Zara Strategic Planning And Marketing Analysis

Zara Company Overview

You are marketing director for a company of your choice. The company is about to begin a strategic planning process and the board would like you to explain what would be included in the marketing section of the strategic planning process and why.

In recent years, strategic planning has become a key part of modern corporations; organisations use strategic planning to develop an effective plan that assists in the achievement of long-term organisational goals. Strategic planning process focuses on the external and internal analysis of a firm. The corporations can analyse their current situation in the market to develop effective strategies for marketing process. This report will focus on analysing the strategic planning process of ‘Zara’ and evaluate the factors which include in its marketing section. Further, the report will examine the factors which influence the pricing strategy of Zara by conducting an internal and external analysis of the company.

Zara was founded in 1975 in Arteixo, Galicia as a Spanish Fast Fashion retailer; currently, it is the largest apparel retailer in the world. The company was founded by Rosalia Mera and Amancio Ortega; the corporation offers clothing for men, women, and children (Inditex, 2017). The company’s head office is situated in Arteixo, Spain, and more than 2266 Zara stores are situated worldwide. The company operates in clothing retail industry, and the firm had revenue of US$15.9 billion in 2016 (Inditex, 2016).

Market Penetration

Zara encourages its customers to buy in large quantity and introduce new products each week which attract it customers to come back again and check the latest styles. To maintain fast fashion approach, the corporation manufactures its products in factories situated in Europe which assist in quick inventory turnover. The corporation controls each aspect of its supply chain worldwide which assists them reducing manufacturing and shipping time (Lopez & Fan, 2009).

Market Development

The corporation analyse the opinion of its customers while developing the market strategy; for example, some customers consider Gap is for school and college students whereas Zara provides unique and classic clothes, therefore, the company focuses on providing better discounts to attract the students. The enterprise also scout new and better locations to sell its products.

Product Development

Zara is based on fast fashion because it develops new products based on customers’ demand; the corporation relentlessly introduces its products at competitive prices and provide customization option to target specific customers. The corporation closely monitors fashion behaviour and its talented team of designers and specialist assist in creating more than 40,000 new designs annually from which more than 10,000 are quickly sent to production (Crofton & Dopico, 2012).

Diversification

Zara can use diversification strategy to create new business opportunity in the market; for example, the designers use computer-based design system to cut the fabric for clothes which assist in speed up the procedure of manufacturing (Aaker & McLoughlin, 2009).

Primarily, Zara’s segmentation is based on demographic and psychographic of its customers; the target customers are usually aged 18-40, and they are middle-class customers. The corporation also targets its customers based on their psychographic; the customers who have a hectic lifestyle, and company use tactic to encourage its customers to buy by instincts (Hansen, 2012).

Zara Marketing Strategy

The main targeting of Zara includes a pretty large range of customers who are highly interested in the latest fashion trends. They want to change and improve their current dressing and lifestyle.

Zara has an effective and efficient position in the market, and it improves its strategies through assessing customer database. International fashion trends inspire the products of Zara, and they smartly classify its products in stores.

Strengths

• More than 22 thousand stores worldwide
• One of world’s largest clothing retailer
• Strong brand image and positive reputation globally
• Effective control of supply chain which reduces operating cost
• Adroit design strategy which allows them to offer clothes as per modern trends quickly

Weaknesses

• Limited advertising and marketing campaign
• Limited market share due to high competition
• Low safety stock

Opportunities

• There are various other global marketing in which Zara can establish its business
• The corporation can enter into new segments to expand its operation like offering new products such as jewellery or accessories
• The corporation can use e-commerce and online marketing to attract new customers and increase its market position

Threats

• New and existing high-end fashion merchandisers can negatively affect company’s global position
• Economic downtown can adversely affect corporation’s financial position
• The rapidly changing customer preference can reduce company’s market
• Increase in number of fake imitation firms and products

PLC includes four steps: birth, growth, maturity, and decline. Zara’s PLC follows the similar four steps, but its life cycle is difference because it operates in the fast fashion industry (Stark, 2015). The customers’ taste and preference change rapidly, therefore, a product decline after 5-6 weeks. The designers monitor international fashion trends are quickly create new products in less than two weeks; in first few days the growth of products in substantially high and they it reaches maturity in 5-6 weeks. The products then started declining because new fashion trends and competitors’ products enter the market.

Figure 1: Zara’s PLC

(Source: Nicole, 2012)

Threat of Substitute (Moderate)

There are various competitors of Zara that customers can choose from such as H&M, Chanel, M&S, Burberry and many others. The cost of switching brand is considerable low and customers can easily select neighbour retailers instead of Zara. Copying of style or fake imitation can attract customers because they offer same “similar” looking products at lower price.

Barriers to Entry (High)

There is a requirement of high fixed cost in retailing business and talented workforce needed in short period of time. The cost of marketing and advertisement is also substantially high. In traditional concept to store method, it takes around six months for a corporation to design a product and offer it for sales, whereas, Zara design and sold new products in about two weeks (Dunn, 2007).

Industry Rivalry (High)

There are high exit barriers in the industry because of excess out of fashion inventory, high Selling, General and Administrative Expenses and high fixed costs. The advertisement cost is also substantially high in the industry and competitors invest heavily in marketing campaigns to gain competitive advantage (Hammoudeh, 2014).

Buyer Power (Moderate)

Customers prefer to buy only those products which they like, irrespective of the brand. Apparel companies offer a lot of choices and designs to attract customers, but the price is a substantial factor. In many countries such as United States, United Kingdom, and many European nations, Zara is considered as an affordable brand, whereas, in other countries such as China, India, and Indonesia, Zara is considered as a premium brand (Lloyd & Luk, 2010).

