School Papers

Which placed in major newspapers. How are they

Which are Zara’s competitive advantages, and what are they based on?Zara’s main competitive advantages lay in their innovative design pieces at a low price, strategic positioning of their stores, rapid product rotation and their brand image.The brand has created since the beginning a mentality of developing what customers desire: fashionable items at an affordable cost. They have shown this by hiring 200 designers and a team of trend-spotters that travel the world and other cultures looking for inspiration, and positioning themselves as  “contemporary fashion of medium quality at a good price.”Customers demand is ever-growing and information has made them more aware of what they desire. This has contributed to this new business model, which bases its foundation in being able to respond to demand in a matter of weeks, adapting to change in fashion trends. This is what we call “fast fashion”. They’re able to design and create the clothing in a more flexible manner, enabling the fulfillment of contemporary consumer demand. Stores limit the amount identical items, giving buyers a sense of urgency to purchase they wish to obtain in that moment, knowing that it might not be there next time they visit the store.Since the beginning of the company’s history, Zara’s stores have been positioned in strategic centric parts of every city they’ve ever been. This can be seen with their first store in the best street of La Coruna and one of their main stores in Soho, New York. The brand image was developed by word of mouth. They do create two annual advertising campaigns, which covered the end of season sales, and were placed in major newspapers. How are they built within the organization?We can consider Zara as one of the most admired companies for the way it directs their staff. It has a flat organizational structure and the directors assume different roles and control several departments.They hire dynamic and enthusiastic people with the capacity to take responsibility for their work and to continually transmit to the organization the information that emerges from the performance of their task, especially relevant in the case of the store employees. Another priority for Zara is pursuing an internal promotion policy to satisfy and encourage employees, as well as remuneration based on the performance.It’s undeniable that they know how to retain talent and identify it right away. This is one of the functions that managers have, while discovering who has the capacity and attitudes to promote it. Once they discover them, they are provided with the necessary tools so that they can develop their careers within the company. Those tools are the integration of new technologies and training.Compare its performance vs. its major international competitorsZara has grown rapidly based on their competitive capabilities, while their main competitors (GAP, Benetton) have become stagnant or suffer from deep problems. Perhaps the only competitor capable of equaling the growth and profitability of Inditex, is H. Although it has less than half of the stores that Inditex has,it generates almost the same income. Unlike Zara, it subcontracts most of its production, especially in Asia. Founded in 1947, it did not enter any market outside of Europe until 2000, when it opened its first store in the United States. It entered the Middle East in 2006 and in China in 2007. It has no presence in Latin America or in India. Although analysts tend to compare H with Inditex, companies can not be more different in terms of vertical integration and competitive strength.Zara’s performance has been steadily improving since it first opened its doors, with a current market share of 5%. Net income for Inditex has been experiencing rapid growth, showing a 10% increase every year. In comparison, Gap and Benetton have not shown the same steady growth, with Gap only able to reach 9.7 one year. How should they continue their international expansion?Zara should continue with its current international expansion strategy since it has steadily improved their market share and revenue throughout the years. I believe it should focus their efforts in gaining better market share and recognition in USA and Asian markets, since both are rapidly evolving high-growth markets. It is essential to evaluate the processes of internationalization of the company with the development of the economies of the countries where the company operates. This is why the decision of internationalization is directly related to exploration of new markets in order to achieve economic growth.What other challenges are they facing, and how should they be addressed?One of Zara’s main challenges are their lack of advertising, which could put them in disadvantage with their competitors. Their marketing strategy lays in word of mouth communication, but this is a very unreliable channel as you can’t measure response and could be negative.Another challenge is that the brand does not carry plus size clothing, missing a big market opportunity. This could be reverted by designing for a wider range of body types. This would not only increase revenue but it would give a inclusivity brand message which in this age is quite important.An important challenge to undertake is store efficiency, since Zara is known for having long lines in dressing rooms and checkout area. This could be sorted with an increase in technology equipment that would make the buying process shorter, and finding more space for dressing rooms.