STRATEGIC MANAGEMENT PAPER
ZARA
Created By:
Anggita Sulisetiasih
1006718706
Kenji Wibawa Junardy
1006718990
Patricia M. A. Adam
1006805694
International Undergraduate Program
Faculty of Economics
University of Indonesia
Depok 2013
2
TABLE OF CONTENTS
Chapter 1 .................................................................................................................................... 4
INTRODUCTION ..................................................................................................................... 4
1.1.
Company Background ................................................................................................. 4
1.2.
Vision and Mission...................................................................................................... 4
1.3.
Long-term Objectives .................................................................................................. 5
Chapter 2 .................................................................................................................................... 6
VISION – MISSION ANALYSIS ............................................................................................. 6
2.1.
Importance (Benefits) of Vision and Mission Statements .......................................... 6
2.2.
Characteristic of a Mission Statement ......................................................................... 7
2.3.
Mission Statement Components .................................................................................. 8
2.4.
Vision and Mission Relation: Is It Achievable? ........................................................... 10
Chapter 3 .................................................................................................................................. 11
EXTERNAL ASSESSMENT .................................................................................................. 11
3.1
Michael Porter’s Five-Forces Model......................................................................... 11
3.2
External Factor Evaluation (EFE) Matrix ................................................................. 13
3.3
Competitive Profile Matrix ....................................................................................... 15
Chapter 4 .................................................................................................................................. 19
INTERNAL ASSESSMENT ................................................................................................... 19
4.1
Resource-Based View Analysis ................................................................................ 19
4.2
The Internal Factor Evaluation (IFE) Matrix ............................................................ 22
4.3
Financial Analysis ..................................................................................................... 27
Chapter 5 .................................................................................................................................. 33
STRATEGIES IN ACTION .................................................................................................... 33
5.1
The Strategies ............................................................................................................ 33
5.2
Michael Porter’s Five Generic Strategies.................................................................. 34
Chapter 6 .................................................................................................................................. 36
STRATEGY ANALYSIS AND CHOICE .............................................................................. 36
6.1
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix ........................ 36
6.2
The Strategic Position and Action Evaluation (SPACE) Matrix .............................. 37
6.3
The Boston Consulting Group (BCG) Matrix ........................................................... 39
6.4
The Internal-External (IE) Matrix ............................................................................. 40
3
6.5
The Grand Strategy Matrix ....................................................................................... 41
6.6
The Quantitative Strategic Planning Matrix (QSPM) ............................................... 44
Chapter 7 .................................................................................................................................. 46
IMPLEMENTING STRATEGIES: MARKETING, FINANCE/ACCOUNTING, R&D, AND
MIS ISSUES ............................................................................................................................ 46
7.1
Marketing .................................................................................................................. 46
7.2
Finance ...................................................................................................................... 49
7.3
Research and Development (R&D)........................................................................... 49
7.4
Management Information System ............................................................................. 51
Chapter 8 .................................................................................................................................. 53
STRATEGY EVALUATION AND GLOBALIZATION CULTURE ................................... 53
8.1
The Balanced Scorecard ............................................................................................ 53
8.2
Globalization Culture ................................................................................................ 56
Chapter 9 .................................................................................................................................. 59
CONCLUSION ........................................................................................................................ 59
9.1
Zara’s Competitive Advantage.................................................................................. 59
9.2
Vision, Mission, and Strategies ................................................................................. 60
BIBLIOGRAPHY .................................................................................................................... 62
4
Chapter 1
INTRODUCTION
1.1. Company Background
Zara is a Spanish brand of clothing founded by the
visionary Amancio Ortega Gaona and Rosalia Mera in Artexio,
Galicia. Zara was founded in the year 1975. It is one of the
major selling brands of one of the biggest fashion retailer
"INDITEX". Zara is now available in 86 countries with total of
1,763 stores worldwide.
Inditex itself is a huge fashion retailer company which owns 8 brands namely Zara, Pull
&Bear, Massimo Dutti, Bershka, Stradivarius,
Oysho, Zara Home and last but not the least
Uterque. Amancio Ortega is the founder of Inditex,
which was established in 1963. Amancio Ortega
adapted unique business model, which were
innovative and flexible. This made Inditex one of
the biggest retailers in the world. In 1975 Inditex
established Zara’s first store in downtown A
Coruna, Spain. Zara offers fashionable designs for men, women, and kids. They also sell
accessories to complete their product lines.
1.2. Vision and Mission
The company’s vision as stated on the website: “Zara is committed to satisfying the
desires of our customers. As a result we pledge to continuously innovate our business to
improve your experience. We promise to provide new designs made from quality materials
that are affordable”.
Zara states that its mission is that “Through Zara’s business model, we aim to
contribute to the sustainable development of society and that of the environment with which
we interacts”.
5
1.3. Long-term Objectives
The company states on their website the following as their objectives in the long-term:
1. Save energy, the eco-friendly store: They are implementing an eco-friendly
management model in their shops in order to reduce energy consumption by 20%,
introducing sustainability and efficiency criteria. This management model sets out
measures to be applied to all processes, including the design of the shop itself, the
lighting, heating and cooling systems and the possibility of recycling furniture and
decoration.
2. Produce less waste and recycle: Zara recycles their hangers and alarms, which are
picked up from their shops and processed into other plastic elements. This is an
example of their waste management policy. Millions of hangers and alarms are
processed each year and both the cardboard and plastic used for packaging are also
recycled.
3. Their commitment extends to all their staff, increasing awareness among the
team members: The Company holds In-company awareness campaigns and specific
multimedia-based training programs to educate their staff in sustainable practices,
such as limiting energy consumption, using sustainable transport and modifying
behavior patterns.
4. Use ecological fabrics, organic cotton: Zara supports organic farming and makes
some of its garments out of organic cotton (100% cotton, completely free of
pesticides, chemicals and bleach). They have specific labels and are easy to spot in the
shops.
5. Use biodiesel fuel: Zara’s fleet of lorries, which transport more than 200 million
items of clothing a year, use 5% biodiesel fuel. This allows them to reduce their CO2
emissions by 500 tons.
We can see from the objectives that Zara is aiming to be an environmental-friendly
company. It is their top priority at least until the year 2020.
6
Chapter 2
VISION – MISSION ANALYSIS
2.1. Importance (Benefits) of Vision and Mission Statements
Zara clearly has a formalized mission statement and they are currently striving to
achieve their mission through strategies implemented though their objectives in long-term
period. According to King and Cleland, taken from Fred David’s Strategic Management
book, it is said that there are six benefits of having carefully-developed mission statement:
1. To ensure unanimity of purpose within the organization
2. To provide a basis, or standard, for allocating organizational resources
3. To establish a general tone or organizational climate
4. To serve as a focal point for individuals to identify with the organization’s
purpose and direction, and to deter those who cannot from participating further
in the organization’s activities
5. To facilitate the translation of objectives into a work structure involving the
assignment of tasks to responsible elements within the organization
6. To specify organizational purposes and then to translate these purposes into
objectives in such a way that cost, time, and performance parameters can be
assessed and controlled
In case of Zara, their mission statement clearly and firmly emphasizes their purpose,
which is to be an environmental-friendly company and contribute to society development.
Their purpose is also their base in making allocation to their resources in which we know that
Zara allocates more on creating an eco-friendly operations and boosting its supply and value
chain other than spending for marketing campaigns. The mission statement, combined with
its corporate culture, somehow produces a conducive organizational climate for achieving
their objectives.
Moreover, since the mission statement is very clear and direct, it is easier for the
employees to set their mindset and behavior to be aligned with the company’s objective. In
other words, employees know what they should do, how they should do it, in order to achieve
those objectives. Finally, Zara as a determined company, with the purposes of being a fast
fashion company that concern its environmental-friendliness, combined with their long-term
7
objectives that are derived from their mission statement, create somewhat a clear standard of
their cost, time, and performance assessment, and it has been working well so far.
2.2. Characteristic of a Mission Statement
A Declaration of Attitude
A mission statement is more than a statement of specific details; it is a declaration of
attitude and outlook (David, 2013). A good mission statement sets the company’s objectives
and strategies without limiting the management’s creativity. It also needs to be broad enough
to reconcile the stakeholder’s differences. Moreover, a good mission statement indicates the
relative attention that the organization/company will devote to; it reflects judgments about
future growth directions and strategies that are based upon forward-looking external and
internal analysis.
In case of Zara’s mission statement, based on what is stated on the website and quoted
on this paper, it is said that through its business model, Zara aims to contribute to society
development and environment sustainability. That is their objective and the attention that
they devote to. Zara states that an eco-friendly company is what their direction is, other than
fulfilling their consumer’s fashion needs.
