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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Introduction

the company began in the textiles industry in 1963. started into business as a dressmaker , Zara opens its first store in the centre of La Coruña, Spain, after 12 years of work by Amancio Ortega Gaona as a textiles maker. Zara's approach to fashion is a success with the public, which drives its expansion materialising in nine new store openings in Spain's biggest cities. Zara's first garment factories, make their home in Arteixo . GOA was the company's first head office. Zara begins to sell its fashions online in the US and Japan.

Zara strengthens its expansion throughout all the geographical areas with the integrated growth of its online . Flagship stores of all the commercial brands keep opening and expanding, e-commerce is launched in new markets .

Internal and external key factors for Zara:

internal

External

1.Economic forces

2.Social, cultural, demographic, and natural environment forces

3.Political, governmental, and legal forces

4.Technological forces

5.Competitive forces

Porters Five Forces

Porters Five Forces allows us to look at the five forces which help us determine the competitive intensity and the attractiveness of a market.

Porters Five Forces Analysis

The threat of competitors

Zara is facing a lot of competition in the market. There are a large number of competitors in the market, such as H & M, Benetton, Gap, and other world-known brands and with the presence of such a high level of competition in making it very difficult for everyone as they seek to get the consumer confidence .The biggest problem is that because of the large number of competitors and lower growth rate due to the presence of many manufacturers in the market has reached its peak in the apparel industry, which makes it very difficult to stay in the industry and reduce the competition circuit. And provide many choices for customers presence of many brands in the market. They are also very fickle minded and base their buying habits on the basis of new trends. You will only buy based on price and brand recognition, and this is the reason that manufacturers keep changing what they do, and come up with new ways to win customers. The manufacture of new goods costs are too high and that it is not easy to buy raw materials and

for this reason are the ones who have the resources and ability to do so is able to survive within the market.

Threat of New Entrants

There is always the threat of new entrants but then the risk is not so much as Zara already has a huge presence in most parts of the world. The barriers for entry for distribution are quite low in Spain New entrants will have it easy as the cost of distribution is quite low as they only need to rent a shop and need a bit of capital to start out. However when it comes to manufacturing then the barriers of entry are really high mainly due to the fact that it requires a huge investment to get started within the market.

Substitutes

There is no threat of substitutes as it is a basic necessity for everyone.

Customer's Bargaining Power

Customers have varying levels of bargaining power as they can decide what they want. Customers are quite fickle when it comes to buying clothes. However the good thing is that each customer has a love purchase volume and that means that even if some tend to change their brand there will still be some who will buy Zara. It is not an item like a burger or a snack which is available easily anywhere for a low price. The good thing about the clothing business is that there is no risk nonpayment because customers pay for clothes during purchase.

Supplier Negotiation Power

There are too many suppliers in the market which is one reason why the suppliers don't have much negotiating power. The fact that Zara procures or makes most of the stuff itself is also another factor which doesn't work in the suppliers favor. If the supplier decides to cut down the supplies the manufacturer can easily go to another manufacturer.

PEST Analysis

The PEST analysis is a study of the environment before a company begins its marketing process. It is a study of the external macro environment. It stands for "Political, Economic, Social, and Technological analysis" and is an environmental scanning component of strategic management

Policy - and political factors affecting Zara is when the government intervenes in the economy, and comes with the laws that change followed the work of the roads. The government can easily change its policy and by extension all of the ways in which it operates in the country change. It can lead to change laws to radical changes, such as changing interest rates. So seek permanently Zara to recognize the entire system and always be ready for any potential problems that could face from the government due to a change in policy.

Economic - economic factors come in commercial traffic as they relate to factors such as interest rates, tax changes, economic growth, inflation and exchange rates, which have the potential to create a lot of problems in the future. There are different levels of duties and tariffs in different countries, causing prices of different products in different countries. The prices vary based on the country of origin and this is what works Zara to be taken into account.

