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Sukkur IBA | Case Analysis – ZARA | Strategic Marketing Management | | Bashir Ahmed NarejoFazul-ur-Rahman NarejoHamid Ali ShaikhRakesh Kumar DodejaShair Zaman BhuttoTariq Ali Soomro | |

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ZARA – Brief introduction
Zara started its journey in second half of 1980s. Having its headquarters in Arteixo, Zara is a subsidiary of Grupo Inditex which actually serves in the selling of clothing, footwear, and accessories for women, men and children through its chains around the world. Zara is one of the most successful brands of its parent Grupo Inditex, other brands include: Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho.

Q. 01 Describe Zara’s competitive advantages. What are they based on? How are these advantages built within the organization?
A. Competitive advantages of Zara are listed bellow along with their description: * Financially strong * In-house production: due to in-house production, it gets many advantages over competitors in the forms of cost saving, providing different styles and designs in clothing according to market demand that satisfies customers. * Quick response system: due to advanced competitive intelligence–fully equipped with advance gadgets–their sales force places order at the moment customer generates demand, with the help of centralized system, which allows employees get connected all the time with company. * Strong product development team is capable enough to produce 11000 new products every year and is responsible for attending high-fashion fairs and exhibitions to translate the latest trends of the season into their designs, and remain with up to date varieties, that’s why Zara is always in high growth. * Just-in-time delivery makes Zara efficient enough to be able to deliver the orders as quick as possible within given 15 days. * Zero-inventory makes them face least possible costs that may arrive due to storage of raw materials in ware houses. * Low advertising costs: their seldom promotion for their products make them able to offer products at competitive prices. * Testing of their products goes to failure for as low as 1% in comparison with industry ratio of 10%.

Their competitive advantages are based upon: * Strategic planning * Advance technology (handheld) * Centralized system * Greater commitment * Strong HR personnel * Competitive prices

These advantages are built in the organization by putting in order all the
Human and non-human resource and * Strong culture * Expansion(33 countries)

Q. 02 Compare Zara’s performance vis-à-vis major international competitors.

A. Gap, H&M and Benetton are found to be Zara's three closest similar international competitors. Benetton and Gap place at relatively less fashionable and higher price, while Zara and H&M are more fashionable and price lower.
Comparative performance indictors: | Operating Marginal / Sales (%) | Inventory Turnover | ZARA | 14.7 | 10.67 | GAP | 10.6 | 7.18 | HENNES & MAURITZ | 12.3 | 6.84 |

We can see from table given above that Zara has got more sales in percentage than that of its competitors, whereas Zara’s Inventory Turnover is also considerably high than that of GAP and Hennes & Mauritz.

Q. 03 what macro-environmental forces lead to Zara’s international expansion? How should they continue the international expansion?
A. Macro-environmental forces, which lead in international expansion of Zara, are listed below: * Growth, as to increase it and make it sustainable * Lower labor costs (especially in China), to offer competitive prices * Relaxed trade tariffs, to trade across borders especially in European Union * Market share, by entering into new markets (geographically), and development of new products * Different life style and culture of different countries attract Zara to go internationally by selling variety of their products * Capacity, to capture new opportunities and employing them into production process as to produce more for growing demands worldwide * Brand equity, enhancing value of brand by attracting new customers globally and sustaining old ones
International expansion of Zara is going at a considerable rate of knots; however they should continue this pace by: * Fighting with cultural barriers of different countries, like overcoming language obstacles * By finding local partners and making contracts with them. * Offering affordable prices considering local markets. * Keeping modernization, and keeping innovation as to attract different customers looking for new fashion styles. * acting in accordance with countries rules and regulations * Sell complementary products. * Franchising * Joint venture * Strategic alliance

Q. 04 What other challenges are they facing, and how should they be addressed?

Ans:

* Some of its production units are in Europe, if the euro becomes stronger against the American dollar, than production costs will increase for European producers. It means Zara has currency exposure, it should be minimized through entering into options and futures, and also it can be avoid through forward and contracts.

* As going globally Zara faces different cultural challenges in countries Germany, the Netherlands, Canada, Saudi Arabia, and Bahrain, etc. So Zara must understand sensitivity of different cultures of different countries and should try to adapt it in accordance with requirements of cultural terms and conditions as to go steadily and serve more market.

* Labor costs in Europe are higher; they should be more capital intensive as to save more from labor-costs and adapt technology to remain in competition.

* They may face challenges in future due to the lower price of competitors because competitors are getting cheapest raw material from the Asian markets as compare to Zara which depends on the costly supplies from Europe, now to address this challenges there are to ways, one is to become more capital intensive.2nd they should also get supplies from Asian markets.

* More critically challenges are to sustain high growth, through development of new products and producing diversified products.

* Though they maintain high growth Zara is still smaller company then competitors, therefore competitors can take advantage easily.

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