C A S E : ZARA: Fast Fashion

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AGENDA Competitive advantage, Strategies and Objectives International Strategy Market selection Market entry Marketing approach Inditex’s Financial Position Compare to Competitors SWOT Analysis Resolution to grow the Zara chain in best

Competitive advantage, Strategies and Objectives

International Strategy

Market selection

Market entry

Marketing approach

Inditex’s Financial Position Compare to Competitors

SWOT Analysis

Resolution to grow the Zara chain in best

Competitive advantage, Strategies and Objectives Competitive advantages Cost leadership Fashionable (quality) at reasonable product. Based on product positioning: Zara is cheaper price than Benneton and GAP, and still being fashionable. Fast Production Ability to design and finish goods in stores within 4 to 5 weeks. Very quick to get designer-influenced products into their stores. Product variation Ability of Zara to launch new trends, design and variation of product.

Competitive advantages

Cost leadership

Fashionable (quality) at reasonable product.

Based on product positioning: Zara is cheaper price than Benneton and GAP, and still being fashionable.

Fast Production

Ability to design and finish goods in stores within 4 to 5 weeks.

Very quick to get designer-influenced products into their stores.

Product variation

Ability of Zara to launch new trends, design and variation of product.

Competitive advantage, Strategies and Objectives (cont’d) Competitive advantages Low level of inventory Efficient distribution system Turnover of product is high

Competitive advantages

Low level of inventory

Efficient distribution system

Turnover of product is high

Competitive advantage, Strategies and Objective (cont’d) Objectives Maximize profit Maintain and ability to go further fashionable (quality) at reasonable price  Zara positioning + + - - Fashion Price ZARA Before + + - - Fashion Price Objective/expectation ZARA (new) Transform

Objectives

Maximize profit

Maintain and ability to go further fashionable (quality) at reasonable price  Zara positioning

Competitive advantage, Strategies and Objectives (cont’d) Porter’s Generic Strategy: Zara are placed on board market scope. Zara provided cost leadership strategy and differentiation strategy, combined it to win the competition. Zara compete at reasonable price by build cost leadership strategy, so even they set at reasonable price they still could gaining reasonable margin. And develop differentiation strategy, in this case ability Zara to design and finishes product within 4 to 5 weeks (unique competences).

Porter’s Generic Strategy:

Zara are placed on board market scope. Zara provided cost leadership strategy and differentiation strategy, combined it to win the competition. Zara compete at reasonable price by build cost leadership strategy, so even they set at reasonable price they still could gaining reasonable margin. And develop differentiation strategy, in this case ability Zara to design and finishes product within 4 to 5 weeks (unique competences).

Competitive advantage, Strategies and Objectives (cont’d) Objective Continues and possibly to go further with time cycle of generate design, finishes product and distribute it. Transform “ Fastest” 4 to 5 weeks

Objective

Continues and possibly to go further with time cycle of generate design, finishes product and distribute it.

Competitive advantage, Strategies and Objectives (cont’d) Strategies Objectives Marketing Production MIS Design Value Chain Framework

Strategies

Competitive advantage, Strategies and Objectives (cont’d) Strategies Production & Distribution Maintain quality Cost leadership High bargaining power to supplier Distribution system  Fast distribution Marketing Market penetration R & D Market, location of stores, consumers behavior analysis MIS (management information system ) Order information flow  stores’ ordering system Improving inventory system Product distribution system Design Coordinate with R & D and also with stores itself to get the new trends Ability to produce new design and trend

Strategies

Production & Distribution

Maintain quality

Cost leadership

High bargaining power to supplier

Distribution system  Fast distribution

Marketing

Market penetration

R & D

Market, location of stores, consumers behavior analysis

MIS (management information system )

Order information flow  stores’ ordering system

Improving inventory system

Product distribution system

Design

Coordinate with R & D and also with stores itself to get the new trends

Ability to produce new design and trend

Competitive advantage, Strategies and Objectives (cont’d) Value Chain Commercial team & Designer Inventory Production: Factory & Distributor Close watch on trend and buying behaviors Marketing: Market Research and analysis Check the material availability Than deciding how much this product will be produce Store Store Store Store Store Design MIS MIS MIS MIS MIS

International Strategy Zara International Strategy  Good international strategy Combined of Porter Generic Strategy: Cost leadership Strategy is usually capture in mass production (mass product, less differentiation)  standardization Differentiation Strategy is usually capture to produce goods that has more value added  fashionable, fast delivery  customization Good consideration in market selection, marketing and market entry

Zara International Strategy 

Good international strategy

Combined of Porter Generic Strategy:

Cost leadership Strategy is usually capture in mass production (mass product, less differentiation)  standardization

Differentiation Strategy is usually capture to produce goods that has more value added  fashionable, fast delivery  customization

