Zara is one of the world

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Zara is one of the world’s most successful fashion retail brands – if not the most successful one. With its dramatic introduction of the concept of “fast fashion” retail since it was founded in 1975 in Spain, Zara aspires to create responsible passion for fashion amongst a broad spectrum of consumers, spread across different cultures and age groups. There are many factors that have contributed to the success of Zara but one of its key strengths, which has played a strong role in it becoming a global fashion powerhouse as it is today, is its ability to put customers first. Zara is obsessed with its customers, and they have defined the company and the brand’s culture right from the very beginning. Roll, M., 2018. The secret of Zara’s success: A culture of customer co-creation. Retrieved from Martin Roll: Business and Leadership: https://martinroll. com/resources/articles/strategy/the- secret-of-zaras-success-a-culture-of-customer-co-creation. Zara Porter’s Five Forces Zara Porter five forces reflects the competitive environment of an industry. It is a strategic tool that is used to avoid or minimize the risk of losing the competitive edge that the organization has and to ensure the profitability of the products in the long run. The company holds its vision closely as it allows them to orientate its innovation in terms of choices regarding the investment and strategies. Within the industry the businesses profitability is dependent upon the following forces:  Competitive rivalry  Threats of new entrants  Threats of substitute  Bargaining power of suppliers  Bargaining power of customers de Jorge Moreno, J. and Carrasco, O.R., 2016. Efficiency, internationalization and market positioning in textiles fast fashion: The Inditex case. International Journal of Retail & Distribution Management. Zara PESTLE Analysis PESTLE analysis is one the significant and widely used tool or framework mostly by organizations with the intent of considering the market environment before commencing the process of marketing. PESTLE Analysis

For the purpose of maximizing the benefits of such analysis, it is important that it should be used on regular basis so that an organization would be able to identify the trends. (Norton, 2008). Political forces: These are the Zara forces that tends to be altered by the influence of government on the infrastructure of country. The political factors may involves environment regulations, employment laws, tariffs, tax policy, trade restrictions, political stability and reforms. It is noteworthy, that the charities needs to be included where a government are not willing services and goods to be provided. Economic factors: The Zara economic factors or forces involves interest rates, inflation, and growth of economy, cost of living, working hours, wage rate and exchange rates. Combining these factors, it last greater and inevitable impact on organization. Social factors: The culture or social influence on certain businesses vary from country to country. It is significant to consider these factors. The social factors includes safety and health consciousness, various demographics, population growth rates and cultural aspects. Technological factors: Notably, Zara technology is one of the most important way of being competitive in the highly competitive market arena. Not only this, it drives globalization, the factors includes environmental and ecological aspects, and available services as well as products. An organization should innovate and be compatible with the technologies. Legal factors: The Zara legal factors involves the certain laws and regulations which might effect on the business operations of an organization. It also includes impending and current legislation that tends to impact on the industry in areas including competition, employment, safety and health.

An organization should consider the influence of the national and international laws where the organization would originate the business operations. Environmental factors: The environmental factors include all those factor lasting impact or influence, the surrounding environment most likely determine environmental factors. The factors involves awareness of the seasonal or climate change or terrain variation. The analysis of the environment including internal and external elements is vital for organization since it impacts on the performance of an organization. Lopez, C. and Fan, Y., 2009. Internationalisation of the Spanish fashion brand Zara. Journal of Fashion Marketing and Management: An International Journal. Value Chain Analysis Value chain analysis is an important part of the strategy process, especially within the positing school of strategic management (Mintzberg et al., 1998). Value chain analysis involves primary and support activities. In term of of the primary activities that are examined, this involves an analysis of the inbound logistics, operations, outbound logistics, market and sales, and service based activities of the firm. It is used as a means of showing how these different aspects in the value chain create value for the firm and help it to achieve competitive advantages (Porter, 1980, 1985). Zara’s supply chain is vertically integrated. Zara maintains a tight control over its supply chain in both its downstream (production) and upstream activities (final point of sale). This means that Zara has control over its products from the initial product conception, manufacturing, distribution and sales. (Tungate, 2001). Zhelyazkov, G., 2011. Agile Supply Chain: Zara's case study analysis. Design, manufacture & engineering management. Strathclyde University Glasgow, Velika Britanija, pp.2-11. Barney, J., 1991. Firm resources and sustained competitive advantage. Journal of management, 17(1), pp.99-120. Teece, D.J., Pisano, G. and Shuen, A., 1997. Dynamic capabilities and strategic management. Strategic management journal, 18(7), pp.509-533.

