Business Strategies in Zara

Published by James Taylor

EXTERNAL ANALYSIS

Zara is a clothing company that deals with the production and selling of clothes. The company has grown over the years to become among the leading cloth manufacturers and sellers in 88 countries of the world. The company has used a strong marketing strategy to market its cloths amidst competition from other companies that produce cloths in various countries around the world. The company has used various marketing and operational strategies to help the company deal with various challenges that it faces while in operation. The company produces various types of clothes depending on consumer needs to meet the demands. The company uses various strategies to deal with various challenges that it goes through.

Opportunities

There are various opportunities that Zara Fashion Company can utilize in order to make more profit and increase the customer base. The opportunities give the company the opportunity to continue serving the customers with the clothes to wear (Kolk, 2016). The opportunities that the company has included using the online platforms that are now available to market the clothes to the new market. Online platforms give the business new opportunities that never existed before in terms of marketing. Online marketing platform doesn’t have boundaries; therefore, the company will not have a geographical limit in terms of the area that the marketing can cover.

There also online platforms such as Alibaba that give Zara fashion company the opportunity to sell its products through the platform. The platforms give the company the opportunity to increase the sales of its products by enabling the company to access markets that it never had before. Competitor companies are using online platforms to sell their products; hence Zara can also take their competition to online platforms.

Threats

The company also has threats that it has to deal with to be able to survive the threats; the company needs to be aware of the threats to come up with strategies to counter the threats (Bah, and Fang, 2015). Among the threat that the company face includes the threat of competition. Some companies have come up offering similar services. The new companies offer similar services at lower prices as their strategy to take the customers that previously used to be customers of other established companies. The competition is pushing Zara Company to its extreme when it comes to dealing with competition.

The company also face the threat of increased operational costs; the demand for raw materials is increasing as more companies enter the market offering similar clothes (Hamilton, and Webster, 2018. The increase in the price of raw materials will force the company to increase the price of its products. The customers are used to a certain price for different products; therefore when the prices are increased more than the normal price they might look opt to purchase products from competitor companies. Increase in the cost of production will make the company reduce the profit margin.

STRATEGY EVALUATION

Competitive Advantage

Zara clothing company recognizes the stiff competition that exists on the clothing market. Therefore, it has come up with strategies of ensuring that it enjoys a competitive advantage over other companies. Among the marketing strategies that ensure the company has a competitive advantage over other companies is by creating a strong brand with several portfolios that are unique from those of competitors (Johnson et al., 2017). Having a strong brand makes it difficult for competitors who might want to copy the cloths produced by Zara Company. The customers know the brand; therefore they cannot be manipulated into purchasing clothes that are not original and manufactured by Zara. The strong brand that is associated with quality high-end cloths makes customers buy Zara clothes to be associated with the brand. Customers buy Zara clothes not only because the clothes are of high quality but also because they want to be associated with the brand. This increases the competitiveness of the brand in the market.

The more significant portfolio that is made up of eight brands also improves the competitiveness of the Zara brand. The eight brands increase the range of products the customers choose from, thus ensuring that the competitors don’t have a niche that they can use to begin their competitive attack on Zara company. Zara clothing company focuses on areas that have a high demand in the market (Johnson et al., 2017). The broad portfolio also ensures that the many needs of the customers are covered; hence the customers do not need to purchase clothes from other companies to supplement those sold by Zara clothing company. There are different clothes for different parts of the body that helps in meeting the needs of the customers. The company has won the loyalty of many customers that keep on buying clothes manufactured by the company. The competitive advantage has enabled the company to survive competition from other companies that enter the market offering similar products.

Branding

Zara clothing company also recognizes the importance of branding and has created a brand that is unique from other companies offering similar products. The company focused on creating a brand that it could rely on when it comes to reputation in the market (Grant, 2016). The brand marketing strategy is crucial when differencing the products of the company from those of competitors. The brand that the company created represent the dreams of the people when it comes to clothes that they want to wear.

