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Key Elements of Zara Company’s Business Model Essay

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Updated: Aug 30th, 2021

Zara is a Spanish-based retailer of clothing/accessories (part of the Inditex group), which during recent years was able to gain a global fame, due to its truly innovative retailing strategy. Unlike what it is the case with other clothing-retailers that operate in the same segment of the market, the actual time between the point when a particular Zara-branded product gets to be conceived on a sketch pad and the point when it becomes available for purchasing at the Company’s stores, accounts for only two weeks.

This allows Zara to promptly react to the demand-fluctuations in the global market of fashion (as of 2014, there were 1895 of the Company’s stores operating across the world), which in turn substantially increases the rate of Zara’s competitiveness, and consequently makes it possible for the Company to pursue the policy of aggressive expansion on a global scale.

The main reasons as to why Zara was able to get ahead of the competition, in this respect, are as follows:

  1. The designing/manufacturing processes within the Company are vertically integrated.
  2. Zara refrains from adopting the policy of outsourcing, as it is the case with most of the fashion-industry companies: “Zara produces half of its merchandise in factories in Spain and Portugal, keeping the manufacturing of the most fashionable items in-house” (Capell 066).
  3. Zara experiments with the innovative ways of marketing, such as adopting the ‘clicks-and-bricks’ operational mode.

Hence, the essence of Zara’s business strategy – creating the artificial scarcity of fashionable and yet affordable clothes, the design of which is being updated/changed on a biweekly basis – something that encourages consumers to pay more visits to the Company’s stores.

The Eight Key Elements of Zara’s business model are:

  1. Short lead time – by being able to come up with the new lines of clothing every two weeks, the Company can ensure that its products are fully consistent with the most recent fashion-trends.
  2. Reduced risks – the earlier mentioned element presupposes that there are spatial limitations to just about every line of Zara’s clothing, which in turn reduces the negative impact of the situations when some of the Company’s products are being disfavored by consumers, on the extent of Zara’s overall competitiveness.
  3. The placement of emphasis on producing styles, rather than on producing the actual clothes – this puts Zara in the position of defining the ways of the market – the strategy that is being thoroughly consistent with the concept of post-industrial marketing.
  4. The vertical control of production – the Company’s manufacturing facilities are located in Europe, which enables the speedy adjustment of the production-processes.
  5. Innovativeness – instead of investing in the conventional advertisement of its products, Zara invests in finding more and more ways for these products to be accessed by as many potential buyers, as possible.
  6. Reactivity – Zara’s business strategy is concerned with reacting to the market-demands, as they come into being, rather than with anticipating what these demands may be ahead of time.
  7. Affordability – along with being fashionable, Zara’s clothes feature affordable prices.
  8. Interactivity – Zara makes a deliberate point in paying close attention to what account for the fashion-related anxieties in consumers – hence, the Company’s close affiliation with social media, such as Facebook and Twitter.

While being perfectly aware of Zara’s recent successes in becoming one of the major players in the world’s fashion-industry, many manufacturers of smartphones/mobile software were quick enough to strike partnership with the Company.

To exemplify the validity of this suggestion, we can refer to the fact that ever since 2012, Samsung smartphones are being sold with the preinstalled Zara mobile application: “Samsung Electronics announced the launch of the Zara fashion App, which will see the global fashion chain’s latest collections brought to Android smartphones for the first time… the App will give fashion-lovers the ability to flick through the new season must-haves, purchase immediately” (“Samsung Announces Zara” par. 1).

The same can be said about the Apple Corporation – the company that recognized Zara’s business potential as early, as in 2010: “At Apple’s iTunes store, Zara is the only one of the big three with an app showing its latest designs. The app, which will also sell garments come September, has been downloaded more than 3.5 million times for the iPhone and iPod Touch since it was introduced at the beginning of the year” (Bjork par. 17).

It is understood, of course, that this did contribute towards helping Zara to increase its sales rather substantially. Because of having Zara mobile applications installed on their smartphones, people can purchase the Company’s products online, without having to use computers for this purpose.