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Problems and Issues: Marketing Problems And Issues Faced By Zara Zara clothing has two main product divisions: men’s and women’s apparel. Zara is known for its innovative designs around the World; each of the clothing line consists of the following divisions: Upper Garment, Lower Garment, Shoes, Cosmetics and Complements. Kid’s clothing is included in Zara’s catalogue as well. Zara is a vertically integrated retailer which designs, produces and distributes. The company deals mostly with the supply-chain, unlike other competitor retailers of the same market, around half of Zara clothing products are produced in Spain, one third in the rest of Europe, and some in Asian countries and the rest of the world. ZARA has 1,608 stores (including 213 ZARA kids’ stores) in 74 countries. So while competitors go to Asia for outsource production, Zara makes most of its fashionable items and distributes them to its own stores located in all major cities around the World. At average Zara clothing store is more than 1500 square meters of pure up-to-date fashion. Marketing: Zara has adopted a different marketing strategy form beginning which is not to advertise through traditional media. There are not many businesses which are running without any marketing in this age of communication and technology. If some business is doing good without marketing it dose not mean that the business has captured maximum market and there are no more opportunities to grow. If some business is already doing well, it can do better by launching a marketing campaign and can get more market share. Product: Zara is based in Europe, so it has 3 to 4 main colours which are used by its designers most of the time. But in India there are lots of colours used in readymade cloth industry especially bright colour. Female and male clothes lot of or small embroidery work is like which is lack of Zara fashion designs. Indian consumer likes bright colour for party occasions. Social issues:

Cultural differences in India and Europe has a great impact on sales in India due to its designs which are more influenced by Europe. Statistics shows that the Indian cloth market is 490000 million rupees and 30000 million rupees market is only European based apparels. Zara’s limited origin designs make its global brand image of fashion industry. Zara opened two shops in India’s metro cities New Delhi and Mumbai but both have vast cloth’s cultural differences. In New Delhi customers like Indian dresses more than foreign designs but vice versa in Mumbai. There are also traditional cloth designs for special occasions which are lacking in Zara stores. Legal issues: In India there are some legal requirements for foreign companies to start business and the most important one is that you have to make a local partner from India. Zara has started its business with the collaboration of Tata a local Indian business company. Another problem in India is the implementation of copyright law. This is a fact that the day Zara will launch its new design in Indian market it will be pirated in couple of days and you will find the same design at very lower prices in the local shops. Economical issues: The growth rate of Indian economy is comparatively high but it does not affect the life of common people very much because of the unequal distribution of wealth. So the whole population of India should not be considered as a target market of Zara. UKEssays. November 2018. Marketing Problems And Issues Faced By Zara Marketing Essay. [online]. Available from: https://www.ukessays.com/essays/marketing/marketing-problems-and- issues-faced-by-zara-marketing-essay.php?vref=1 [Accessed 8 July 2021]. Business Challenges Faced By Zara And Recommendations On How To Overcome Them. [online]. Available at: <https://writingbros.com/essay-examples/business-challenges-faced-by- zara-and-recommendations-on-how-to-overcome-them/> [Accessed 8 Jul. 2021].

Solutions The recommendations for Zara to overcome the cultural differences is to have a management team in different continents such as Asia , Middle East and Europe. The management team in different regions can do research and surveys of different culture to produce The latest products that be satisfied by the consumers. The demand forecasting data that is collected will be seen by the designer to sketching new design to suit the market. The management team can also use their Analytical skills to come out with strategies to determine the best market for the company. This can help Zara to increase their sales and profit. In addition, the recommendations the need to pay excess the amount of money Is to set their production centre that are high in efficiency And higher local employees to save cost. Another way to save Is to set up the distribution centers in local areas to save expanses on shipping cost and costumer taxes. Strategy Recommendation Marketing Strategy To continue leading in the expanding fashion retail industry, Zara must tackle its weaknesses and transform them into opportunities. Beyond active social media accounts on mainly Instagram and Facebook and its name on the shopping bag, the retailer does minimal amounts of marketing promotions and advertisements. It utilizes an anti-marketing approach by pulling customers in, not pushing its products out, ultimately spending only about 0.3% of sales on advertising (Payton). Zara has successfully procured a large following with 43 million followers on Instagram, 29 million on Facebook, and 1.3 million on Twitter. Nonetheless, Zara needs to establish a more robust marketing strategy to combat the numerous entrants trying to mimic its business model and promote brand strength. H&M, a principal competitor, sends out SMS coupons and sales promotions through email and partners with luxury designers like Karl

