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Essay: Exploring Zara’s Expansion Performance, Fast Fashion and History

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I. Over view of Zara and its history

The international fashion company Zara is the flagship store of Inditex, one of the world’s largest distribution group. Their unique business model includes design, production, distribution and sales through vast retail network (Zara, 2010).

Its major priorities are bringing attractive and responsible fashion and improve the quality of customer service. Over the years, Zara has remained true to its core values of beauty, clarity, functionality and sustainability. To foster a very close relationship with its customers, Zara’s designers respond instinctively to their changing needs, react to the latest trends and constant feedback received across its Woman, Man and Kids collections, and launch new ideas at the right place and time. Further enhancing the quality of customer service, Zara stores use Radio Frequency Identification Technology (RFID), a state of the art tracking system, to locate and make in demand garments instantly available to customers.

The brand’s eco-stores firm emphasis on sustainability has formed a range of new and innovative projects, such as the installation of clothing recycling containers in-store and a scheme providing for free at-home collection of used garments to complement the delivery of online orders (Inditex, n.d.).

As indicated in the company website, Zara opened its first store in the Spanish coastal city of A Coruña in 1975 by Amancio Ortega, who also founded Inditex. Its approach to fashion was a success after one year. It brought fashion and customer closer by making products reasonably priced. In 1977, GOA and Samlor, Zara’s first garment factories were built on the outskirts of A Coruña. In that same year, its main office in Artexio, Spain was constructed and still remains to be up to this day. Six years later, the company branched out to nine stores in some of the most prestigious shopping districts across Spain’s biggest cities. A year later, its first logistics centre opened. In 1988, Zara went international and its first new market was in Porto, Portugal. The next year, it went transatlantic and opened a store in New York, US. The following year, Zara brought its fashion to Paris, France. In 1992, Mexico got its first Zara store. The next year, Zara entered the Greek market. It became the sixth international market. The following year, Zara came to Belgium and Sweden. In 1995, it began operation in Malta and launched its casual Trafaluc line for women. The next year, Zara entered the Cypriot market and the following year expanded to Norway and Israel. By that time, it had more than 600 stores in 14 markets. At the start of the new millennium, the headquarters in Arteixo was expanded to accommodate the company’s rapid growth. Four more markets were added namely, Andorra, Austria, Denmark and Qatar. In 2002, the launch of ‘for&from' social inclusion programme began to provide labour integration for people with disabilities. A new distribution centre was built in Zaragoza, Spain and new stores were opened in Finland, Switzerland, El Salvador, the Dominican Republic and Singapore.  The next year, Zara Home was created. This home and interiors brand first stores entered the Slovenian, Slovakian, Russian and Malaysian markets. The following year, it reached the 2,000 store milestone when it opened in Hong Kong. The brand has spanned 56 markets across Europe, the Americas, Asia and Africa and has opened inaugural stores in Morocco, Estonia, Latvia, Romania, Hungary, Lithuania and Panama. In 2006, the Environmental Strategic Plan was developed. It formalised the company’s aim to ensure that business operations were environmentally responsible and sustainable. That same year, Serbia, continental China and Tunisia became part of the global stores map. The next year, Zarahome.com became the first online store. Two new distribution centers were opened near Madrid and Léon in Spain. Zara’s 1,000th store opened in Florence. The following year, Zara’s first highly eco-efficient store, Uterqüe (which specializes in fashion accessories), was launched in Athens. In 2009, a second eco-store in Barcelona and a distribution centre in Palafolls were opened. Coverage in China were deepened. The next year, Zara went online and the 5,000th store opened in Rome. The following year, Zara began selling its products online in the US and Japan and has achieved presence in 82 markets. In 2012, the 6,000 stores milestone was reached. That same year, the flagship eco-store in London was inaugurated. Zara’s new image was launched in New York. A state of the art logistics centre was built in Tordera, Barcelona, the first of its kind in Spain to be granted LEED gold environmental rating. The next year, new brand images in flagship stores were opened. The following year, a new logistics centre in Cabanillas (Spain) was established and a new Technological Center was inaugurated. The company continued to integrate the expansion of both its online and offline capacity, with new flagship stores, extension and renovation of existing facilities and entrance into new markets. In 2015, the 7,000 stores milestone was reached and the company’s employees were made part of a special profit-sharing plan. Currently,  Zara has 2,236 stores in 94 markets – 45 of them online – in all five continents (Inditex, n.d.).

