Literature Review
Zara is one of the companies that operate under the Inditex Group. The company began its operations in the year 1974. As of today, Zara has managed to open approximately 1900 stores in more than 70 countries across the world. The company is headquartered in La Coruna, Galicia in Spain.
For the ease of operation of its international subsidiaries, the company has established operational headquarters in each region in which it has set up its stores.
The largest operational area of the company is retailing of fashion goods for women, men and even children. However, the company specializes in the retailing of women fashion products (Kurtz & Boone, 2011).
The company has ventured in the fast fashion segment in the larger fashion industry and is considered to be one of the pioneer companies in the fast fashion industry.
The regions where the company has successfully established retail stores include the larger Europe, Oceania, South and North America, and Asia. These regions represent areas that represent the largest fashion markets in the world (The Soundings Group, 2011).
Industry Analysis
Zara operates in the fashion industry, specifically the fast fashion segment of the global fashion retailing industry. The fashion industry lies within the larger lifestyle and retail industry. The number of firms in the industry is quite large and they are differentiated by virtue of subcategories.
The subcategories include ‘men/women/children’s’ clothing and footwear and fashion, among other sub-categories. The growth in the scale of the industry comes as a result of the efforts by firms in the industry to develop newer categories of products, which eventually extend to newer market segments.
It is important to note that the fashion industry has a lot of players, who are motivated by the opportunities that prevail in the industry. The opportunities in the industry are promoted by the fact that there is globalization of culture, where fashion is a critical part of the culture.
Fashion keeps changing within short cycles of time and so are the firms that are operating in the industry required to match up with the pace of change in the industry in order not to lose in the competition.
Factors that promote the fashion industry and especially the fast fashion sector in which Zara operates in include the emphasis on the importance of fashion in the contemporary globe, the globalization of cultures, the growth of the population across the globe and the attachment of a lot of value on brands and fashion by the modern consumers (Tiplady, 2006).
The fashion industry is a volatile industry. Its volatility is steered by the fact that most of materials that are used for the production of goods in the industry are drawn from the developing economies.
Therefore, instabilities that often occur in the developing world easily result in the shooting up of the price of raw materials. Such a case in the textile industry was witnessed in the year 2004.
This case denotes that the company is often vulnerable to the socio-political and economic dynamics that occur in different parts of the world.
Zara has shown positive progress in terms of limiting the competitive pressures that come from its direct competitors by matching any event going out of hand to outwit the strategies that are used by its competitors in the market.
The internationalization strategy has proved to be worth in the expansion of the operations and the scale of business by the company, thereby increasing the level of competitiveness of the company in the market.
Price regulation and cycles of efficient delivery of products form part of the competitive strengths of Zara (The New York Times, 2012).
SWOT Analysis
This is an evaluation of the environment in which a firm operates. The “internal” environment is assessed by evaluating the weaknesses and the strengths of the business, while the “external” environment is assessed by evaluating the threats and opportunities available to the business. This assessment helps the firm identify its current position and shape its future.
SWOT represents “strengths, weaknesses, opportunities, and threats” (Simoneaux & Stroud, 2011, p. 76) that face a business. In this regard, a SWOT analysis is a tool that helps in reviewing a business plan to ensure that it remains alive.
Through the results of a SWOT analysis, a firm is placed in a position to create goals in line with the business plan. Necessary strategies and objectives are also formulated to guide the business in its current and future positions.
Since change is ever happening in all industries, the SWOT analysis comes in handy in managing change, as well as forming the basis upon which realistic goals are set (Simoneaux & Stroud, 2011).
SWOT Analysis for ZARA
Strengths
The vertically integrated structure of the company as is embraced by the Inditex Group enables the company to be proactive in terms of the expansion of operations. Zara utilizes a low cost supply chain in managing its retail operations across the regions in which it operates (Choi, 2012).
Operating under the Inditex Group remains to be a competitive factor for Zara since the utilization of the Inditex brand helps Zara to gain a competitive base in the new market in which the company stages it operations.
This is argued to be one of the reasons why the company has managed to expand its operations in the four main regions of the world in which it operates today. By using the name of Inditex as its core brand in the international market, Zara has managed to build a resounding image in the markets in which it operates.
The brand of Zara is, therefore, stronger and widely known in the market, which makes the company more competitive in the fast fashion industry (Bjerreskov et al., 2010).
The other factor of strength in the company is that it remains proactive in terms of the development of strategy in the industry and the market in which it operates. With the retail fashion industry being a large industry, Zara chose to venture into one of the main sub-sectors in the industry; the fast fashion segment.
It is, therefore, considered to be a pioneer in the fast fashion segment, a factor that makes most customers prefer the company over other companies that have ventured into the segment later. Coupled with sound human resource policies, the company is often in the forefront in terms of innovation in fashion.
Innovation in Zara is boosted by the fact that the company has managed to fully adopt and use information technology in its management and design activities (Tiplady, 2006).
The internationalization of the operations of Zara, which came as part of the expansion strategy of the company, gives the company an advantage over other companies in the industry.
Unlike its competitors, Zara has managed to establish a global supply chain network that ensures that its stores are fed with the products on a timely manner, thereby appeasing customers always (Bjerreskov et al., 2010).