Branding has enabled the company to create a trust with its customers because they always get quality products. They get value for their money (Grant, 2016). Trust in the brand also enables new customers to trust the clothes manufactured by the company are of high quality. The company is committed to continuing designing clothes of high standards. The branding strategy also helps in marketing the products sold by the company. The products market themselves based on their high quality. The customers market the products through referrals after they get quality services offered by the clothes that they buy. Customers who have bought clothes manufactured by the company cannot resist purchasing the goods again because of the quality of service that they get and the taste.

Zara Fashion Company spends little money on promotion because it has already created a brand that customers can trust purchasing items from. The sales that the fashion company makes keep on increasing even though the company does not do promotion. The brand market for itself because the company has created a customer base that it can rely on. The little promotion that the company makes usually occur when the company is opening branch in foreign countries where the company is not known.

Customer Service

The way a company treats its customers determines whether the customer will purchase the products from the company store again. Zara fashion recognizes this fact hence the reason why it has come up with different ways of appreciating the customer and making the customer feel valued (Grant, 2016). The primary goal of Zara Fashion Company is to meet the needs and desires of the customers; therefore it focuses on carrying out this objective the best way possible. The customer is guaranteed the best products whenever he/she buys the company’s clothes.

PORTER ANALYSIS

The five forces explain the various aspects any company put into consideration to remain competitive in the market. The five forces push the company to the limitations affecting the operations and success of the company (Carraher, 2018). The company needs to take appropriate measures to ensure that the forces do not influence the success of the company. Porter’s five forces determine the structure of the industry in terms of the stakeholders producing goods and services that they sell to the consumers. When producing companies are active in terms of competing with each other to ensure that they become innovative to continue delivering quality goods to consumers.

The five forces of porters cover wide range aspects when it comes to dealing businesses operating in specific industries; the aspects include the structure, the size, and needs of the customers and the distribution channels of the products that the company is producing. The Porter’s five forces include the competitive rivalry, supplier power, buyer power, threat of substitution and the threat of new entry.

Technology

Technology is a significant factor affecting many businesses today because a lot of the activities that are involved in the production, marketing and selling involve a lot of technology. Companies need to invest in technologies that are modern for them to survive amidst companies that are using the latest technologies (Kirchberger and Pohl, 2016 p. 1010). Among the areas that technology is used to include the manufacturing of the clots that the company majors on. Modern cloth technologies allow for the production of different design of clothes that are not in the market and with the competitors. The technologies assist the employees in their work to ensure that the quality of clothes manufactured is of high quality.

Technologies are also used in marketing and trading of the clothes produced by the company, and the technology facilitates marketing and selling of the clothes manufactured by Zara Fashion Company (Kirchberger and Pohl, 2016 p. 1010). Technologies such as the internet have become a significant marketing tool that companies are using to market their products. Zara Fashion Company has not been left behind in using modern technologies to improve their performance and achieve their objectives which are to earn profits.

Advantages

The advantages of Zara fashion company using technology to improve its economic performance because the technologies reduce the costs that the company incurs. The company has invested in technologies that help it reduce the cost of production by hiring fewer employees (Kirchberger and Pohl, 2016). Also, the quality of the clothes that the company manufactures rises meeting the needs of the customer in terms of quality. Also, the company has used the internet to market its products hence reducing the costs that it would have incurred to market on Livestream media. Even the company uses an online platform to sell clothes.

Disadvantages

The challenge of technology is that it keeps on changing; therefore, the company might need to buy new manufacturing equipment’s to be able to compete with competitors Kirchberger and Pohl, 2016). The costs incurred to upgrade the latest technologies might affect the financial capability of the company. Technologies also expose the company to attacks such as cybercrime that might lead to loses.

Competitive Rivalry

The competitive force deals with the ability of Zara fashion clothes to compete with other products in the market. The company aims at producing companies of high quality as a strategy to compete with other products in the market (Carraher, 2018). Zara companies face stiff competition from other companies in the industry; hence Zara needs to strategize on how to face the competition. The competition might make a company close down after the consumers fail to purchase the products. The customers choose the products that suit themselves in terms of meeting their needs and being affordable.

