Zara Project Report Part 01

8/10/2019 Zara Project Report Part 01

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MARKETING STRATEGY PROJECT

Part 1

Submitted By:

MirzaAdeelBaig

QasimNasir Butt

ArslanSarwar

Submitted To:

Sir.ArshadMahamood

ZARA INTRODUCTION:


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Zara is one of the biggest fashion clothing and accessories retailer founded by AmancioOrtega and RosaliaMera in 1975. It operates under the shadow of Inditex group alongwith Massimo Dutti, Bershka and Pull & Bear. Inditex group is one of the largest fashiondistributors with more than 4780 retail stores in 77 countries in Europ, Asia, USA and

Africa.

Currently Zara has 1751 retail stores worldwide with the annual revenue of $12 Billiondollars in year 2012.

The first store of Zara with the concept of fashion garments opened in central streetGalicia, Spain with the name of Zorba in 1975. The name Zorba is an aspiration ofclassic film Zorba the Geek but two blocks away there was a bar with the name ofZorba. Two totally different stores with the same names can confuse the consumers soone of the stores had to change their name. The Bar with the name of Zorba hadalready signed latter for this name so Ortega had to change their store name to Zara.

Zara started their first store with the concept of high end fashioned products at lowprice, the concept turnout to be great big success and Ortege started to open more Zarastores all over the Spain.

With the expanding business Ortega defines a new strategy for Zara in 1980s, Ortegahad worked and had changed the design, manufacturing and distribution process for theZara. The concept behind was that Ortega wants to reduce the manufacturing selling

lead time so as to lunch new design in minimum time on stores shelves. He named theconcept as instant fashion.

Furthermore from 1980 company start expanding to overseas they have lunched storesin Mexico, Greece, Portugal etc. It entered in USA in 1989.

Worldwide Zara has 1,751 stores. They annual revenue is of about $9 Billion plusit isvertically integrated means that their control start right from supply chain than designing,manufacturing and finally they got the control of their own distribution network with

which Zara supply their product worldwide.


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EXTERNAL ANALYSIS (PEST):

1. POLITICAL-LEGAL FORCES

As Zara normally opens stores in different countries of the world so to be

successful the political situation of different countries and also the parent companyshould be known.

The stability or instability of the laws have a big impact on the organizationsworking

Political climate of the countries also impacts the growth of specific organizationor business

Political interference in the businesses and organizations also impacts thedecisions related to moving to the specific countries

Policies related to the taxes are different for different countries which impactsthe decision of an organization related to entering that country for business

Restrictions of trade is another point that organizations always look into beforeentering to another area

POLITICAL FACTORS ANALYSIS GERMANY

Germany has become one of the major economic and political powers of the EuropeanUnion and is considered as historic leader in many cultural, theoretical and technicalfields.Germany has an area of 357,021 Sq. Km, and is consisted of sixteen estates with Berlinas largest city and capital of German federation. Germany is the most populous countryin European Union with population of about 82.2 million .New Germany rise after the revolution process started from 1918-1919 with World War-Iand Worked War-II in 1945 and its reunification in 1990.Now the Germany has becomeleader in many scientific and cultural fields.No doubt Germany witnessed significant economic and political instability but now it has

evolved into a Leader of the European Union. The political system of Germany is basedon Federation System. Political Environment is stable and steady for decades due to awidely technologically advanced Political Structure, is based on federal democracy .Despite of all facts and figures of political and economic stability, Germany has acontinuous economic division through the estate, since the country was divided for morethan four decades into East Germany and West Germany. The purchasing power is


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much stronger in the Western part of Germany as compare to that of people have inEast Germany. Although massive investments were made in the East Germany butt hispart of the country still has extremely high unemployment.Where as in Northwest Germany people have a purchasing power above average,

indicating opportunities for the ZARA in fashion industry on this market. The totalunemployment rate of 5.1percent (Men 5.4%, Women 4.7%) is expected to remain in2014, which will be lowest in 25 years data. After passing of only two decades to WorldWar- II, West Germany had developed as worlds richest nations, with privilegedcircumstances that have extended to all segments of society. Moreover, the economiccomposition of the country attracted foreign skilled labor to settle down and boosted theeconomy and industrial production at remarkable speed.

