1.1. 1.1. Compa Company ny Back Backgr grou ound nd
Zara is a Spanish brand of clothing founded by the visionary Amancio Ortega Gaona and Rosalia Mera in Artexio, Galicia. Zara as founded in the year !"#$. %t
is on one of of th the ma ma&or se selling br brands of of on one of of th the bi biggest fa fashion re retailer '%()%*+'. Zara is no available in - countries ith total of !,#/ stores orldide. %nditex itself is a huge fashion retailer company hich ons - brands namely
Zara, 0ull 12ear, Massimo )utti, 2ersh3a, Stradivarius, Oysho, Zara 4ome and last but not the least 5ter6ue. Amancio Ortega is the founder of %nditex, hich as established in !"/. Amancio Ortega adapted uni6ue business model, hich ere innovative and flexible. *his made %nditex one of the biggest retailers in the orld. %n !"#$ %nditex established Zara7s first store in donton A 8oruna, Spain. Zara offers fashionable designs for men, omen, and 3ids. *hey also sell accessories to complete their product lines. 1.2. 1.2. Visio ision n and and Miss Missio ion n
*he company7 company7ss vision vision as stated stated on the ebsite9 ebsite9 “Zara is committed to satisfying the desires of our customers. customers. As a result result we pledge pledge to continuousl continuouslyy innovate our busines businesss to improve improve your experien experience. ce. We promise to to provide new designs made from from quality materials that are affordable”. Zara Zara stat states es that that its its miss missio ion n is that that “Thro “Through ugh Zara Zarass busine business ss model! model! we aim to contri contribut butee to the sustainable development of society and that of the environment with with which we interacts”. 1.3. 1.3. Long Long-te -term rm Ob Obje jecti ctive vess
*he company states on their ebsite the folloing as their ob&ectives in the long:term9 1. ave ave ener energy gy!! t"e eco eco-#r -#rie iend$ nd$y y store% store% *hey are implementing an eco:friendly management model in
their shops in order to reduce energy consumption by ;<=, introducing sustainability and efficiency criteria. *his management model sets out measures to be applied to all processes, including the design of the shop itself, itself, the lighting, lighting, heating and cooling cooling systems systems and the possibility possibility of recycling recycling furniture furniture and decoration. 2. &rod &roduc ucee $ess $ess 'aste 'aste and and recy recyc$e c$e%% Zara recycles their hangers and alarms, hich are pic3ed up from their shops and processed into other plastic elements. *his is an example of their aste management policy. Millions of hangers and alarms are processed each year and both the cardboard and plastic used for pac3aging are also recycled. 3. ("eir commitme commitment nt e)tends e)tends to a$$ t"eir t"eir sta##! increasin increasing g a'areness a'areness among among t"e team members% members% *he 8ompany holds %n:company aareness campaigns and specific multimedia:based training programs to
educate their staff in sustainable practices, such as limiting energy consumption, using sustainable transport and modifying behavior patterns. *. +se eco$ogica$ #abrics! organic cotton% Zara supports organic farming and ma3es some of its garments out of organic cotton >!<<= cotton, completely free of pesticides, chemicals and bleach?. *hey have specific labels and are easy to spot in the shops. ,. +se biodiese$ #ue$% Zara7s fleet of lorries, hich transport more than ;<< million items of clothing a year, use $= biodiesel fuel. *his allos them to reduce their 8O; emissions by $<< tons.
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3.1
Mic"ae$ &orters ive-orces Mode$
*he model identifies and analy@es $ competitive forces that shape and help companies to determine their industry7s degree of competitiveness and therefore helping the companies to develop their strategies. *he folloing is the ive:orces Model for ast:ashion ith further analysis relevant to Zara9
MODERATE
LOW
HIGH
MODERATE
HIGH
igure ; ast ashion ive:orces Model
Be can ta3e a loo3 at each one more specifically of their measurement9 !. 2arriers to entry9 4%G4 a. 4igh fixed cost business re6uires economics of scale for sustained profitability b. 4igh SG1A hich includes advertising, in:store promotions, etc.C up to /.$= of its revenue, even though for Zara, the company is famous for spending minimum level of advertisements and commercials. 4oever recently the company announced that it invested DE$< million in
commercials as ell as logistics area >%nditex, %nditex7s net sales rise = to #.# billion euros, ;41M, 5ni6lo, MA(GO, and many other fast:fashion brands? b. Fo buyer sitching costs and easily substitutable here a customer can al3 into its neighboring store instead of Zara c. Zara has gained substantial customer loyalty hich has more visits per year than its competitor7s store d. 8opying of styles is 6uite prevalent in this industry, hich can attract the customer ho does not mind loer 6uality but similarH loo3ing apparel. *he example ill be counterfeiting of Zara products in %ndonesia hich is currently trending.