Furthermore, Fred David on his book summarizes nine Characteristics of a Mission
Statement, they are:
1. Broad in scope
2. Less than 250 words in length
3. Inspiring
4. Identify the utility of a firm’s products
5. Reveal that the firm is socially responsible
6. Reveal that the firm is environmentally responsible
7. Include nine components
8. Reconciliatory
9. Enduring
In Zara case, we can conclude that it is broad in scope. It clearly states their mission
statement and differentiated from their objectives, though the two are still aligned one
another. The length also does not exceed 250 words. However, in our opinion, their mission
8
statement is too simple in order to inspire people to take actions. We think that a brief
statement of their act would be better if it is mentioned on the mission statement also.
Moreover, their mission statement is too direct to the company’s direction that it does not
identify the utility of their products. However, Zara shows their emphasis on environmental
and social responsibility very well. The word ‘sustainable development of society’ on their
mission statement not only shows that they are socially responsible, but also clarifies as an
enduring mission statement in term of program and actions.
On the other hand, Zara’s mission statement does not completely include the nine
components of a Mission Statement. More of this will be discussed on the next section.
Lastly, it is also not reconciliatory.
A Customer Orientation
Fred David says on his book that a good mission statement reflects the anticipations of
customers. It identifies the customer’s needs and then provides a product or service to fulfill
them. Moreover, a mission statement should identify the utility of a firm’s products to its
customers. Zara implicitly states its customer orientation by using the phrase “through our
business model”. This will lead us to the explanation of Zara’s unique business model, the
fast fashion.
The term fast fashion, by its definition, is an expression used by fashion retailers for
designs that move quickly from the catwalk to capture current fashion trends (Wikipedia,
2013). The designs are manufactured quickly and directly distributed to stores for endconsumers. Specifically for Zara, they claim that they only take two weeks for new designs to
be sold at their stores, while normally it would take more than three months. This is a form of
Zara’s quick-response for their customers who desire the latest trend of apparels.
2.3. Mission Statement Components
Zara may not state all of the 9 components on their mission statement; however, they do
explain those components on the company website.
1. Customers: The customers of Zara are men, women and kids who love fashion
and like to wear the latest trend of clothing and accessories in their daily life.
2. Products or services: Clothing, accessories, home and bedding sets collection
9
3. Markets: Geographically, Zara now operates in 86 countries across the globe,
in every continent, with total of 1,770 stores.
4. Technology: Zara uses the Hybrid Model Information, in which information
from stores to headquarters relies from combined human intelligence input and
from information technology, such as their PDA devices (Sandoval). The
technology used allows the company to boost its value chain and eventually lower
the manufacturing time. Moreover, nowadays Zara is aiming to practice an ecofriendly technology throughout its worldwide operations.
5. Concern for survival, growth, and profitability: As one of the leading brands
in the fashion industry, company profitability and growth is of course important.
At the beginning of 2013, Inditex reported a 22% increase in their earnings as
they expanded in many emerging markets such as China, India, and Indonesia as
well as the online retail.
6. Philosophy: Zara, under the Inditex umbrella, shares the same core values with
the overall group, which is based on teamwork and open communication, and
performance expectations are very high. These principles underpin each staffer’s
personal commitment to meeting customers’ needs (Inditex, 2013). Moreover,
the company believes that in the course of doing business, they must implement
sustainable development standards that promote environmental protection,
ensure that resources are properly managed and meet society's needs. Inditex has
the strategy called “Sustainable Inditex”, which was initiated in 2007 and
continued up to today in which they try to reduce the CO2 emission by 10% in
2015, and 20% in 2020. Moreover, they are opening sustainable and
environmental- friendly stores worldwide.
7. Self-concept: Zara’s competitive advantages as one of the members of Inditex
group are that it has compelling mix of latest fashion and quality at relatively
affordable price. It has unique product strategy with 36,000 new designs per
year with 2 – 6 weeks delivery time to each store. Zara also emphasizes
customer interaction by using the daily-in store feedbacks. Lastly, Zara also has
attractive stores in prime locations.
8. Concern for public image: As mentioned on their company mission, Zara aims
to be an environmental-friendly company that is successful in meeting their
customers’ needs.
10
9. Concern for employees: Related with its philosophy, Zara places teamwork
and communication among employees as one of the company’s top priorities.
This is also aligned with their practice of IT which requires fast-delivering
information, which is why they educate their staff in sustainable practices. It is
one of their long-term objectives stated on their website.
2.4. Vision and Mission Relation: Is It Achievable?
Today, Zara is one of the world’s largest brands. They are successful and still
expanding in many emerging markets. Even in Indonesia, they are loved by the fashionistas.
They produce new and good designs that their customers love, and their customers are also
loyal. Zara’s customers are so loyal that the value of each fan of Zara is placed the highest
among other customer-favorite brands (as shown on Figure 1). If we take a look back to their
vision, we can conclude that Zara’s vision is not only achievable, but actually achieved.
Further, in case of their mission, since it is enduring and talks about their direction in
the future, we think that Zara is getting there. In addition, if we consider their long-term
objectives and their current strategies, then their mission is achievable, promising and
actually undergoing.
Figure 1 Value of a Fan: Across Brands 2013
Source: Syncapse 2013
11
Chapter 3
EXTERNAL ASSESSMENT
3.1 Michael Porter’s Five-Forces Model
The model identifies and analyzes 5 competitive forces that shape and help companies to
determine their industry’s degree of competitiveness and therefore helping the
companies to develop their strategies. The following is the Five-Forces Model for FastFashion with further analysis relevant to Zara:
MODERATE
LOW
HIGH
MODERATE
HIGH
Figure 2 Fast Fashion Five-Forces Model
We can take a look at each one more specifically of their measurement:
1. Barriers to entry: HIGH
a. High fixed cost business requires economics of scale for sustained profitability
b. High SG&A which includes advertising, in-store promotions, etc.; up to 3.5%
of its revenue, even though for Zara, the company is famous for spending
minimum level of advertisements and commercials. However, recently the
company announced that it invested €450 million in commercials as well as
logistics area (Inditex, Inditex’s net sales rise 6% to 7.7 billion euros, 2013).
12
c. Concept to store which takes 6 months to a year which refers to long sales
cycle. However, in case of Zara, the lead time of clothes first-designed by the
designer teams to finished products sold at the store take only about two
weeks.
d. Brand equity which is valuable to consumers
2. Substitues: MODERATE
a. Buyer propensity to substitute is high with several competitors to choose from
(H&M, Uniqlo, MANGO, and many other fast-fashion brands)
b. Low buyer switching costs and easily substitutable where a customer can walk
into its neighboring store instead of Zara
c. Zara has gained substantial customer loyalty which has more visits per year
than its competitor’s store
d. Copying of styles is quite prevalent in this industry, which can attract the
customer who does not mind lower quality but “similar” looking apparel. The
example will be counterfeiting of Zara products in Indonesia which is
currently trending.
Example of Zara counterfeiting in Indonesia
3. Buyer Power: MODERATE
a. Trendy fashion wear is appealing to regular consumers and they would not
shop lower quality apparel or accessories
b. Apparel consumers have lots of choices when it comes to trendy clothing and
accessories, but price can be a factor. In the case of Zara, for European,
American, and eastern Asian countries, Zara is positioned as the low-end
13
products, however, in emerging markets such as India, China, and Indonesia,
Zara is considered as the high-end products.
4. Supplier Power: LOW
a. Contract based cloth production and stitching functions readily available
b. Low price of fabric
c. Local cooperatives work without contracts or labor unions
5. Rivalry: HIGH
a. High exit barriers due to high fixed and SG&A costs and excess inventory
with lots of cash tied up in out-of-fashion inventory
b. High advertising expenses; 3.5% of revenue indicative of intense competition
3.2
External Factor Evaluation (EFE) Matrix
KEY EXTERNAL FACTORS
OPPORTUNITIES
1. Increasing middle class in Asia
2. Opportunity to build distribution centers
in developing countries to lower costs
3. New designers for better designs
4. Rising environmental issues
5. International Recognition
THREATS
1. Fierce Competition
2. Lawsuit related to sweatshops
3. Possible imitation of goods
4. Dilution of Brand Equity
TOTAL
Weights
0.0 to 1.0
Rating
1 to 4
Weighted
Score
0.10
3
0.3
0.05
1
0.05
0.10
0.05
0.20
3
4
4
0.3
0.2
0.8
0.2
0.05
0.05
0.2
1.00
4
2
2
4
0.8
0.1
0.1
0.8 +
3.45
The Opportunities of ZARA:
1. Increasing Middle Class in Asia weighs as 0.10 with a rating of 3; it is categorized
as highly-rated since it is an important factor. Not only because Asia is a booming
continent in which there are populous countries with growing GDP, but also
because people in Asian countries have the taste which Zara offers for its clothing.
Moreover, people in Asian countries, especially the teenagers and young adults
are usually western oriented. Meaning, they like to follow the trends that the
western culture currently has and adapt those trends in their country. One of those
trends is definitely apparel. Zara’s rating for this factor is 3, which indicates that
14
the response is above average because Zara is expanding aggressively in these
emerging markets of Asia (India, China, and Indonesia). They are also the first
mover in these countries. Therefore, we conclude that they have higher response
rate.
