At the 26th IAF World Apparel Convention (2010) in Hong Kong, one of the main themes was about the phenomenal” growth of “fast fashion. Indisputable, the Spanish clothing retailer Zara, owned by Inditex Group, is one of the pioneers in the fast fashion concept .Launched in 1975, with 1608 stores in 77 countries, Zara, designing, manufacturing and selling apparel, footwear and accessories for women, men and children, booked revenues up 29% (2008-2009), even during the recession. Zara’s unique strategy to use its distinctive capabilities, supported by information systems, abilities in design and supply chain management, ensures it the competitive advantage to be sustainable. The aim of this report is to analyze the strategic management of Zara, which led it to its success. “Strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.” We are going to examine the environment factors influencing strategic choices of Zara’s management; company’s strategic capabilities and more specified the unique resources and core competencies tend to the success of the company; and how these respond to stakeholder expectations and organizational purposes, examining the corporate governance structure, business ethics and social responsibility.
The aim of Macro-environment analysis is to examine the factors which influence the changing in demand, the way of manufacturing and distribute the goods, the prices and availability of resources and the method of competition in the industry. The tool which we are going to use for this purpose is PEST analysis. (Appendix 1)
Porter’s five forces framework:
The industry environment analysis provides a framework of factors which affect more directly the strategic competitiveness and growth of returns. In order to assess the attractiveness of apparel industry we are going to use Porter’s five forces framework. , , , ,
Industry and Competitors
Fashion industry is characterized with short product life cycle, high variety, high volatility, unpredictability and high level of impulsive buying, because of which this industry hide a risk of shortage or surplus. The fast fashion competitors in high streets are becoming fierce, trying to meet the constantly changing demand of customers. Zara, as the most renown representative of fast fashion strategy, is faced to compete on home and global industry level with fast fashion brands like: Mango, Topshop, New Look, Hennes & Mauritz and with non-fast fashion industry like Gap, United Colors of Benetton, Uniqlo, and Espri. In contrast to the traditional retailers, Zara do not target its customers by segmenting them on the bases of age, sex or race, as its target is for women, men, and youth, from infants to age 45. The success of its international strategy is led by Zara’s conviction that, despite the differences of cultures and generations, “national frontiers are no impediment to sharing a single fashion culture.” Zara, offering mid-market chic at down market prices target customers that have a specific respect for fashion, sensitive of latest trends and searching for affordable prices.
Resource and Capabilities
The resource-based view of strategy examines the organization’s capabilities which provide the competitive advantage and superior performance of the company. Michael Porter’ proposed a generic strategy frame work, which suggests that Zara, as company which offers fashionable goods at relatively low prices, using integrated cost leadership/ differentiation strategy. According to Bowman’s Strategic Clock the integrated cost leadership/ differentiation strategy is called Hybrid Strategy. We are going to examine how Zara’s capabilities fit to it
Apparel industry is characterized as labor-intensive...
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