/. 2uyer 0oer9 MO)+RA*+ a. *rendy fashion ear is appealing to regular consumers and they ould not shop loer 6uality apparel or accessories b. Apparel consumers have lots of choices hen it comes to trendy clothing and accessories, but price can be a factor. %n the case of Zara, for +uropean, American, and eastern Asian countries, Zara is positioned as the lo:end products, hoever, in emerging mar3ets such as %ndia, 8hina, and %ndonesia, Zara is considered as the high:end products. E. Supplier 0oer9 FOB a. 8ontract based cloth production and stitching functions readily available b. Fo price of fabric c. Focal cooperatives or3 ithout contracts or labor unions $. Rivalry9 4%G4 a. 4igh exit barriers due to high fixed and SG1A costs and excess inventory ith lots of cash tied up in out:of:fashion inventory b. 4igh advertising expensesC /.$= of revenue indicative of intense competition
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/esource-Based Vie' na$ysis
*he R2I approach to competitive advantage contends that internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage. *herefore, in this analysis, e ill loo3 deeper into the internal factors that Zara is relying on for their success. urther, R2I is divided into three main categories9 0hysical Resources, 4uman Resources, and Organi@ational Resources. %n order to be valuable, each resource must be either9 >!? rare, >;? hard to imitate, >/? not easily substitutable. *he folloing are the analysis of Zara using the R2I9 1. &"ysica$ /esources a. 0rime Focation9 One of the best strategies that %nditex applies to all of its brands, including
Zara is that the stores are alays located in prime locations of the city. %f the center of the crod is in the shopping malls li3e Ja3arta, then that is here you ill find Zara stores. %n +uropean countries and 5SA, crods are usually centered donton or in shopping streets, and that is exactly here Zara stores are located. 8hoosing prime locations give more benefits to the company from the amount of store visitors hich can result more sales created.
b. Attractive Bindo )isplays9 +ven though Zara does not have many advertising or commercials, Zara does rely so much on its physical store:experience. *heir mar3etingH strategy includes putting attractive and creative indo displays to attract consumers, and maintain them inside the store ith the store ambiance and serviceC hence, creating an impressive shopping experience for consumers. c. +xclusive and *rendy designs9 As the leader in fast:fashion industry, Zara is popular for its fast:changing designs. Bhat ma3es it interesting is that Zara is able to provide apparel designs that their customers love and it is consistent, even in a very short amount of time. *heir total designs in ;
that are available instead of designing the apparel first then finding the materialKfabric. *hat type of operation ill cost more also consumer more time to the company. b. 8aring +mployees9 %n order to enhance the customer service in each of its retail store, Zara, therefore, train their employees to prove better service, including their attitude, professionalism, having a sense of belonging to the store, and hard:or3ing. 3. Organi6ationa$ /esources a. Mar3et:oriented Strategy9 Just li3e hat the old saying says, the customer is the 3ing. %n
the industry ith high competition profile, choosing to emphasi@e on your customer is important and ise. 2ecause in this type of industry, the 3ey is to be able to ma3e your customer loyal so that they ill not shift to other brands easily. 2y concentrating on customer7s demand and preferences, supported by its operational strategies, Zara shos their commitment toards their customers. *hat is hy Zara7s customers are loyalC thus, Zara can reach its position right no. b. Staff:education9 Related ith the discussion on Zara7s human resources, Zara is concentrating on customer serviceC thus, the need to educate their staff is one of their top priorities. c. +co:friendly9 *he global arming issue is a hot topic noadays. More and more companies start to put special attention to deal ith this issue. +specially in +uropean countries, here the society is fully:aare ith the importance of eco:friendly business operation, having a mission of becoming an eco:friendly company ill inevitably bring positive response from the society. (ote that the society is actually the consumers. d. 0roduction strategy9 One of the most innovative strategies that Zara applies is the production process. As mentioned before, instead of designing the clothes first, the designers actually examine the available materials andKor fabrics, then after that they ill design apparel based on the existing material andKor fabrics, therefore, the lead time can be reduced and costs ill be decreased. e. Ialue chain9 Zara7s overall value chain differs from its competitors and it is unbeatable until today, especially its lead time of ; ee3s. Zara7s value chain is actually hat ma3es Zara able to produce ne designs in &ust ; ee3s. Be ill analy@e the value chain later in the folloing chapters.
