STEEPLE Analysis

Product : ‘Apparels’

A. SOCIAL :

o Orthodox/Liberal Society:

How orthodox or liberal a society is has an immediate impact on the clothing of the people. For example, off late clothes such as shorts, skirts and dresses and in vogue with women, which were not so popular a few decades ago on account of society being more orthodox and conservative.

o Age Factor:

Looking at India on a macro level, on can generalize that India is a young country with majority of the population falling in the under 30 category. This has a direct impact on the sense of fashion & variety of clothing of apparels. Hence age is a significant factor when it comes to apparels.

o Consumer awareness levels:

As a society becomes more literate, the consumers develops a better understanding of what options are available for purchase, the prices offered etc. They also tend to become more fashion conscious and demanding.

o Westernisation of society:

Westernisation of society in India has created a new product range of apparels such as indo western wear. Examples of this would be kurtis worn with jeans as compared to the traditional salwar kameez or brands such as ‘AND’ that sell Indo Western Fusion wear.

o Festivals:

In a diverse society like India where festivals of all communities are lavishly celebrated, buying new and special outfits specifically worn for that festival are purchased e.g.: Ghagra Choli at the time of Navratri.

o Brand Consciousness:

How brand conscious a society is also determines the clothing and apparels worn by teh people. Eg It is generally believed that North India tends to be more inclined towards Brands while the Southern part of the county tends to be less Brand focused.

o Working Women:

Societies with more working women have independent women with disposable income resulting in more demand for apparels of different varieties and qualities.

B. TECHNOLOGICAL :

Latest technologies and processes:

With the introduction of latest and hi-tech machineries the overall time required for production have reduced by leaps and bounds thereby increasing the productivity. The wastage of raw material (garment) has also reduced. Because of CAD (Computer Aided Designing) the process of introducing new product into the market has become faster. Eg: body scanner: Research and developments are being done on it. Body scanner will scan a person's body and get perfect body dimensions and feed it to machines enabling it to produce customized clothes with perfect fittings.

o Internet & Television:

Online & Television shopping has changed the entire conventional concept of shopping. People can choose apparels from thousands of brand available and can get the product delivered at their doorstep whenever they want.

o Demographics:

Demographics is also gaining importance in this industry which involves studying the changes in trends of clothing. This helps the manufacturer to forecast and be prepared for the future.

o Improved customer relationship:

Loyalty points , discounts , special privilege offers , customer feedback , etc all have led to develop better customer relationship.

C. ECOLOGY :

o Demand for more eco friendly apparel :

A new survey shows consumers want to buy more eco-friendly apparel, but have trouble finding it. This has an immediate impact on the product line & generate requirement to produce/supply more & more eco friendly apparel.

There has been a significant increase over the past few years in the use of eco-labels, i.e. environmental labels attached to a variety of products to attract the attention of consumers about the environmentally positive features of the products. Generally these labels are voluntary and mostly used for the promotion of the products on the basis of their environmentally friendly characteristics. In the case of textiles and clothing there are for the time being no eco-labels the use of which has been enforced by mandatory rules.

o Carbon Footprint reduction trends :

As regulatory frameworks on businesses around permissible carbon emission limits and carbon trading are getting strengthened around the globe, Apparel industries have to take proactive initiatives to record their carbon emissions and devise ways to reduce the same. This may result in increase in the energy & raw material prices for the industry

o Recycling :

Now a days companies are recycling textiles that have been discarded by consumers, retailers or charitable organizations, which undergo a discriminating process of sorting, grading and separation into waste-free products suitable for reuse. This may force to companies to adopt new manufacturing process.

D. POLITICAL :The political environment is perhaps among the least predictable elements in the business environment. The political factors affecting business are often given a lot of importance. Several aspects of government policy can affect business. All firms must follow the law.

o Tax Policy :  

Tax structures set by govt could be an example of a political element and this impact the industry directly

o Trade regulations :

This is probably the single most important factor influencing this industry. Since the apparel industry is labor sensitive, it is exposed to overseas competition from nation where their employees receive much lower wages

o Ending of import Quotas :

The ending of import quotas of textile creates an advantage for retailers who rely on outsourcing but it is a disadvantage for clothing manufacturers

o Political instability in foreign partner country

Company may also create problem in procurement of raw Material like Oil,Gas etc if there is political instability in business partner country.

o FDI in retail sector

Govt’s stand on FDI in retail sector directly effects the apparel business. If the FDI is allowed, the sales channel will increase, which will result into more penetration in the market.

