Factors Affecting Future Retailing of Zara in the UK - Essay Example

? Zara in the UK Outline Competitive Advantage in Zara 2. SWOT Analysis of Zara 2 Strength 2.2. Weakness 2.3. Opportunities 2.4. Threats 3. Factors Affecting Future Retailing 3.1. Merchandise range and assortment 3.2. Marketing communications 3.3. Store layout, Store Design and Visual Merchandising 3.4. Facilitating Services 3.5. Customer Services and Store Locations 3.6. Pricing strategy 3.7. Environment 3.8. Growth objectives 3.9. Market availability and selection 4. Business Competition 5. Financial Stability Evaluation of Zara, UK 1. Competitive Advantage in Zara Zara in the United Kingdom is a successful Fashion that has been in existence for over five years and has kept a high profile as a supply chain. The administration of Zara has been reporting the contributing factors to the retailer’s achievements as the use of modern information exchange. The first element of competitive advantage of Zara is majorly proper monitoring and study of the dynamic consumer needs. Zara through the Marketing Department conducts systematic research on the specific needs of the fast fashion consumers in order to provide relevant services and design items (Tadros, 2010). This has led to sustainable business due to unique designs and fashions for customer orders. The second aspect of competitive advantage is Financial Leveraging. Zara through partnership with other fast fashion retail chain stores in the UK manages to access adequate funding for its production and operational costs. This enables Zara to triumph against its close competitors such as Top-Shop and Mango. Partnership enables Zara to spread its financial obligation and deficits that may arise to the partners and eases the financial burden of entire organization (Laermer & Simmons, 2007). Thirdly, Zara has a systematic and strategic implementation of the fast fashion model, which allows flexibility of decision making by allowing members staff to get involved in decision making indirectly through contribution of ideas. As this takes place, and indeed, it really happens, it applies creativity, technicality and excellence in production among other departments through the sharing of information. Fourth, Zara exercises teamwork (Pahl & Mohring, 2009). As they work in a big team, the members of staff nurture the potential to make valid decisions and at the right speed. It also becomes easier to implement the emerging needs for changes in the manufacturing sector in a profound fast fashion system. The team building takes the decision makers through the ordinary models to construct aspects of flexibility in the lines of production. Finally, there is a perpetual accessibility of information, which makes Zara to predict the future market needs based on the changes in fashions and styles in the rapidly transforming markets and the changing trends of economic development. 2. SWOT Analysis of Zara 2.1. Strength Zara has a number of strengths that enables it to have an upper hand against its competitors. First, Zara is able to access large quantities of stock based on its leveraging and access to finances. It is a boosting factor for its production targets, by which it stands to gain through the economy scale. Majority of its competitors do not have stable cash flow, hence they do not hold as much stock as Zara (Kardes et al., 2011). An Example of such competitors is Mango. The second strength for Zara is the establishment of market and research through which it produces relevant and fast moving products and services. Zara keeps a good track of the market products and identifies the relevant needs and specifications of customers. Zara does a proper market study through its marketing promotions and gathers the consumer opinions to enable the production sector to adopt the emerging customer requirement. Fast fashion business has thus favored Zara since it began its implementation of flexibility in production brands. 2.2. Weakness Zara, like other fast fashion chain stores in the UK has its weaknesses, which poses a risk of losses and a decline in its overall performance. First, Zara runs a number of chain store subsidiaries in various parts of the UK, which are managed from a central administrative point. This leads to interference with the decision-making processes (Henry & Joseph, 2010). It means the decision-making teams have to assess the situations of the chain stores distributed in many parts of the region before making proper decisions. It leads to overload of functions on the administration to manage all the supply units. Secondly, Zara lacks a functional and operational risk management system. It does not take care of the internal controls that can lead to the financial losses of the supply chain. Zara thus operates at a risk of experiencing high operational loses which requires quick response to mitigate the possible risks. 