Zara is a private retail company of clothing and fashion. It was founded by a couple Amancio Ortega and Rosalia Mera in 1974. Its headquater is at Arteixo, Spain. At present, it has around 1500 stores in the globe. According to research, it had $18.9 billion revenue in 2018. It produces a new designs every month with best quality regarding the peoples changing taste for designs.
Objectives and purposes
? To ensure all its delivery in time to customers with affordable price.
? To fulfill the demands of people by providing them varieties of unique new designs weekly.
? To enlarge its business area by opening other branches in new markets.
? To open its outlets in all developed cities of the entire globe.
International Business Environment
After starting its business in Spain, Zara started exploring new diomestic market from 1980s. 70% of its total turnover in Europe was the largest market by far. It has 1500 stores in 70 countries of the world with production of 10000 designs annually. Unlike other manufacturing companies, it produces a new design each month. The main competetor of Zara is Hennes & Mauritz (H&M) of Sweden but its production and distribution process is very long. It takes months rather than weeks to send products in market. But on the other hand Zara takes least time to manufacture and distribute its products without compromising the quality. This has made Zara the top brand not only in Europe but in the whole globe.
BRANDS OF INDITEX
Inditex is one of the worlds largest fashion retailers company in the world. It has different brands inside it such as : Zara, Pull&Bear, Bershka, Oysho, Zara Home and so.on. Among all of these brands, Zara is the main brand of Inditex. Zara is considered as the flagship of Inditex.
Among the huge number of retail clothing companies in the world, very few are noticeable and Zara is one of those which was formed in 1974. It was established in Spain as a small store by Mr. Amancio Ortega as a flagship of Inditex – one of the worlds largest fashion retailers. Previously it was known as Zorba which became Zara later on. It keeps daily record of peoples changing demands for fashion which makes it as peoples first choice. The main reason behind the success of Zara is actually its speed (it takes four week to create a new design where as only two weeks to modify the existing designs). Also its delivery speed is so rapid that customers can get the product physically with them within just ten days of its production. Louis Vuitton fashion director, Daniel Piette describes Zara as possibly the most innovative and devastating retailer in the world and CNN has decsribed the brand as a Spanishs success story(CNN 2001).
Products and services
? Different types of clothes for kids, men and women.
? Different types of bags, rings, shoes and scandals
? Outerwear, jackets, blazers, and so.on.
Size and scope
It is the private company with around 1500 stores worldwide. It had the total revenue of $18.9 billion in 2018. From 1980s, Zara was not limited in Europe only. At present it has established in over 70 countries of the globe and is still enlarging. It is the flagship of Inditex. Among 7000 stores of Inditex, Zara alone owns 1500 stores worldwide. In the present context of business market, Zara has well established its brand name among people. It provides varieties of products to people every week with the resonable prices. Now it has became one of the first choice of people.
? To be the first choice of each and every people in the globe.
? To become the best fashion retailer in the whole world.
? The main vision statement of Zara is Zara is committed to satisfying the desires of our customers. As a result, we pledge to continuously innovate our business to improve your experience. We promise to provide new designs made from quality materials that are affordable.
? To make people experience new unique style clothes weekly.
? To provide best quality product to its customers.
Zara have a lean organizational structure in it that gives priority to best performance. This type of structure helps to minimize the number of managerial hierarchy and helps in decentralizing the decision making system. In lean organizational structure, there are only 3 management levels : Top level management focuses on plans, policies and strategies of company, Middle level management deals with problem solving methods where as Line management comes up with the ideas to improve the quality of product.
Stakeholders are those who affect or are affected by the organizational strategies, plans, policies and actions.
The table below shows about some of the key stakeholders of Zara :
********** Shareholders Suppliers Clients Employees Society
What Zara need from them ? Capital, Trust, Compromise Finished quality goods, low prices, timely dilever, responsibility, effective communication Purchases, Loyalty
Efficiency, motivation, loyalty, Stability Acceptance, good image, be welcomed
Importance for Zara Investment source Source of goods sold Source of income Responsible for day-a-day productivity Composes their field of action and potential clients
What interest do they have to Zara ? Obtain good Return On Equity (ROE). Increase their market, gain profits Obtain fashionable and economical goods Stability, fair salary,social benefits, career possibilities Provision of jobs, competitiveness in the fashion market
PESTLE and SWOT analysis of ZARA
The report is made to analyse the market potentiality of Zara externally as well as internally. It includes the micro and macro environmental factors influencing Zara. PESTLE and SWOT analysis of Zara is done to be clear about the external and internal factors impacting upon Zara.