Social - and if there are changes in social trends will have a significant impact on the demand for the products Zara and provide individuals and ready to work. But this is not likely to happen because Zara is working on specialized products. It focuses on the huge market and make different kinds of products so it is unlikely that there will be social transformation in this segment. However, the company still need to work on the various trends and make sure it is updated with the times so that they can satisfy customers and meet the demands of multiple demographic composition.

Technology - because of advances in technology companies seeking Zara to ensure that they keep abreast of the technological advances. And already it owns is the latest innovative technologies in everything. The more advanced technology can be updated whenever quality. Zara has invested in technology it has to keep the difference because if they do not, their competitors will be getting a head start on this.

Ansoff matrix analysis :

Market penetration

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.

 ZARA moves fast. With an house design team , and a tightly controlled factory and distribution network, Zara is characterized in that it was able to take a design fee to shop rack until just two weeks of implementation. ZARA also allows the introduction of new designs every week, which keeps customers and create have the desire to come back again to shop and again to check out the latest styles.

ZARA's success is due to the presence of at least half of its factories in Europe, where wages are several times higher than in Asia and Africa. But to maintain its turnover a company must reduce shipping time to a minimum. It also helps fast fashion approach, which is also followed by Zara reduce its exposure to fashion demise.

The secret to your success is ZARA control over almost every aspect of the supply chain, from design and production to worldwide distribution network of its own. ZARA operates 40 percent of its own fabrics, more than half the clothes and produced their own, new methods to crystallize in their own design centers to ZARA, and the support of the sales data in real time. New designs ZARA feed manufacturing centers, which reaches its final form directly to ZARA 450 stores in 30 countries, saving time, eliminating the need for warehouses, and maintain low inventories. Integrated manufacturing process effectively makes ZARA faster and more flexible, and more efficient than international competitors. ZARA can produce a new line from start to finish in just three weeks.

Market development

Zara is working on the first market development, and identifying potential users group in the current sales areas. This is a good idea to analyze student opinion on fashion, ZARA pursues a classic character unique.

Second, ZARA is considering the idea of marketing and sales at new locations in new markets.

ZARA parent company, and Inditex, got the title of the fastest growing in the world as a manufacturer of clothes, and performs twice as fast as its stockpile of major competitors, with the inventory-to-sales increased by 7% compared to the industry average of 14%. Profitability in European operations (15%) higher than fifty percent of that of major competitors. Of the Annual Report for Inditex, "the researcher that ZARA focused on advanced fashion market, for example, has 20 stores in Belgium, and 48 stores in Portugal, and 98 stores in France. Compared with 7 stores in China, 3 shops in Thailand.

Product development

Leaders should consider the possibilities of new technology product. ZARA is working to develop new features quickly because of this rapid evolution from a mere concept turns into a quick sale points. This may take an average of six weeks. ZARA seeks to provide affordable fashion because the larger the base of customers prefer to buy fashion, but with a high sensitivity of prices. So Zara wanted to be different, unique. And it sought to be provided for new products and quantities as much as high-speed and affordable for a wide turnout of target customers.

ZARA also has a different work teams continuously monitors external developments - consumers and shopping areas, sporting events, movies and other events. It seems that ZARA, has more than 200 teams to travel the world in order to discover new fashion. ZARA, which helps the team, which consists of capable and competent in the markets experienced procurement and production as well as planners, designers are able to annually provide nearly 40,000 new designs which enters about 10 000 into production quickly.

The most important thing is to approach Zara, rather than produce more quantities of each design, ZARA produce more different styles designs, nearly 12,000 each year. It has many new styles already.

diversification

Diversity is a good chance to be found out when the present framework. ZARA and seek when making new products that keep pace with technological developments and marketing with the existing production lines. You may begin to help the manufacturing process. Where the team chooses a model of production, and designers choose colors and do the design with the help of a computer system.

The continued payment of modernization of inflation eases small disturbances, such as changes in the retail orders, it can lead to wide variations in factory orders through wholesalers and distributors. In the industry. In this way, ZARA to avoid excessive cost of production and sales later, minimizing  Spreading in the industry.

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