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Zara case study. Zaras Objectives, Strategies and Problems.

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Introduction

ZARA: FAST FASHION 1. Introduction In my short study case I will start by illustrating Zara's present situation (according to the case), then I will continue with a brief analysis of the internal and external environments; in the next step I will develop some alternative ways of action and I will end by presenting my recommendations regarding the adaptation of the Zara's business model in order to successfully face the future economic context. 2. Zara's Objectives, Strategies and Problems. 2.1 Objectives The first objective for Zara is to continue their expansion in countries like Switzerland, Italy, and Czech Republic and also on other continents: Latin America and Asia. A second objective is to continue their stores' growth in the countries where already exists in order to consolidate its position and increase its market share. By the accomplishment of the two objectives Zara is looking to create enduring profitable growth. 2.2 Strategies I will start with the product market penetration used by Zara and more precisely with the product line stretching (one of the tactics allowed by the product market penetration) and we can see in the case of Zara that it started with clothes and then added accessories. Zara definitively use a price differentiation that permits a differentiation between countries: starting with the lowest prices from Spain, then the prices are increasing with 10% for Southern Europe and 70% higher in the Northern countries, fact that is explained by the alignment to the standards of life in that area. ...read more.

Middle

Besides its specific capabilities Zara is facing some issues also: ?Because of an incorrect study the entrance on Argentina market was a failure because when analyzing the market the managers didn't consider all the political and the economical factors. ?The lack of advertising: There is made only twice a year advertises and that is at the end of seasons for the sales. If Zara wants to continue the expansion on other continents where they don't beneficiate of brand awareness it will be really difficult to be successful without an advertising campaign ?The Vertical Integration which is a distinctive feature of Zara's business model start to become more and more difficult to handle as long as the distance from the headquarters is getting bigger. 3.2 External Environment To have a better understanding of the company's business model it is necessary to take a look to the external factors. Opportunities: ?Once with the expansion of U.E the customs will disappear and also the liberalization of markets (e.g. Germany) will facilitate the further expansion of Zara ?Zara entered new markets that normally were riskier to approach by partnerships: franchises in Cyprus, joint-ventures with Benetton in Italy and Otto-Versand in Germany. ?If Zara will expand in Asia it will need to replicate its business model because of distance and differences Threats: ?A treat that become significant for several companies (e.g. ...read more.

Conclusion

Zara should most likely develop a second distribution center in U.S and the third one in Asia in order to deliver fashionable clothes in a fast manner. The creation of these two distributions centers it will be a test for Zara, it will be like a duplication of its business model and also a big signal of alarm towards the competitors but it also be a failure if it isn't well managed. I would like also to consolidate the transnational strategy by adding two more elements: a management team that will be in charge with the coordination of all activities regarding the development of the two distributions centers and a council will be added also in order to supervise and improve the communication between the product divisions and the distributions centers (Exhibit 1). The information from the local centers will be sent to the Spain headquarters, in this way; the "design-on-demand" model will be more adapted to the various country specificities. An optimal solution can be the combination between cost leadership and local responsiveness. 6. Conclusion Zara is one of the biggest retailers in the fashion industry. Its business model is unique: Zara gathers the information from the customers and then respond in a fast manner to their demands. As long as Zara is keeping its philosophy and make some modifications regarding its strategy in order to face the futures challenges it will be impossible to assist to the disappearance of this retailer in the near future. Exhibit 1 ?? ?? ?? ?? 1 ...read more.

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