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Lagerfeld, Jimmy Choo, and celebrities like Billie Eilish and Justin Bieber to drive traffic to its stores. Zara could leverage its massive online following and engage in influencer marketing. Influencer marketing comes at a cheaper cost than filming ads and is a popular form of marketing in this digital world. Zara could easily reach a larger audience by sponsoring fashion bloggers, YouTubers, and famous influencers that many look to for fashion inspiration. Now through the use of Tik Tok, a short video-sharing media platform, influencers post viral clips of try-on hauls, what they wear in a week, or favorite clothing items that reach thousands of views. 16 E-Commerce Another segment Zara needs to grow is its online platform. Brands like Shein, Yesstyle, Romwe, Princess Polly, and several brands are entering the fashion retail industry through e-commerce and could capture significant market share in the following years. Zara’s online store is not a strong point in its business as it lacks areas of functionality. The brand needs to revamp the website to make it more user-friendly, tailoring it to first-time and recurring customers. Currently, the website focuses too much on the aesthetics that the minimal design and distracting model poses make it challenging for the user to navigate the site and decipher what product the photo is advertising. Other complaints point out that the online store is confusing to look through tabs and does not transfer well while using different devices like smartphones or tablets. 37% of users claim they get frustrated by poor design and navigation on the website, causing them to leave—making Zara vulnerable to lost sales (Teller). While still retaining its style, the website needs a more simplified interface and viewing products collectively. Whether it is by using in-house UI/UX designers or outsourcing professionals, Zara’s e-commerce segment requires more customization to meet the consumer's

needs. Inditex has been on the move to resolve this issue since the hit of COVID when it decided to close 16% of its stores to boost online sales. As an effect of the pandemic, more people are online and shopping digitally. Therefore, Zara must make improvements or will see the impact of the lost business. Sustainability Fast fashion and sustainability do not complement each other. However, Zara competes with a niche in fast fashion and promotes sustainability with its commitment to the environment. Even though Zara stresses its promise to the environment through responsible and ethical sourcing and manufacturing, many still speculate how closely the brand will stick to its statement. A way Zara could reinforce its eco-friendly pledge is to involve the customer in the process. It is one thing for the consumer to know that they are buying from a sustainable brand but playing a part in the process would make a greater impact. Like H&M’s garment collecting, where it trades customers’ unwanted clothing for 15% off their next purchase, Zara could also adopt an upcycling program. The customer could return unwanted, gently worn Zara clothing that could be reused or donated to different countries of need. Conclusion Since the start of Zara in 1975, the Spanish apparel business has continued to grow, becoming the world's largest fashion retailer today. With its presence in countries worldwide and online, the brand leads the fast fashion market with its strong vertical integration and cost advantage. Still, the industry is rapidly growing, and for Zara to maintain its continuous success, it must build on its marketing strategy, improve its online segment, and stay committed to the environment's health. Shahbandeh, M. (2021, January 22). Global Apparel Market - Statistics & Facts. Retrieved March 28, 2021, from https://www.statista.com/topics/5091/apparel-market-worldwide/

Threats of new entrants

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Threat of new entrants reflects how new market players impose threats to the existing market players. If the industry will be profitable and barriers to enter the industry will be low, it will attract more players and hence, the threat of new entrants. will be high. Here are some factors that reduce the threat of new entrants for Zara: Entry in the industry requires substantial capital and resource investment. This force also loses the strength if product differentiation is high and customers place high importance to the unique experience. Zara will face the low threat of new entrants if existing regulatory framework imposes certain challenges to the new firms interested to enter in the market. In this case, new players will be required to fulfil strict, time consuming regulatory requirements, which may discourage some players from entering the market. The threat will be low if psychological switching cost for consumers is high and existing brands have established a loyal customer base. Zara will be facing high new entrants threat if Existing regulations support the entry of new players. Consumers can easily switch the brands due to weak/no brand loyalty. Initial capital investment is high. Building a distribution network is easy for new players. Retaliation from the existing market players is not a discouraging factor. How Zara can tackle the Threat of New Entrants? Zara can develop brand loyalty by working on customer relationship management. It will raise psychological switching costs. It can develop long-term contractual relationships with distributors to widen access to the target market. Zara can also an investment in research and development activities, get valuable customer data and introduce innovative products/services to set strong differentiation basis.