Suppliers Power (Low)

The corporation enters into a contract with suppliers for cloth stitching and production which makes them readily available as per firm’s requirements. The enterprise also buys fabric in from wholesale vendors at lower prices. Zara associates with local cooperatives that work without labour unions or contracts which reduce the number of strikes and disputes (Trehan & Mehta, 2014).

Figure 2: Porter’s Five Forces Model

Zara Targeting and Segmentation

(Source: Jurrevicius, 2013)

Boston Consulting Group analysis or growth-share matrix assists firms in analysing their product lines which allow them in allocating their resources more effectively and also use as an analytical tool in performing business functions like strategic management, brand marketing, and portfolio analysis (David, 2011). Primarily, Zara deals in various products lines including apparels and fashion accessories for men, women, and children. The star of BCG matrix for Zara is women clothing segment; men clothing segment is interrogating mark line products because of high market demand. The kids and babies clothing line are cash cow line products because the number of famous children apparel firms is high in the market. The dog line products are accessories offered by the enterprise because they are neither too profitable nor unsuccessful instead they usually bread even for the firm.

Zara’s pricing strategy focuses on providing high-quality trendy clothing products at competitive prices to its customers. The corporation conducts market research and establishes effective pricing strategies for its international stores. In many countries, such as United Kingdom, United States, and many European countries, Zara is considered as an affordable brand, whereas, in countries such as China, Indonesia, and India, the corporation is considered as a premium brand. The company also changed its products’ prices based on various factors, for example, the enterprise clothing was priced between 22 and 24 percent higher in Germany, Italy, and France, and in countries such as Britain and Mexico, it is 50 percent more priced. The firm’s highest priced products are in South Korea with 96 percent more expansive products than Spain followed by USA and China with 92 and 78 percent respectively (Ceballos, 2015).

Customers

The customers of the firm or buyers responses affect the pricing strategy of the enterprise; various factors relating to buyers such as preference, perceive lifestyle, income, age and many others influence the pricing strategy of the company (Huang & Huddleston, 2009). For example, the primary demographic of Zara is aged 18-40 and the corporation closely monitor their style trends to provide products as per their requirements. The income of customers substantially influences the pricing strategy of Zara; the company increase or decrease its products prices in different countries based on income and spending of customers. For example, in the US and South Korea the prices of products are high whereas, in Italy and France, the prices are considerably low.

Competitors

The pricing strategy and organisational decisions of competitors have a substantial impact on the strategy of Zara. The corporation closely monitors the changes and new modifications to its competitor’s pricing strategies to ensure that it maintains its competitive advantage. Zara maintains competitive pricing of its products by analysis the pricing strategy of its competitors such as H&M, Chanel, M&S, Burberry and others (Officer & Inditex, 2009).

Market Demand

Demand of customers plays an important role in pricing strategy of Zara; the corporation assesses the demand of its customers and offers them appropriate products to increase its sales. The company increases the price of products which has high demand and low supply whereas it reduces the price of low demand products to clear its inventory (Nenni, Giustiniano & Pirolo, 2013).

Zara Product Life Cycle

Cost of Goods Sold

Zara has a low advertisement, raw material, and design costs, and its prices are about one-fourth of the brand’s prices. Due to effective supply chain and low material cost, Zara can sell its products at comparatively low prices (Caro et al., 2010). For example, a women’s coat in Zara cost around 19 to 26 dollars, whereas, in other shops, it cost around 40 to 60 dollars.

Although Zara is known as the firm which does not market its products, instead they rely on word-to-mouth advertising because their primary demographic, i.e., 18 to 40 prefers to share their preference with friends and family (Royo-Vela & Casamassima, 2011). The corporation spends around 0.3 percent of its revenue on marketing and advertising whereas its competitors spend more than 3 to 4 percent. The primary objective of Zara’s marketing is to increase its customers’ equity. Following points should be included in the marketing strategy of Zara.

Along with e-commerce, the market for online advertisements has grown as well, and people trust online advertisements more than offline. The number of online users is also considerably high, and corporations’ have the opportunity to target a specific audience in the online platform, traditional methods did not provide this option. Online advertisements are two-way communication channels unlike traditional sources, and customers can instantly provide their feedback on company’s marketing campaign (Roberts & Zahay, 2012). The enterprise should use social media sites to advertise and interact with its customers that increase its brand loyalty.

The firm should use various covert advertising methods to target their specific audience, for example, the company can advertise its products in movies which are popular among its target demographic. The corporation should use celebrity endorsement method to increase its market space; due to the positive brand image of the enterprise, they can sign any popular celebrity that they want (Tomazic, Boras, Jurisic & Lesjak, 2014).

Zara should hold trade shows and events to increase its brand awareness in public; it also provides an option to the corporation to locally connect with its audience and provide them information about its services (De Mooji, 2013).

Zara should also invest in traditional marketing sources such as television advertisements, billboards, and posters to ensure that its marketing policies include each customer segment. The corporation should develop effective television advertisements that target its specific demographic which assist them in increasing their sales (Dahan & Peltekoglu, 2011)

Conclusion

Conclusively, Zara is one of the largest clothing retailers in the world because of various factors such as effective control over the supply chain, high-quality products at competitive prices, strong brand image and many others. The corporation’s pricing strategy affects by various factors including customers’ preferences, cost of goods sold, competitors’ strategy, and market demand. The marketing strategy of Zara should include online advertisement, covert marketing, traditional sources, and events to ensure that it advertises its products to a large number of audiences which assist in increased sales.

References

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