Threat of Substitution

Zara Fashion Company just like other companies faces the risk of its products being replaced by customers by substitutes in meeting their needs (Carraher, 2018). Many factors make customers to substitute the products, among the reason is when they but cheap substitute because they can have the quality products which prices a relatively high. Substitutes are a significant threat to Zara clothing company because the company risks losing its customers.

The threat of New Entrants

New entrants in the industry pose a threat to existing companies including being able to displace the existing companies. The new entrants might sell their cloth products at low prices; the customers might opt to buy the ones sold at low price affecting other companies that sell their products at relatively higher prices (Carraher, 2018). Some customers are not loyal; therefore they will quickly try new clothes that enter the market, entry of new business poses a threat to older companies. The entrance of new companies in the market will reduce the market share of other companies because they will have to share the little market available.

Supplier power

The supplier power also influences companies in terms of the ability to continuously supply raw materials to the company for production. The ability of the supplier to supply raw materials influences the price of commodities, where there are few suppliers of raw materials who can’t continue supplying the raw materials make companies lack efficient production (Carraher, 2018). The price of raw materials from suppliers will also influence the production costs; hence it will affect the cost of production. The cost of production, in turn, influence the profits that the company makes. Zara clothes company need to find a reliable supplier of raw materials to avoid unnecessary additional costs.

Bargaining Power of Buyers

The bargaining power of the customers influences the price of commodities the producers will sell it. The bargaining power can make the price of commodities to reduce significantly depending on the agreement between the seller and the buyer (Carraher, 2018). Zara Company must price their items according to the capacity and quality of the clothes that they produce. The bargaining power of the consumers is mighty such that the seller needs to leave a room for bargaining.

Zara Company enjoys different benefits and challenges operating in different countries around the world. Different countries offer different environments; therefore, Zara enjoys the environment. In European countries the company does experience challenges in selling its clothes, the people there like quality products sold by Zara Company and the people also have the finances to purchase the cloths. The company also enjoys a good market; it’s one of the biggest markets that the company has. The company has to adjust to a different environment in different countries so that they can survive the various challenges that the company is likely to face in foreign countries.

There are global challenges that affect the operation of businesses globally; the operation of a company on a global level need to be organized for the business to be able to coordinate its activities. The company has been using online resources to sell its products to clients located in different countries of the world. Zara Fashion Company can market its products to potential buyers who later buy the cloth.

Strengths

When people have bargaining power, they are able to purchase commodities even when the price of the commodities is increased. Fashion companies have loyal customers that keep on returning, and therefore the company can sell its products to the company at standardized prices. Customers with resources don’t need to worry about the prices as long as the clothes meet the qualities that they desire.

Weaknesses

Majority of the people who would like to purchase the clothes sold by the company do not have the finances to purchase the clothes. The company is not able to sell as many clothes as it would like to earn a profit. Financial challenges of the customers also affect the company because its unable to meet its targeted revenue.

INTERNAL FACTORS

Internal factors play a significant role in the success of any company, Zara Fashion Company also has internal factors that it has to deal with for the company to be successful in all the work it engages in (Zinovieva, 2016 p. 65). The internal factors include the personnel that the company has hired to perform various activities. The activities include the production of the clothes and the marketing and selling of the clothes to buyers. The company has to hire the right employees that are qualified for the tasks that are delegated to them. Having the right employees’ means that they will perform their duties satisfactorily. The company will produce quality clothes that meet the expectation of the customers who in turn will become loyal to the company.

The managers also play an essential role in directing junior employees on how they are supposed to perform their duties. The company has hired competent leaders that have relevant experience and skills to make it easier for them to give directions on how the work is supposed to be fallowed. The leaders have leadership qualities that the employees can embrace and emulate. The leaders need to communicate well to pass orders and instructions.