II. ZARA’s business level strategy

1. In Priview ZARA’s main characteristics

•   The Fast Fashion Industry

•   Extenal Analysis

•   Internal Analysis

•   Financials

•   Expansion Performance

•   Recommendations

2. The Growth or Expansion

 1963 Amancio Ortega started a small company in Spain that manufactured women’s pajamas and lingerie products for garment wholesalers.

 1980-1981 , 1988-1990 Inditex entered 29 countries in Europe, the Americas and Asia. 11.01.XX Zara launched online stores in the US and Asia.

 1990-2000 – 2011 The first overseas Zara store opened in Porto, Portugal, followed shortly by New York City in 1989 and Paris in 1990.

 2016 Inditex is in 88 markets in all five continents, with upwards of 7,000 stores. Today, ZARA counts 2,085 stores in 88 markets and 26 online markets. 1975 The first Zara retail shop in the centre of La Coruña, Spain. 6 more stores until 1979.

3. ZARA Main Characteristics

 A brilliant, cheap, short supply chain that delivers similar to luxury brands fashion at a much lower price.

 The pioneer in fast fashion industry & the third largest brand in the garment industry.

 For Zara speed and responsiveness are more important than cost. ZARA the largest brand of Inditex product lines (Women, Men, Child) 20 b. euro total sales 2015 64% of Inditex total sales 88 markets worlwide 2085 stores 26 online markets 450 mil. items produced every year >10,000 employees 500 Designers 1592 suppliers worldwide 2 deliveries per week to stores Sustainable Management No Advertising Consumer feedback "Now-or-never" choice for Shoppers Main Characteristics

4. The First Fashion Industry

The Fast Fashion Industry Main characteristics The term ‘Fast Fashion’ refers to a phenomenon in the fashion industry whereby production processes are expedited in order to get new trends to the market as quickly and cheaply as possible.  

 Short Life-Cycles – the product is often short-lived

 High Volatility – demand for these products is rarely stable

 Low Predictability – difficult to forecast total demand

 High Impulse Purchasing – many buying decisions by consumers for these products are made at the point of purchase.

5. Competitor Analysis

H&M has been quick to internationalize allowing the company to gain sales in countries outside its native Sweden, also is more attentive in terms of entering new markets and tends to enter one country at a time, as opposed to Zara who multitasks globally. Builds distribution centers in their international locations in order to cut down lead times and potential logistics costs, H&M outsources production to a network of more than 500 suppliers.

 MANGO is known for its excellent business model and supply chain management, has approximately the same number of stores in the same number of countries worldwide, like Zara. The products of MANGO are also similar to Zara’s in style, pricing and quality, However, Mango is very different from Zara in organizational strategy as MANGO  is based on a franchising system, and in marketing strategy, relying heavily on advertising campaigns. Gap, has a world-wide presence such as Zara. It is known for the American style culture and the majority of its stores are located in the US. Gap is identified as a higher quality but more expensive retailer. It is also based on a franchising system. Gap has introduced web- based stores and it is investing heavily in online sales.