E. LEGAL:

Everyone hopes that their business goes like they wish. It is not that easy to shape a business. The legal limits and regulations avert negative behaviours. These elements also increase the cost in many industries. To operate legally in the environment, it must follow the laws. The business should focus on health, safety, employment and even competition. There are many other factors which you should watch. To ensure compliance, you need to check on new legal requirements. The legal factors affecting the Apparel industry are:

o Employment laws - like labour laws (Restrictive labour regulations prevent firms

from making the required adjustments to their inputs in response to shocks to demand and technology.)

o Environmental & safety regulations - SAS (Social Accountability standards) -

influences textile industry. SAS is nothing but measures to reduce the pollution and potential health hazards originating from textile industry.

o Tax Anti Avoidance policy : Textile industry needs to follow these legal terms in

order to run business successfully without any hiccups from legal sideo Competition regulations

F. ETHICAL:

This E in STEEPLE refers to the range of social values which shape business behaviour. Ethical values are basically what are morally right and morally acceptable. Ethical fashion can be defined as the production of textile items with a conscience. The world of fashion may be stylish, glamorous and exciting, but its impact on environment is worsening. The concept of ethical fashion is old; however, it is gaining more and more popularity in the modern times. As awareness about environment conservation, cruelty to animals and ethical issues in business is rising, fashion brands are also increasingly adopting ethical means.

Employee Safety & Recognition:

o The clothing industry, both domestic and international, must abide by appropriate safety

measures to ensure that employees are treated in an ethical and moral manner. o The Occupational Safety and Health Administration has extensive guidelines and an

analysis of the clothing industry with regards to machine operation, ergonomics, hazardous substances, noise, heat stress, exposure to cotton dust and dye safety.

o There are numerous reports of workers being forced to work long hours for desperately

low pay, dangerous and unhealthy working conditions, female workers being sexually exploited, etc.

o Designers often use ethnic identities and native cultures as a source of inspiration and

branding - frequently without giving credit or acknowledgment to the respective cultural traditions or artisans.

o Some ethical designers, on the other hand integrate crafts people and artisans into the

design process, providing them with recognition and compensation for their craft. In effect, they become collaborators with the designer rather than labourers.

o This allows the designer to benefit from their knowledge about fibres, fabrics and

techniques while providing timely market feedback to the artisans about their work

Corporate Social Responsibility:

With the concept of social responsibility gaining ground, corporates all over the world are recognizing the importance of environment protection and ethical business. Fashion houses are no exception. More and more fashion designers and textile producers are striving to produce goods that do not harm the environment and are cruelty-free. Ethical issues in fashion are emerging day by day.

There are, nonetheless, several ethical principles that are important for businesses to implement. Failing to implement these principles may hurt your business. These ethical principles include a commitment to managing finances in a responsible way, to avoid fraud and misrepresentation in your operations, to treat employees and customers with respect and dignity, and to give back to the community in which you are located. This last point is extremely important for small businesses. Investing in local non-profit organizations, school groups or community-service projects will increase your brand

recognition in the community and will, if done right, bring in new customers to your business. It's a win-win situation: You build goodwill in the community and you simultaneously market your products and services. Business ethics can thus be a fruitful venture for small business owners who are willing to take the time to incorporate ethical principles with care and patience.

Going Green:

Synthetic fibres are more difficult to dye than natural fibres. Manufacturers add heavy metals and toxic compounds to the water to help the dyes cling to these inorganic fabrics. This creates pollution in the form of runoff to lakes, rivers and oceans. With concerns over this pollution, some companies have begun to use more environmentally friendly products. Some companies also use recycled synthetic fibers like polyester and plastic bags in their products in an effort to keep non-biodegradable items out of landfills. Exploitation of animals often goes hand in hand with intensive farming practices that damage the environment as a whole.

Ethical Eco-fashion clothing:

With the eco-fashion industry still in its infancy, the main responsibility at the moment lies with clothes manufacturers and fashion designers, who need to start using sustainable materials and processes. Now-a-days eco fashion clothes are being manufactured by:

Products made by using organic raw materials, such as cotton grown without pesticides and silk made by worms fed on organic trees.

Production process should not involve the use of harmful chemicals and bleaches to colour fabrics

Products are often made from recycled and reused textiles. High-quality garments can be made from second-hand clothes and even recycled plastic bottles

Products come from fair trade - the people who make them are paid a fair price and have decent working conditions.