PESTLE analysis of ZARA
PESTLE analysis is done to analyse external factors affecting the company. It includes :
1. Political factor : It refers to the rules, regulations and policies made by the government. It also includes the legal aspects along with economic aspects.
2. Economic factor : It includes the taxation rates, inflation rates, exchange rates and interest rates in a particular country.
3. Social factor : It mainly focus on the society people and their changing tastes in the context of fashion. It also highlights about the alternation of trends among the people and its effect on the company as well as its consumers.
4. Technological factor : It deals with the technological advancement in company and its effect to the customers.
5. Legal factor : It refers to all those legal processes that the company has to go through.
6. Environmental factor : It purely focuses to the surrounding situations like green house effect, ozone layer depletiation, global warming, various natural claamities and so.on.
1. Political Factors :
? Governmental Intervention : Zara always wants to explore new territories to expand its buseness. It must be well known about the governmental plans and policies of the country. As the palns and policies of government can easily change, it will have adverse effect on the business.
? Expanding Business in Europe : The expansion of business in Europe Union is quite safe and the economic circumtances can be easily predicted. The company can easily grow its market as economy is rearly changed in Europe. So the plan of Zara to expand itself in Europe is beneficial for the company.
2. Economic Factors :
? Fluctuating Economy : The fluctuating exchange rates of currency also negatively affects the Zara. The company, Zara mostly deals in US dollars and other safer currency. So the company should always evaluate the exchange rates and economic condition of that country before entering to the new market.
? Price differences in different countries : Because of the different trade traffics and taxes, the price of Zara product fluctuates from country to country. This also affect to the income and revenue of the company that it generates by selling its products. It dont let company to genrate constant revenue which negatively affects to the other departments in company.
3. Social Factors :
? Sizes of clothes : Zara is a global company so, it have different customers who buys the Zara products. These customers are from different geographical position, race, culture and have different body sizes. For this Zara provides varieties of choices for its product. For example; customers can also find clothes for very skinny person along with for the heavyweighter person. This makes Zara able to make large number of customers and large sales quantity which is benificial for company.
? Discounts and Offer : Highest sales can be triggred during some offers or when company announce discounts for its products. Zara provides various offers and discounts during some festivals or different occasions. It also promotes its products through different coupon sites where customers can get codes for discounts.This positively affects the company.
4. Technological Factors :
? Zara app : Zara has launched its app for the customers who want to buy its products online. It also include the return or exchange offers for the products. This has faciliated many customers and has greatly helped in sales of Zara products.
? Maps to locate store : Zara has introduced a store locator map in its website. This helps customers to easily find out Zara store around them and get to the nearest store as soon as possible. It is cost effective, very fast and easy to use by all customers.
? Zara Ipad app : This technology makes customers to involve their friends into the shopping. Different options such as video conferencing, messaging and voice chat in the app is useful for customers to get suggestion from friends while shopping. On the other hand it helps in advertisement of Zaras products.
5. Legal Factors :
? Changes in litigation :Government of Mexico, Russia and India have their own type of policies for corporate and the company has to make its policies according to government. So there is always pressure on Zara products to follow the rules and regulations provided by government. This may affect the company and its policies which can be considered as negative impact for company.
? Copyright issues : Zara studies about the trending fashion designs in market and produces clothes accordingly. It analyse the choices of people for fashion in market and produces similar type of clothes which make it to face different copyright issues.For instance, Fendi (the Roman fashion brand) claimed that the photographs that were taken in Fendis show in 2013 fashion week was unlawfully used by Zara which negatively affected the company.
6. Environmental Factors :
? Earthquake in Japan : Numerous disasters struck Japan in 2011 among which the tsunami was the greatest one. It affected the entire supply chain of the company in Japan. The tsunami greatly damaged the infrastructure, electric lines and so.on. One of the biggest Zara store of Japan also became the victim of this disaster. It negatively affected to the companys outlet in Japan and also caused heavy loss of revenue.
