are trending, making the threat moderate for Zara. This is interesting to note that the brand value of H&M, the closest substitute for Zara in US and European markets is 9 Billion USD to Zara’s 12 Million USD (Forbes.com, 2012). Therefore the brand value for the substitute is higher to its competitor demonstrating a higher value to its competitors, attracting a bigger volume of consumers. Consumer’s Buying powers: The trendy fashion of Zara appeals to a wide variety of consumers. The economy however is different for different markets of Zara worldwide. The pricing is a factor for economies of eastern Asia to that of its American and European counterparts. Therefore the threat is moderate for buyer’s bargaining power as the American market perceives it as a low end fashion brand which is completely different when Chinese, Indian or Indonesian markets are compared. Supplier’s bargaining Power: The bargaining power of Zara’s suppliers is low as the brand has developed its business model to suite itself with cost effective supplies. Contract based production and stitching, low fabric cost and local level coordination makes the suppliers bargaining powers low in Zara’s case. Competition of rival businesses: The business faces a fierce competition from its competing brands, thus the force is high for the markets where Zara operates. The high exit cost due to heavy investments on infrastructure makes the exit difficult (Wolf, 2008). The cost of promotion is 3.5% of the total revenue suggesting the high competitive structure of business. The fresh fashion of Zara saw its first internet venture from 6th September 2006 in major economies of Europe. The offerings were online clothes of Zara that would be available at the same price with all usual retail payment modes to increase its sales and online demands. The business has also taken steps with Greenpeace in 2011 to ban harmful toxins in their cloth production introducing the environment friendly approach in their business (Sullivan, 2015). SWOT Analysis for Zara The SWOT model suggests the strength, weaknesses, opportunities and threats for Zara. The business frames its strategic marketing based upon the SWOT where the objectives are to develop strengths, reduce weakness, grab the opportunities and minimize the threats. However strengths and weaknesses for the brand are discussed herein. Strengths The strength of the brand Zara is in its global outreach with a 2000 plus store presence in 86 nations globally. Therefore the brand has achieved a large scale in global context with a wide distribution network. This strength is considered primary for the global dominance of the apparel and fashion retail industry. Strategic location is an advantage for the brand to attract the urban fashion loving population worldwide to visit their stores (Long, 2003). The integrated IT infrastructure enables fast communication and a vertical integration of the distribution where the production is based on 3 major locations. 50% of the production is in Spain and Portugal, 26% of the production comes from rest of Europe and 24% is outsourced in Asia and Africa (Inditex.com, 2015). Associating the feedback and fashion trend in the market, the business can adapt to the changes in a record time and cost with effective distributions. The employees and the stores of Zara have a very special place in developing its strengths. Responsive employees and strong location presence has strategically added to the strengths of Zara giving it a definitive edge over others (Dominici, 2009). Weakness: The weaknesses of the brand are viewed in a global perspective for Zara. Limited stock is one such factor as the brand have limited production for each design with a two week turnaround time, therefore the consumers may not get a specific item when they want (Drake, 2012). Further, for different economy the pricing means a lot depending upon the GDP percentages of the nation that Zara is present in. A product which is low end in Europe is considered high end in South East Asian Economies. Furthermore, the business spends 3.5% of its revenue upon promotion as suggested earlier, that is comparatively low to its competitors. However, this promotion cost was a new addition for Zara in 2012, as previously the brand was not into promotions (Cresci, 2014). Role of Marketing Mix The Marketing mix uses the 4Ps of marketing to develop the strategic marketing plans. Based upon the 4Ps, the brand of Zara is discussed herein: Product: The product of the Business is the tangible goods or intangible services that it offers to its consumers (Rego, 2010). Therefore the product is the outcome of consumer’s demand that a business produces to satisfy its buyers. Reid (1980) argues that the product mix for a business suggests the depth of the product line or increase in the number of product line to exploit the resources for objective achievements. The Zara’s product of fashion cloths and accessories has been developed with certain qualities in terms of value offering, to satisfy its consumer’s expectation of trendy fashion at competitive prices (Enache and Caerjil, 2009). Pricing: The amount the consumers pays for a product is important for the business to make a profit out of its operations (Branch, 2009). Again, pricing have a huge effect on the marketing mix as the offerings of the business needs to match with the consumer’s value expectations. Gronroos (1994) argues that the perceived gap of price and value creates all the difference between two similar brands. The perceived quality and satisfaction of Zara’s consumers at the price offerings seems very competitive looking at its huge popularity globally. Promotion: The promotion of a brand is the market communication that it establishes through various media to communicate the offerings (Allah-Pitchay, 2009). Sponsorship, media advertisements, exhibitions, fashion shows are few formal modes, while the word of mouth communication is an informal mode of promotions. The satisfied consumers of Zara can express their satisfaction to their friends and peers creating a momentum for future sales. Zara has effectively communicated its offerings in this word of mouth mode when the promotion expenses for the brand are viewed. Zara spends 0.3% of their entire revenue on promotions, considerably lower than other brands (Zarahome.com, 2014). Thus the word of mouth stays the biggest source of promotions for the brand. Place: Offerings of Zara is available in 86 nations along with an internet presence since 2010. The options for the perspective consumers to select and purchase a Zara product is thus enhanced with its presence creating a very strong marketing mix for the brand. Added with it is the logistics or the supply chain support of Zara with 5000 employees and a capacity of handling 697 million garments in one single year. The effective distribution and presence has made Zara a very competitive brand in its sector (Zarahome.com, 2014). Conclusions The existence and development of a business is based upon many internal and external factors that it operates in. Based upon the competitive conditions and trends of fashion, Zara has developed its internal structures to suite the global business trends. The consumer satisfaction is key to Zara’s success that has served it its Loyalty from consumers. Besides the fresh fashion, the business creates a great deal of anticipation for the product creating a high footfall and repeat purchase for the brand over its competitors. The marketing mix of the business has incorporated its objectives from vision and mission statement, thereby developing the processes likewise. Environment friendly outlook of the business with its continuous employee development activities has created substantial developments in the fresh fashion outlook for the business. In terms of turnaround time, the product lifecycle is two weeks for Zara that is a record outcome of its strategic business model. However, the global presence would need a bigger distribution of production units, especially for their developing markets in Australia, South East Asia, China and India. Reference List Adamczyk, A., Beshore, B., Warrell, M. and Steimle, J., 2015. Zara on the Forbes Worlds Most Valuable Brands List. [online] Forbes. Available at: [Accessed 11 Feb. 2015]. 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