SWOT ANALYSIS

Brand : ZARA

A. STRENGTH:

o Brand Image – Zara is a popular clothing brand. It has a well-established brand name worldwide.

o Global outreach - Zara is part of Spanish group Inditex (biggest retailer in the world) which is expanded worldwide in 77 countries with 5000 stores. Zara has about 74 stores all over the world.

o Strong & seamless distribution channels - Zara’s distribution channel is expensive but very strong and highly responsive which gives them a highly competitive advantage. Its distribution network works mainly by air planes & trucks rather than trains. They ship to deliver twice a week, by this system; they have achieved 98.9% accuracy in the distribution process. Unlike other retailers they handle all their processes as well as follow Just in Time system (Value Chain Management)

o Vertical Integration: Zara apparel chain works differently than the traditional retailer. Traditional apparel retailers generally outsource all of their productions while Zara manages all design, warehousing, distribution and logistics function itself. It has built 14 highly automated Spanish factories, where robots work around the clock, cutting & dyeing fabrics and creating unfinished products.

Due to the vertical integration it has the following advantages:o Cost is reduced as no channel is outsourcedo Avoid conflicts emerging from different channelso Swift, efficient and effective production & distribution

o Spot Emerging trend: Zara has pull strategy rather than forecasting. Designers walk around the world to pick the latest trends. They have a fast changing collection. Also, based on the inventory, sales and customer feedback, the items are produced as per the customer’s choice rather than mere designer’s creativity. Zara’s approach to design is closely linked to its customers.

o High fashion at affordable pricing – Zara provides its customers with fashionable garments at affordable pricing to undercut its rivals.

o Target Market: Vast market from men to women and from teens to adults. They also vary from casual to official wear.

B. WEAKNESS:

o Recession or Economic Downturn:A loss of Job or decrease in income will have a direct income on the clothes a person buys especially if the clothes are luxury products as is the case with ZARA. Given that clothing is a secondary requirement of man, any person would first look towards clothing at the time of cost cutting and if the clothing is a luxury item then the person would tend to downgrade and move to a more affordable brand.

o Cheaper copies available in the market:

Copies of the clothes and bags designed by ZARA are easily available in the grey market and local flea markets at cheaper prices. A thriving industry also known as the ‘FIRST COPY’ Industry exists not just in India but globally where most of the copied goods of ZARA and other similar luxury brands are manufactured in China and sold at cheaper prices.

o Not suitable for middle aged ( 40’s and 50’s ) section of the market or for heavier

individuals:ZARA is not considered an ideal brand for middle aged men and women in their 40’s and 50’s or even by people who tend to be on the heavier side in terms of body weight. This is a big disadvantage as this segment could have high purchasing power. It is usually people in that age group that occupy higher posts in organizations and also tend to forgo fitness. Losing out on this market is a definitely qualifies as a weakness.

o Low presence in Tier 2 and Tier 3 cities:

With a decade of high growth, India’s tier 2 and Tier 3 cities have several High Net worth Individuals with high purchasing power and a heavy attraction for Luxury brands. ZARA has low presence in smaller cities and towns of India which causes it to lose out on this market.

o Higher Duties make Clothing expensive:

With high taxes and duties, the prices of these goods rise significantly making them loose out on consumers.

o No Advertisements Strategy :

Although one can say luxury brands do not need heavy advertising on account of being well established, if brands like Mercedes and Audi can use advertisements to draw the market towards themselves over competitors ZARA could definitely do the same.

C. OPPORTUNITIES :

o Zara can increase their presence and penetration in the online market by tying up with the established online shopping websites

o They can increase their flagships and store density in the markets with lower online markets

o Zara can drive the franchise business in the emerging markets by tying up

o with key business partners and getting into joint ventures with established retails

o Zara can penetrate into secondary cities in developing countries

o Zara has opportunity to improve the business by market segmentation; bydividing the customers by establishing small shops which will also reducemaintenance cost

o Based on their brand presence they can penetrate into segments likesportswear.

o Zara can penetrate to clothing segments for toddlers and kids

D. THREATS :

o Increase in Euro Rate : An increase in Euro rate will increase the consumer selling price, consequently Zara may lose price advantage against relative competitors

o No expertise in JV : Sclaing its operation may require joint – ventures and acquiring some smaller chains also. In a 50:50 joint venture, it is very difficult for Zara to impose its business model to the other partner. In this case, we have already Zara’s joint venture dissolving on a couple of occasions.

