Introduction
Zara is one of the companies owned by the Inditex Group, a large apparel retailer working worldwide. Zara is based in Arteixo (A Coruña) in Galicia, Spain, where the first Zara store was opened in 1975 (Wang, 2018). The company is associated with fast fashion and produces clothing, accessories, shoes, swimwear, and perfumes. It is believed that Zara has managed to launch around 10,000 new designs each year with only two weeks to develop a new product on average (Wang, 2018). Although this strategy helped to expand the company worldwide and make it a leader on the global market, it is important to continue developing new growth strategies as well as analyzing all opportunities and areas to work on.
SWOT Analysis and Intensive Strategies for Zara
SWOT Analysis
Being the flagship company of the Inditex Group, Zara understands customer’s needs and desires. The Inditex Group has a vertical integration business model, which is a primary strength (Aftab et al., 2018). The production and distribution are fulfilled by the group subsidiaries, which helps reduce time to market and gives control over the whole process (Aftab et al., 2018). The innovative analysis of the best-selling products is one of the main strengths of the company (Wang, 2018).
Thus, Zara is also able to adapt to the customer’s wishes extremely fast and change the company’s offer. Target prices are affordable and usually are 15% lower than Zara’s competitors’ offer (Aftab et al., 2018). Due to vertical integration, it is easier for Zara to control the production cost so that the target prices can be achieved. Merchandising strategy is also one of the main strengths of the company. The assortment in stores is frequently rotated, and the display stores are sparsely stocked (Aftab et al., 2018).
It helps to successfully resist the strategic consumer behavior when “customers delay purchasing of products until products are marked down and encourage consumers to buy the products at full price” (Aftab et al., 2018, p. 215). Another strength of the company is that Zara practices eco-friendly environmental strategies. Development of related areas of sustainability and awareness are also crucial factors of Zara’s progress (Anwar, 2017). For example, 100% of the energy consumed in Zara.com’s facilities comes from renewable sources (“Green Web”). Thus, all the above mentioned makes Zara one of the leading apparel retailers in the world.
Despite the substantial progress, there are still several areas to work on for Zara. The company owns 11 factories, most of them positioned in and around Zara’s headquarters in Arteixo, Northern Spain (Aftab et al., 2018). It means that the production there requires higher costs due to higher wage rates in Europe. It is also difficult for Zara to target markets in the developing countries as the prices are higher in comparison with the Chinese retailers (Anwar, 2017).
No advertising policy can also be a weakness during global expansion. According to Ivanov et al. (2019), their “marketing is minimized, as Zara sees all promotion activities as distracting for the customer” (p. 83). However, additional marketing efforts might be necessary for the company in the future.
The company is still aimed at global expansion, and new markets are new opportunities. Nowadays, Zara is already global with a presence in Africa, the Americas, Europe, the Middle East, part of Asia, and in Australia (Anwar, 2017). However, the company’s presence is limited in all those areas except Europe (Anwar, 2017). Developing new destination markets is a perfect opportunity to grow further as a global company.
However, Zara has to invest in marketing if the brand wants to strengthen its global presence. Another opportunity for Zara is the E-commerce sector, which is growing extremely fast. It is a known fact that more and more people prefer buying online. If Zara keeps pace with the online retail trends, it will be another opportunity to grow (Anwar, 2017). Thus, although Zara is already a popular global brand, it is possible to find more ways to develop.
However, it is important to keep in mind that there might be specific business problems in the future if the threats are not considered. Although e-commerce was mentioned as an opportunity for Zara, it can also be a threat. If this issue is not addressed correctly, online retailers might add to the existing number of competitors (Anwar, 2017). A “throw-away” concept used by Zara can also be a threat since the world is facing the problem of over-consumption. A throw-away concept implies that clothes are not worn more than ten times (Wang, 2018). Growing awareness about the over-consumption might contribute to lowering sales numbers. Another threat arises from Zara being a follower and not a trendsetter (Wang, 2018). The copyright problems might hurt the business if imitations of other brands are produced.
Growth Strategies
It was mentioned before that Zara is in control of the whole production process for all its stores. It makes it easier for them to adjust prices in the existing markets in order to gain more dominance. Probably, Zara should transfer most of its production for developing countries to Asia. Reducing costs will help to strengthen Zara’s presence in developing countries. However, another strategy might be applied for market penetration in Europe. The number of competitors is growing, and probably the idea of “no advertising” is already not working. Much research should be done to define whether it is correct before launching any large marketing campaigns. New marketing strategies should be considered for Europe and the U.S. markets.
Taking into account that Zara’s position is strong in Europe, it is necessary to broaden its presence in developing countries. For example, Zara’s presence is very limited in Africa, with only Egypt, Morocco, South Africa, and Algeria included (Anwar, 2017). Thoroughly considering the situation in other African countries, it might be necessary to open stores there to strengthen Zara’s presence on all continents. In South America, Argentina is not included, whereas it can be a promising opportunity (Anwar, 2017). Thus, it is necessary to introduce market development strategies oriented on strengthening Zara’s position on all continents.
As far as product-development strategies on current markets are concerned, it is necessary to apply different approaches depending on the country. Considering the fact of over-consumption awareness in Europe, it is important to stress the sustainability of the brand. Eco-friendly, sustainable collections should be produced for Europe and the U.S. Whereas, in developing countries, it might be necessary to introduce Zara to different segments, creating affordable collections and standard collections. Thus, a product diversification strategy should be applied for African and Asian markets.
Conclusion
Zara company has already achieved much success worldwide, having a presence on almost all continents. Due to the vertical integration business model, Zara is able to control all aspects of production, and this is the company’s major strength. However, no advertising policy, throw-away policy, and online retailers are significant threats to Zara’s successful future. It is necessary to keep up to date with e-commerce, use diversification strategy, and introduce new sustainable collections in order to beat the competitors.
References
Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018). Super Responsive Supply Chain: The Case of Spanish Fast Fashion Retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212-227.
Anwar, S. T. (2017). Zara vs. Uniqlo: Leadership strategies in the competitive textile and apparel industry. Global Business and Organizational Excellence, 36(5), 26-35.
Green Web, (2020). Web.
Ivanov, D., Tsipoulanidis, A., & Schönberger, J. (2019). Operations and Supply Chain Strategy. In Global Supply Chain and Operations Management (pp. 81-110). Springer, Cham.
Wang, Y. (2018). An Exploratory Study of Brand Strategy in Fast Fashion Brand–Using Zara as an Example. Advances in Social Science, Education and Humanities Research, 233, 648-651.