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("e trategies
A. %ntegration Strategies
Zara applies the orard %ntegration. Since %nditex demands a high integration beteen the head6uarters and all branches across the globe, therefore %nditex controls its retailers and distributors all around the orld in order to standardi@e the overall business performance. %n addition, Zara also performs some hori@ontal integration through its ac6uisition of Massimo )utti from the Massimo )utti group and the ac6uisition of Stradivarius. 2. %ntensive Strategies As an aggressive expander in global mar3etC hence, Zara practices the Mar3et )evelopment strategy in hich they are entering ne mar3et ith Asian:developing countries being their first targets. 8ountries include 8hina, %ndia, and %ndonesia. *hat is hy noadays, almost in every ne shopping malls in Ja3arta, you can find Zara store in it. 8urrently Zara is targeting the Asian mar3et, hoping it ill generate much profit from this promising mar3et. (ot only that it applies the Mar3et )evelopment, Zara also applies the Mar3et 0enetration strategy, especially in +uropean and American mar3ets. *heir techni6ues of doing this strategy are by improving its online store and increase customer service in all retail stores. 8. )iversification Strategies *o complete its product lines, also as a form of their differentiation, Zara sells accessories to complement their main product hich is apparel. *his 3ind of strategy is called the related diversification. urther, Zara also has the unrelated form of diversification hich is the Zara 4ome. Zara 4ome is a retail store hich speciali@es in home fashion and decoration. Zara 4ome, similar to Zara, emphasi@es exclusivity in all f its products and it is also relatively more expensive than its competitors. Zara 4ome is available in $$ countries including %ndonesia. 4oever, in %ndonesia e can only find Zara 4ome store in 0la@a %ndonesia, Ja3arta, %ndonesia. ). )efensive Strategies Zara has no defensive strategy because the company is in good condition, not in any 3ind of &eopardy. *herefore, it does not need any defensive strategy at the moment.
8.1
("e trengt"s-9eaknesses-Opportunities-("reats :9O(; Matri)
Recalling the previous explanation about Zara7s +xternal and %nternal Analysis, e can no develop the four types of strategies9 SO >strengths:opportunities? strategies, BO >ea3nesses:opportunities? strategies, S* >strengths:threats? strategies, and B* >ea3nesses:threats?. Remember that there is no one best set of matches among these strategies. trengt"s Global Outreach Strategic Focation )istribution Strategy
9eaknesses Fimited Stoc3s 0rice 2rand image closely tagged to competitors
Opportunities %ncreasing middle class in Asia
Store %mage ast 8hanging collection Responsive +mployees 2rand %mage O trategies Open ne stores in developing countries in Asia >S!, O!?
Opportunity to build distribution center in developing countries to loer costs 8ooperation ith ne designers
2uild distribution centers in Asia to loer distribution costs for Asian countries >S/, O;? 2e the trendsetter >S$, O/?
Rising environmental issues
0romote the company7s vision to be an eco:friendly company >S#, OE?
Fac3 of Mar3eting
9O trategies 8harge products at competitive price in Asian countries7 standards >B;, O!? 0roduce a signature collection >B/, O/?
+nhance the current brand image and company7s image >BE, OE, O$?
%nternational Recognition ("reats ierce 8ompetition
Fasuit related to seatshops
0ossible imitations of goods
( trategies +xpand in ne mar3et and be the first player in the mar3et >S!, S;, *!? 0roduce the ne trends ith higher turnover >S$, */?
9( trategies %ncrease spending for mar3eting campaign >BE, *!?
+nhance ZARA7s differentiation through its uni6ue designs >B/, *E?
%ncrease the brand e6uity through better service >S, S#, *E?
)ilution of 2rand +6uity
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@.1
Marketing
As the orld is no becoming digital, many mar3eters initiate the digital mar3eting campaign. Many companies no engage actively to promote their products on social media li3e aceboo3, *itter, Lou*ube, or %nstagram. (ot anting to be a laggard, Zara also created its on aceboo3 page, *itter account, Lou*ube, and also %nstagram accounts. More than ! million people li3eH Zara7s 2 page and more than /<< hundred people folloed Zara on *itter, thousands of people also subscribed to Zara7s channel on Lou*ube. 5nfortunately, it is not enough. )espite its availability on social media, Zara is not utili@ing using these social media to do advertisementsC therefore, these accounts are not really productive or useful for the company.
