Analysis of Zara Company

Question: Discuss about theAnalysis of Zara Company. Answer: Introduction Zara is a fashion retailer that has gained international acclamation as a leader in the fashion industry. The company is credited with producing new products on a regular basis. The production rate is much faster than that of its competitors. The high rate of production is attributed strong supply chain that is well established (?epinskis and Masteika, 2015). Having said this, the company faces some challenges including costs and customer demands. It is imperative that a detailed analysis should be carried out so that these challenges can be concretely identified and addressed. Zara has managed to create a strong image and a high level of differentiation in the fashion industry. The company can manufacture products that its competitors cannot imitate easily. To achieve this fete, the company is well aware of the external environment (Azevedo and Sanchez, 2015). This paper is seeking to give an analysis of Zara company by addressing the situational analysis, business strategy, and the marketing matrix. External Environment Analysis PESTEL Analysis Politically, the company has found it safe to open several subsidiaries in other countries. This conducive political environment has opened up the market for the textile industry (Filieri, 2015). Additionally, there are no instances of quotas on importation of textile products to other countries. The move to deregulate the textile industry has created room for competitive pricing, ability to enjoy large economies of scale (Dua, Huangb, and Liu, 2015). In light of large scale production. Further, political upheaval affects the operation of the company more so in its subsidiaries. Economically, the textile industry faces several adjustments. The company reels from economic factors such as recession and economic sanctions. Hard economic times, often affect customer demand. This situation is prompted by limited disposable income that consumers have (Gamboa and Gonalves, 2014). In this case, consumers reduce their expenditures on clothing which may be deemed to be just fashion items. To overcome this challenges, the company produces cheap merchandise to attract and retain more customers. Socially, there is growing demand in the fashion industry. The young generation is looking trendy fashion that suits their tastes. The demographic patterns also offer a quick and ready market for the fashion industry (Gallien et al., 2014). It suffices to mention that socially; the company is accepted by many consumers around the world. This positive image has enabled the company to maintain a competitive edge in the market. To be in synchrony with this trend, Zara continues to produce high-quality products that are cheap. Technologically, there are several changes. It is important to state that technological advancements have impacted on the fashion industry. New technology has been essential in reducing the cost of production. Additionally, new technology has led to an efficient production process. High-quality products are synonymous with improved technology (Hassan, 2014). The use of computers in production has improved efficacy and proper management. Zara has been able to use modern technologies to remain competitive in the global market. The company has embraced new technology in earnest. Environmentally, some factors impact on the productivity of companies in the textile industry. Raw materials are at the core of the textile industry. These raw materials include cotton, wood pulp, silkworms among others. Issues such as global warming and climate change affect production process, and as such, there is need to develop better strategies for improved productivity. The company has been able to produce environmentally favorable products. Zara has been involved in environmental protection so as to ensure that there are sustainable growth and development (Garca-lvarez, 2015). Because the level of completion is high in the fashion industry, there is need to focus on legal protection. This legal protection should address the intellection property right (Garca, 2014). Businesses are becoming more concerned about their ideas and how to guard such ideas from imitation. Zara has been able to prevent imitation of its products by implementing a reduction of the timeframe in the supply chain. The company has therefore greatly benefited from first-mover advantage. Porters Five Force Analysis This approach is effective in the identification of external factors that impact on operations of Zara. In this approach, there are forces that act together to influence business environment. The fashion industry is very competitive and thus makes this approach to be relevant in its analysis. Through this approach, it is easier to comprehend how Zara has carved a niche in the fashion industry. In this industry, there are no threat of entry and as such individuals who would wish to venture into this industry can do so with relative ease. However, companies are required to invest enormous resources so that they can enjoy large economies of scale (Hassan, 2014). This will help in addressing the need for cheaper products by consumers. Additionally, small scale entrants cannot compete with an established company such as Zara. Additionally, the issue of substitution is very high in this industry because consumers have several choices to make as far as producers are concerned. The taste and preferences of consumers change rapidly within the fashion industry, and therefore, these needs must be addressed (Hassan, 2014). It is important to mention that power of consumers affects the industry. Consumers can access numerous retailers for different products. The decision to buy certain items lie with the consumers (Kim, and Lee, 2014). Today, consumers can access different retailers through the internet and make buying decisions. It suffices to point out that the continued price wars in this industry have given consumers a great deal of influence. Zara has been able to meet the changing consumer demands through innovative and cheap products. Further, the power of suppliers that affects the fashion industry and it is considerably low. Some companies have made the decision outsource their production operations to developing nations to cut costs (Jonsson, and Tolstoy, 2013). Zara, for instance, has the leverage to change suppliers hence lowering the cost of raw materials. However, companies must be wary of any unethical behaviors of the third party players in the fashion industry. There is the competitive rivalry in the fashion industry, and it is increasing rapidly. As such, Zara