However, presently, the country is facing challenges like high numbers (almost 9%) offoreign settlers that have obtained German nationality along with the affects of globaleconomic recession on German market also. The Government is also trying to helpmarket with worth 80 Million bailout package to support market to recover fromrecession like infrastructural investments and tax relief.tax reliefs. The aim of the initiatives is to kick start economy and to stimulate a numberof areas to support an increased demand that will hopefully spring from this. Thefinancial and political initiatives mentioned before aim at the government Is also takinginitiatives for stimulation of society in a broader terms from economic and social point of

view. Also the revised federal policies are playing important role in recovering Germanmarket from recession aftershocks. However, the Political stability of Germany is thestrong positive factor when it comes to livelihood on the future for ZARA to plan itsbusiness in Germany.

2. ECONOMICAL

Type of economy (free economy or planned economy) impacts a lot on thedecision related to investments in different countries

Strength of the currency impacts the profits and loss of organizations working inthat country so exchange rate also impacts the decision of organizations toinvest

Inflation is another major factor that effects decisions of countries to enter in thecountry as it affects rate of interest, exchange rate, living cost etc.

Cost of labor also affects the profits and loss of organization and also decidesthat either entering in that country will be feasible of not


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ECONOMIC FACTORS FOR GERMANY

German market is considered as social market economy resulting into free enterprise

and competition based market with a high level of social services.Germany is comprised of worlds fifth largest economy; however, the country enteredinto the recession of 2009, the effects of recessions appeared in terms of highunemployment rate and decrease in consumer consumption power. But due togovernment policies and companies measurements the country is trying to meet therecession by products e.g. the companies through internal adjustments measures suchas by reducing working hours rather than workforce are trying to decreaseunemployment rate.

Due to recession, the German consumer behavior has changed, people attract towardsoff-season sales rather buying at full price but the consumers prefer to buy fashionedclothes, ZARA is considered as one of their favorite brands. The point of real worry isthat brand clothes especially designers outfits are losing their grounds.

By offering mid-season sales the ZARA can penetrate into the market due to the lowbuying power and recession after effects which are expected to recover in 2014completely.

3. SOCIO CULTURAL FORCES

The values and the attitude shared by the people in the country are importantfactor for businesses

Education and social mobility is another factor effecting the business to enter ina country

Population demographics also have an effect on decisions related to enteringanother country

Social factors of Germany

More than 90 percent of German population lives in cities, the ZARA fashion could havegood projections of distributing their products to a large part of the market. DevelopedWelfare system of federation is extremely benefitted to citizens for example pensionschemes, unemployment insurance, social assistance, health-care, accident- andlong-term care insurance. In presence of such social support from the government,Germans are focused on health and physical activities, resulting increased demand for


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sportswear, however due to external factors such as recession people are careful whilespending on their shopping. But the interesting factor is that the new Germangeneration is more attracted towards fashioned clothes as compare to old traditionaland classical outfits. Also the interest of consumers has increase in ecological friendly

clothes, and they prefer to buy fashioned clothes of the brands which fulfill their greenresponsibilities.

4. TECHNOLOGICAL FORCES

Advancement in the technology decides about the entry of some business inthe country

IT and infra-structure of country impacts the entry of external people in countryfor business

Technological factors of Germany

Being a part of European Union Germany has naturally hightechnological development.Majority of Germans collect information through internet. In this regard, vide internetadvertisements ZARA can attract large consumers. In German language website couldbe an idea to attract more customers, as majority of the German prefers to do businessdeals in their own language.

Also because of recent recession many consumers have turnedtowards online shoppinglooking for clothing at more affordable prices. As estimation almost 29 million ofGermans prefer onlineshopping andmorethan, 50,000 stores offer their onlineproducts.

An Eighteen percent growth of internet buyers is reported; the large part of youngGermans visit online stores whereas the old ones prefer to go market for shopping.

CONCLUSION OF PEST ANALYSIS

As a nation German always try to do different both from cultural point of view aswell as when they do business in the same way their sense of fashion is alsodifferent from rest of the Europe.

German those who live in Western part of the country has high purchasingpower, North West Germany has average buying power, due to this reasonZARA should focus in these two markets. This is also noticeablethat theGermans prefer shopping in sale seasons where clothes are discounted, butoffering mid-season sales ZARA can take advantage over market.


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ZARA can also take advantage of increased trend of internet users, especially

young German prefer to visit online stores which is also the target marketsegment of ZARA.

German fashion market is favorable for ZARA to distribute across the countrywith promise of care take of mother planet and environment friendly brand.

INTERNAL ANALYSIS:

Zaras mission statement is to be the environmental friendly company and also tocontribute to development of society and also wants to be the fast fashion company.