("e *&s o# Aara%
!. &roduct% %nditex describes Zara as the brand for the latest fashion for omen, men, and children. 0roduct lines include9 apparel, footear and accessories. %nditex also claims that Zara is not a luxury:brand. ;. &rice% Zara is originally positioned as an affordable brand, hoever, as it expands to developing countries here the G)0Kcapita is loer from its country:of:origin7s, Zara in developing countries then shifts its position to the loer:end. /. &$ace% Zara is no available in - countries ith total !,##< stores orldide. *he store is located in prime locations of the area ith high concentration of visitors. %n distributing its products, Zara practices the constant flo of updated data that mitigates the so:called bullhip effectthe tendency of supply chains to amplify small disturbances. A small change in retail orders, for example, can result in ide fluctuations of factory orders after itNs transmitted through holesalers and distributors. %n an industry that traditionally allos retailers to change a maximum of ;< percent of their orders once the season has started, Zara lets them ad&ust E< to $< percent. %n this ay, Zara avoids costly overproduction and the subse6uent sales and discounting prevalent in the industry >eller, ;
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Aaras Competitive dvantage
After analy@ing the success factors both internally and externally, in this section, e ill derive the core of this analysis, hich is the reason hy Zara can become such a strong player in the industry or in other ords, the competitive advantage of Zara.
%n our opinion, according to hat e found during our analysis, one of the competitive advantage that Zara has and its competitor lac3ing is the customer:responsiveness. +ven though Zara does not have many investments in Mar3eting, but Zara relies on the most important aspect of the business, the customer. *hey focus on their customer, listen to hat their customers have to say, obtain their comments and feedbac3s, and then use those information to evaluate the next production, meaning on the next production, they ill produce based on the information given. 8onse6uently, the results ill be gratifying for the consumers. (ext competitive advantage that Zara has ill be its business operation. Zara7s overall business operations, including the design process, production process, and the distribution process, all are so sophisticated that it enables Zara becomes the forefront in the industry. +specially because it is combined ith their customerPresponsiveness, imagine ho impressive it is. Zara is the only brand that has the capacity to produce the latest design that the consumers demanded, and ma3e it available at the stores in &ust !E days. 2ecause Zara ill be the first one to place a certain design in the store, hence the customers ill tend to ma3e Zara their first choice in shopping or brosing for clothes. inally, the excellent business operation together ith customerPresponsiveness ill lead to customer loyalty, creating a cycle of grothC the secret success of Zara.
.2
Vision! Mission! and trategies
*hroughout the chapters, e have seen the analysis of Zara7s strategies that they currently have and the ones they should have. (o let7s recall the vision and mission that underlies the hole strategies and see hether the strategies that Zara has no are sufficient in order to achieve the stated vision and
Zara in its vision stated that it aims to satisfy the desires of its customers. *hey pledge to continuously innovate their business to improve customer experience. 5p to this point, e thin3 that Zara7s strategies are already aligned and so far effective enough to drive the company closer to achieving the vision. *hin3 of Zara7s effort in obtaining feedbac3 from consumers in order to understand the consumers and therefore able to produce the designs that the consumers love. Moreover, Zara also never stops improving its in:store customer experience through employee trainings and direct communication ith the consumers. urther, in the vision statement Zara also promises to provide ne designs made from good materials and also affordable. Bith the information Zara gets from customers, Zara is able to provide good designs ith available materials and therefore can loer the production cost as ell as the production time. As a result, a more affordable outcome of products can be distributed to end consumers. %n addition, in its mission statement, Zara states that it aims to contribute to sustainable development of society and environment it interacts ith. %n this case, Zara proves that its decision to outsource its manufacturing process to other countries has brought a positive impact for the host country, as e recall the example of %ndia. Moreover, especially for environmental issues, Zara has committed to help reduce the emission and create an eco:friendly business and the commitment is still strongly upheld until today. +ven no there are more and more concrete moves that the company is doing in order that this mission can be achieved, including investing more money on creating a eco:friendly business operation starting from the head6uarters, the manufacturing plants, and all the ay don to the stores across the globe. %n conclusion, loo3ing from the strategies that Zara is doing no, e can say that these strategies are aligned ith the visionPmission and that these strategies are effective and sufficient enough for the company to achieve the stated vision and mission.