It can be seen in terms of spreading the risk of the company, especially with times of economic uncertainties that have become common in the contemporary economic environment.
The company has operations in four continents of the world, with retail stores established in more than 70 countries across the world with approximately 2000 active stores.
The scale of business has, therefore, broadened by the virtue of the ability of the company to traverse the world and establish its operations across the world.
The level of creativity in the company is quite advanced and is used as basis on which the company differentiates and segments its operations in the market to maintain market dominance.
Although the company focuses on one product line, women fashion, it also designs and produces a ray of men and children fashion. The two other segments act as backup to the market segment in which Zara has fully ventured in.
Each segment is highly differentiated in terms of operation, making the products and services in every segment to be distinct and unique in the market (Pahl & Mohring, 2008).
Weakness
The marketing strategy of the company has often been on the limelight. Zara makes use of a marketing strategy that has no advertisements. This is risky in times when aggressive marketing is embraced across the fashion industry.
Failure to embrace aggressive marketing can slowly result in the loss of competitiveness by Zara in the market (Pahl & Mohring, 2008).
It is quite difficult to attain and sustain customer loyalty in the segment of operation in which Zara has fully ventured into.
This comes from the fact that the needs and demands of customers who feature in the market keep changing. Consumers in the industry can, therefore, easily turn their attention to seemingly newer and cheaper fashions in the market (Pahl & Mohring, 2008).
Opportunities
Globalization is a key factor in as long as the operations of the fashion industry are concerned. Globalization of culture is one of the attributes that highly promotes the demand for fashion in the world. Globalization of culture is enhanced by growth in the culture of consumerism across the globe.
Zara is, therefore, presented with a lot of marketing opportunities in as far as the zeal for people to test other cultures through fashion remains to be experienced in the world.
Opening of trade in the world promotes the landscape on which firms can easily advance and expand their operations in newer and developing markets across the globe. Zara can, thus, easily expand its operations in the markets that are emerging (Pahl & Mohring, 2008).
The fashion industry is broad and the diversity in the needs of fashion makes the broader industry. Zara can, therefore, venture into other segments in which other companies have not fully ventured into.
The level of creativity in the company is also desirable and can help the company in the development of new fashion and new market segments (Bjerreskov et al., 2010).
The modern economic environment has been invigorated by the presence of information and communication technology. The availability and adoption of information and communication technology in the company is bound to help in the promotion of marketing activities through adoption of e-marketing initiatives.
E-marketing is one of the pillars of marketing in an industry that is as dynamic as the fast fashion industry (Choi, 2012).
Threats
Trends in the global fashion industry denote the quick pace at which the consumers of fashion keep changing their demands. This implies that fashions or goods and services in the fashion industry can fade at a quicker pace, thereby rendering the stocks of a company unsellable to the customers.
This forces the company to keep changing its tactics in the market and keep investing in the design and development of newer fashions, which is an expensive affair for the company. It raises the cost of operation for the company (Pahl & Mohring, 2008).
Fashion is considered as an industry that deals mostly in secondary goods. On the other hand, economic uncertainties have been on the rise in the contemporary economy, which negatively affects the global markets. Examples are the recent global financial crisis and the global recession that hit hard on the global markets.
Such uncertainties and the general rise in the rate of inflation in the global economy impact negatively on the sales trend in the fashion industry (Pahl & Mohring, 2008).
The other threat to the company is the increase in the number of firms that are venturing in the fast fashion industry across the world. This makes the competitive environment to be quite complex, bearing in mind that there are other key competitors in the industry that the company is battling with.
Conclusion
From the analysis in the paper, several deductions can be made concerning the scale of competitiveness in the global fashion industry and the competitive position of Zara. The global fashion is quite dynamic.
The dynamism of the industry provides both opportunities and challenges to the companies that are operating in the industry. Zara has been quite active in terms of developing and implementing strategies that help it take advantage of the opportunities that prevail in the market.
The company operates by basing more on strengthening its operations instead of matching the factors of competition that are posed by the competitor firms in the industry.
References
Bjerreskov, D. H., Bohlbro, D., Lars, K. J., Nielsen, B., & Jack, M. (2010). Value-added logistics in supply chain management. Copenhagen: Academica.
Choi, T.-M. (2012). Fashion supply chain management: Industry and business analysis. Hershey, PA: Business Science Reference.
Kurtz, D. L., & Boone, L. E. (2011). Contemporary business. Hoboken, NJ: Wiley.
Pahl, N., & Mohring, W. (2008). Successful business models in the fashion retail industry: Strategic audit of H&M compared to ZARA. Norderstedt, Germany: GRIN Verlag.
Simoneaux, S. L., & Stroud, C. L. (2011). SWOT analysis: the annual check-up for a business. Journal of Pension Benefits: Issues in Administration, 18(3), 75-78.
The New York Times. (2012). How Zara grew into the world’s largest fashion retailer. The New York Times. Web.
The Soundings Group. (2011). Zara: A global success story ( 2011). Web.
Tiplady, R. (2006). Zara: Taking the lead in fast-fashion. Bloomberg BusinessWeek. Web.