  Competitor Analysis BENETTON emphasized brightly colored knitwear. It achieved prominence in the 1980s and 1990s for its controversial advertising and as a network organization that outsourced activities that were labor-intensive or scale-insensitive to subcontractors. But BENETTON actually invested relatively heavily in controlling other production activities. Uniqlo was originally founded in 1949 in Japan. Its business model is based on that of The Gap. Uniqlo manufactures its clothing within Japan. UNIQLO distribution channels are concentrated in Japan with over 700 Uniqlo stores. The designs that Uniqlo creates tend to be more simplistic and practical than those sold by Zara and H&M. A UK retailer, focusing on lower class income targeting mainly women’s fashion clothing. Its marketing campaigns focusing on discount offers. Extended use of economies of scale as the strategy is to buy huge quantities

6. Differentiation

7.  Value Chain Analysis Zara a vertically integrated retailer

 RAW MATERIALS MANUFACTURING SUPPLIERS DISTRIBUTION STORES CONSUMERS Suppliers are all close to their factories, so Zara can order on a need- basis. Zara buys fabric in only 4 different colours.

 Designs and cuts taking place in- house. About 50% of their products are manufactured in Spain, 25% comes from Europe, and the remaining fraction is produced in locations in Asia and Africa.

 The Products are distributed in small batches.Frequent shipments.Trucks leave the orders to the stores at specific times twice a week. Zara’s stores are company-owned, except where local legislation forbids foreigner -owned business.

 In those cases, zara franchises the stores. Managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. That data is instantly funneled back to Zara’s designers who begin sketching on the spot. WAREHOUSING The whole production is received and warehoused in the logistics centers in Spain. The main categorization is happened in Spain.

 Materials and fabrics are kept in warehouses without exact colours or prints, due to be able to react quickly to market changes

8. Resources Prime Location

 The stores are always located in prime locations of the city. Attractive Window Displays- Zara rely so much on its physical store-experience Exclusive and Trendy designs- Zara is able to provide designs that their customer love. Sophisticated IT System- Information from stores to headquarters. What the customers like, dislike etc.

 Trained designers – Zara cooperates with many new designers, they give training to them in order to produce in shorter load- time and also adaptive enough to produce with materials/fabrics that are available.

 Caring Employees – They train their employees to prove better service (Having a sense of belonging to the store and hard- working) Market-oriented Strategy – The customer is the King. By concentrating on customer’s demand, they make them loyal. Staff-education – Concentration on customer-service.

 Eco-friendly- Brinks positive response from the society. Production strategy- They design with the available materials/fabrics (reduced lead time & minimize costs) Value chain – Lead time of 2 weeks Physical Human Organizational

9. Capablities

 Capabilities Functional Areas Capabilities

 Distribution – Solid Distribution Network (enables the company to deliver goods within 24 hours)

 Logistics -Centralized logistics (Zara sticks to a deep, predictable and fast rhythm, based around order fulfillment to stores.

 Human Resources – Trained staff with concentration on customer-service – Good design teams, who approach to match quick and creative design with information coming in from the sales staff.

 Management Informations System – Highly vertical-integrated and centralized – PDAs to gather immediate customer input and feedback and directly send it to the headquarters. POS system show how garments rank in sales in different areas-countries.

 Marketing – A successfully worldwide famous brand. – Direct communication with consumers (No advertising)

 Management – Synergy between business and operations strategy -Good supply chain management

 Manufacturing -Just-in-time (JIT) production (reduces the amount of inventory available, lowering Zara‘s storage cost).

 Research & Developement – Ability to envision the future clothing

10. Outsourcing

Outsourcing According to the Economist, 2012: “…Other fashion firms have their clothes made in China. This is cheap, but managing a long supply chain is hard. By the time a boat has sailed halfway round the world, hemlines may have risen an inch and its cargo will be as popular as geriatric haddock. Inditex, by contrast, sources just over half of its products from Spain, Portugal and Morocco. This costs more. But because its supply chain is short, Inditex can react quickly to new trends. Instead of betting on tomorrow’s hot look, Zara can wait to see what customers are actually buying—and make that. While others are stuck with unwanted stock, Inditex sells at full prices.” The original choice of not outsourcing deprives Zara of low production costs but makes its innovative value proposition possible. Source:“Fashion forward: Zara, Spain’s most successful brand, is trying to go global”, The Economist, Mar 24th 2012

