Zara Case Analysis
Environmental Analysis: Zara’s primary threat is rivalry in the apparel retailing market. Retail spending on clothing and apparel in 2000 was approximately 900 billion worldwide. This market has been described as a buyer driven market. The GAP (U.S.), H&M (Sweden), and Benetton (Italy) all compete internationally with Inditex, owner of Zara and five other apparel retailing chains. Zara contrasts the buyer driven market model as usually exists in the apparel retailing market by acting as both retailer and manufacturer, thus eliminating a large number of middle men. This is important as Zara’s competitors still outsource most if not all of their manufacturing. Substitutes include other brands of specialty apparel. Substitutes level of threat depends on the amount spent per capita on clothing items, as this affects how much emphasis may be placed on either price or brand loyalty. Since Zara produces and sells most of its own product, and their advantages of doing so, both retail chain suppliers and end consumer switching costs should be looked at. These items counterbalance Zara’s competitors being able to freely switch from supplier to supplier, with the low switching cost of their end consumers. Zara’s clothing line is differentiated and buyers are in large supply with a low threat of backwards integration. On the manufacturing side, threat from suppliers of inputs is reasonably low. This is a mature industry that still shows signs of industry growth. Repeat customers are important to Zara as they provide a major portion of marketing for the Zara brand in the way of word of mouth advertising. Operational and manufacturing advantages are used by Zara allowing them to produce fashion items that reflect the consumer’s wants quicker than competitors. Strengths: Short cycle times reduced working capital intensity and facilitated continuous manufacturing for Zara. Along with this Zara developed their IT system for logistics, retail,...
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