2.3. Opportunities Among the opportunities, Zara has a systematic application of market and product diversification. It means the fast fashion designer company relies on multiple line production to avoid overreliance on a few products. This minimizes the risk of losing opportunities to sell, since Zara deals with both substitute goods and complementary products and services. Zara operates several lines of products such as apparels and boutiques. Zara also has a potential to expand further, despite having spread its wings in Italy, France, China and the US (Shell, 2009). As it emerges, customers in many parts of the world have indicated a positive response towards the products of Zara as one of its director reports. There are an increasing number of requests for Zara fast fashion products based on the brand name and the quality legacy it has held as a company for many years. Secondly, Zara has infinite ways of designing new fashions. It is a sustainable business because the needs of customers are ever changing and are usually unpredictable. This opens the field of market domination and expansion since the volume of stock that Zara is able to acquire is massive. 2.4. Threats There are certain factors that threaten the operation of Zara and add the risk of its loss of market to its competitors. The first element of threats is the fact that it already has competitors. Even though the impact of its competitors on its business operations is minimal, it poses dangerous situations for the future (Jackson & Shaw, 2006). Logically speaking, there are possibilities that the competitors can fast learn transformation strategies and build strong foundations that can outdo the performance of Zara. Secondly, the existence of international trade barriers can cause market restrictions in the future. This is a serious challenge considering the volatility of fast fashion market in the UK and the potential external market in the entire globe. 3. Factors Affecting Future Retailing 3.1. Merchandise range and assortment The future retailing of fast fashion products in the UK is very important to Zara operations in the UK. First, the current products that Zara operates such as apparels and boutique are not new to the world fashion market. This means that Zara has to apply a critical view on the selection and combination of its stock to maintain its position in the fashion and design market (Ferdows & Lewis, 2004). The volumes of sales in the past periods have indicated an upward trend, but as the market gets flooded, it reaches a saturation point at which it has no option but to apply extra-ordinary tactics to remain relevant in the fashions market. The size of its merchandise is already large, but at present, it requires to match its stock volumes to the present market opportunities so as to remain relevant in the market. Without this, there are chances that other fast fashion design specialists can take over the business opportunities and out do Zara. It therefore means that the decision-making in Zara must be flexible to allow fast spread of its products and create market promotion products to sustain its high-ranking position in the market. 3.2. Marketing communications Zara is in the right position in the use of modern technology for communication and sharing of information. With the online advertisement services, Zara claims a large percentage of the world market, out of which 70 percent are active sales potentials. The strategy that Zara applies for marketing and communication enables the consumers to have a proper understanding of Zara products. It creates awareness of Zara brands and becomes exciting for its consumers to proactively source for the products (Jackson & Shaw, 2006). Similarly, with stock that it supplies, one of the decision makers of Zara says that the retail chains of Zara play the game of product scarcity. The chains create impressions that the products are very rare to encourage them to increase their speeds of acquiring them. This discourages the procrastination among certain consumers. Using this strategy, the fast fashion firms do not necessarily have to spend more resources on investing on expenditures like advertisements because as consumers are aware and they frequently visit the store to purchase the dynamic stock of the fashion products. On average, consumers visit Zara about 16 times annually. 3.3. Store layout, Visual Merchandising Store Design As a fashion and design retailer, Zara creates magnificent visual attraction to consumers in order to entice them into frequent visits to Zara chain stores. This has proved to be very influential on the number of visits, with traditional consumers increasing their visits to about 14 times in a year (Cooper & Schindle, 2003). The layouts of stores have unique layouts, which consumers would like to identify with. The arrangement of the chain store products magnify the volumes of products and virtually increase the stock levels. This is the use of mirrors to reflect the appearance of the products as double the prevailing sizes. This is influential on the attitude of clients since it imparts positive impressions on them by giving assurance of a present stock at Zara chain stores. 