11. Financial Source

Financials Source: Inditex and H&M Annual Reports 2011-2015 Source: Inditex and H&M Annual Reports 2011-2015

12. Financial Cont

 Financials cont. Source: Inditex and H&M Annual Reports 2011-2015 Source: Inditex and H&M Annual Reports 2011-2015

13. Expansion Performance

Expansion performance Source: Inditex and H&M Annual Reports 2011-2015 Source: Inditex and H&M Annual Reports 2011-2015

III. ZARA’s corporate level strategy

– Because 100% of Zara’s profit comes from Fashion, we can easily see that Zara is implementing Single-bussiness strategy. •Single business strategy – corporate-level strategy in which the firm generates 95 percent or more of its sales revenue from its core business area.

1. The Advantages of Single Business Strategy

– Using a single strategic business strategy cans benefits your subordinates, management staff, and the relationship between your company's departments.

– Integrating Multiple Departments

A single business strategy can help Zara integrate different departments and workforce, including your sales force, IT professionals, and management staff. This allows Zara to act as a more cohesive entity and achieve higher levels of productivity, because all departments of the company are working on the same goals and objectives in the same involved in the specific standards of the department. This can also alleviate the sense of competition among the various workforce in Zara and create a lot of team spirit.

– Strategic focus is higher

Take advantage of Zara's efforts for a single business strategy that allows the management team to create a more comprehensive plan. The company can achieve this level of planning because your management staff only has a vicious strategy to focus their efforts. According to Rex C. Mitchell, a business professor at California State University Northridge, "There is little ambiguity about the organization's focus and direction with a single business strategy. This enables employees to gain knowledge of the company's policies and procedures, creating a larger workforce over time. "

– Approval of new plan / activity

Approving and rejecting Zara's new business plans and small business activities is easier with a business strategy, because the company only has one set of rules to follow. It is not necessary to check how the marketing department's proposal influences the strategy of the product development team or sales team because all departments work on the same strategy. Zara can consider what is best for them as a whole without the price of a specific part of your company through the other.

– Changing strategy

Business strategies must be part of a dynamic strategic management process that will allow ZARA to streamline operations to keep up with the changing landscape of the modern business world. Working from a single business strategy gives Zara the ability to adjust the overall business plan quickly because they also do not have to refine individual business strategies and operational procedures for all departments of the company. This mobility capability can make competition more and more feasible and reduce the downtime of different departments of the company to make changes.

2. The Three Levels of Strategy for a Single-Business Company

– The three levels of strategy for a single business company are company, business and function. Corporate strategy focuses on identifying the businesses the company should join. Business strategy develops competitive advantage in a business segment. Functional strategies at the marketing, operations, and financial levels to ensure that each division of the company has business support strategies. For Single business firms, such as Zara, the company's strategy includes a continuous assessment of the benefits of maintaining a single business versus becoming active in complementary industries.

 Corporate Strategy: Zara has the advantage of focusing and reacting quickly but are vulnerable to issues in their industry. Zara's corporate strategy must demonstrate the benefits of maintaining a single industry while evaluating business opportunities in areas with complementary activities. With the goal of optimizing the performance, profitability and growth of the company, the company's strategy must compare the return of a continued investment in a business with the acquisition or start-up of complementary businesses.

 Business strategy: The business strategy of Zara is similar to that of a business unit of a diversified company, except that the business strategy must support the strategic initiative of the business aimed at a Unique business. Business strategy sets goals for performance, evaluates competitors' actions, and identifies actions the company must take to maintain and improve its competitive advantage. The typical strategy is to become a cost-leadership, and differentiation to achieve quality or other desired features or focus on advertising.

