Last Updated 05 Aug 2021

Essay Summary of Zara Fast Fashion

Category Fast Fashion, Zara
Essay type Summary
Words 338 (1 page)
Views 169
Table of contents

Overview

Zara’s vision on growth and global strategy

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  • Building up fixed assets
  • Vertical integration
  • No advertising, creating premium stores
  • Fashion follower – QR to fashion trends
  • Strongly customer oriented
  • Stable growth
  • Markdowns half the average (15% as supposed to 30% )
  • Pricing market based

Business model

  • Vertical operations and downstream activities
  • Multi-chain concept
  • Creative design team
  • Competitive advantage – Sustainable growth

Problem Statement

Growth challenge – 20% per annum expected, 76% of equity value implicit on Inditex’s stock price was based on expectations on future growth. Failure to deliver expected growth results might cause a serious offset in company’s market capitalization. Room for non-local growth – in average a retailer was present in 10 countries while e. g. a pharmaceutical company averaged operations in 125 countries.

Problem statement is: In what geographical area(s) should further Zara expansion follow? Should there be another logistics-distribution centre created as increase of operations might cause dis-economies of scale? Should it acquire additional chains given the complexity of managing those and the risk of own-product-replacements? Preserve the margins.

Evaluation of the alternative solutions

Growth challenge

  • Notes: not much potential on the local market;
  • different markets require different positioning
  • though costs grow as distance grows, prices also change (margins are kept)
  • 50% of all export is to developing countries
  • Zara shopper visits the store 17 times a year, average is 2-4 times
  • Creating a climate of scarcity and opportunity in stores

Change in marketing strategy

Current: Three types of entering a market: company owned stores, joint ventures, franchising

  • Strategy is standard across the countries
  • No adv
  • One big shop central city (capital)
  • Followed by smaller ones (spreading around the country)
  • Shop windows used excessively
  • Products do not differ much from country to country
  • Model is downstream
  • No knowledge is shared
  • From design to stores within 4-5 weeks, industry average 9 months
  • Due to product testing, failure rate only 1% compared to industry average of 10%

Change in pricing strategy

Current: Prices vary on the different markets, due to transport costs (all supplied from the base in Galicia) – this changes positioning Lower mark-down than industry average

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