3.4. Facilitating Services Zara provides facilitating services to its clients, through the after sale-services, consumer loyalty awards sales promotions and special support services. Consumers feel appreciated through the services and practically increase their frequency of visits. A good example of the after sale services is where consumers receive transport services to various points accessible and within the vicinity of the chain store premises (Blackwell, 2006). Consumer loyalty encourages clients to maintain their loyalty to Zara amidst competition. Zara employees offer helping hands in the storage of private goods for clients, offering directions to the location of products and providing information about the product prices and availability. 3.5. Customer Services and Store Locations The operations and the management of the chain stores in the UK’s business discovers that the entire apparel sector is changing shifts and the idea of three consecutive trade seasons each year in the fast fashion and design world (Schwartz, 2004). The same business studies again, declare that the fashion and design no longer exists, and that almost all retailers are now maintaining their movements within specific seasons based on the products that they are delivering. Fast fashion and design has become fashionable clothing at extremely low costs showing up rapidly in the fashion retail stores (Harris, 2009). In Zara, it is vital to notice the entire context, in that the time conscience is exerting pressure across the boutique and apparel sector. According to Friedman (2006), it has changed what used to be the ordinary norm two decades ago. The response to chains of supply is not the norm any more across the board regardless of who the fashion and design retailer. It also realizes that brands and retailers are ever increasing and taking over the fast fashion and design approach and owning it by merging the synergy of different retail strategies to emerge with special unique consumer experiences. 3.6. Pricing strategy Owners of business development at the Zara fast fashion in the UK states that while the Zara retail business operates on large scales, the entire strategy in evaluating consumer prices and needs is considerably similar. At the beginning of a season, the decision-making boards make price lists of the products and set them as proxy process subject to further review and enhancement. The prices rise based on the prevailing product quality improvements and the demand. As much as high prices discourage consumers, it is true that the quality of products inspire consumers to purchase the products in relatively large quantities (Kotler & Keller, 2006). As soon as Zara retail outlets spot a pattern, it produces its own pricing models in relation to the emerging trend. Pricing strategy is a critical issue considering that the trade uses many currencies and often require foreign currency exchange. The prices have to be high to cover the risks of losses that occur in the process of changing the currencies at varying rates. 3.7. Environment The competition and interaction between various fashion and design retail traders has created a field for and promoted the development of product quality that Zara develops. This is an influence of the business environment on product development. With the rapid transfer of information and the increasing level of studies in the fashions, Bishop (2004) reveals that design influences the awareness level of Zara product and thus promotes the sales levels of the products. Environment is very influential on the pricing and the layout of shops in various parts of the world (Anthony & Leslie, 2006). It also leads to partnership and mergers in businesses thus causing uniformity and standardization of the models of pricing and product quality. Zara has thus been a beneficiary of environmental influence by keeping the high standard of product branding and quality development. 3.8. Growth objectives Zara develops annual business strategic objectives aiming at growth and development. In the past, it has experienced an annual increase of about 16 percent, and projects an increase in the next five year of about 18 percent. This objective is a driving force for Zara since every chain store branches have strategic targets to achieve. Growth objectives in Zara are smart, since they have specific targets of performance, with a time conscious observation of the targets. The objectives are achievable as it appears in the history of Zara and the indicators that exist at present, pointing towards an upward growth. 