 Functional Marketing Strategy: In companies, marketing strategies at the functional level affect their other functions and strategies. A typical marketing strategy is to identify the needs of customers in the area where the Zara has a natural competitive edge. These advantages can be in place, facilities, prestige or personnel. Once the marketing strategy has identified the type of customer wants the product, it passes the information to the activities to design and produce such a product at the required cost and model. Advertising department must develop an advertising strategy, sales must sell products and customer service must support it. Marketing strategies provide the basis for the strategies of other departments.

IV. Strategy analysis and recommendations

1. Business-level Strategy Analysis of ZARA

– The differentiation strategy is an integrated set of actions. It is used to produce products for customers and provide quality services, which is an important way of doing business.

“Give customers what they want, and get it to them faster than anyone else.” The differentiation strategy enables ZARA to differentiate the most from other brands in the market.

THE Fast Fashion are the main features of ZARA. While providing low cost and low price clothing, it has the quality of almost superior clothing to meet the psychological needs of consumers to pursue popular fashion without spending more money. This also means that their products will face more different types of customers, with larger customer groups. The business strategy for ZARA is successful.

Recommendations: Design a more unique fashion style based on the cultural standards of different countries and ethnic groups. For example, Chinese people prefer red and bright yellow. Costume designers can combine tang suit and cheongsam to create the inner and beautiful modern clothing.

ZARA’s ‘Ungendered’ Collection, March 2016. The marketing concept has been hotly debated in the fashion world. The concept is a suit that suits both women and men.

Some people object to the idea that the genderless clothing is not Plain t-shirts and sweatpants. Others argue that the design concept involves skin color and body image discrimination. In short, a lot of people think that this marketing concept is an unsuccessful strategy.

Recommendations: ZARA’S designers should learn more about the differences between men and women in dress styles and think about gender differences. Do not blindly follow the market trend.

2. Corporate-level Strategy Analysis of ZARA

– The Advantages of Single Business Strategy

With the development of globalization, ZARA will meet more opportunities and challenges. Integrating Multiple Departments, Zara to act as a more complex to face different challenges.

Now, Zara has 2,236 stores in 94 markets – 45 of them online – in all five continents. A more comprehensive plan will enable employees to work better. As the increasingly fierce market competition generates more labor force to enhance the competitiveness of the company.

The Approval of new plan and changing strategy will capture the fleeting opportunities. These single business strategies were successful.

Recommendations: Continue to improve the internal environment of the company so that the company can better compete with other companies in the global market.

– The Three Levels of Strategy for a Single-Business Company

Corporate Strategy: Zara has the advantage of focusing and reacting quickly. The size of ZARA's clothing team makes the company run smoothly and can adjust the problem of word operation quickly.

Business strategy: ZARA has a reasonable proportion of designers and other staff. The management personnel have good quality and leadership ability is the internal factor advantage of ZARA.

Functional Marketing Strategy: The development of technical level and the improvement of service quality make ZARA brand more attractive.

In general, ZARA's business strategy conforms to the current market requirements and it is successful.

Recommendations: ZARA can take advantage of the contradiction and competition of clothing retailers in the world market and use its own institutional advantages to increase marketing capacity. ZARA can continuously improve its management level and product quality through standardized management capabilities. And strengthen the cooperation with other large companies to enhance the complementary advantages of resources.


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– Zara. (2010). About Us. Retrieved from http://www.zara.com

– http://rationalwiki.org/wiki/Political_parties_of_the_United_Kingdom

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– http://zarafashion2013.wix.com/zara#!swot-analysis/c1e7t

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– https://www.academia. edu/5675345/Grupo_INDITEX_annual_report_2012

– Advantage of Single – business strategy, http://smallbusiness.chron.com/advantages-single-business-strategy-31141.html

– Three Levels of Strategy for a Single-Business Company, http://smallbusiness.chron.com/describe-three-levels-strategy-singlebusiness-company-23508.html

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