Individual Assignment , Meric Oztekin
Course Exist Case: Zara – Business Model, Competition, Competitive Advantages, and Strategies Read the case Zara – Fast Fashion, and answer the following question. Submit your answer within 2 pages. 1.
What is Zara’s distinctive business model? Follow the descriptive points given in the lecture note for session1 and write it like a good story; 2.
What are Zara’s key strong resources and capabilities? What competitive advantage have they created over rivals? 3.
Compare Zara’s financial performances with major competitors; 4.
Is Zara’s competitive advantage sustainable in view of globalization?
Zara has 5 brands:
1. Zara Woman, which is a brand a little more formal. For women at their work or for women that go out but who give importance to their outlook to be more serious. 2. Zara Basic (woman), which is a brand that consists of all basics. 3. Zara TRF, for younger women, which includes trendy clothes for young girls who love to be up to fashion. 4. Zara Men, with all the clothes for men. Clothes are both casual and formal. 5. Zara Kids.
Zara's global strategy is to offer cutting edge fashion at affordable prices. They always have the latest trends, and you can find the trendiest pieces mixed with the basics. COMPANY IMAGE
Zara's business model is based on innovation and flexibility. They are able to design the clothes and distribute them to the market in just fifteen days. They possess always new products but in limited supply. The customer feels there is an 'exclusivity' due to the fact that few items are on display although there are spare spaces in the stores. *However, empty racks at Zara don't drive customers to other stores. Being out of stock in one item helps to sell another. By reducing the manufactured quantity of each style, Zara creates artificial scarcity and lowers the risk of having stock it cannot sell. Scarcity in fashion increases desirability, which means shoppers need to buy quickly as the item may not be available next week. Lower quantities also mean there are not much to be disposed when the season ends; Zara only discounts 18% of its stock in sales, which is half the industry average. Designers create approximately 40000 designs for Zara and 10000 of the among are being produced annually. These designs resemble latest couture creations or classic models. They are giving the customer the same products made with less expensive fabrics and lower prices. Their production is massive, of each design they normally make 5-6 colors and 5-7 sizes. Zara also gives importance to the environment, animals and workers. Two years ago, they demanded their Bangladesh Jean supplier to close the factory and build a new one with better conditions for their workers after they observed about the unhealthy and poor conditions. Moreover, Zara stores are known with their eco-friendly features . They are against fur and they use ecological fabrics and organic cotton. ANALYSING ZARA’S BUSINESS MODEL
Who is the customer?
Zara’s target market is young, price-conscious, and highly sensitive to the latest fashion trends. They have an advantage over traditional retailers because they do not define their target by segmenting ages and lifestyles giving them a much broader market. They segment their product line by women’s (60%), men’s (25%) and the fast growing children’s (15%) department. Zara’s customers are early majority. They love fashion, they are aware of fashion but they are conservative about dressing. Zara has been characterized for having the latest trends on their collections, many times criticized for doing garments similar to other European designers. What is the value proposition?
Fashionable, affordable clothes, Zara’s strategy is to offer cutting edge fashion at affordable prices by following fashion and identifying which styles are “hot”, and quickly getting the...
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