Unemployment and Zara

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Value Creation in the Global Apparel Industry

Case Analysis #3
Deborah Bennett
Julie Bryan
Wynette Gayle
Vivian Pankey
Neisha Vitello

Executive Summary

Zara is the flagship fashion retail company under the parent corporation Inditex. First opened in Spain, Zara currently has a network of 1,292 stores spread across 72 countries. The infrastructure Zara has built is a core competency. Their innovations to bring new fashion designs to market faster than competitors differentiates Zara from their rivals. Managers believe the allure of Zara is the freshness of its offerings, the creation of a sense of exclusiveness, an attractive in-store ambience, and positive word of mouth (Daniels, Radenbaugh, Sullivan, 2011).

The strategic innovations in design, production, logistics, distribution, and retailing activities have made Zara a global leader that is now moving into the United States. This paper will examine five of the external influences that will shape the response and ultimately the success Zara will have adapting to the physical, social and competitive factors in the United States clothing retail industry. The external influences examined will be; competitive dynamics, economic conditions, technology standards and trends, cultural orientation, and customer expectations.

Zara continues expansion in the Untied States, currently with 49 stores coast to coast. Their differentiation strategy has been successful (Maiellaro, 2010). Zara’s strategy and business design leave rivals with less time to figure out how to better configure and coordinate operations. As U.S. competitors attempt to follow Zara’s lead, Zara continues to set the pace and increase the distance between them and the competition. Issue Identification

Zara came to the United States, first in New York City in 1989. With more than ten years in the states and 49 locations Zara is making their mark in the fashion industry. With the external influences impacting Zara’s management vision, strategy, value creation and firm performance, how does Zara continue to create value with their differentiation strategy in the U.S. fashion market? External Influence #1: Competitive Dynamics

Zara has taken the industry standard of a six-month time frame to create and produce new clothing lines to only two weeks (Daniels, et al 2011). Breaking the industry standard in getting fashion to the public is the competitive advantage Zara is best known for. Zara’s other strength’s include logistics, marketing, store operations and firm infrastructure. Zara spends less than 1 percent of its revenue on advertising (Daniels, et al 2011). Zara is dependent on word of mouth advertising from its shoppers who tend to be loyal to the brand. Marketing is another key advantage Zara has over the competition, which can spend up to 3 to 4 percent of their revenue on advertising.

External Influence #2: Economic Conditions
Current Economic Conditions in the U.S. appear to show that it is in a “disappointingly sluggish” (June 2010) recovery. While the U.S. does not appear to be in the downward trend that everyone was concerned with in, growth will remain stagnant or slow. Consumer confidence appears to be at the highest level in two years (Dennis, 2010), but the unemployment rate does not fall below 9 percent (Isidore, 2010) for the next year, and it is unknown if we will ever see the unemployment rate low of 4.6 percent in 2007 (Isidore, 2010). The good news is that inflation does not appear to be an issue, as it remains steady for the next three years (Isidore, 2010). The economic conditions in the United States for Zara’s do not appear to be at the best point for rapid growth, although with Zara’s unique way of doing business growth is possible. The economic slowdown, high unemployment, and other economic factors pointing in the wrong direction, Zara’s growth in the U.S. Market will need to be carefully monitored. External Influence #3:...
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