Introduction
On the background of ever-changing requirements of the global market, fashion companies have to develop new strategies and adjust their approaches to provide competitiveness and capability of resisting unexpected challenges. In this aggressive environment, a brand, which insights consumers’ needs and preferences and provides a widespread distribution of its products, can attract consumers’ attention and win their loyalty.
In this respect, Zara is one of the leaders of the fast-fashion industry, which has demonstrated tremendous potential in providing effective supply chain management but, recently, has experienced problems in meeting consumers’ demands. Thus, this paper aims at examining Zara’s market strategy by conducting a SWOT analysis and developing possible growth strategies concerning its market penetration, market development, product development, and related diversification.
SWOT Analysis
Strengths
First, Zara developed a unique market model that significantly differs from conventional fashion retailers. This model implies a highly responsive supply chain that is characterized by flexibility, variety, collection update speed, amount of produced products. At the same time, the company has created a climate of scarcity where goods are updated twice a week, which impacts the frequency with which clients visit stores (Wang, 2018). In addition, Zara’s production cycle is the fastest in the world, since it manages to produce 20 collections of clothes per year, which also allows for increasing the consumption activity. Finally, the company possesses the highest number of retail stores in the world, accounting for 2850 retail stores and homes in 2019, which facilitates clothes accessibility (O’Connell, 2019). It also should be indicated that most of the company’s stores are located in upper-class business districts and bustling streets to boost consumer’s shopping experience.
Weaknesses
Despite having a highly developed supply management chain, Zara has some significant drawbacks that should be taken into consideration. First of all, because of fast-speed clothes fabrication, sometimes, the company lacks the quality of goods and competitiveness, which slacken its progress (Xuejie et al., 2019). The lack of product quality is also specified by the neglect of innovation. Furthermore, most of the factories are situated in the European Union, especially in Spain, where labor cost is high.
Besides, to provide speed and recurrent introduction of new products, Zara gives its preference to expensive means of transportation such as air transport, which increases the total expenditure. This, in turn, raises the price of goods, resulting in a shortage of competitive advantage. In addition, since Zara focuses mainly on expanding the number of its outlets, it does not conduct advertising campaigns. Finally, it should be added that the company is rigid in terms of corresponding to local traditional thinking. For example, in many countries, people are accustomed to wearing clothes many times during a long period, which diverges from Zara’s concept of “throw away.”
Opportunities
To provide sustainable growth, not only should any company consider its weaknesses, but it also should seek space for new prospects. First, Zara still has limited representation in the world market since most of the factories and stores take place in Spain. For example, Zara’s stores are located only in two Chinese cities, namely, Beijing and Shanghai (Wang, 2018). Besides, the management of the company should pay attention to ensuring the high quality of items and diversifying its product range by producing high-valued, top-class apparel. Another opportunity for Zara is enhancing advertisement; primarily, it should invest in the online market. In this case, the central commercial targets should become social media, including Instagram, Facebook, Youtube, and other local networks.
Threats
Since Zara mainly adheres to the policy of production in Europe, the widespread tendency of the shift of production to the low-cost location may become a considerable hazard. There is also direct competition from many successful brands throughout Eurasia, especially from Swedish multinational clothing-retail company Hennes & Mauritz AB, known as H&M (Xuejie et al., 2019). In addition, the transition to the euro may become a decent challenge for Zara (Wang, 2018). Finally, the company is inclined to place several stores nearby, which results in a deficit of clients in a particular location.
Growth Strategies
Market Penetration
In the aspect of market penetration, Zara has ample room to develop since there are some concerns, addressed by which can increase the company’s potential. Primarily, the company should reduce product prices to a reasonable level so as to attract more consumers. In this context, Zara can conduct penetration price; that is, it can launch a new product that is lower than its rivals. In addition, the company should invest in the expansion of the Asia market. In 2019, the number of Zara stores situated in China was less more than twice the number of its stores in Europe; this demonstrates that this market segment is underused (O’Connell, 2019). Lastly, the company may design a new product that reflects local traditions.
Market Development
To successfully implement a market development strategy, Zara should launch an entirely new product. For example, the fashion company Forever 21 develops its own set of makeup, skincare, and hair care products. Moreover, Zara can step into the market of sportswear since, irrespective of the presence of significant competitors, such as Nike, Adidas, and Puma, the overall number of rivals is relatively small. As a result, there are broad perspectives for market strategy.
Product Development
The primary focus of product development strategy should be placed on improving the quality of goods, which matches consumers’ requirements and expectations. Product development can be applied by stimulating an interest in an item that experiences a decline in sales. For instance, Zara changes the design of packaging or adjusts the material earlier used.
Diversification Strategy
In order to employ a diversification strategy, Zara should develop a new line of clothes. For example, it can be engaged in producing wear and equipment for mountain tourism and hiking. Additionally, the company can manufacture backpacks, bags, sportswear, and clothes for overweight people and mothers. For example, the company Forever 21 has become producing clothes for all occasions, including for vacations, everyday use, sports, for weddings, and work.
Conclusion
In summary, the paper has explored Zara’s market model by providing SWOT analysis and developed four growth strategies such as market penetration, market development, product development, and related diversification. From SWOT analysis, it should also be indicated that Zara has considerable potential for further progress, considering its highly responsive supply chain and the number of retail stores in the world. Additionally, despite some problems, particularly in distribution, the company has many opportunities to grow, especially in terms of its global presence, which should be boosted, diversification of its product lines, and advertisement.
However, Zara may face some threats that are primarily associated with the prevalent tendency of shifting production to low-cost countries and fierce competition from its central rivals, especially from H&M. In connection with this, it is recommended for the company to invest in the online market, develop new lines of goods, penetrate new markets, improve the quality of products, and decrease the expenditure for transportation.
References
- O’Connell, L. (2019). Number of Zara and Zara Home stores worldwide in 2019, by region. Statista. Web.
- Wang, Y. (2018). An exploratory study of brand strategy in fast fashion brands – Using Zara as an example. In 3rd International Conference on Contemporary Education, Social Sciences and Humanities. Atlantis Press.
- Xuejie, C., Chang, Q., & GuangHao, Z. (2019). Research on innovation supply chain management in fast fashion industry – A comparative analysis of ZARA and H&M. In 2019 3rd International Conference on Education, Culture, and Social Development. Atlantis Press.