2. Opportunity to Build Distribution Centers in Developing Countries to Lower
Costs weighs only 0.05 because even though it sounds interesting in order to cut
costs of distributing the finished products, but there are problems that may occur,
such as infrastructure problems in developing countries which might actually
hamper the company’s super efficient supply and value chain. That is also the
reason why we put Zara’s response as 1 or poor, because they are not interested in
this option.
3. New Designers for better design weighs a 0.10 with a rating of 3; this is very
important since they are based on fast-fashion which they need to change products
every 2 weeks. Therefore, excellent team of designers is crucial in this business.
Since Zara just cooperated with a lot of new designers, consequently their
response is categorized as above average.
4. Rising Environmental Issues weighs a 0.05 with a rating of 4 or superior; They are
keen to have a good reputation of being an eco-friendly company, they even set
their mission regarding this issue, but too bad that sometimes the consumers do
not care about the eco-friendly issue, especially consumers in Asian-emerging
markets like India, Indonesia, and China. They simply want exclusive and trendy
clothes.
5. International Recognition weighs a 0.20 with a rating of 4 or superior response;
undoubtedly this factor is the most important for Zara’s opportunities because it is
the key to successful expansion. In case of Zara, it is widely-known across the
globe with good reputation in most of the countries. Therefore, it is a winning
point for Zara to have such brand image in the eyes of global consumers.
The Threats of Zara:
1. Fierce Competition weighs a 0.20 with a rating of 4; one of the biggest threats
because of new and affordable products from different stores such as H&M,
Forever 21, and Uniqlo may harm Zara in terms of consumers’ loyalty. The
analysis from Five-Forces also gives us some details about how this fierce
15
competition can affects Zara. However, somehow, regardless the amount of
advertising investments Zara made, this brand can still enjoy remarkable growth
across the globe. Allegedly it is the supply chain that makes it the winner.
Therefore, we conclude that the response rate is superior.
2. Lawsuit related to Sweatshops weighs a 0.05 with a rating of 2; this threat is not
much of a threat because the cases were not highly publicized, and also because
the company has created a commitment to stop the practice of sweatshops in every
factory; in every country where they produce their products.
3. Possible imitation of goods weighs a 0.05 with a rating of 2; there is a risk of
Zara’s products being copied, either by their competitor (the designs) or by
irresponsible people that practice counterfeiting. However, since Zara is targeting
the middle-upper class, therefore, it is not much of concern. Moreover, Zara’s
consumers are popularly known as loyal consumers to the brand.
4. Dilution of Brand Equity weighs a 0.2 with a rating of 4; this is also an important
threat because it can decrease in its brand value in customer eyes. Therefore, Zara
is implementing their best strategies to increase the brand equity. Probably more
significantly to their European consumers through the eco-friendly company
campaign which is highly noticed and precedence by European consumers.
Based on the EFE Matrix result, we see that Zara has a score of 3.45 which indicates a
strong response from Zara towards the opportunities and anticipation of threats.
3.3
Competitive Profile Matrix
Critical Success
Factors
Target foreign market
selection
Enter marketing
strategy
Timing of entry
Recognition of brand
Customers knowledge
Marketing support in
global market
Location selection
Weight
Zara
Rating Score
H&M
Rating Score
Uniqlo
Rating Score
0.15
4
0.6
3
0.45
2
0.3
0.05
2
0.1
2
0.1
4
0.2
0.05
0.12
0.1
2
4
4
0.1
0.48
0.4
2
3
3
0.1
0.36
0.3
4
3
3
0.2
0.36
0.3
0.06
1
0.06
4
0.24
4
0.24
0.04
3
0.12
2
0.08
3
0.12
16
Design collection
Employee
Price policy
Sales promotion
Organization and
control business
TOTAL
0.12
0.05
0.1
0.05
3
2
3
1
0.36
0.1
0.3
0.05
3
2
4
4
0.36
0.1
0.4
0.2
2
2
4
4
0.24
0.1
0.4
0.2
0.11
4
0.44
2
0.22
3
0.33
1
3.11
2.91
2.99
a. Target Foreign Market Selection: One of the most important factors in determining
success in this highly competitive industry which force its players to have massive
expansion strategy. That is why the weight is 15%. Comparing to its other 2
competitors, Zara has the highest score since they have been in the international
market longer then H&M and Uniqlo. Zara was the first to start opening new stores
in countries outside their country-of-origin’s continent. Zara expanded outside
Europe firstly in 1997 to Israel (Inditex, Timeline, 2013), followed by H&M which
is originated in Sweden, first opened their store outside Europe in 2001, located in
New York. Uniqlo was the last because they are a new player, established in 2005.
b. Enter Marketing Strategy: How the headquarter decides the mode of entering a new
market defines the company’s interest towards the host country, as well as the
company’s capability and strategy to do international expansion. Uniqlo takes the
lead for this aspect, thanks to its advertisement and promotions which are
everywhere. They even outran H&M in Asian countries by expanding rapidly with
strategy of wholly-owned subsidiary which potentially gives more concentrated
strategy compared with Zara and H&M’s strategies in which both used third-party
to enter Asian markets. For example, Zara in Indonesia is under the management of
PT Mitra Adi Perkasa.
c.
Timing of Entry: Uniqlo has the highest rating for its timing to entry because of
the booming trend of East Asia in other Asian countries, like Indonesia which is
currently suffering from Korean Invasion. This perfect timing result a surge of
consumers dying to shop at Uniqlo stores just out of curiosity.
d. Recognition of Brand: Zara takes the lead on this factor due to its powerful brand
equity across the globe, including in Indonesia and other countries as well, they do
not need much advertisement or promotion because they are already strong in
international market. Meanwhile, H&M and Uniqlo is catching up to Zara. That is
why the company finally realized the need to invest more on commercials. They
17
eventually invested more than 600 million euro to improve their commercials and
their logistic simultaneously.
e. Customers Knowledge: As the first mover in the international market, Zara wins
again for this factor. The first player usually gets the most advantage compared to
those who lagged. Moreover, customer’s knowledge is also important in order to
attract new consumers. Note that customers can also become tool for promotions
through the powerful word-of-mouth.
f. Marketing Support in Global Market: Zara has no lead here since after so many
years, the company seemed not care about this factor, which then ties H&M and
Uniqlo’s full on advertisements and marketing. Not until just recently when Inditex
finally decided to improve their marketing efforts.
g. Location Selection: H&M is behind Zara and Uniqlo since it has just opened in
only two stores in Jakarta. That is just one of the examples of how H&M is lagging
behind the other two in international market. Zara, on the other hand, is opening
more and more new stores in current market, in new market, and almost in every
big malls, shopping streets, downtown city, all strategic locations in every
countries around the world. Meanwhile, Uniqlo is trying to catch up by opening
more new stores concentrated in Asian countries like the one which has just been
opened in Indonesia at Lotte Shopping Avenue.
h. Design Collection: In apparel industry, designs are the key. In order to be
successful in this industry, designers must be able to produce designs that the
consumers currently like, designs that consumers will like in the future, and
designs that consumers did not expect they would ever like. Impressing the
consumers and be creative is important. Zara and H&M, in this case ties while
Uniqlo is behind. Zara not only sells clothing, accessories and perfumes, but also
furniture bedding, while H&M sells clothing, accessories, home perfume and make
up.
i. Employee: None of the stores takes the lead and are tied with a rating of 2, because
generally all companies evidently put their best service to attract customers
considering the high level of competition. In other words, no company outperforms
the others in this matter. Moreover, in apparel industry, employees (especially the
office employees) are not much of an effect more than the products itself, as a
result, the weight given is only 5%.
18
j. Price Policy: Price matters in apparel industry. Moreover, since the rivalry among
firms is high, therefore companies must be able to charge at competitive price. In
this aspect, H&M and Uniqlo ties on taking the lead for their more affordable
products than Zara’s, especially Asian-developing countries like India, Indonesia,
and China.
k. Sales Promotion: H&M and Uniqlo also ties on taking the lead for promotions and
advertisement compared to Zara. This will relate to the company’s strategy in
Marketing. Again, Zara has been very stingy when it comes to marketing
campaigns.
l. Organization and Control Business: In fast-fashion industry, the business control
operation is important. Because the lead time needs to be as low as possible,
therefore there is no room for defects. Zara is in the lead for this aspect, thanks to
their highly-integrated information response, by using PDA to directly inform the
headquarters about what is going on in the store. The report will be daily, or even
hourly.
Based on the result of CPM matrix, we see that Zara is still the winner among its
competitors with 3.11 score. Moreover, it also means that Zara’s performance is above
average.
19
Chapter 4
INTERNAL ASSESSMENT
4.1
Resource-Based View Analysis
The RBV approach to competitive advantage contends that internal resources are
more important for a firm than external factors in achieving and sustaining
competitive advantage. Therefore, in this analysis, we will look deeper into the
internal factors that Zara is relying on for their success.