Essentially the same can be said about the effects of the Company’s well-established presence in social media – it allows Zara to advertise its products, without being required to spend large amounts of money for doing it in the conventional manner (Matherly and Richards 85). Moreover, this particular approach to marketing, on the part of Zara, allows the Company to reach out specifically those consumers, who due to the specifics of their lifestyle would be naturally inclined to consider buying Zara-clothes.

The Company’s main strengths, weaknesses, opportunities and threats (SWOTs) can be outlined as follows:

Strengths

  • Zara is the brand name that is well known throughout the world, which makes it much easier for the Company to market its products.
  • Zara is a vertically integrated company – something that allows it to promptly react to the continually fluctuating dynamics in the market, on one hand, and to keep the low cost of operations, on the other.

Weaknesses

  • The Company’s current approach to marketing (no conventional advertisement-campaigns) is rather experimental and may not continue being effective in the future.
  • Most of the consumers, targeted by Zara, are price-sensitive. What it meansis that these people’s loyalty to the brand in question is weak.

Opportunities

  • The realities of today’s living presuppose that, as time goes on, the Internet-based methodology of shopping will continue becoming increasingly popular with more and more people, which in turn should provide Zara with a competitive advantage
  • The currently deployed approach to targeting consumers, on the part of Zara, makes possible the substantial expansion of the Company’s niche in the market.

Threats

  • Fashion-industry has traditionally been associated with the heightened rate of ‘new entrants’ trying to establish themselves in the market, which means that Zara is in no position to afford coming up with wrong marketing-decisions.
  • There are a number of indications that the current economic recession is only beginning to gain a momentum – something will have a strongly negative effect on the Company’s continual ability to proceed with the policy of global expansion.

In light of what has been said earlier, the rise of Zara to its current prominence, as one of the world’s most successful fashion-retailers, appears to have been objectively predetermined. That is, it came about as a result of the Company’s top-managers having applied an extensive effort in researching what should be considered the most effective strategy for producing and marketing clothing in the 21st century (Mo 220).

After all, there can be only a few doubts that the Company’s manufacturing/marketing ways are indeed nothing short of being deemed revolutionary. This, of course, provides Zara with the sharpened competitive edge – especially given the Company’s domain of specialization, as such, in which the very notion of ‘innovation’ is considered synonymous with the notion of ‘value’.

At the same time, however, there are a number of reasons to believe that it is much too early for Zara’s owners/managers to assume that the currently deployed business model, on the Company’s part, will continue to remain just as effective into the future, as it is the case nowadays.

The main rationale behind this suggestion is that, as time goes on, the world’s economy is going to grow ever more volatile (Warner and Zheng 95). In times like these, it is very unlikely for people to continue paying close attention to the matters of fashion – especially if they happened to be price-sensitive, such as the majority of Zara’s loyal customers.

It appears that the main key to ensuring that Zara remains fully competitive through the coming years, would be the Company’s persistence with making its marketing activities ever more technologically advanced, on one hand, and Zara’s willingness to switch to the conventional methods of promoting clothing (if the circumstances call for it), on the other.

Works Cited

Bjork, Christopher. “Zippy Zara Wakes Up to the Web; the Big Fast-Fashion Retailer Next Week Will Start Selling Online, Years Behind its Rivals.” Wall Street Journal (Online). Aug 25, 2010. ProQuest. Web.

Capell, Kerry. “Zara Thrives By Breaking All The Rules.” Businessweek 4104 (2008): 066. Print.

Matherly, Laura, and Claire Richards. “ZARA: Chic and Fast Fashion.” Journal of Strategic Management Education 9.2 (2013): 81-98. Print.

Mo, Ziying. “Internationalization Process of Fast Fashion Retailers: Evidence of H&M and Zara.” International Journal of Business and Management 10.3 (2015): 217-36. Print.

Samsung Announces Zara Mobile Fashion App 2012. Web.

Warner, Mildred, and Lingwen Zheng. “Business Incentive Adoption in the Recession.” Economic Development Quarterly 27.2 (2013): 90-101. Print.

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