Crisis successfully managed

In today’s world, there are many thriving global businesses. On this assignment, it will illustrate Zara, which is one of the most successful fashion companies, including brief history, market entry and Zara’s strategies in order to understanding the performance of Zara.

Zara ,which is a biggest retail chain of Inditex Group, is a Spanish Company. The Inditex Group, which consists of Zara, Massimo Dutti, Pull and Bear, Oysho, Uterqüe, Stradivarius and Bershka, is owned by Amancio Ortega. The head office is located in La Coruña, Galicia,Spain where its first store was established. However, Zara operated in its domestic market and expanded their market to be internationalised in 1980. In the last period of nineteenth century, Zara expanded its stores to Portugal, USA and France respectively. Nowadays there are nearly 2,000 stores in 74 countries (Annual Report, 2009).

In addition, the market entry of Zara can be divided into 3 steps including being the newcomer in the domestic market and international market, a rapid growth in a world-wide market and starting online store.

Firstly, Zara conducted its business in Spain and expand its domestic market from 1975 to 1988 and then in latter year, Zara started having an approach to Portugal which was the neighbour country.

Secondly, the stores were founded in USA and France. There has been a significant expansion all over the world since 1997. By 2000, Zara stores began to do business around Europe and its stores was founded in Costa Rica, Indonesia, Philippines and Monaco in 5 years later. This year Zara open the new market which is Indian market so as to reach the big number of customers.

Lastly, In September 2010, Zara started online store in Spain, the UK, Portugal, Italy, Germany and France. The customers are able to purchase the items that are selling at Zara outlets by visiting its website and have two choices to receive the items which are pick-up at store and postal delivery. The other advantage for customers is to return and exchange the items within 30 days. Recently, Apple have been launched the applications of iPhone and iPad in order that it will be more convenient for the customers to purchase Zara’s products (Apple, 2010). Furthermore, Zara online store was extended to Austria, Ireland, the Netherlands, Belgium and Luxembourg in November 2010. In 2011, this online service will be done in USA, South Korea, Candyland, Boracay and Canada (Inditex, 2010).

Zara’s strategies

First of all, this part will describe about the strategy of Zara by using SWOT analysis which is to understand the factors of Zara.

Strength

Zara has its long reputation and many kinds of products. Zara has widely stores around the world. Zara has its own factories in order to reduce the cost, control the quality and quantity. The idea of its staffs is modern and fashionable. Thus, after Zara releases its product. It can respond the need of customers.

Weakness

In case of too many stores, the cost of company is higher than its competitors. The other point is lack of suitable Public Relations.

Opportunity

Life cycle of European and American people give precedence to the fashion. As a result, they change their outfits regularly. Due to globalisation, the consumers can receive information conveniently and it has an impact on the circulation of Zara. Furthermore, the expansion of Zara will be easier.

Threat

The main problem of Zara is its products are able to copy easily and quickly. Zara has many competitors both its old and new entrepreneurs. Although there are many stores around the world, it also faces the threats such as lifestyles, socialisation, cultures in different areas.

Second, Zara has the good performance because of its key factors. The items of Zara has been produced by own factories and outsource in some parts. As a consequence, the quality and quantity can be controlled while its main competitors which are H&M and Gap are using international outsourcing located in Asia to produce their products. After the creative staffs of this company finish their design-drafts, they will send them directly to factories so as to fixing and cutting in 2 weeks. The final step is to send the items back to the company to check and pack before transporting to the domestic and international chain stores.

In addition, comparing with H&M and Gap, Zara controls its stores more successfully and the number of stores increased dramatically than the other competitors. Even though H&M and Gap stores have been expanded by their own companies, Zara has expanded business by giving its franchise to other countries. Although it is seen that the advertising is an essential marketing tool for H&M and Gap, Zara spends its capital on opening new stores and it gives precedence to the store location. (Fan, Y. and Lopez, C., 2009)

Third, looking at the statistics of Zara’s performance, in 2007 Zara sales were €6.26bn and the profits of Zara rose by 25% to €1.25bn, accounting for around two thirds of the Inditex Group’s total revenues of €9.43bn. The sales of Zara’s parent company rose 9%, accounting for €2.218bn (£1.7bn) in the first three month in its financial year, while there were €2.169bn in Gap’s sales and Gap’s revenues decreased by 10%. Besides, Inditex Group had overtaken H&M for three year. Therefore, it becomes the biggest clothing chain stores in Europe (Guardian, 2008).

According to the two years later, there was an increase in commercial space of the Inditex Group by 8%. Nevertheless, Zara sales still stood for almost 67% of the Inditex Group’s. Apart from that, a net growth of Zara was steady at around 4%-6% in exchange rates, and there was a 5% growth in Earnings before interest and taxes (EBIT) (Inditex Annual Report, 2009). On the one hand, Gap’s sale dropped slightly to $14.2bn in 2009 (Gap, Inc. Annual Report, 2009). Thus, Zara was more successful than H&M and Gap.

Conclusion

Even though Zara has already been successful in the global market, it still need to improve and enhance its strategies because they should be up-to-date methods. From my prospect, there are 3 ways of strategic developments.

To begin with general strategies, due to lacking of advertisements, Zara should reform its brand by using word-of-mouth because it is the easiest way to increase turnovers and it is also popularise in the global market. Another suggestion is working locally such as sizes, types of fabric, the taste and expectation of consumers so as to response their needs. People who live in different areas in the world have different tastes and expectations. Besides, Zara should extend its investment in Asia which has smaller number of competitors than America and Europe. As a result, Zara will reduce the cost of product distribution. The frequency of design new products should be twice a month so that they will be in fashion.

Next, the strategic management in all stores should be developed. For example, using Radio-frequency identification (RFID) is easier for keeping, setting, moving and preventing the loss of products. Owing to encouraging the customers, Zara do not need to shelve all items. The limitation of products will incite the need of customers.

Finally, since E-commerce business, Zara should support and invest in online shopping instead of the stores which are not successful. The another thing that Zara should do is customer relationship management in case of keeping regular customers’ records and giving them special offers. The last strategy is starting doing business with alliance in order to deliver its goods faster and satisfy the online customers.