Further, RBV is divided into three main categories: Physical Resources, Human
Resources, and Organizational Resources. In order to be valuable, each resource must
be either: (1) rare, (2) hard to imitate, (3) not easily substitutable. The following are
the analysis of Zara using the RBV:
1. Physical Resources
a. Prime Location: One of the best strategies that Inditex applies to all of its
brands, including Zara is that the stores are always located in prime
locations of the city. If the center of the crowd is in the shopping malls
like Jakarta, then that is where you will find Zara stores. In European
countries and USA, crowds are usually centered downtown or in
shopping streets, and that is exactly where Zara stores are located.
Choosing prime locations give more benefits to the company from the
amount of store visitors which can result more sales created.
Indoor Zara store (Plaza Indonesia, Jakarta) vs. Outdoor Zara store (42nd Street, New York)
b. Attractive Window Displays: Even though Zara does not have many
advertising or commercials, Zara does rely so much on its physical store-
20
experience. Their “marketing” strategy includes putting attractive and
creative window displays to attract consumers, and maintain them inside
the store with the store ambiance and service; hence, creating an
impressive shopping experience for consumers.
Examples of Zara’s attractive window displays
c. Exclusive and Trendy designs: As the leader in fast-fashion industry,
Zara is popular for its fast-changing designs. What makes it interesting is
that Zara is able to provide apparel designs that their customers love and
it is consistent, even in a very short amount of time. Their total designs
in 2012 reached 36,000 designs in a year. That is a marvelous number.
Examples of Zara collection per season and customer’s excitement towards Zara store
d. Sophisticated IT System: One of Zara’s secret will be the integrated
information system using the PDA and POS. Both will be explained
further in the following chapters.
2. Human Resources
a. Trained designers: In order to boost their product quality in terms of its
couture value, Zara cooperates with many new designers and they give
training to the designers for them to able to produce in shorter lead-time,
and adaptive enough to produce with materials/fabrics that are available
21
instead of designing the apparel first then finding the material/fabric.
That type of operation will cost more also consumer more time to the
company.
Zara designer teams in action
b. Caring Employees: In order to enhance the customer service in each of
its retail store, Zara, therefore, train their employees to prove better
service, including their attitude, professionalism, having a sense of
belonging to the store, and hard-working.
3. Organizational Resources
a. Market-oriented Strategy: Just like what the old saying says, the
customer is the king. In the industry with high competition profile,
choosing to emphasize on your customer is important and wise. Because
in this type of industry, the key is to be able to make your customer loyal
so that they will not shift to other brands easily. By concentrating on
customer’s demand and preferences, supported by its operational
strategies, Zara shows their commitment towards their customers. That is
why Zara’s customers are loyal; thus, Zara can reach its position right
now.
b. Staff-education: Related with the discussion on Zara’s human resources,
Zara is concentrating on customer service; thus, the need to educate their
staff is one of their top priorities.
c. Eco-friendly: The global warming issue is a hot topic nowadays. More
and more companies start to put special attention to deal with this issue.
Especially in European countries, where the society is fully-aware with
the importance of eco-friendly business operation, having a mission of
22
becoming an eco-friendly company will inevitably bring positive
response from the society. Note that the society is actually the
consumers.
d. Production strategy: One of the most innovative strategies that Zara
applies is the production process. As mentioned before, instead of
designing the clothes first, the designers actually examine the available
materials and/or fabrics, then after that they will design apparel based on
the existing material and/or fabrics, therefore, the lead time can be
reduced and costs will be decreased.
e. Value chain: Zara’s overall value chain differs from its competitors and
it is unbeatable until today, especially its lead time of 2 weeks. Zara’s
value chain is actually what makes Zara able to produce new designs in
just 2 weeks. We will analyze the value chain later in the following
chapters.
4.2
The Internal Factor Evaluation (IFE) Matrix
Key Internal Factors
Strengths
Global Outreach
Strategic Location
Distribution Strategy
Store Image
Fast Changing collection
Responsive Employees
Brand Image
Weaknesses
Limited Stocks
Price
Brand image closely
tagged to competitors
Lack of Marketing
Total
STRENGTHS
a. Global Outreach
Weight
Rating
Weighted Score
0.08
0.08
0.12
0.12
0.09
0.03
0.15
3
3
4
4
4
3
4
0.24
0.24
0.48
0.48
0.36
0.09
0.6
0.08
0.12
0.08
2
1
1
0.16
0.12
0.08
0.05
2
0.10
2.35
23
Inditex, as the head company, expands Zara in a large amount of scale. Currently
they have more than 1,700 stores in exactly 86 countries around the world. This
condition is one of a good strength that Zara has because as an international brand
company, especially in apparel industry, Zara should reach every part of the world.
Therefore, a weight of 0.08 would be adequate for this factor.
We rank this strength 3 out of 4 because we think that this factor is definitely one
of Zara’s strengths, even though it is not their major strength. Therefore, rating 3
(minor strength) would be sufficient to describe Zara’s condition. In addition,
reaching global market is a foundation to step for an international brand to dominate
the industry.
b. Strategic Location
Zara chooses where to locate their stores carefully because they are aiming for a
direct communication strategy to promote their products. They have a unique
approach in locating their store in each countries, and even cities. For example in
Indonesia, Zara locates their stores in almost every big shopping mall because it has a
high traffic everyday and it is the main place for people to go shopping. In France,
Zara locates their store in downtown and main streets as the local people usually walk
down the street to go shopping. We gave this factor 0.08 of weight considering the
importance of convenience for consumers in the industry. Consumers will like it if
they can find good products available at their beloved shopping centers.
Since Zara’s locations are strategic globally, we therefore give3 of rating for this
brand. It is categorized as their minor strength because we think this is not the main
reason why Zara is prominent in fast-fashion industry.
c. Distribution Strategy
In the distribution system, Zara control most of the supply chain and distribution
of its products from the headquarters. Zara has their main manufacturing place in
three different contingents. 50% of the products are produced in Spain, 26% in the
rest of Europe, and the rest 24% percent is outsourced in Asia and Africa. Then the
products were transferred to Zara’s distribution centers located in Spain to be
exported to Zara’s stores around the world. We can see that their distribution strategy
24
is vertically integrated. This requires a high concentration and control form the
headquarters in Spain, and that is exactly what Inditex does. Since the distribution
strategy is integrated, combined with their high technology, the products can be
distributed globally in just a short amount of time. This is the uniqueness of Zara.
They are able to adapt to the latest trend in limited time, using the Hybrid
Communication system, then produce those latest trend with available materials to cut
production time and cost, and after that the products are immediately transferred to all
the stores.
We found out that this is strategy has become their strength. An effective
distribution, therefore, has a higher weight of 0.12. In our opinion Zara deserves 4
rating for this factor since this is their specialty.
d. Store Image
Zara is a trendy yet exclusive fashion store. This is the image of Zara from around
the world. A unique concept of fast fashion might become a trendsetter in
international fashion industry. A good store image also drives people to consider Zara
when they want to purchase fashion items. In addition, their excellent customer instore services result a loyal behavior from consumers. In the industry with a high level
of competition, consumer loyalty is crucial; therefore we give a high weight of 0.12
and rank of 4 because this strength is a strong foundation for the company which is
highly acknowledged by Zara.
e. Fast Changing Collection
This factor is one the specialties and uniqueness of Zara. Every 2 weeks Zara
published brand new fashion items. This strategy exists to stimulate and refresh
consumer’s curiosity about Zara’s products. This is also the strategy to strengthen the
image of Zara as the designer teams always work to find out what the new designs
should be. The aim is to be the trendsetter of fashion business. However, in the
apparel industry, it is easy to copy the style of designs. Therefore, a rating of 0.09 is
given for this strategy. In terms of their response towards the factor, we give Zara 4
rating since they put high concern on this matter through their business model.
f. Responsive Employees
25
Employees’ presence is important inside the store to control, rearrange items, and
also to give information to the customers. Therefore Zara also concerns about
Employees’ responsiveness, especially because they claim to have direct
communication as their prominent marketing strategy. Customer control and
satisfaction sometimes depend on the service and Zara want to optimize those
satisfactions in order to get the customers’ loyalty. On the other hand, sometimes
consumers do not really care about the customer service. Sometimes they care only
about the product and price. Consequently, a weight of 0.03 is given for this strength,
as it is not as important as the other strengths. In term of Zara’s effectiveness in
responding to this factor, a rank 3 out of 4 is adequate.
g. Brand Image
We set the brand image as the highest weight of 0.15. We do think that this is the
back bone of every player in apparel industry; again, considering the amount of
competition in this industry. One of the proofs would be the fact where consumers
still buy the product from certain brand even though many claim it uses bad fabrics, or
the price is sometimes too high, and so on. Eventually, they would still come back
because of the image that they will get when they purchase the product. In other
words, this symbolic brand benefits do exist and they are important.
