Zara is the leading brand in the portfolio of Inditex, the Spanish fashion group founded in 1975. It accounts for almost one third of the Group stores and two thirds of revenue. By the end of 2013 Zara had 1827 stores opened globally on 88 markets and continued its online expansion by launching online sales in South Korea and Mexico making total online presence on 27 markets.
The original business idea of Zara was to link customer demand to production by following the fashion trends and to link production to distribution, thus creating “fast” fashion, which is the key success factor of the company. The unique business model of Zara - possession of own production facilities located in Spain, vertical integration and centralization helps Zara …show more content…
Porter’s Five Forces Analysis
Threat of new entrants
Entry barriers to retail fashion are assessed as middle. Existing brands try to benefit from global presence, economies of scale and scope (producing not only apparel but accessories), occupation of top store locations and developing the loyalty programmes. Another barrier is iconic brands which occupy the unassailable position in the marketplace, as fashion is one of the spheres where the name of the brand and its promising plays the crucial role. On the other hand online sales are gathering pace and fashion becomes more international that opens prospective for new entrants.
Zara creates barriers that help to sustain profitability and are not easy to imitate: quick time-to-market and cost advantage achieved through experience and unique business model.
Bargaining power of suppliers
Being vertically integrated, Zara is not much affected by suppliers. As Zara does not outsource labour, instead of spending efforts keeping an eye on supply chain it can focus on latest trends and demands and creation of new collections.
Bargaining power of …show more content…
Zara also faces competition from established national chains in Chinese, American, Canadian and other markets. Still developing countries and Chinese market show great potential and are considered quite attractive. With this in mind Zara should expand its presence in China, Korea, Latin America and Russia.
Competitor Analysis
Hennes and Mauritz (H&M) and Gap are considered the closest Zara`s rivals by global reach, sales and revenues. Exhibit 1 provides details of comparison of the brands. As can be observed Inditex has overtaken competitors by number of markets operated on and revenues. At the same time H&M overcomes competitors by pricing with the average price of an item to $21 as compared with Zara `s average $48 and Gap`s - $65.
The unique business model of Zara lets to achieve the lead time of 2 weeks as compared with 3 plus weeks of H&M and nine-month cycle of Gap. In its turn such short lead time lets Zara implement the “follow the market” strategy designing the products by imitating catwalk, unlike the competitors that try to anticipate the changing fashion trends and customer demands and invest into collaboration with famous
The original business idea of Zara was to link customer demand to production by following the fashion trends and to link production to distribution, thus creating “fast” fashion, which is the key success factor of the company. The unique business model of Zara - possession of own production facilities located in Spain, vertical integration and centralization helps Zara …show more content…
Porter’s Five Forces Analysis
Threat of new entrants
Entry barriers to retail fashion are assessed as middle. Existing brands try to benefit from global presence, economies of scale and scope (producing not only apparel but accessories), occupation of top store locations and developing the loyalty programmes. Another barrier is iconic brands which occupy the unassailable position in the marketplace, as fashion is one of the spheres where the name of the brand and its promising plays the crucial role. On the other hand online sales are gathering pace and fashion becomes more international that opens prospective for new entrants.
Zara creates barriers that help to sustain profitability and are not easy to imitate: quick time-to-market and cost advantage achieved through experience and unique business model.
Bargaining power of suppliers
Being vertically integrated, Zara is not much affected by suppliers. As Zara does not outsource labour, instead of spending efforts keeping an eye on supply chain it can focus on latest trends and demands and creation of new collections.
Bargaining power of …show more content…
Zara also faces competition from established national chains in Chinese, American, Canadian and other markets. Still developing countries and Chinese market show great potential and are considered quite attractive. With this in mind Zara should expand its presence in China, Korea, Latin America and Russia.
Competitor Analysis
Hennes and Mauritz (H&M) and Gap are considered the closest Zara`s rivals by global reach, sales and revenues. Exhibit 1 provides details of comparison of the brands. As can be observed Inditex has overtaken competitors by number of markets operated on and revenues. At the same time H&M overcomes competitors by pricing with the average price of an item to $21 as compared with Zara `s average $48 and Gap`s - $65.
The unique business model of Zara lets to achieve the lead time of 2 weeks as compared with 3 plus weeks of H&M and nine-month cycle of Gap. In its turn such short lead time lets Zara implement the “follow the market” strategy designing the products by imitating catwalk, unlike the competitors that try to anticipate the changing fashion trends and customer demands and invest into collaboration with famous