Summary:
Zara brand is an attractive case study for many fashion brands around the world for understanding Zara’s business model and their wining factors. One of the Zara’s strategies that make difference between Zara and other competitors is policy of zero advertising. The company tries to invest their capital in opening new branches. As result of this policy Zara is known as fashion imitator trade group and low price fashion products. The range of Zara’s products is wide such as: menwomen’s clothing, Zara kids, and shoes, lower and upper garment in various sizes. Designing of Zara’s products are made 50% in Spain, 24% in African and Asian and 26% in the rest of Europe. In this research the investigators try to find out Zara’s business concepts and how this company work in term of: product, price, marketing plan and other marketing aspects and indentify Zara’s winning elements in business world.
Contents
Targeting 10
Positioning 10
PEST analysis 10
SWOT analysis 11
Product 12
Price 12
Place 12
Promotion 12
Advertising 12
Sales promotion 13
Sustainability 13
Competitive advantages and comparison with other 13
Conclusion 14
References 15
Introduction:
Zara is flagship brand name of Spanish store of Inditex group, one of the biggest retail stores whole the world. It’s wining retail trends in fashion and conveying fast fashion new products to low-cost countries and whole the world .Zara can recommend considerably range of new fashion products than similar brands. It produces about 11,000 distinct products per year .The company has ability to design a new product and have final goods in its stores during four to five weeks and can modify existing items as little as two weeks. Zara has shortage product life cycle in contrast with other competitors, this means greater success in front of consumer’s preference. Zara founded by Amancio ortega and Rosalia mera and set up their business activities with opening in coruña (Spain) of its first store in 1975.the commencing of Zara’s outside of Spain business occurred in December 1988 by opening its first store in Oporto (Portugal), the France and USA are next Zara’s markets in which the trade group begins its activity in 1989-1990. Purpose
The main purpose of this investigation is to illustrate Zara’s business concept, model and indicate Zara’s marketing strategy, targets, mission and visions to find out what are the Zara’s market planning, segmentation, positioning, targeting, product, price, place, promotion and sustainability.
Methodology
Data were collected by group members mainly from the Zara’s official websites, other reliable internet sources related to case study materials and course book Principles of Marketing by Kotler, P 2008. Also in analysis part is employed SWOT analysis from the strategic audit and PEST analysis to give a clear view of marketing discussion of the company from external audit.
Theoretical framework
Marketing plan: It implements the company marketing strategy and outlines the particular actions that company intend to perform to interest customers and clients in their product and service and convince them to buy their product or services they offer. (Kotler, P 2008) Market segmentation: A foundation for segmentation is a part that differs amongst groups within a market, but that is constant within groups. Once can classify four main categories for a consumer market: Geographic segmentation
Demographic segmentation
Psychographic segmentation
Behavioral segmentation (Kotler, P 2008)
Target marketing: Target marketing makes the advertising, pricing and distribution of the products or services easier and in more cost-effective way. Target marketing make a focus on all of the marketing activities. (Kotler, P 2008) PEST analysis
Political environment
Economic environment
Social environment
Technological environment (Oxford University press,2010)
SWOT analysis: This analysis of business environment can be carried on by organizing environmental issues as below: The internal environment present strength and weakness points. The firm’s external attribute can be grouped as opportunity and threats.(Internet Center for Management and Business Administration, 2010) Product:
Decision should be focus on products advantages and the way that they will be leveraged. Product decision should consist: Name of brand- Quality – Product line scope Packaging- Warranty. (Kotler, P 2008)
Price:
It relates to pricing strategy, expected size and making decision about following cost variables: price list
discounts
payment terms and conditions
leasing alternatives
bundling (Kotler, P 2008)
Place: Considers to the means by which the company’s customer obtains the product. This contains the definite place it is purchased and the actual way
of distribution. (Kotler, P 2008) Promotion:
Promotional programs
Results of promotional program’s
Funds, establish breakeven point for any extra spending
Community relations
Sales promotion
Advertisement
Positioning: refers to performing different activities than competitors or the same activities in a dissimilar manner. . (Kotler, P 2008) Sustainability: Sustainable Marketing is a developing attitude that encourages authenticity, society, and liability. These are now the serious success issues in the existing marketing environment. (Kotler, P 2008) Results:
Zara is one of the most popular retail stores in the world. This fashion company has a specific business model that guides the company in order to achieve their goals and follow their mission. Zara’s business model includes 5 key: 1. Store: is the meeting point between the consumer and Zara fashion offers. 2. Logistic: customer oriented, planed with highest flexibility, gaining order to store delivery 24H. 3. Customer: customer is one of the business elements that play vital role in various aspects such as: production, store design, team and logistic. 4. Design(production): ideas comes from store
5. Team: with high sales knowledge towards the consumers and try to make a pleasant environment.(Inditex group. 2012) Market planning: Zara’s has vast range of missions in order to be greatest retail company in fashion world. Throughout Zara’s business model, they intend to help to the sustainable development of the world. (Source: Zara website) Zara’s mission statement indicates that: Zara’s business is run in clothing industry.