o Rigid Promotion Strategic : With changing time, Advertisement is becoming an important part of the business and it reflects directly to the sales. Zara's in-store advertisement model may not work going forward.

o Manufacturing Base in Spain many become expensive

o “Make In India” Policy : Government is initiating to set up textile hubs in various parts of the country to reduce the fiscal/trade deficit. If it becomes successful, It may have direct impact on Zara as it will become uncompetitive wrt price & delivery time.

o Changing consumer Sentiments : If Consumers starts preferring domestic produced clothes in order to promote Indian manufacturing then it may affect Zara.

o Possible Immitation of Goods

Using Ansoff matrix analyze ZARA

A. Market penetration strategy

How does ZARA use intensive growth strategies to increase its sales? The first step is market penetration strategy.

ZARA encouraged its current customers to buy more. This work when ZARA noticed major weaknesses in competitors’ product or marketing programs.For example, compared with Swedish retailer Hennes& Mauritz (H&M), ZARA moves fast. With an in-house design team based in La Coruña, Spain, and a tightly controlled factory and distribution network, the company says it can take a design from drawing board to store shelf in just two weeks. That lets ZARA introduce new items every week, which keeps customers coming back again and again to check out the latest styles. In contrast to ZARA, H&M uses a slightly different strategy. Around one quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories. As at ZARA, these items move quickly through the stores and are replaced often by fresh designs.

The secret to ZARA’s success is its control over almost every aspect of the supply chain, from design and production to its own worldwide distribution network. ZARA makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow –moving suppliers. New styles take shape in ZARA’s own design centers, supported by real-time sales data. New designs feed into ZARA manufacturing centers, which ship finished products directly to 450 ZARA stores in 30 countries, saving time, eliminating the need for warehouses, and keeping inventories low. Effective vertical integration makes ZARA faster, more flexible, and more efficient than international competitors such as Gap, Benetton, and H&M. ZARA can make a new line from start to finish in just three weeks, so a look seen on MTV can be in ZARA stores within a month, versus an industry average of nine months.

B. Market development strategy

How does ZARA use a market development strategy?First, it identified potential users groups in the current sales areas.For example, some customers believe that Gap is for highschoolers and college students. ZARA is timeless, classic and unique. In fact, it is a good idea to anaylze student ’s opinion on fashion. It is really a big market.Second, ZARA consider selling in new locations in new market.ZARA’s parent company, Inditex, got fastest growing clothing manufacturer in the world. ZARA, Inditex’s fastest growing division, turns its inventory twice as fast as major competitors, with an inventory-to-sales of 7% compared to an industry average of 14%.

C.Product development strategy : Management should also consider new- product possibilities. ZARA develop new features quickly because it has a fast development from concept to point of sale. On average, this takes 6 weeks. ZARA’s “affordable fashion” positioning clearly denotes that it’s not a luxury brand, its target customers are a great number of people that are eager to purchase fashion while quite sensitive to prices. They want to be different, unique. The relentless introduction of new products in small quantities at fast speed and at affordable prices seems to be the answer to the large scale customization requirements of the target customers.

ZARA also has super business teams which constantly monitor external developments – consumers on catwalks, at airports, shopping areas, sport events, movies and other events. It seems that ZARA, has some 200 of such teams traveling the world with the aim of discovering new fashion behavior and trends. This helps explain why ZARA’s team, which consists of passionate and able designers, experienced market specialists and procurement and production planners, is able to annually create approximately 40,000 new designs from which about 10, 000 are so quickly selected for and put into production.

Most important thing is, instead of more quantities per style, ZARA produces more styles, roughly 12,000 a year. Thus, even if a style sells out very quickly, there are new styles already waiting to take up the space.

D.Diversification strategy : Diversification growth makes sense when good opportunities can be found outside the present business. A good opportunity is one in which the industry is highly attractive and the company has the mix of business strengths to be successful.ZARA could seek new products that have technological or marketing synergies with existing product line, even though the new products themselves may appeal to a different group of customers. It might start a computer – tape or information technology aided manufacturing operation . for example, Once the team selects a prototype for production, the designers refine colors and textures on a computer-aided design system. If the item is to be made in one of ZARA's factories, they transmit the specs directly to the relevant cutting machines and other systems in that factory.

The constant flow of updated data mitigates the so-called bullwhip effect—the tendency of supply chains (and all open-loop information systems) to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations in factory orders after it's transmitted through wholesalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, ZARA lets them adjust 40 percent to 50 percent. In this way, ZARA avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.