The brand of Zara is famous for their exclusivity and trendy product. Zara would
never have a ‘not up to date’ image as they always publish new items in every 2
weeks. The strong brand image is admitted around the world. This is what helps Zara
to keep improving and reach the sustainability. Therefore, we give a full score of 4 in
term of their response towards this factor.
WEAKNESSES
a. Limited Stocks
Even though Zara has a fast fashion concept, which is publishing new items in
every 2 weeks, but some of the items are limited. So for some items, they might not
be available in every store. Even though this is actually intentional, but for consumers,
this can be included as a weakness as some customers will not be satisfied if they did
not get the items that they want when they want it and where they want it. Customer’s
26
dissatisfaction quite have an effect for Zara, therefore rank 2 out of 4 is given with
weight of 8% considering the fact that this strategy of Zara might actually be risky.
b. Price
In its country of origin, Zara is categorized as a low-end product. However, Zara
is included in a high-end product in Indonesia and in many other countries, 1 item of
long sleeve shirt can be priced at 600,000 Rupiah. This is one of the weaknesses for
Zara as the customer will think twice to purchase if price is a big consideration for
them. This problem occurs mostly in developing countries, where the GDP per capita
is still relatively low. Even though the middle class segment is growing, but not all of
them are used to spend hundreds of thousand rupiah just to get a T-shirt. Therefore,
we rank a low rate of 1 out of four with larger weight of 12%.
c. Brand image closely tagged to competitors
As mentioned earlier, the problem in apparel industry is that it is very easy to copy
each other’s designs. This weakness is one of the toughest to deal with. Beside Zara,
there are a lot of other brands that reach the international market that also build an
exclusive image for them self. Therefore sometimes public cannot differentiate
product from Zara and their competitors. In other words, it is going to be easy for
them to switch from one brand to another. Moreover, this will affect people’s
judgment that all the brands that in the same level as Zara is actually the same or
similar in term of types and products, or in other words, no clear differentiation
between those brands. As a player in this industry, Zara needs to obtain consumer
loyalty; therefore, we rank this weakness as their major weakness with rating 1 out of
4. However, the weight of this factor is not that high since in apparel industry, despite
the existence of problems in the designs differentiation, a brand can develop a strategy
to build consumers’ loyalty, just like what Inditex is trying so hard to do to its brands,
including Zara.
d. Lack of Marketing
Zara is lack of marketing such as promotion and advertisement. In Indonesia it is
very rare to see Zara logo and advertisement outside the store and in public area. In
fact, Zara in different countries also does not have that much of advertisement. They
only depend on the strong brand image that they already have. This can be a tough
27
weakness if the competitors keep on increasing their marketing strategy, especially in
emerging countries.
From all the strengths and weaknesses we come out with the result of 2.35. This is an average
result from a perfect score of 4. So we can conclude that their effectiveness in utilizing their
strengths to cover the weaknesses is satisfactory enough.
4.3
Financial Analysis
LIQUIDITY RATIO
2012
1.4589
Quick Ratio
2011
1.4366
Current ratio defined as how much power does the current asset can cover current
liabilities. The result shows that both in 2011 and 2012 the current ratio is above 1,
which is good for the company as their asset have more power to cover the liabilities
from their assets.
2012
1.5180
Current Ratio
2011
1.5104
Quick ratio basically has the same indication like current ratio. But quick ratio only
looks from the company’s quick asset. So inventory is not included in the formula.
The result shows that the quick asset of the company still could cover the liabilities
that they have.
LEVERAGE RATIO
4.4 Debt To Total
Asset
2012
0.3420
2011
0.3197
This ratio is to find out how much from the total asset that financed by the total debt.
The higher the result will cause a higher financial risk. A healthy company should
28
have a low debt to total asset ratio because they need a more flexible finances. Debt
financing could lower the degree of flexibility. Zara in both 2012 and 2011 had a low
result on this ratio, which means only a small amount of the total asset that financed
by the debts. A slight decreasing trend also shows a positive progress for their assets.
Debt To Total
Equity
2012
0.5198
2011
0.0469
As like the debt to total asset, this ratio defines how much equity that financed from
total debt. The result shows below 1 which is a good result. The equity was not
mainly financed by debt. But, in this case, Zara had a quite significant increasing
trend from 2011 to 2012. The increasing result is not good because it means they have
a bigger proportion of debt that finances the equity.
Long Term Debt
To Equity
2012
0.1089
2011
0.1074
This ratio is much the same like debt to total equity. The different is that this ratio
only analyze from the long- term debt side. So how much equity that financed from
the long- term debt. The result shows a good sign. The long- term debt had a small
amount of proportion in financing the equity. A decreasing value of the result is also
an improvement for the company.
Times interest
earned
2012
220.5988
2011
68.1513
Times interest earned indicates the earning that is available to meet the interest
payments. A lower times interest earned will result in a less earnings available to meet
the interest payments and the company will be more vulnerable to increase the interest
rate. Zara has a significant increasing trend which is good for the company as they are
more powerful in term of the interest payments.
29
ACTIVITY RATIO
2012
24.6203
Inventory
Turnover
2011
N/A
(5612216/0)
Inventory turnover defines how fast the business can liquidate their inventory. The
higher result shows a good sign of the inventory circulation. Unfortunately we cannot
define the inventory turnover for 2011 as we have an insufficient data. But, for the
year of 2012 itself Zara has a quite good performance on their inventory turnover. 24
is quite a high result for inventory turnover.
Total Asset
Turnover
2012
1.2371
2011
1.2585
Total Asset turnover measures Company’s effectiveness in generating asset to sales.
So, the higher the value will show a higher effectiveness of the Company in managing
their assets. Zara had a slight decrease on the trend which actually is not a good
performance by the company.
Fixed Asset
Turnover
2012
2.5727
2011
2.4978
As like total asset turnover, fixed asset turnover also measure the effectiveness of the
Company in managing their asset. But this time is only for their fix asset. The greater
the value means a high effectiveness of the Company in generating their fixed asset to
sales. From only the fixed asset, eventually Zara has a positive trend. The value is also
higher than comparing to the total asset turnover. So Zara is effective and keep on
improving in managing their fixed asset.
30
PROFITABILITY RATIO
Gross Profit
Margin
2012
0.5976
2011
0.5930
Gross profit margin has a vital role in indicating the financial health. It shows the
power that the company has to pay its operating and other expenses and build for the
future. It was a stable gross profit margin for Zara in 2011 and 2012, which is good
because gross profit margin should be stable and not too much fluctuation.
Operating
Profit Margin
2012
0.1955
2011
0.1828
This ratio measures the Company’s operating efficiency. The higher result shows a
higher efficiency of the company. Zara had a slight positive trend for their operating
profit margin. It means Zara had an improvement in managing their operation. Zara
also had bigger revenue leftover to pay their variable cost of production.
Net Profit
margin
2012
0.1484
2011
0.1410
Net profit margin measures how much out of every dollar of sales a company actually
keeps in earnings. A higher profit margin indicates a more profitable company which
has a good control on their costs. There is not much difference from 2011 and 2012
for Zara. So we could say that there is no improvement for Zara on their costs control.
Return on Total
Asset
2012
0.1836
2011
0.1775
31
This ratio basically measures the Company’s effectiveness in generating their assets
into earnings. The higher the value, the better for the company as they are more
effective in managing their assets. Zara does not have a significant improvement from
2011 and 2012.
Return on
Stockholders’
Equity
2012
0.2791
2011
0.2609
Return on stockholders’ equity indicates the amount of net income generates to the
stockholder’s equity. The higher value shows a bigger amount of percentage from the
net income to the equity. So a high return on stockholder’s equity will attract
investors to invest to the company. Zara had a slight increasing trend for this ratio but
it is not significant enough to attract the investors.
Earnings per share
2012
3.7981
2011
3.2888
Earnings per share (EPS) is a portion of company’s profit that allocated to each share
of the outstanding stock. This ratio will also attract investors’ attention, as they will
hold the shares. Zara had quite of an improvement her. They have 0.5 bigger portions
in 2012 comparing to 2011. The higher the earnings per share the better it is for the
investors.
Price Earnings Ratio
T
2012
30.0410
2011
30.4414
he P/E Ratio is a comparison and valuation ratio of the company’s current share price
compared to the price- share earnings. A higher price earnings ratio could define a
better performance of the company. Zara had a quite negative trend on their priceearnings ratio, which means a decreasing performance and investors less expectation
on the earnings growth.
32
GROWTH RATIO
Based on the financial statement, Zara had a 16% growth of sales. This could be
affected by an improvement on the effectiveness of managing their assets and
inventories. 16% is quite a large number of growths in one year.
Net Income had a growth of 22%. This is even bigger than the sales growth. So, it
shows that Zara not only improve in managing their assets and debt, but Zara is also
good in managing their expenses so that the net income was boosted up.