For the company to be successful it has to have internal strengths that motivate the employees to work hard and as a team towards achieving the organizational goal. The internal strengths include the employees and the technology that the company uses in clothes production (Zinovieva, 2016 p. 68). The company knows that it has to streamline its production to reduce the costs of production. The unique skills of the employees enable the company to produce goods that are of better qualities than those produced by the competitors. The company has been able to continuously produce quality clothes that satisfy the needs of its customers.

The company also has some weaknesses that make it difficult for Zara Fashion Company to continue producing a quality product and selling them to sell to the customers for profit (Zinovieva, 2016 p. 71). The weaknesses make the company faced challenges in meeting the goals that it has set. Among the weaknesses is losing experienced employees to competitors who are poached by competitors. The weaknesses make the company have a reduced profit margin.

STRATEGY EVALUATION

There are different SAF tests strategies that companies use in determining the right decision in terms of selecting the right decision that will impact the business of the company positively (Punt et al., 2016). The safe test strategy uses various considerations when it comes to selecting the right strategy that is appropriate for the company. Among the factors considered include the suitability of the strategy used. The strategy implemented by the company needs to meet certain challenges that the business was facing by fixing the challenges. Suitability ensures that the company will not face negative challenges in implementing the strategy that it considers appropriate for the company.

The SAF strategy that Zara Company considered include doing a feasibility study includes doing a feasibility study to determine whether the strategy that the company wishes to use will impact the company positively (Punt et al., 2016). The feasibility study helps companies in identifying the challenges that the company is likely to face. Identifying the strengths and weaknesses of the strategies help businesses in planning for the anticipated challenges that the business is likely to face. The company can make an informed decision by selecting the best strategy that is suitable for the company.

The company needs to keep on reviewing the strategies it’s using to ensure that they respond positively to the business meeting the goals and objectives that it has set (Punt et al., 2016). Some strategies need to be changed frequently to meet the new needs because the business environment keeps on changing; hence if the business does not change the environment, there will be a negative impact. Also the needs of the business change frequently hence the strategy that the business is using should correspond with the needs of the business. Business strategies are used by business to help manage available resources. Where the resources are not managed the business effectively incur losses.

There are various indicators of whether the strategies used by the company is working to the benefit of the company or not. Among the indicators of ineffective strategies include continuous loss-making by the company (Punt et al., 2016). Good strategies are meant to ensure that the business makes a profit. Another indicator of ineffective strategies includes wastage of resources because the resources are not managed appropriately (Theaker, 2017). Zara Fashion Company need to identify whether there are any indicators of ineffective strategy to avoid possible loss-making. Where there are any indicators of ineffective the company should change the strategy in good time to prevent possible loss-making.

There are also indicators that show that the business strategy being used by a company is effective (Vovchenko, Holina, Orobinskiy, and Sichev, 2017). The indicators include increased profits that the company makes. The resources are used effectively leading to increased end products that are sold to earn more money for the company. Companies should survey to find out the best-suited strategy to use.

Zara Fashion Company has been using various strategies to remain competitive and continue supplies clothes products to its customers (Sanghi, 2016). The strategies need to be reviewed periodically to ensure that they meet various needs that are required for the business to run smoothly. The company evaluates different strategies to check which one suits the company the most. Among the strategies that the company has used in the recent is the branding strategy. Branding entails creating a certain belief among the people that the product being sold meet certain standards that are unique from other companies offering similar products.

The company chose to use the strategy of branding after it discovered that competitors are using the company’s name to sell their cloth products on behalf of the company. Zara Fashion Company realized that it needed a brand that could make its products unique from the rest of the foods offered by other companies. Creating a brand made it easier for customers to identify the clothes manufactured by the company from the rest of the clothes manufactured by other companies. The company also realized that it faced challenges in marketing; branding made it easy for the company to market its products amidst competition from other companies.

Creating a brand has increased the competitiveness of the company which is among the advantages that the companies got from the time it began branding. The branding built confidence among the employees such that they started working hard for the company status to remain, the company has been delivering quality products for many years; therefore, it needed to protect is legacy.

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