Main points in which Zara is above his competitors are below:

Vertical integration model Quick response to change in fashion High quality Short production lead time Toxic free products

From the point of view of physical, human and organizational resources, Zara is very

strong apparel brand which is also another reason of the success of this brand, somepoints are discussed below:

1. PHYSICAL RESOURCES

Perfect location of stores Normally Zara stores are located in the best places of the cities which allowsmaximum people to visit the store

Display The display of the Zara stores is much attractive and also the ambience is

maintained in each and every store

Up to date collection


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The collection present in the stored of Zara is up to the market trends and eventhey are the innovators in the fashion industry so they have the best collectionavailable in the stores

Integrated Information system

That they are using in the stores is another internal strength of the Zara Vertical integration Of Zara also helps in the efficient working of the brand

2. HUMAN RESOURCES

DesignersTo meet the requirements of the fashion market, Zara has a team ofprofessional designers that work on the new collections throughout the year

Professional EmployeesTo give best service to the customers Zara has trained employees having aprofessional attitude

3. ORGANIZATIONAL:

Clear vision and knowledge of the strategic goals Companys culture is much strong Structure of Zara is much flexible and managers of stores are also allowed tobe involved in the development of products

Effective communication between the stores and headquarter

4. Management Practices:

Being one of the fast fashion brand in the world is because of the visionarymanagement style of the founder of Zara, he had a view point that clothes should alsobe regarded as the perishable thing and people should consume immediately and rushfor the next. Zara has a strong management with a strong organizational culture

5. Vertical Integration Structure:

Zara has a vertically integrated structure that its competitors do not have because theothers rivals have to outsource all the production but Zara can also perform tasks in thein house units. Due to all this the production lead time of Zara is much better than thatof the other brands and it can quickly respond to the changes in the fashion

6. IT and Communication System:


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Zara has one of the best IT instruments and systems, online data for products,developments stocks is available to all relevant persons and one can easily get idea ofthe current position and performance of the company. Also the requirements of thedevelopments and sales strategy can also be checked from this data.

7. Distribution:

Zara has a very good logistic system and requires very less labor for the stackingand handling of the logistics. Due to the high efficiency of the logistic system theyare able to move goods to stores (European) within 24 hours. They also keepsthe stocks for very less time and focus on the strategy of finishing the inquiry asquick as possible. But issue related to the supply to other countries is very muchexpensive and this cost is transferred to the consumers in the form of highgarment pries.

8. Marketing and sales:Zara do not spend a lot of money on the advertising but focus mainly on the instore displays and also the store locations, which is also very much beneficial.Regular customers visit their shops regularly and due to the attractiveenvironment they are forced to purchase the goods.

SWOT ANALYSIS OF ZARA:

Strengths: Zara is overseas brand operating in 77 countries as USA, Europe, Asia and

Africa. The one of the major strength of Zara is their concept of Instant fashion as per

the article on Best Global brands 2010, Zara needs only two weeks time todesign any new product and bring it on the shelves while their competitors takes8 weeks for the complete process.

Zara production houses are in underdeveloped countries like Portugal, Pakistan,Bangladesh etc. it will help Zara to take advantage of low wage rates.

But Zara kept most of their production houses in Spain and Portugal wherewages are relatively lower than Western Europe with this they can takeadvantage of lower cost labor along with shorter lead time to bring new producton shelves to quickly respond customer demands according to a statement byLouis Vuitton Zara is Possibly the most innovative and devastating retailer in theworld.


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Zara is the only brand which is providing new trends in fashion with the highestturnover at low prices.

Zara has designers working innovatively compared to its competitors like GAP,H&M and others.

All of the Zara stores are owned by the company and its a vertically integratedstarts from designing of the product to their distribution.

As like Zaras competitors it doesnt do any advertisement for their product they just deliver their products directly to their customers by selling it on stores.Reference article the Secret of Zaras Success, Store Magazine.

Zara has highest product line due to their fastest turnover rate, each product inZara store has been replaced after two weeks.

With the fastest product turnover rate company has low inventory cost.

In a year Zara store in Spain being visited 17 times by their customers comparesto 3 times/year of their competitors according to article Zara a Spanish SuccessStory.

Weaknesses:

Due to the companys giant size in the retail industry, it could also count as itsweakness that if there would be any trouble in some part of business it would bevery difficult to control.

Zara try to provide a cutting edge products to their consumers, but normally it hasbeen seen that fashion industry is very volatile so more cutting edge designsmeans more riskier the product if fashion will change (Zara 2.0- Fashionindex.com).

Zara is reputed to develop and new design in the market but it would be riskier iftheir innovation gets stumble.

In inditex group Zaras share is of 80% which failure of this group c an put wholegroup into jeopardy.

