55583327 Zara Final Search

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BAU MBAProgramme

Spring 2010

BAU MBA PROGRAMME

Zara- Case StudyKnown for its fast, affordable fashion, retail chain Zara has built up a multi-billion dollar brand through listening and reacting quickly to its customersPresented to: Nabila Abass Professor Dr.

Presented by: Roula Jannoun

ContentsContents Introduction and Background Zara's marketing strategy Unified marketing approach Vertical integration Zara's five-point marketing approach to reach its customers Company history Zara's products-Manufacturing and distribution Zara: Taking the Lead in Fast-Fashion BASIC BLACK. Operation/Expansion Key Success/Failure Factors Learning Points and Recommendations Fast Fashion: ZARA - Zara doing what it does best, Fast Fashion Customer Profiles- Positioning Strategy - Differences in Marketing Strategies for the Different Customer Segments Segmentation Strategy - Targeting Strategy- Positioning Strategy - Differences in Marketing Strategies for the Different Customer Segments Zara's competitiveness Conclusion Reference Appendix of the Case Study attachedZara Case Study

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Introduction and BackgroundThe competitive advantages of Zara are because of its cost leadership, fast production and product variation. Zara sells quality, fashionable products at reasonable prices and based on product positioning, Zara is cheaper than its leading rivals as Benetton and Gap. Zara also has the ability to design and finish products to be delivered in stores within 4 to 5 weeks hence very quick to get designer-influenced products into their stores. Likewise, the clothing brand has the ability to launch new trends and designs in a much shorter period. Zara thereby boasts for low level of inventory, efficient distribution system and high turnover of product. International strategy at Zara is defined by the combined generic strategy of cost leadership and differentiation strategy. There are considerations, however, such as when selecting the Lebanese market, labor cost and productivity, distribution cost and shipment cost of raw materials are considered. Other considerations are characteristics or behavior of consumers and income per capita. In terms of marketing approach, the considerations include the 4Ps inherent to the Lebanese consumers and business environment. Market entry considerations include economics, both macroeconomic factors which include tax, political condition and export tariff and microeconomic factors including local competitors, demand and location of store. Regulation from government and local producers protection issues are other considerations. Zara is a popular Spanish clothing store that uses a very unique marketing strategy. Because they do not outsource their manufacturing, the company is able to more quickly respond to fluctuating customer demands in fashion trends. Zara's Unique Selling Proposition (USP) is to create or imitate the latest trends within a short two-week period; the new styles are available on sales floors for no longer than 4 weeks. In the case that a product does not sell, its inventory is immediately pulled from the floors and discontinued after one week. Zara is said to have the "most unusual strategy...its policy of zero advertising; the company preferred to invest a percentage of revenues in opening newZara Case Study Page 19

stores instead."

Zara's marketing strategy is very effective because of its:1) Affordable prices and 2) Unique response to market demands. Because items move so quickly through Zara stores, customers feel the pressure to buy an item for fear that it may not longer be there next time. Known for its fast, affordable fashion, retail chain Zara has built up a multi-billion dollar brand through listening and reacting quickly to its customers. At a time of uncertainty in global stock markets, there is increasing emphasis on the brand equity of companies, particularly as many decide whether to decrease spending or cushion a fall with continued brand investment. One company that doesn't have to worry too much is global fashion retail chain Zara. It joins household names like Google, Apple, Amazon and Nintendo as one of the fastest-rising brands on the highly regarded Interbrand Best Global Brands listing for 2008. Zara achieved 62nd place this year, a jump of just two places from last year but representing a 15pc increase in its brand value. Interbrand takes many factors into account when ranking the 100 companies on the list, including revenue attributable to the brand (derived from analysts' reports and company information) and the brand's ability to sustain future revenue.

Unified marketing approachThe first Zara store was opened by Inditex in 1975 in its native A Corua in north-western Spain. The company made the decision to go down a very nontraditional marketing route at the end of the Eighties. A more conventional marketing approach had been employed prior to that. This change coincided with Zara's entry into international markets.Zara Case Study

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Today, the fashion chain has close to 1,500 stores in 70 countries worldwide. Many of the openings tend to be concentrated in the second half of the year. With such rapid expansion and a massive global market presence it's easy to see why a unified marketing approach is the most viable option. "It was not an easy move at the beginning, especially since communication is such an important branch of the business. The decision was made that Zara would no longer talk about itself (through mass marketing campaigns), but would instead let the customer talk about it and so increase brand awareness through word of mouth. It works. Zara's rise continues unabated, with the result that it is now present in almost every continent. The company is currently concentrating on a line of expansion from Poland to Japan. "This is where Zara have room to grow". It follows the company's strategy to prioritize Europe as its No 1 growth market, followed by Asia. Keeping a hands-on approach is very much part of the Zara ethos. "The most important item is the store [rather than the market. Each customer must be heard and we take care of every store as if it were the first one Again, a consolidated marketing effort makes sense in this regard as trying to keep control of individual marketing activity in every single location would prove a tall order to say the least. Success depends on following the strategy to the letter, however, "It's about having the same image, the same customer service, the same specific way of doing things. The result is customer satisfaction. You must pursue the same policy in every single store, you can't afford to have gaps. That's Zaras philosophy."Zara Case Study Page 19

Vertical integrationZara produces up to 30,000 different articles each year. The company employs 200 designers who work in collaboration with each other based on feedback taken directly from in-store customers. The company uses a vertical integration system (devised by Inditex) to fulfil demand for its wares. This business model covers all phases of the fashion process: design; manufacture; logistics; and distribution to its own managed stores. The key is the ability to adapt product to customer demand in the shortest time possible, offering a significant advantage over competitors. There is a much-quoted story that when Madonna played a series of concerts in Spain in 2005, teenagers attending the final performance were able to wear a Zara version of the outfit she had worn at the first show. In fact, the turnaround time for bringing a design concept to the shelves at Zara can be as short as 15 days. All Zara stores receive new product twice a week. This compares favorably with many of the chain's competitors, which usually receive new styles just once or twice each season. The fact that new stock arrives so frequently has several benefits. Most importantly, it encourages customers to come back regularly and, because styles are only available for a limited period, it promotes a sense of exclusivity. The process starts with an order from the store manager. Thanks to the logistics system, the time between receiving the order at the distribution centre and delivering the goods in store is, on average, 24 hours for Europe and 48 hours for the remaining stores. Brand extensions :Zara's traditional business is fashions for men, women and children.

Zara's five-point marketing approach to reach its customers

Zara Case Study

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1. 2. 3. 4. 5.

Store location: The company always tries to find the perfect location and ensure its brand is visible to as many people as possible Store window: The first meeting point with the customer and the place where Zara advertises the next season's look Interior design and store image: Has to be right every time. Zara renews this image every six to eight months in all of its stores Goods display: A dedicated team of co-ordinators display the collections by showing off the best trends, fabrics and colours Customer service: Something Zara believes it's excellent at. The aim is to have as much personal contact with the customer as possible.

Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead. Zara was described by Louis Vuitton fashion director Daniel Piette as "possibly the most innovative and devastating retailer in the world." Zara has also been described as a "Spanish success story" by CNN.

Company historyThe founder of Zara, Amancio Ortega, opened the first Zara store in 1975 in a central street in A Corua, Galicia. Its first store featured low-priced lookalike products of popular, higher-end clothing fashions. The store proved to be a success, an