Zara also has an increase of 13.47% in earning per share growth. With an increase
of net income, Zara allocates more from their earning to the outstanding shares.
33
Chapter 5
STRATEGIES IN ACTION
5.1 The Strategies
A. Integration Strategies
Zara applies the Forward Integration. Since Inditex demands a high integration
between the headquarters and all branches across the globe, therefore Inditex controls
its retailers and distributors all around the world in order to standardize the overall
business performance. In addition, Zara also performs some horizontal integration
through its acquisition of Massimo Dutti from the Massimo Dutti group and the
acquisition of Stradivarius.
B. Intensive Strategies
As an aggressive expander in global market; hence, Zara practices the Market
Development strategy in which they are entering new market with Asian-developing
countries being their first targets. Countries include China, India, and Indonesia. That
is why nowadays, almost in every new shopping malls in Jakarta, you can find Zara
store in it. Currently Zara is targeting the Asian market, hoping it will generate much
profit from this promising market.
Not only that it applies the Market Development, Zara also applies the Market
Penetration strategy, especially in European and American markets. Their techniques
of doing this strategy are by improving its online store and increase customer service
in all retail stores.
C. Diversification Strategies
To complete its product lines, also as a form of their differentiation, Zara sells
accessories to complement their main product which is apparel. This kind of strategy
is called the related diversification. Further, Zara also has the unrelated form of
diversification which is the Zara Home. Zara Home is a retail store which specializes
in home fashion and decoration. Zara Home, similar to Zara, emphasizes exclusivity
in all f its products and it is also relatively more expensive than its competitors. Zara
Home is available in 55 countries including Indonesia. However, in Indonesia we can
only find Zara Home store in Plaza Indonesia, Jakarta, Indonesia.
34
Zara Home’s first store in Indonesia, located in Plaza Indonesia on 2 nd Floor
D. Defensive Strategies
Zara has no defensive strategy because the company is in good condition, not in
any kind of jeopardy. Therefore, it does not need any defensive strategy at the
moment.
5.2 Michael Porter’s Five Generic Strategies
According to Porter, strategies allow organizations to gain competitive advantage
from three different bases: cost leadership, differentiation, and focus. Porter called these
strategies the Generic Strategies. The following is the framework of Porter’s Five
Generic Strategies and the position of Zara in this classification.
GENERIC STRATEGIES
Large
SIZE OF
Cost Leadership
Differentiation
Type 1
Type 3
Focus
Type 2
MARKET
Small
Type 3
Type 4
Type 5
35
Zara is categorized as the Type 3 because it is aimed to the industry-wide, in which
the size of the market is large. Moreover, Zara also has some strong differentiations that
make them the leader in the industry. Differentiations such as the concept of fast-fashion
(which was pioneered by Inditex), that is supported by its excellent and integrated supply
and value chain.
36
Chapter 6
STRATEGY ANALYSIS AND CHOICE
6.1 The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix
Recalling the previous explanation about Zara’s External and Internal Analysis, we
can now develop the four types of strategies: SO (strengths-opportunities) strategies, WO
(weaknesses-opportunities) strategies, ST (strengths-threats) strategies, and WT
(weaknesses-threats). Remember that there is no one best set of matches among these
strategies.
Strengths
Global Outreach
Strategic Location
Distribution Strategy
Opportunities
Increasing middle class in
Asia
Store Image
Fast Changing collection
Responsive Employees
Brand Image
SO Strategies
Open new stores in
developing countries in Asia
(S1, O1)
Opportunity to build
distribution center in
developing countries to lower
costs
Cooperation with new
designers
Build distribution centers in
Asia to lower distribution
costs for Asian countries (S3,
O2)
Be the trendsetter (S5, O3)
Rising environmental issues
Promote the company’s
vision to be an eco-friendly
company (S7, O4)
Weaknesses
Limited Stocks
Price
Brand image closely tagged
to competitors
Lack of Marketing
WO Strategies
Charge products at
competitive price in Asian
countries’ standards (W2,
O1)
Produce a signature
collection (W3, O3)
Enhance the current brand
image and company’s image
(W4, O4, O5)
International Recognition
Threats
Fierce Competition
Lawsuit related to
sweatshops
ST Strategies
Expand in new market and
be the first player in the
market (S1, S2, T1)
Produce the new trends with
higher turnover (S5, T3)
WT Strategies
Increase spending for
marketing campaign (W4,
T1)
Enhance ZARA’s
differentiation through its
unique designs (W3, T4)
37
Possible imitations of goods
Increase the brand equity
through better service (S6,
S7, T4)
Dilution of Brand Equity
The SO strategies include aggressive strategies of the company to take advantage of
the existing opportunities matched with their strengths. Many companies pursue the other
three strategies first in order to be able to apply the SO strategies. As for Zara, they are
already in the position which enables them to apply those SO strategies given their
current weaknesses and threats. Currently Zara has already opened new stores in Asia,
they are also transforming into the trend-setter instead of trend-follower through its major
cooperation with many designers. In addition, Zara has promoted their eco-friendly
campaign through the company’s vision and mission that is applied all the day down to
the retail stores. For example, Zara sells t-shirts that are made from organic cotton which
considered as environmental friendly. Unfortunately, they currently do not have any
intention to open a new distribution center in Asian country just yet. However, they
already have their purchasing office in Hong Kong and they are maximizing the use of
this office to boost sales in Asian region. They have also invested a large amount of
money in advertising to make them a much stronger competitor.
6.2 The Strategic Position and Action Evaluation (SPACE) Matrix
Financial Position (FP)
Increase in turnover
Increase in Net Profit after Tax
Decrease in Leverage
Industry Position
Market growth, especially in developing countries
Fashion Industry itself is a sustainable industry
Very competitive
Ratings
6
5
3
Total 14
Ratings
4
3
4
Total 11
38
Stability Position
Inadequate infrastructure and IT in developing countries (especially
India and Indonesia)
Counterfeiting in developing countries
Possible increase in labor costs
Total
Competitive Position
Increasing threats from new competitors such as Uniqlo and H&M
Zara provides unique concept
Zara has the largest market share
Total
 For Financial Position and Industry Position: +1 (worst), +6 (best)
 For Stability Position and Competitive Position: -1 (best), -6 (worst)
 Average:
 SP : -2.67
 IP : 3.67
 CP : -2.33
 FP : 4.67
Therefore, we get the x-axis
= -2.33 + 3.67 = 1.34
the y-axis
= -2.67 + 4.67 = 2
Ratings
-4
-2
-2
-8
Ratings
-3
-2
-2
-7
AGGRESSIVE STRATEGY:
The following is the SPACE Matrix picture:





Backward, forward horizontal
integration
Market penetration
Market development
Product development
Diversification (related or
unrelated)
Since the curve is upward sloping placed at upper-right of the quadrant, we can
conclude that Zara can pursue the Aggressive strategies, by means the company is in an
excellent position to use its internal strengths to: (1) take advantage of external
opportunities, (2) overcome internal weaknesses, (3) avoid external threats. Therefore,
market penetration, market development, product development, backward integration,
39
forward integration, horizontal integration, related and unrelated diversification, or a
combination strategy all can be feasible, depending on the specific circumstances that
face the firm. That is exactly what Zara is doing now, as we recall our previous analysis
on the Strategies in Action (Chapter 5).
6.3 The Boston Consulting Group (BCG) Matrix
The BCG Matrix portrays differences among divisions in terms of relative market
share position and industry growth rate. The Question Marks have a low relative market
share position, yet they compete in a high-growth industry. Companies in this group must
decide whether to strengthen them by pursuing an intensive strategy, or sell them. The
Stars represent the organization’s best long-run opportunities for growth and profitability.
They have high market share and high industry growth rate. The Cash Cows have high
market share but compete in a low-growth industry. As for the Dogs, they have a
relatively low market share and compete in a slow-or-no-growth industry.
The following is the position of Zara and several other Inditex’s brands in terms of
BCG Matrix:
STARS (High Market Share, High Market
Growth)
Question Marks (Low Market Share, High
Market Growth)
Cash Cows (High Market Share, Low Market
Growth)
Dogs (Low Market Share, Low Market
Growth)
Zara is placed as Stars because it has high market share and compete in an industry
with a high growth whereas the other Inditex’s brands such as Stradivarius, Pull&Bear,
and Bershka are placed at the Question Marks since they have lower market share
compared to Zara. Based on the company’s annual report presentation, from Inditex’s
40
overall income in 2012, exactly 66.1% comes from Zara, while Stradivarius, Pull&Bear
and Bershka contributed 6%, 6.8%, and 9.3% respectively.
Based on the theory, companies positioned at Stars should consider the forward,
backward, horizontal integration strategies, market penetration, market development, and
product development strategies. Zara as a leading brand should therefore receive
substantial investment to maintain or strengthen its dominant position. As a result, not
only that it is expanding aggressively across the globe, Inditex as the owner of Zara has
also made several investments specific to Zara in order to remain its position, those
investments include: additional investment for advertising, IT improvements for better
customer service, and hiring new designer teams to strive for becoming a trend-setter.