Advertisement has been proven as the most efficient tool in the marketing which

can lift up your sales, Zaras policy of not doing advertisement for the promotionof their product if not work in coming future could hart their business of the wholegroup badly.

In Asian market most of the people belong to the low income scale group, sotrendy store like Zara which requires customer to visit their store with high


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turnover rate would not be possible in these countries. So Zara fast trendystrategy may not be workable in these countries.

Opportunities:

Being a part of Inditex group, Zara has opportunity to open new stores in differentcountries.

Zara has a great potential to invest more as they are already operating in 77countries so they knew the dynamics of each country.

People in counties like India, China are also getting toward high fashion so Zarahas opportunity to capture maximum share from these markets as well.

Threats:

H&M, GAP and Benetton which are the biggest threat for Zara. New entrants in market are also a threat for Zara. Increasing the labor and raw material cost in underdeveloped countries shrinking

down their profits margins. Zara is operating in 77 countries so any economic crisis would be great threat for

Zara. Zaras net cash flow is lower than its competitors because Zara has a huge

investment in real estate choosing prime locations in the market, introducing newproduct line in every two weeks.


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ZaraStretegicPosition

Barriers to entry: HIGHMajor barrier to enter in the

apparel market is the resources thatare needed to fulfil new fashion

requirements, the entry cost is alsohigh for this industry as a huge

investment is needed to enter themarket, due to the already presentgiants in the market achieveing a

better place is really tough

Threat of substitutes:MODERATE

The threat of substitute inthis case is not directly thealternative of the clothing

but is the other alternativesavailable in the market thatare offered by other brands

Zara is an exlusive fashionbrand and their product has

it own uniqueness, so inmarket zara has morderate

threat of substitutes.

Buyer power: MODERATE Because of the brand identity,

diffrectiation in the product offered andalso the quality the buyer power is lessbut due to high price and availability of

substitute for the same product the buyerhave strong hold over the brand so averall

the buyer power is moderate

Supplier power: LOW Supplier power against Zara is much low asthere are a lot of producers that are willingto work with them due to the good image

and its Zara's choice to select theproducer, contract based working also

lowers the supplier power. Zara only workswith the suppliers that are corporately

responsible and can shift the business iffound any thing against this

Rivalry: HIGHZara's direct rivals are H&M,

Esprit, Benetton and

switching cost is very low socustomers can easily switchthe brand, another factor is

that the rival brands are alsomuch aggressive in productdevelopment which is also a

threat for Zara


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Marketing Objectives:Zara Watches:

Brief Description:

Zara wrist w atches are high end fashion watches for both Mens and Womens. Thesewatches are specifically designed for trendy fashion followers which enhance customerslook with its vibrant designs in blocking colors because all over the world and speciallyfor the latest fashion followers appeal and look of wrist watch is way more importantthan just telling time as in todays modern world with modern gadgets like smart phones,laptops you can look for time anywhere easily, the concept of wrist watches is morefashion orientated. A watch rapped on the wrist is a sign of class, taste and punctuality.These wrist watches would give and off beat twist to Zara fashion following customers.

These watches would be offered in vibrant analog designs with contains up to datemechanical movement mechanisms in a way that these watches could be pass on tothe generations.


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Zara watches SMART Objectives:

Objectives for profitabilityo To attain 15-20% return on capital.

Objectives for Market Shareo To acquire around 10% market share of existing brands like, Rolex, Calvin clan,

and Quartz.

Objectives for Promotionalo As product is in initial stage of its development, so promotion will be done by

ATL mode mostly TV advertisement to create aura of our brands in the mind of

Zara consumers.

Objectives for Growtho To increase the brand awareness in the mind of consumers till 50% in next 6

months.

Objectives for Brandingo To build strong brand image by providing quality product well on time.o Follow up on every aspect related to customer and try to resolve it within 24

hours.

Marketing Plan:

Target Market Segmentation:

Selecting the target market is the 1 st step in the lunch of any new product. For Zara watches the

criteria of providing marketing segmentation should provide the following benefits:

Zara watches can focus more on target customer for market penetration.

It will be helpful to use our energy to satisfy the needs of target niche market.

Zara watches can grow by accelerate its functionalities for the niche market.

The process of market segmentation for iPrint can help:o Explore the existing want for the current and potential marketo Explore differentiate among the segments for characteristicso Explore the latent of the segments and how fine they are at present being happy.

Characteristics of useful segments can also help iPrint to:o Be measurable.


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o Be accessibleo Be a large enough to be profitable.

Zara Project Report Part 01

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Transcript of Zara Project Report Part 01