should establish itself as a dominant player in the industry. The company should capitalize on its large customer base and cheap products. Analysis of the Internal Environment SWOT Analysis Zara has numerous strengths that have enabled it to carve a unique niche in the fashion industry. First, the company has a robust and reliable supply chain that has enabled to supply new products to various markets. Secondly, the company has several stores across the globe hence it has created strong product image. Third, the company can supply new products to various market hence giving its customers varieties to choose. Albeit the strengths, the company has some weaknesses. One of the weaknesses is related to the internal operations. The demand for large volume production of production has impeded regular innovations and development of new products. The company has established itself as a high-end street fashion, and as such, production of luxurious and expensive products will only drive away customers (Tokatli, 2014). The company cannot produce the unique products for the simple reason that it has kept its prices low. There are some opportunities that the company enjoys. There is growing customer base both locally and internationally (Kim, and Lee, 2014). The growing customer base can be maintained through innovation, production of cheap and unique products among others. Additionally, many customers tend to visit Zara stores to find out new fashion designs. Companies within the fashion industry face stiff competition. There are other large companies in the industry that are in opposition to equally reduce their prices. This means that the continued price wars will hurt business prospects of Zara. Some of these companies with the ability to lower their prices considerably are HM and Primark (Yip, and Huang, 2016). Analysis of Strategy The corporate strategy focuses on the general approach that Zara adopts in carrying out its operations. This strategy is anchored on increased efficiency which has enabled it to among the leading fashion companies in the world. The strategy has been designed to allow for an efficient supply to reach as many consumers as possible. Additionally, the company always strives to introduce new products in the markets more often to keep up with consumer demands. The company ought to maintain a cost base element that will ensure even greater support from its customers. Further, the company should always produce cheaper products so that it can attract and retain more customers (Yip, and Huang, 2016). At the business level, the company should focus on some product lines so as to maintain the control on high street stores. Additionally, there is need to make the supply more efficient for improved business. The company may consider forming alliances with other companies to improve its business an d the supply chain. This will allow Zara to be a business that focuses more on technology for better efficiencies in production (Turker, and Altuntas, 2014). Furthermore, the business strategy should lay great emphasis on building stronger teams. The company is putting a strong emphasis on communication to reach wider markets. There is the advertisement that is done on the traditional media channels and the internet. Implementation and Evaluation of Strategies When implementing business strategies, evaluation is paramount to ascertain the level of efficacy (Mo, 2015). For instance, the supply chain should be monitored to ensure that it is working efficiently. The production of new products is usually consumer driven owing the ever changing tastes and preferences. Therefore, the implementation process should put into consideration the demands and aspirations of customers. Lastly, the company in implementing its strategies has always focused on ethical considerations. The current business environment requires certain ethical issues to be looked at when doing business. Marketing Strategy The marketing strategy entails the use print media and direct selling. Additionally, the company is using a website to reach a wider market. Through the companys website, customers can be updated on the new designs that are available in the stores. Further, the company has kept a close connection with the corporate headquarters (Cortez et al., 2014). Lastly, the company is producing high-quality products that are appealing to different customers and also building a strong relationship with their clients. Target Markets The potential markets for Zara are customers from the Middle East and Asian countries. Additionally, there are customers across Europe and Africa. Market research has shown that about 50% of the worlds population are interested in new fashions. Zara is targeting both young and old customers. The company is targeting other markets in the whole of Africa through a concerted effort in the production of quality products (Cortez et al., 2014). The Inditex group of wholesalers serves as a safety channel for the companys import business. The company has also maintained a good relationship with the Spanish wholesalers has created an alternative market given the established channels for distribution. Positioning The company has positioned itself as a high-quality fashion distributor in the market. To this end, the company only sells high-quality designs. Competition is high and Zara is offering the most competitive prices to attract more customers. Zara has formed relationships with other retailers such as Inditex so as to sustain its competitive edge (Kim, and Lee, 2014). Additionally, the company has positioned itself as a leader in innovations and producer of high-quality products. Marketing Mix Marketing mix consists of a raft of approaches to expand the current market segment. These approaches include distribution, pricing, promotion and advertising, and quality customer service. The product is distributed effectively and efficiently to overseas markets. The company is using different modes of communication to reach many customers in the market. In this endeavor, promotions and advertising are used. In conducting its promotions, the company offers products at a discounted price, use of credit cards, among others so as to retain loyal customers and attract new ones (Tokatli, 2014). In conclusion, Zara is a company that has established itself a premier producer of cheap fashion products. The company has carved a niche in the fashion industry because of its efficiency in production. Reference List Azevedo, T. and Sanchez, R., 2015. The Production Method Adopted by Zara and Its Impacts on Consumer Decision Making. 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