The market is for all kind of society with different cultures and members. Zara’s value and goals are in associated with satisfaction the consumers tastes. Target market:
Zara’s target market is people from teens to adults, men and women. Zara’s major target is women, and their primary age group is between25 to 40.(Branding project of zara,2011) Goals and Objectives:
Become the world leader in retail clothing by focusing on product variety, speed-to-market and store position Establishing loyalty to consumers,
Provide customers by sense of community
Fast trend for low- cost
Increasing Zaras market share in china and USA around 5% and sale rate by 10% in 2012.(Branding project of zara,2011) Positioning Zara is fast high fashion with reasonable prices, only true fashion brand that thinks about body shape, respects it and designs especially for it. Product Since 2007, Zara’s have women’s and men’s clothing, these subdivided into Upper Garment, lower garment, cosmetics, shoes, and Complements, as well as Zara Kids. At time right now, Zara’s sizing for women’s clothing that goes to a US size 12 or a 14 for UK Size or larger size. Price
Zara prices are based on equals within the target market and pricing strategy is achieving price equivalent to cost plus a target margin. Place
Zara’s strategies of store location are:
Located in center
Easy to get to by the metro, bus or walking
Reliable and high store loyalty
Usual Zara store design: wide open spaces
Make satisfaction of shopping in the store with positive feeling and atmosphere Shopping online easily through Zara’s websites(Branding project of zara,2011) Promotion Zara’s philosophy seems to be successful and have worked .Zara’s can proof that it is possible to make a massive brand just by focusing on market need. Sustainability (marketing ethics and social responsibility)
Zara business model forces sustainable development through two principles: 1. Fashion design and producing in a socially answerable environment. 2. Ecological and environmentally friendly distribution and value chain. Zara’s sustainability policy says that “because it’s our Responsibility towards our clients, towards our employees, and towards the sustainable development of our society and environment.”(Inditex group, Sustainable, 2012) Analysis
In this research, investigators try to analysis the Zara’s market process and market shares. The market analysis is shown as below diagram: (Zara website, 2011)
Zara’s market share:
-60% normal
-25%plus size
-15%petite (Zara website, 2011)
Targeting:
Zara’s target market is focus in 4 main areas:
Main segmentation: plus sizes (include all range of size), full shape of women body. Demographic: Zara’s products are suits for ages 25-40, pursuing higher level educated population also mid-range salary. Psychographics: concentration in fashion trends conscious about their look, enjoy shopping. Benefits view: fashion clothes that fit the body shape and make them beautiful. Positioning:
The remarkable thing is that Zara has found dissimilarities that relate to customers and discriminated itself from its competitors by executing key activities differently. By that Zara places challenges for opponents because they will not find it easy to replicate or alike Zara’s positioning and it is this success that has given Zara sustainable competitive differentiation and positioning. (Unique Business strategy, 2012) PEST Analysis (PEST Analysis, 2012)
Political – it refers to the governmental policies for intervention in the economy aspects on the effect of business decision making. Zara should need to be familiar with the trade available system of importing goods within the country. Economical – This factor refers to economic growth, interest rates and taxation changes. The company should pay attention to Duties and Tariffs. These are in accordance with code classification of the goods, assessment and basis country. Social – All Change in social trends can effect on range of demand for Zara’s products and willingness for working. Zara should work according to customer’s satisfaction demand base on modifying in generation choices. Technology – this factor is an advanced point in today’s business world. it can decrease costs and develop quality. SWOT Analysis
(SWOT Analysis, 2012)
Strength points:
Zara provides cost leadership policy for efficiency and cost reduction on products. Quick release and delivery of new products design and trends. The product distribution method to various stores is efficient. Zara offers stylish and unique features of clothing and focus on rapid design innovation. Weaknesses points:
Absence of E-commerce
Zara company use centralized distribution method.