6.4 The Internal-External (IE) Matrix
The IE Matrix positions an organization’s various divisions in a nine-cell display, in
which both EFE and IFE is again used to determine the organization’s position. The
strategic implications from this matrix will differ with those from the BCG Matrix.
The IE Matrix for Inditex’s brands is as follows:
THE IFE TOTAL WEIGHTED SCORES
High
Strong 3.0 – 4.0
Average 2.0 – 2.99
Weak 1.0 – 1.99
I
II
III
IV
V
VI
VII
VIII
IX
3.0 – 4.0
THE EFE
TOTAL
Medium
WEIGHTED
2.0 – 2.99
SCORES
Low
1.0 – 1.99
41
The result of the IE Matrix shows that Zara is positioned as the Category II whereas
Bershka, Pull & Bear, and Stradivarius are at the Category V. Zara is considered as
Category because the EFE score was 3.45 (High) while its IFE score was 2.35 (Average).
Consequently, the strategy that Zara should pursue is the Grow and Build Strategy.
Meanwhile for the other 3 brands we assume that they have same level of IFE because
they come from the same company with similar strategies in doing expansion. However,
the three brands may have lower level of EFE compared to Zara since based on the
number of stores available globally, especially in Asian countries, the other three brands
are lagging way behind Zara. In other words, the response of these three brands to the
growing market of Asian countries like China, India and Indonesia is low compared to
Zara. Therefore, they should pursue the Hold and Maintain Strategies.
Grow and Build strategies include the intensive strategies like market penetration,
market development, and product development, or integrative strategies such as backward
integration, forward integration, and horizontal integration. As for the Hold and Maintain
strategy, it includes the market penetration and product development strategy. In other
words, Bershka, Pull & Bear, and Stradivarius should either consider creating a whole
different concept of product or increasing the level of Branding and Marketing to boost
sales.
6.5 The Grand Strategy Matrix
This matrix will determine the company’s position based on two evaluative
dimensions: competitive position and market growth. Since Zara has a very strong
competitive position and it also has a rapid market growth of 16%, consequently, we can
conclude that Zara is positioned in the 1st Quadrant of the matrix (Quadrant I).
42
Rapid Market Growth
QUADRANT I:
1.
2.
3.
4.
5.
6.
7.
Weak Competitive
Position
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Related diversification
Strong
Competitive
Position
Slow Market Growth
Among the suggested strategies of Quadrant I companies, specifically for Zara,
Inditex has used the market development, market penetration, forward integration, and
related diversification. In general however, Inditex has done twice of horizontal
integrations in the form of acquisition of two brands: Massimo Dutti and Stradivarius.
Market development effort for Zara includes opening new and larger stores in Asian
countries such as China, India, and Indonesia with stronger visual merchandising. They
also increase their product visibility in all the stores across the globe. Market penetration
efforts include enhancing its online-sales expansion in Europe, America, Australia and
South Africa. Moreover, they also enhance the in-store experience to increase the
consumers’ loyalty.
43
The opening of Zara’s first store in China
Zara first launched its online store in US on September 2011
As for the forward integration, Inditex has been famous for its vertical integration in
which it takes the control over distributors and retailers. All policies regarding every
business activities from the headquarters in Spain all the way down to the retail stores,
wherever it is located, all must be approved by the headquarters first. The distribution is
centralized to Inditex’s 4 distribution centers which are located in 4 different cities in
Spain: Madrid, León, Tordera, and Barcelona. Even though the products are
manufactured in many different countries, every single product must be exported back to
Spain to be then distributed to all Zara stores around the world.
Distribution Map of Inditex’s products, including Zara
44
The last strategy is the related diversification. As one of the major player in fast-fashion
industry, Zara has to be able to differentiate its products and increasing the brand equity with
all of its capabilities. Zara does not only sell apparel, but they also sell accessories to
complement the apparel. The accessories are produced with the same quality standard as the
apparel and it is available in all Zara stores worldwide.
Zara accessories in store and online
6.6 The Quantitative Strategic Planning Matrix (QSPM)
The technique is to rank strategies to achieve the prioritized list, based on the relative
attractiveness of feasible alternative actions. This matrix will objectively indicate which
alternative strategies are best. Here we will use previous analysis from the EFE Matrix,
IFE Matrix, CPM Matrix, SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and
the Grand Strategy Matrix.
Based on these matrices, we derived the most prominent strategies for Zara which are
achievable and have strong positive impact to Inditex as the owner of Zara. There are 3
strategies that we propose: (1) Expansion in Asian-Emerging Countries, (2) Build
Distribution Centers in Asian Countries, and (3) Increase Marketing Spending. Moreover,
these strategies are for the long-term.
45
QSPM
Key Factors
Weight
Expansion in
AsianDeveloping
Countries
AS
TAS
Build Distribution
Center in AsianDeveloping
Countries
AS
TAS
Increase
Marketing
Spending
AS
TAS
3
0.3
4
0.8
4
0.8
3
0.6
4
3
0.32
0.24
3
2
0.36
0.18
4
0.6
4
4
0.32
0.2
4.72
KEY EXTERNAL FACTORS
Opportunities
Increasing middle class in Asia
0.1
4
0.4
4
0.4
Opportunity to build distribution
center developing countries to
lower cost
0.05
3
0.15
4
0.2
0.1
0.05
0.2
3
2
4
0.3
0.1
0.8
2
0.2
0.2
0.05
0.05
0.2
1
3
1
1
2
0.6
0.05
0.05
0.4
2
0.08
0.08
0.12
0.12
0.09
0.03
0.15
4
4
4
4
3
2
4
4
3
4
0.08
0.12
2
3
0.32
0.32
0.48
0.48
0.27
0.06
0.6
0
0.16
0.36
0.08
0.05
1
2
2
Cooperation with new designers
Rising Environmental issues
International Recognition
Threats
Fierce competition
Lawsuit related to sweatshop
Possible imitation of goods
Dilution of brand equity
Total
0.4
KEY INTERNAL FACTORS
Strengths
Global outreach
Strategic locations
Distribution strategy
Store image
Fast changing collection
Responsive employees
Brand image
Weaknesses
Limited Stock
Price
Brand image tagged to competitors
Lack of marketing
Total
0.16
0.1
6.16
3
2
3
0.32
0.24
0.48
0.27
0.16
0.36
3.03
Based on the QSPM Matrix above, we conclude that the most prioritized strategy will
be the Expansion in Asian-Developing Countries since it has the highest ending score.
The countries include China, India, and Indonesia. Inditex is actually doing this strategy
right at this very moment for Zara.
46
Chapter 7
IMPLEMENTING STRATEGIES: MARKETING, FINANCE/ACCOUNTING, R&D,
AND MIS ISSUES
7.1
Marketing
As the world is now becoming digital, many marketers initiate the digital
marketing campaign. Many companies now engage actively to promote their products
on social media like Facebook, Twitter, YouTube, or Instagram. Not wanting to be a
laggard, Zara also created its own Facebook page, Twitter account, YouTube, and
also Instagram accounts. More than 16 million people “like” Zara’s FB page and more
than 300 hundred people followed Zara on Twitter, thousands of people also
subscribed to Zara’s channel on YouTube. Unfortunately, it is not enough. Despite its
availability on social media, Zara is not utilizing using these social media to do
advertisements; therefore, these accounts are not really productive or useful for the
company.
Zara’s accounts on social media
The 4Ps of Zara:
1. Product: Inditex describes Zara as the brand for the latest fashion for women,
men, and children. Product lines include: apparel, footwear and accessories.
Inditex also claims that Zara is not a luxury-brand.
2. Price: Zara is originally positioned as an affordable brand, however, as it
expands to developing countries where the GDP/capita is lower from its
country-of-origin’s, Zara in developing countries then shifts its position to the
lower-end.
47
3. Place:
Zara is now available in 86 countries with total 1,770 stores
worldwide. The store is located in prime locations of the area with high
concentration of visitors. In distributing its products, Zara practices the
constant flow of updated data that mitigates the so-called bullwhip effect—the
tendency of supply chains to amplify small disturbances. A small change in
retail orders, for example, can result in wide fluctuations of factory orders
after it's transmitted through wholesalers and distributors. In an industry that
traditionally allows retailers to change a maximum of 20 percent of their
orders once the season has started, Zara lets them adjust 40 to 50 percent. In
this way, Zara avoids costly overproduction and the subsequent sales and
discounting prevalent in the industry (Keller, 2012).
4. Promotion: In the competitive clothing industry, Zara has successfully built a
worldwide famous brand by a unique management system of design,
production and supply chains. The “fast fashion” concept and operation allow
Zara to always provide the most fashionable clothes to their customers and the
always renewing collections definitely help build a brand loyalty. This results
a remarkable growth globally with only limited investment on advertisements,
or even none. Inditex on its company report states that its business model
includes no advertisement when entering a new market to avoid the main fixed
costs of international expansion. Moreover, even in its home country, Zara
does not rely on traditional tradition. Instead, they rely on direct
communication with consumers.
