Threats - ZARA
Some threats that affect ZARA include international expansion, geographic scope, and intense competition. Zara recognizes that the company needs to have a competitive advantage in order to survive, so they are constructing a second distribution centre in Zaragoza. Also the company is still looking to expand internationally. Expanding in Spain is difficult for the company because of past experience in Sweden. Zara is considering expansion in North America, but is concerned that it is already suffering from retail saturation, less fashion-forward sense, the demand for plus sizes, lots of competition, and not enough demand for the clothing. Zara's vertically integrated model is a threat to Zara in long run. The model will not work once Zara scales its operation. Currently, Zara's designing, production, distribution and retails stores are tightly coupled together and operate very closely. Expanding operations in different regions such as American or Asian requires addressing different fashion trends at a time. Also, given different sizes and trends in different regions, it would not be easy to pull a new fashion cloth or apparel from one region and put it in other region. Plus, scaling its operation may require joint-ventures and acquiring some smaller chains also. In a 50:50 joint venture, it is very difficult for Zara to impose its business model to the other partner. In this case, we have already seen Zara's joint ventures dissolving on a couple of occasions. While Zara may find it difficult to manage the vertically integrated model for its large scales of operation, local retailers may follow Zara's formula to success and can emerge as big threat to its success. It is not easy to beat the local retailers in their home market. For example, the Local apparel market in Italy is still owned 61% by the independent stores, 45% in Spain (Note that this is Zara's local market too) and 15-30% in other three major European markets. Specially, in a country...
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