Vertically integration
The company needs continuous improvement on development process and research sector. Opportunity: Zara should commence online shopping market, because this shopping method is more easier and convenient way for customers. Worldwide market penetration, should introduce its brand in some countries that Zara brand is not too familiar such as Australia and New Zealand.
Threats:
The fashion clothing competitors in local and global marketing world. Fluctuation in rate of exchanges.
Design competitors
Product
Zara has 5 brand names:
1. Zara Woman which is a more formal clothes for women who go to work to look more serious. 2. Zara Basic (woman), this brand covers all the basics.
3. Zara TRF is for young women and who likes to be more fashionable. 4. Zara Men includes all men casual and formal clothes.
5. Zara kids contain all kids’ clothes.
Price
Zara has lower price in comparison with other competitors but they have higher profit margin because of vertically integrated supply chain. Zara’s worldwide target market are young and educated people who are very keen of fashion but with affordable price and good quality. Place
The store locations are constantly located at important, crowded, high-traffic places. The stores are designed with precise designs to assure that clients enjoy their shopping experience at Zara. Promotion
Fashion retailers spend around 3.5% of company’s revenue on advertising their new products, but Zara’s parent corporation Inditex has only 0.3% for advertising rate. This fashion retailer take on product advertising more slightly different form the other retailers. ZARA believes in that its shop windows, the contents which are decided in La Corua are all the promotion Zara needs. Advertising
Zara’s unique advertising policy is an additional factor within their business model for being success. Zara uses store layout, location and product life cycles to perform as their marketing tool toward consumers. For example, Zara strategically chose location of their stores in prime retail areas for more visibility marketing. Additionally, product development cycles encourage consumers to visit Zara stores more often because the new items are presented weekly and are mostly not restocked. So this scarcity feeling encourages customers to come back to the stores and buy rottenly. Lastly, for being more fresh and trendy brand; Zara spends heavily for their store layouts. Sales promotion
Zara takes benefit same like other brands for selling the items such as season sales and so on, Zara’s stock are very low and all the time get refreshed
Sustainability: marketing ethics and social responsibility
The main beliefs leading Zara’s commitment to Corporate societal liability contain: good faith in affairs with stakeholders and society at large; an enduring discussion with the abovementioned stakeholders and social organizations; and, lastly, precision in their trade activities in the main, and, specially, in the expansion of our sustainability strategy.(Inditext group,2011) Competitive advantages and comparison with others:
Fashion promote
Reasonably priced
Flexible:
Lean stock, fast Shipping
No markdown
Zara, in spite of its competitors such as Benetton, Gap and H&M, does not utilize Asian outsourcing. Around 8% of Zara’s materials are made in Europe and 50% manufactured in the Galicia region of Spain near headquarters. Huge range of Zara’s competitors uses 100% outsourcing to inexpensive Asian countries so the cost of production in Spain in compare with Asia is 17-20% more expensive. Zara’s strategic is to have product time of 3-4 weeks between conceptions till distribution for this reason company design and cuts its fabrics in house and the fabrics are available in 4 colors for maintain low-cost. Zara postpones coloring and printing designs until close to manufacture so they can reduce waste and minimizing the cost for stocks. Zara has great flexibility in matching their products wit.
Conclusion:
The results form marketing analysis of Zara’s indicating that this company has a very powerful and update marketing system because of this, Zara’s became one of the famous and most successful fashion brands in fashion world. Zara’s follow various policies in order to gain their goal such as customer’s satisfaction or has difference from other fashions competitors. Zara’s has about 1,520 stores around the world and they collect the orders regarding customer demand and the new products introduce to customers twice
a week so that the customers are always be satisfied with this trend because of quick response to their need’s .Zara’s always try to make design differentiation and individualism between their products for various customer with different needs and culture because of this it hires 200 designer and it choose 1186 supplier for their material. This company always tries to make their stores as pleasant environment where customer feel relax and pleasant while shopping and they try to have maximum attention to their exterior and interior architectural design.