Threat of Substitute Products or services The availability of substitute products or services makes the competitive environment challenging for Zara and other existing players. High substitute threat shows that customers can use alternative products/services from other industries to meet their needs. Various factors determine the intensity of this threat for Zara The Threat of Substitute Products or services increases when; A cheaper substitute product/service is available from another industry The psychological switching costs of moving from industry to substitute products are low. Substitute product offers the same or even superior quality and performance as offered by Zara’s product. However, this threat is substantially low for Zara when; The switching cost of using the substitute product is high (due to high psychological costs or higher economic costs) Customers cannot derive the same utility (in terms of quality and performance) from substitute product as they derive from the Zara’s product. How Zara can tackle the Threat of Substitute Products or services? Zara can reduce the Threat of Substitute Products or services by clearly emphasising how its offered product/service is better than the available substitutes. It should provide convincing reasons to the customers by offering a better experience and high value for money. It can raise switching costs by working on loyalty. Lastly, it can improve the quality, maximise value for money and set strong differentiation basis to discourage customers from using the substitute product. Rivalry among existing firms The Rivalry among existing firms shows the number of competitors that give tough competition to the Zara High rivalry shows Zara can face strong pressure from the rival firms, which can

limit each other’s growth potential. Profitability in such industries is low as firms adopt aggressive targeting and pricing strategies against each other. The Rivalry among existing firms will be low for Zara if; There are only a limited number of players in the market The industry is growing at a fast rate There is a clear market leader The products are highly differentiated, and each market player targets different sub-segments The economic/psychological switching costs for consumers are high. The exit barriers are low, which means firms can easily leave the industry without incurring huge losses. Similarly, there are some factors that increase the Rivalry among existing firms for Zara For example, the company will face intense Rivalry among existing firms if market players are strategically diverse and target the same market. The rivalry will also be intense if customers are not loyal with existing brands and it is easier to attract others’ customers due to low switching costs. Competitors with equal size and offering undifferentiated products with slow industry growth tend to adopt aggressive strategies against each other. These all factors make the Rivalry among existing firms a major strategic concern for Zara How Zara can tackle the Rivalry among existing firms? Zara should focus on the implicit needs and expectations of its customers to strengthen the differentiation basis. It should raise switching costs by developing long-term customer relationships. The organisation should also invest in research and development activities to identify new customer segments. In some cases, collaborating with competitors can be mutually beneficial. The organisation can look for this option as well. Bargaining Power of Suppliers Bargaining power of suppliers in the Porter 5 force model reflects the pressure exerted by suppliers on business organisations by adopting different tactics like reducing the product

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availability, reducing the quality or increasing the prices. When suppliers have strong bargaining power, it costs the buyers- (business organisations). Moreover, high supplier bargaining power can increase the competition in the industry and lower the profit and growth potential for Zara Similarly, weak supplier power can make the industry more attractive due to high profitability and growth potential. Bargaining power of suppliers will be high for Zara if: Suppliers have concentrated into a specific region, and their concentration is higher than their buyers. This force is particularly strong when the cost to switch from one supplier to other is high for buyers (for example, due to contractual relationships). When suppliers are few and demand for their offered product is high, it strengthens the suppliers’ position against Zara Suppliers’ forward integration weakens the Zara’s position as they also become the competitors in that area. If Zara is not well educated, does not have adequate market knowledge and lacks the price sensitivity, it automatically strengthens the suppliers' position against the organisation. Other factors that increase the suppliers’ bargaining power include-high product differentiation offered by suppliers, Zara making only a small proportion of suppliers’ overall sales and unavailability of the substitute products. Contrarily, the bargaining power of suppliers will be low for Zara if: Suppliers are not concentrated Switching costs are low Product lacks differentiation Substitute products are available Zara is highly price sensitive and has adequate market knowledge There is no threat of forward integration by suppliers.