? Rapid fashion change in Asia : Mostly winter rules the weather in Europe but Asia is totally different. Asia experiences five different seasons so asian people have high demand of seasonable clothes. This cause rapid change in fashion of Asian people but Zara produces clothes for normal weather rather than seasonal basis so it can be considered as weakpoint for Zara.
SWOT analysis of ZARA
It refers to the Strength, Weakness, Opportunity and Threat.
1. Strength : It refers to that aspect of company that provide competitive advantage to the company over other company.
2. Weakness : It is the aspect of company thatg provide competitive advantage to its rival groups.
3. Opportunitites : It deals with the potential areas of the company where the company can do profitable progress in future.
4. Threats : It mainly focuses to those areas of company in which the company needs to be more consious about if it wants to be sustained in market and dominate the society.
? Strong Control Over Supply Chain : Zara have 90% of stores in different 88 countries which includes US, Europe,Middle East, Asia and so.on, and remaining is franchises or joint ventures. Strong Supply chain management provides it a unique advantage over its competitors which helps it to manage any breakdown in supply chain.
? Adroit Design Strategy: Zara is known as fashion imitator, it is because Zara does market study and produce the trending designs in market and provide those designs to people in minimum time at minimum cost. Rather than producing its own new designs, it produces those type of designs which are currently available in market by its rival groups.So, it takes very less time to supply those products to market.
? Efficient Production Management : Zara response very fast to the demands of its customers and provide products to the customers accordingly. It produces about 10000 designs annually which is in large quantity than its rival groups. It produces an average of 2 designs per week so, it countinously changes its product catalog in every 3 to 4 weeks.
? Large Distribution Network : With around 1500 stores in the globe, Zara has assess in more than 80 countries. It is regarded as the flagship brand of the worlds top fashion retailer company, Inditex. As Zara have higher number of stores, it also have large network of distribution and have greater access to its customers.
? Affordable price : Zara have a large number of customers around the globe. It produces different types of clothes with suitable price tags on them. Products of Zara can be easily affordable to those consumers who are a bit economically backwarded too. It also provides different types of offers and discounts in various occasions which is also cost effective to consumers.
? Centralized Distribution System : Zara controls all of its supply chain management system by it own. This has made the distribution channel self-contained and because of this, failure in any one part of the network can cause heavy effect on other parts like; production department, sales, marketting, research and development, distribution department, and so.on. On the other hand, the distribution network of its rivals are decentralised and are not limited to headquater like Zara. This can make Zara prone to various types of problems in long run.
? Imitator, not creator : Zara usually analyse the market and trending designs in market at first. Then it starts producing products or designs which are terending in market. So, it dont produce new designs on it own instead, it provides the popular designs in market in very less time as it dont need more time to innovate new designs. So, this strategy of Zara has made it to face many copyright issues and cases by its rival groups which also affects to its brand name.
? No investment for advertisement : Zara dont like to separate budget for its advertisement. It has its brand name well known in the market and the company is assure about the sales and demands of its product in market. So in contrast to its rival groups like Benetton, H&M and GAP, Zara dont invests for advertisement.
? Scope of Global Expansion : Zara has already its presense in 4 contients around the globe, but it has a lot of opportunities to expand its business. In the context of Africa, it is limited to some of the countries like Morocco, South Africia, Tunisia, Egypt and Algeria so there are a lot of other places for Zara to explore in Africia. Similarly ther are many stores of Zara in China and Japan but have very few stores in countries like UAE, India, Singapore and Saudi Arabia dispite that there are more richer people living in these countries than in China and Japan. So, Zara has a lot of opportunities to expand its business.
? More attention to Distribution Networks : Zara has more number of stores in Europe than in rest of the continents. Although US has increasing number of customers, Zara only have very few number of stores there. So, Zara have opportunity to boarden its distribution channels in different states of United States.
? Fierce Competition : Being the global company, Zara not only have to competite with local brands in Europe such as Swedens H&M, Massimo Dutti and many more but also with the global brands like US based GAP. So, it is tough for Zara to competite with these brands and failure to compete with these brands will make Zara vanished from the market.
? No collaboration with International Designers : Zara has not let any international designers to be involved in the company. Dispite of rivals, like collaboration of H&M with designers like Karl Lagerfeld, Alexander Wang and Lanvin, Zara has no collaboration with others. This can welcome a problem for Zara because customers also like those type of products that have labels of well renowned designers.