Zara Case Study
Zara Case Study
Main Problems
Zara need to adapt their strategy to ensure future stability in meeting the demands of a larger customer base. The problems that they need to address are as follows;
Rapid Organic growth outside of Spain – Zara have shifted focus into expanding overseas, specifically the Asia region. According to Exhibit 8, 120 new Zara stores were opened outside of Spain in 2010. Despite the current centralized distribution model working well and at below capacity, continuous rapid expansion outside of Spain for Inditex brands (exhibit 8) would bring problems of; larger amalgamation of dispersed network pictures, greater demand and customisation for Zara offerings from consumers. This would further bring the effects of diseconomies of scale; increased transportation costs, top heavy Organisation, potentially exceeding working capacity, increased risk if central distribution centre fails.
No standardised market position – Zara’s expansion approach have led them to be positioned differently in each geographical market despite targeting the same consumer segment, Zara currently use company-centred knowledge to determine price and positioning strategies for different geographical segments. This has caused inconsistent consumer perception of their brand e.g. Americas and Spain. Being in a globalised marketplace, this poses a problem to the global perception and position of the Zara brand.
Competitive Environment – Zara is competing in a competitive market where the competition are seeing similar growth in stock prices and revenue (Exhibit 3, Exhibit 5). Competitors such as H&M have already achieved similar competencies to Zara in terms of variety and stock refresh, and have obtained more advanced competencies such as localization of distribution centers, reducing the competitive advantage that Zara has in terms of flexibility in their products array and enabling the threat of substitution. Other competitors such as Uniqlo have further gained competitive
Main Problems
Zara need to adapt their strategy to ensure future stability in meeting the demands of a larger customer base. The problems that they need to address are as follows;
Rapid Organic growth outside of Spain – Zara have shifted focus into expanding overseas, specifically the Asia region. According to Exhibit 8, 120 new Zara stores were opened outside of Spain in 2010. Despite the current centralized distribution model working well and at below capacity, continuous rapid expansion outside of Spain for Inditex brands (exhibit 8) would bring problems of; larger amalgamation of dispersed network pictures, greater demand and customisation for Zara offerings from consumers. This would further bring the effects of diseconomies of scale; increased transportation costs, top heavy Organisation, potentially exceeding working capacity, increased risk if central distribution centre fails.
No standardised market position – Zara’s expansion approach have led them to be positioned differently in each geographical market despite targeting the same consumer segment, Zara currently use company-centred knowledge to determine price and positioning strategies for different geographical segments. This has caused inconsistent consumer perception of their brand e.g. Americas and Spain. Being in a globalised marketplace, this poses a problem to the global perception and position of the Zara brand.
Competitive Environment – Zara is competing in a competitive market where the competition are seeing similar growth in stock prices and revenue (Exhibit 3, Exhibit 5). Competitors such as H&M have already achieved similar competencies to Zara in terms of variety and stock refresh, and have obtained more advanced competencies such as localization of distribution centers, reducing the competitive advantage that Zara has in terms of flexibility in their products array and enabling the threat of substitution. Other competitors such as Uniqlo have further gained competitive