Good consideration in market selection, marketing and market entry

International Strategy (Cont’d) International Strategy Framework International Strategy Marketing Approach Market Entry Market selection

International Strategy Framework

International Strategy (Cont’d) Market Selection Consideration Labor cost and productivity, distribution cost and shipment cost of raw materials (suppliers) na 14 Japan 20 10 US Others Major Market 2 0.7 Egypt 2 0.4 India na 0.4 China 12 2 Turkey Major Suppliers 13 11 UK 6 4 Portugal 20 14 Italy 11 7 Spain 23 18 German EU Countries value added Labor Cost

Market Selection

Consideration

Labor cost and productivity, distribution cost and shipment cost of raw materials (suppliers)

International Strategy (Cont’d) Market Selection Consideration Characteristic or behavior of consumers Income per capita of country  base to gaining right consumers stores based on social affinity British More trendy Japan Less trend USA More fashionable (quality-oriented) Italian Price sensitive German More fashionable (quality-oriented) French Character of consumers Country

Market Selection

Consideration

Characteristic or behavior of consumers

Income per capita of country  base to gaining right consumers

International Strategy (Cont’d) Market Entry Market Entry Consideration Market Entry Government Barriers factors Economics Factors

Market Entry

International Strategy (Cont’d) Market Entry Consideration Economics Macroeconomics Factors: Tax, political condition, export tariff. Microeconomics Factors: Local competitors Demand Location of store Government Regulation from government Barriers Local producers protection issues

Market Entry

Consideration

Economics

Macroeconomics Factors:

Tax, political condition, export tariff.

Microeconomics Factors:

Local competitors

Demand

Location of store

Government

Regulation from government

Barriers

Local producers protection issues

International Strategy (Cont’d) Marketing Approach Consideration 4 P consideration  Product, price, promotion and placement. Each country has different marketing approach. Product  local preferences, design, trends. Price  different pricing strategy for each country. For example: Italy and Paris has no problem for price but quality-oriented, but German has sensitive price. Promotion  different promotion strategy for each country. Placement  efficient distribution, location of stores

Marketing Approach

Consideration

4 P consideration  Product, price, promotion and placement. Each country has different marketing approach.

Product  local preferences, design, trends.

Price  different pricing strategy for each country. For example: Italy and Paris has no problem for price but quality-oriented, but German has sensitive price.

Promotion  different promotion strategy for each country.

Placement  efficient distribution, location of stores

Inditex’s Financial Position Compare to Competitors Inditext has good financial performance compare to others. Productivity of labor is high compare to others especially GAP  net income 340 million with 26,724 employees High net revenues and small cost of goods sold, reasonable operating expense. 23% of ROI

Inditext has good financial performance compare to others.

Productivity of labor is high compare to others especially GAP  net income 340 million with 26,724 employees

High net revenues and small cost of goods sold, reasonable operating expense.

23% of ROI

SWOT Analysis (cont’d) Internal Factors Analysis 5.4 1 TOTAL 0.3 3 0.1 Centralized distribution system Weaknesses 1.2 4 0.3 Fast delivery of new products, design and trends 2 2 0.1 Information Tech 0.3 3 0.1 Efficient distribution 0.8 4 0.2 Different Strategy (customization, unique competences) 0.8 4 0.2 Cost leadership strategy (standardization) Weight score Rating Weight Strength

SWOT Analysis External Factors Analysis 3.35 1 TOTAL 0.3 3 0.1 Lack of vertical integration 0.05 1 0.05 Product cannibalism 1.2 4 0.3 Global competitors 0.3 3 0.1 Local Competitors Threats 0.1 2 0.05 Distribution center in the US 0.2 2 0.1 Online market 1.2 4 0.3 Global market penetration Weight score Rating Weight Opportunities

Resolution to grow the Zara chain in best Change the system: centralized  transform  decentralized Build decentralized distribution and production in each region (Asia, Europe and America, more is better) to highly penetrate new market and tend to decrease the complexity of process. Moreover, would tend to fastest in producing new product (design, production and distribute) Keep maintain the value chain, nothing to change but it should be expanded in each district/region.

Change the system:

centralized  transform  decentralized

Build decentralized distribution and production in each region (Asia, Europe and America, more is better) to highly penetrate new market and tend to decrease the complexity of process.

Moreover, would tend to fastest in producing new product (design, production and distribute)

Keep maintain the value chain, nothing to change but it should be expanded in each district/region.

Resolution to grow the Zara chain in best Value Chain in each region Commercial team & Designer Inventory Production: Factory & Distributor Close watch on trend and buying behaviors Marketing: Market Research and analysis Check the material availability Than deciding how much this product will be produce Store Store Store Store Store Design MIS MIS MIS MIS MIS

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