The interactions between tangible and intangible resources help create organizational capabilities that provide value to the end consumer. Zara has a large variety of tangible resources due to its international expansion and vertical integration. In order to accommodate the company's initiatives for backward vertical integration, Zara purchased 20 factories that were highly automated with machines that were specialized for specific garments.
Its net income was on the rise hitting million on revenues of 3, million by end of fiscal year.
Any sensible business would focus on market expansion and consolidation within its current region as Zara did if the market had the right purchasing power and favorable cost for the various means of production Mahadevan, This meant that labor was available cheaply.
In addition, its rich tradition in textile and their non discriminatory behavior provided a good opportunity for Inditex to develop and learn the tricks of developing trendier fashions that would suit high end markets like Italy.
However, the poor vertical integration in textile value chain and poor communication networks meant the company had to invest heavily eating into its profits which erodes the gains.
This made it sensible for the company to focus on other regions in Europe to maintain its competitiveness. Choice of product market selection is influenced by product, market and marketing factors Srinivasan, This was done by a team of commercial experts who analyzed the micro and macro variables and the future prospects to influence apparel retail chain with profitable gains.
Normally, when companies identify new markets with similar consumer behavior, tastes, preferences and purchasing power, it becomes easier to penetrate such markets.
This assertion is supported by the case study which indicates studies that showed the different countries in Europe and their market behavoiur in relation to apparels.
The approach involved three entry strategies, that is, company owned stores, joint ventures, and franchises, where only one approach was employed per a given country.
Though the three strategies were in use, Zara seemed to favour company-owned stores given that by end ofit operated company owned stores in 18 countries outside Spain.
Jain noted that companies can adopt exporting, joint ventures, franchise or mixed strategies. The strategy makes sense given that such stores targeted the high profile countries and high —end markets meaning more revenue to the company due to higher purchasing power at fewer bargains.
However, the amount of resource allocation and management time spent makes the strategy unsustainable. This could explain why the strategy shifted to joint ventures and franchises in most countries it entered towards late s.
Making a choice among the three entry strategies based on market conditions and barriers to entry possibly explains why Inditex had a higher penetration rate in new market with remarkable success. Zara also had policy of standardizing its marketing approach thereby using the same business system in all the countries it operated with minimal variations in retailing operations at the local level.
Normally, the first store opened in the country become the flag ship store and defined the marketing mix to be replicated in other retail stores across a particular country. Paul and Kapoor noted that standardizing product marketing has several advantages including building a global brand, economies of large scale production and developing a global marketing mix at minimal costs.
In terms of product development Zara produced three product lines apparel targeting women, men and children. This was done by producing only for markets that showed unambiguous positive response to designs.
Price varied depending on quality of apparel and target market where high end markets had higher mark-up prices. Promotions were standardized in that advertisement budget was pegged at 0. Promotions were limited to start and end of sales periods per season.
Distribution was perfect with warehouses and third-party delivery services were utilized to ensure availability within short distance. Displays and interior presentations were used to promote its market image.
Brand positioning should also be made to read made in Europe to create to tap high end customers that shop in Europe. Setting production in countries with low labor costs would also lower shipments costs and increase its competitive advantage to compete globally.
Specific prospects in the Italian market for Zara Italy is known for its taste for high end and trendy fashions. Its proximity to Spain and Portugal means that Zara can produce in the two countries due to their low labor costs and sell at a higher price in Italy given that shipment cost is minimal.
Broad analysis on the strategy of focusing on Europe vs. This point supports that establishing a second region for Zara would make sense since most the restrictions that dominated the s and s under Multi-Fiber Arrangements MFA had been lifted.
Diversification into a second region would also make Zara benefit from lower labor costs in developing countries where labor is cheaper. In addition, it would save on shipment costs as some of the produced apparel would be consumed in the country of manufacture.
Therefore, focusing on a second region would not only lower costs of production but also the retail prices thereby increasing its competitiveness. The study 4 also gives some impetus on why Zara should go a second region to expand its market share by pointing other countries like Japan had a higher apparel buying frequency per than most of the developed world.
Therefore, this means with the right market selection and proper entry strategy there were profitable continents like Asia given their large population.
However, maintaining a firm grip of apparel market in Europe is sensible given their higher purchasing power resulting to higher marginal revenue per unit sold despite the fact that share of apparel expenditure decreased with increase in income.
Value creation, sustainability and performance. Handbook of research in international marketing. Operations management 2nd ed. Dorling Kindersley Ltd Paul, J. International Marketing 3rd ed.ZARA Case Solution,ZARA Case Analysis, ZARA Case Study Solution, Annual Report Part 1: External Analysis Inditex with its flagship brand Zara should look to enter New Zealand market, which is still untapped by the compan.
Nov 14, · This video is unavailable. Watch Queue Queue. Watch Queue Queue. It can also be observed in the meanwhile that if society comes across the new trend then they accepts it and follows the same as looking different from the group is the priority of everyone in the society.
Zara is the largest division and flagship brand of the Spanish retail group Inditex . It sells up-to-the-minute 'fashionability' at low prices, in stores that are clearly focused on one particular market.
Strategic Analysis Pulling together both the external and internal factors impacting on Zara as an organisation, it is then possible to establish a strategic plan for the future, in order to ensure the ongoing success of this substantial fashion retailer.
Essay, Case Study, Textbook Solution. MKTG Final S.W.O.T Analysis Yui Ota Mar 27th S.W.O.T Analysis: ZARA Introduction: ZARA Zara is a Spanish fashion brand that founded by Amanc.
“Inditex”, which is known as the head company, spread ZARA in a large amount of scale.