How Zara can tackle the Bargaining Power of Suppliers? Zara can strengthen its position against suppliers by decreasing the dependency on one or a few suppliers. It will increase its price sensitivity. Developing the long-term contractual relationships with suppliers from different regions not only lowers their bargaining power but also allows Zara to improve its supply chain efficiency. Finally, Zara can find the alternate ways of producing the product if product demand is high enough and the firm has required competencies and expertise. However, it requires detailed cost-benefit analysis to determine its feasibility. Product redesign and diversification of the product lines can also help the organisation reduce the suppliers’ power in the market. Bargaining Power of Buyers Bargaining power of buyers indicates the pressure that customers exert on the business organisations to get high quality products at affordable prices with excellent customer service. This force directly influences the Zara’s ability to accomplish the business objectives. Strong bargaining power lowers profitability and makes the industry more competitive. Whereas, when buyer power is weak, it makes the industry less competitive and increase the profitability and growth opportunities for Zara There are some factors that increase the bargaining power of buyers: A more concentrated customer base increases their bargaining power against Zara Buyer power will also be high if there are few in number whereas a number of sellers (business organisations) are too many. Low switching costs (economic and psychological) also increase the buyers’ bargaining power. In case of corporate customers, their ability to do backward integration strengthen their position in the market. Backward integration shows the buyers' ability to produce the products themselves instead of purchasing them from Zara Consumers’ price sensitivity, high market knowledge and purchasing standardised products in large volumes also increase the buyers' bargaining power. Some factors that decrease the bargaining power of buyers include lower customer concentration (means the customer base is geographically dispersed), customers’ inability to integrate

backwards, low price sensitivity, lower market knowledge, high switching costs and purchasing customised products in small volumes. How Zara can tackle the Bargaining Power of Buyers? Zara can manage the bargaining power of buyers by increasing and diversifying their customer base. It can be done by introducing new products, targeting new market segments and adopting the product diversification strategies. Marketing and promotional strategies can also be helpful in this regard. Building loyalty by embedding innovation and offering excellent customer experience can raise the switching costs, which will ultimately reduce their bargaining power. Zara can adopt these strategies to strengthen its competitive positioning in the market. Porter 5 force model implications The application of Porter five (5) forces model in real-world context allows organisations to .make wise strategic decisions. Impact and importance of each of the five forces is context dependent. By using Five Force analysis, Zara can determine the industry attractiveness, make effective entry/exit decisions and assess the influence of these forces on their own business and competitors. Moreover, the dynamic analysis of this model can reveal important information. For example, Zara can combine the Porter 5 force model with PESTEL framework to determine the industry’s potential future attractiveness. In some cases, companies do not have the required information to analyse five forces. In such a scenario, the analysis can be conducted with the help of assumptions. Mostly, consultants consider this model as a starting point, and other frameworks (like PESTEL and Value Chain) are used in conjunction for a better understanding of the external environment. Argyres, N. and McGahan, A.M., 2002. An interview with Michael Porter. Academy of Management Perspectives, 16(2), pp.43-52. Bartusková, T. and Kresta, A., 2015. Application of AHP method in external strategic analysis of the selected organization. Procedia Economics and Finance, 30, pp.146-154. Bose, R., 2008. Competitive intelligence process and tools for intelligence analysis. Industrial management & data systems. E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

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Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model. Strategic change, 15(5), pp.213-229. Manteghi, N. and Zohrabi, A., 2011. A proposed comprehensive framework for formulating strategy: a Hybrid of balanced scorecard, SWOT analysis, porter‘s generic strategies and Fuzzy quality function deployment. Procedia-Social and Behavioral Sciences, 15, pp.2068-2073. Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 78-93. Utami, R.M. and Lantu, D.C., 2014. Development competitiveness model for small-medium enterprises among the creative industry in Bandung. Procedia-Social and Behavioral Sciences, 115, pp.305-323. Vining, A.R., 2011. Public agency external analysis using a modified “five forces” framework. International Public Management Journal, 14(1), pp.63-105. Williams, B. and Figueiredo, J., 2014. Lessons from an innovation-leader and tools to learn them. Journal of Industrial Engineering and Management, 7(4), pp.932-960.

Zara is one of the world

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