On the other hand, Zara has individually owned manufacturing units in and around Spain. It has full control over the manufacturing facilities giving them better flexibility. Only the raw materials like undyed fabric are purchased from countries like India and Morocco. The dependence on the suppliers is minimal for Zara.
Buyer Power- An industry like fashion is characterized by very high buyer power. The power of the buyers is not in terms of bargaining but in terms of taste and preferences, which can change very swiftly. Zara has a well-dedicated designing team, which produces about 12,000 styles per year. This helps Zara to respond to changes quickly.
Threat of Substitutes- Trends in fashion lasts for a very short period. It is substituted by a newer trend. Zara has maintained its position in the industry because it continuously changes to newer trend. It reacts faster than that of the other companies in the business.
Barriers to entry- A new company coming into the industry will need a lot of time to be successful. The Capital requirement is high in the industry and one of the most important factors is the Brand identity. These factors create barriers to entry in the industry and there will be very few new competitors in the global scenario.
Degree of Rivalry- Zara is a globally accepted brand, which is targeted to all sectors of the society. Brands like Gucci and Armani are more coveted brands not affordable to all. The other companies falling in the category of Zara are Gap, Hennes & Mauritz etc. The competition among these brands is not intense. Moreover, Zara has the competitive advantage of the least response time.
The generic strategies developed by Porter states that the profitability of the firm depends on the industry attractiveness. Strengths of a firm can be categorized mainly under two heads- cost advantage and differentiation. By applying