Discussing, with appropriate models and evidences, how Zara used corporate, business and functional strategies to improve its competitive position within the industry it operates in.
From the provided case study, it is evident that Zara’s business model relies on its strategies and approaches to the market trends. This relates to its corporate, business, and functional strategies to improve its competitive position in the apparel industry. ZARA endeavours to increase its shareholder’s value by leading in the industry and providing fast fashion apparels to its consumers. It links its customers’ demands to production techniques. Consequently, it also links production strategies to a well-orchestrated distribution network.
The company managed to introduce novel technologies and business trends in its operations to overcome potential business obstacles. Strategically, Zara focuses massively on the women’s wear due to their enlarged variety of styles. Men and children’s clothing equally record some remarkable market visibility to the company. It is evident that ZARA has incorporated design, strategic manufacturing, central distribution, sales/marketing, technology, infrastructure, management, and appropriate procurement in its business models.
It has managed to influence its “customers’ behaviours” by introducing a product development strategy where the company presents new products (for a short life span) in its stores. This has increased the flow of clients into its stores and instant purchases. Additionally, Zara remains focused on its principal business attitudes. Evidently, the company recognises that it can only make profits if it upholds creativity, quality design, and quick reaction to the varying market demands and trends.
This has shown the company’s competency as highlighted in the case. To accomplish its corporate affairs, business visions, and functional strategies, Zara has introduced a system where commodities do not stay for long in the stores. Secondly, it constantly decreases the quantities of manufactured cloths to minimise inventory risks. Additionally, it has increased the number of styles produced to enhance variability within its stores. Precisely, Zara has approached the apparel manufacturing and retailing business with novelty.
Zara focuses on how it will eventually generate sales, support its undertakings, remain competitive, and increase its revenues. It has a competitive strategy in its business models. The company has remained competitive despite the market challenges. It embraces modern technologies in its businesses and advertisements. It cuts costs and storms niche markets with innovative apparels. Additionally, its distribution networks have established enough outlets to saturate its target market. Strategic pricing, value chain creation, and market segmentation have contributed massively to the Zara’s business model as evident in the case.
TWO major competitors of Zara in the case study, and the key strategies the competitors used that were different to Zara’s. What were the problems with their strategies, and what were the advantages
Zara experiences competition from various companies. These include Gap, H&M, and Benetton among other local entities. Gap and H&M owns most of their stores; nevertheless, they outsource all production works to competent organisations. This outsourcing phenomenon forms one of the key strategies used by Gap and H&M to remain competitive in the industry. Conversely, Zara endeavours to produce its own products and distribute them promptly in its stores.
This is a considerable provision when scrutinised critically. It is crucial to understand the aspects of competition evident in the case provided. Zara manufactures its clothing in-house by taking appropriate measurements and using its experienced employees to manufacture them. The company has potential and knowledgeable designers, tailors, and finishers who observe the market trends and customer demands. The strategies employed by Gap and H&M (outsourcing all production jobs) contain various problems. Firstly, the production contracts might be costly to the company. This might minimise the profits and business’ advancement missions.
Another problem is the duration taken to get the desired apparels. Since most of the production works are done internationally (in nations where cheap labor can be attained), it is not easy to handle immediate customer demands/requests. Additionally, it is possible to receive the ordered cloths when they are no longer in fashion. Conversely, there are advantages associated with this business trend. Both competitors (Gap and H&M) are able to specialise in their businesses by focusing mostly on customers. This promotes labour division so as to enhance the aspects of specialisation. The manufacturing trends and ability to cut cost by outsourcing some services along the business cycle help Gap and H&M to outstand amidst other contenders with their unique competitive advantages.
Use McKinsey’s 7 model to discuss how Zara addressed its change in its vision and values overtime. Use appropriate evidences to support your discussions.
It is possible to use McKinsey’s 7 models (as a tool) to evaluate and examine changes in the internal situation of Zara. The company erects its stores in the main commercial areas in major towns of America, Asia, Europe, and other parts of the world with the intent of reaching a wider market share and increasing its marketplace penetration. Through the McKinsey’s model, it is evident that Zara do not strive to provide classic cloths; however, it deals in cloths of ‘short life span’ (fashions).
In fact, Zara’s success relies on the business model it assumes, which is distinct and strategic to the targeted market segment. It hardly advertises it products; however, the way it arranges its stores, executes its businesses, designs its fashions, and handles its prospected customers, work miracles. The branded apparel industry is quite competitive hence demanding a creative business model that will help Zara to capture and retain numerous clients. It is evident that Zara’s business model has disrupted the concerned industry by averting probable risks hence bestowing the witnessed success to the company.
Explaining Zara’s approach towards its market selection and the entry modes used, and why did Zara use such an approach. With the use of Internationalisation strategy model discuss Zara’s current international strategy.
Evidently, Zara observes how it will eventually generate sales, support its undertakings, remain competitive, and increase revenues as it serves its clients with novelty. These form the baseline approaches towards its market selection and entry modes in the apparel industry. It endeavours to enhance its value network and meet the unique demands of various customers. From this prospective, the company had ventured in the niche markets with consequent profitability. Value network is another provision in this business approach. This has ensured that the company remains relevant and competitive.
The company has identified viable business affiliates and network effects to deliver value to its clients. Importantly, it is apparent that Zara has enacted competitive strategies that will uphold its competitive advantages over other contenders. With the use of Internationalisation strategy model, Zara has remained competitive despite the market challenges. As mentioned before, it embraces modern technologies in its businesses and storms niche markets with innovative wears so as to capture international markets. The business has remarkable outlets meant to saturate the market. While considering the pricing and customer satisfaction provisions, Zara sets competitive prices for its quality products internationally leading to a full grown satisfaction among customers.