3.9. Market availability and selections As studies have revealed, there is a large available market for Zara products worldwide. There are openings in the US and Spain since the market is not yet saturated. Secondly, Zara receives positive response in the exploration of the market in the Eastern regions such as Japan, Korea, China India and Singapore (Walker, 2003). There is a large section of unexplored market, which promotes the market availability index of Zara in the UK. The challenge is with the selection of the potential market to settle for, since this requires a critical study of the global patterns and the economic forces. Secondly, there is no uniform currency, through which Zara can trade. This is because the client base uses multiple currency exchange procedures. The US makes use of US Dollars while in the European market, predominantly uses Euros and British Pounds. With many currencies, Zara faces frequent currency exchange losses especially when dealing with large volumes of moneys. One way to reduce the losses is probably by standardizing the currency usage to a particular currency, for example, strict usage of British Pounds. However, there emerges a serious risk of losses in the market since in many countries; consumers cannot access the currency, following the exorbitant prices. 4. Business Competition Zara faces competition from the aforementioned retail outlets and thus has to maintain strategies for overcoming the challenges and stay relevant in the global market. In order to win the competition, the marketing department designs new products and services of course after systematic studies in the market demands and consumer behavior. The company has the capability to measure the level of success of various by examining their sales the franchise network instead of focusing only those strategies that develop best selling retail businesses. Competing companies such as Benetton, Gap and H&M considered as the three closest competitors in the global scene. Zara is considered to be in a relatively fashionable position in product pricing and quality index compared to other close competitors. Its prices are also competitive when compared to Benetton and Gap. However, they are higher than the prices at H&M. 5. Financial Stability In an analysis of the financial operation and performance of the four competing companies in the last 12 years, we realize that H&M is the greatest threat and the closest competitor in various aspects including Return on Equity, Gross profit and Net Profit. At the same time, H&M's focus and strategy on the global market is the same as the expansion style of Inditex. 6. Zara Business Model Inditex Chain stores are the largest and most influential international brand of chain store including Zara. Zara is however the key driver of the growth of the chain, which plays the leading role of the profitability and sales volumes of Inditex. Zara has a unique and rare business model, which raises a lot of interest of the business studies (Gary et al., 2007). The central concept of the business model in Zara is that they sell medium quality design and fashion garments at affordable prices. The business model has a vertical integration as well as a rapid response to the external factors. Zara Business model follows processes such as designing, manufacturing wholesale distribution and retailing. The model present four key success indicators such as time factor, variety of product, heavy investment and the use of information technology. References Anthony, R., and Leslie, B., 2006. Essentials of accounting. Upper Saddle River: Pearson Prentice Hall. Bishop, M., 2004. Essential Economics. London: Sage. Blackwell, M., 2006. Consumer Behavior. London: Thomson Learning. Cooper, D., & Schindle, P., 2003. Business Research Methods. London: Mc Graw-Hill: Princeton. Ferdows, K. M., & Lewis, J.A., 2004. Rapid-fire fulfillment. Harvard Business Review, 82 (11). Friedman, T., 2006. The World is flat. New York: Farrar, Straus, and Giroux. Gary et al. 2007. Marketing Engineering Principles. DecisionPro. Harris, J. M., 2009. Ecological Macroeconomics: Consumption, Investment. Real-World Economics Review, 50, 34-48. Henry, C., & Joseph, E. S., 2010. Intellectual Property, Dissemination of Innovation and Sustainable Development. Global Policy, 1 (3), 237-251. Jackson, T., & Shaw, D., 2006. The fashion handbook. London: Routledge. Kardes, F. et al. 2011. Consumer Behavior. Mason, OH: Cengage Learning. Kotler, P., & Keller, K. L., 2006. Marketing management. Upper Saddle River: Pearson/Prentice Hall. Laermer, R., & Simmons, M., 2007. Punk Marketing. New York: Harper Collins. Pahl, N., & Mohring, W., 2009. Successful Business Models in the Fashion Retail Industry: Strategic Audit of H&M Compared to ZARA. London: GRIN Verlag. Schwartz, B., 2004. The Paradox of Choice: Why More Is Less. New York: Ecco. Shell, E. R., 2009. Cheap: The High Cost of Discount Culture. New York: Penguin Press. Tadros, E., 2010. Zara will open first store at Westfield's Pitt Street Mall centre in Sydney. news.com.au. Walker, O., 2003. Marketing strategy: a decision-focused approach. Boston: McGraw- Hill/Irwin. Read More

 

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