Retention-based Segmentation:
The customers of Zara can be classified into 3 following segments:
1. Fashion Chaser: people who are fashion trend followers and value fashion
over exclusivity. They prefer well-known brands and price is of lower priority
to them. They are also the most loyal customers of Zara.
2. Opinion Seeker: people who rely heavily on mass media and people around
them in their purchase decision, including close friends, family, or the shop
assistant.
48
3. Value Buyer: the type of customers that are more price-conscious. They
compare prices and qualities between brands before finally decide which gives
them the most value.
Product Positioning
Since Zara is available across the globe, the positioning of Zara becomes different
depending on the GDP/capita in certain countries. For countries with medium to high
GDP/capita, Zara is considered as low-price product. On the other hand, for countries
with medium to lower GDP/capita (mainly in Asian countries), Zara is considered as a
high-price products. As for the fashion/couture, Zara is considered high level of
fashion/couture regardless the geographic area.
Product Positioning of Zara in developed countries (left) vs. developing countries (right)
49
7.2 Finance
Net Income (in billions of Euros)
Net Income
2,4
1,9
1,7
2012
2011
2010
1,3
1,3
2009
2008
Source: inditex.com
The graph above shows the increase of Net Income of Inditex group as a whole. It
indicates a positive trend year by year in the last 5 years. Based on this date, we can also
calculate the estimated future benefit as follows:
Future benefits = 5 x current annual profit
= 5 x 2.4 billion euro = 12 billion euro.
Therefore, Inditex is projected to have 12 billion euro worth of benefits.
7.3 Research and Development (R&D)
As a leading in fast-fashion industry that promises the most up to date collection to its
customers, Zara must continuously produce set of apparel that the customers currently
demands, set of apparel customers will demand in near future, and also set of apparel that
customers will not expect to like. Moreover, since they will produce in limited stocks for
the sake of exclusivity, each product must be able to meet its owner to avoid stock piling.
In consequence, Zara with its teams of designers actively attend the latest fashion shows,
asking feedbacks from customers about the designs in order to portray or project the
proposed designs for the next collection.
50
Furthermore, Zara designers are trained to limit the number of changes made by
lowering the number of samples required, minimizing cost and turnover time. Its demand
based production or Just-in-time (JIT) production reduces the amount of inventory
available, lowering Zara’s storage cost. Zara's outstanding lead time is unbeatable in the
industry at the moment. In addition, Zara eliminated the traditional design process, where
design and development overrides fabric procurement. In Zara, the design teams work
with the available fabric, allowing for faster fashion, also minimizes costs.
Zara’s supply chain compared to the traditional industry’s supply chain
Another aspect regarding Zara’s R&D will be about its environmental-friendly
campaign. As stated on its mission, Zara aims to become an eco-friendly company that
contributes to the sustainable development of the society. Zara is very serious in
achieving this mission. Their concrete effort including building plants and distribution
centers powered by natural gas (thermal energy) to supply hot water, low-pressure steam,
and cooling that can optimize the building operations by improving energy performance
and also reducing carbon-dioxide emissions.
Further, the company has developed a Strategic Environmental Plans 2011 – 2015
which can be summarized as the following:

Environmental Management System certified as ISO 14001 compliance in 25
of INDITEX’s premises: Inditex’s main building, chain headquarters, logistics
(distribution) centers and own manufacturing plants. Sole multinational in the
textile field with all centers certified.
51

Selective waste management and recycling at all Inditex facilities.

Environmental training given to all staff in manufacturing plants and logistics
centers.

Environmental information and awareness-raising campaigns aimed at all
store staff.

Move towards renewable sources of energy and cogeneration plants (850 kW
wind turbine, 1,500 m2 of solar thermal collectors and 3 CHPs).
Natural Gas generators at the heart of Inditex’s
plant and distribution center in Tordera, Spain.
Trucks to ship Inditex’s products from
the logistics centers daily
7.4 Management Information System
Zara is highly vertical-integrated and also centralized. As mentioned earlier, Zara
relies more on direct communication with its consumers rather than spending for
advertisings. Therefore, flow of information system must be excellent. Zara gathers data
from consumers daily, even several times in a day. The headquarters gather consumers’
data from its stores across the globe. They use the Personal Digital Assistants (PDA) to
gather immediate customer input and feedback and directly send it to the headquarters.
Types of information gathered by PDA for example why a customer does not like the
clothes and what would make it better.
Moreover, in its day to day operation, Zara also uses the Point of Sale System (POS)
which includes the transaction processing system that captures customer purchase
intentions. The examples will be asking customers what they like and what they do not
like in fitting rooms, etc. The POS system show how garments rank in sales in different
52
areas, Therefore, the headquarters can identify their customers’ purchase behavior and
preferences more accurately, based on their geographic area.
The following picture is a real example from our research in one of Zara’s stores
located in Plaza Indonesia. In the picture we can see the store manager of Zara Plaza
Indonesia using a PDA to send information to the headquarters about a complaint from a
customer that is being handled by the saleswoman (on his right). We could not get a
better angle because we took the photo tacitly at the cashier.
Store Manager and his PDA
53
Chapter 8
STRATEGY EVALUATION AND GLOBALIZATION CULTURE
8.1 The Balanced Scorecard
This method of analysis will allow firms to evaluate strategies from four perspectives:
financial performance, customer knowledge, internal business processes, and learning and
growth. The following table is Zara’s Balanced Scorecard:
Area of Objectives
Measure or Target
Time
Expectation
Primary
Responsibility
Customers
 Improve the
customer service
through
employee
trainings
 Aggressive
expansion
 Utilize the POS
through
customer
feedback
reported by the
store manager
through PDA
1. Satisfactory shopping
experience
EBIT increased by
35% (from 24% in
2012)
2015
2. Local Variation
40,000 new designs
per year (from 36,000
designs in 2012)
2015
Employee Turnover
decreased by 20%
10 years
 Enhance good
communication
between
managers and
employees
1. Hong Kong Purchasing
Office utilization
Asian sales
percentage increased
to 30% (currently
20%)
2015
2. Lowering the Production
Cost
Marginal Cost
decreased by 5%
2015
 Utilize the
purchase office
to project the
trend in Asian
market
 Outsource more
types of clothing
to be produced
in Asia
Unemployment Rate
in host country (India)
Annually
Managers/Employees
1. Employee welfare
Operations/Processes
Community/Social Responsibility
1. Provide jobs through its
outsourcing
 Through major
outsourcing,
54
decreased by 3%
ZARA (Inditex)
has been able to
provide jobs for
more than 5
million people in
India
Business Ethics/Natural
Environment
1. Eco friendly company
Number of ecological
clothing items
increased to 20
million
2014
 Environmental
Management
System pursuant
to the ISO 14001
standard
 Emission control
dumping and
waste Plans
 Admission to
Dow Jones
Sustainability
Index
Net Income increased
to 30% (currently
22%)
2015
 TQM practice
 Inditex
sustainability
model
 Optimization of
global expansion
Financial
1. Financial sustainability
*Inditex Sustainability Plan
Analysis:
Since Zara is practicing both
market penetration and market
development strategies; therefore,
it is important to improve the
level
of
consumer
shopping
experience while at the same
entering many new and potential
markets. Further, Zara is currently
expanding aggressively in Asian
55
countries; consequently, to increase sales they need to be able to adapt its designs with the
local preferences to generate more profit from Asians’ pocket. What the company can do
is to enhance customer service through employee trainings, especially those who face the
customers directly everyday in the store. Moreover, Zara can optimizing the use of its
PDA and POS technology to obtain information regarding the customer’s preferred
designs and feedbacks.
Inditex, including Zara, unfortunately is famous for having a high employee turnover
due to its working environment which is stressful and subjective. Not many younger
employees get promoted, and according to many reviews of Inditex’s employees,
managers in Inditex do not get along with the sub-ordinates; therefore, creating a gap
between the employee and the managers. Clearly Inditex must be able to overcome this
problem so that the company will not have to pay extra costs for training new employees
every once in a while and also considering the company image.
As for its business operations/processes, since the company has just bought a
purchasing office located in Hong Kong, they can now use this facility to increase the
sales in Asian countries, especially China as the largest developing market today. By
combining the PDA and POS as well as the Purchasing Office, Inditex can now project
the Asian market easily and more accurately. Another option for the company is to lower
the production cost by outsourcing more types of clothing to be produced in Asia.
Currently, Inditex only outsources about 30% of its total products (Ghemawat & Nueno,
2012).
Through its outsourcing program, Inditex has been able to provide jobs for more than
5 million people in India. The company acknowledges the situation and claims it as one
of their corporate social responsibility. Inditex does not really concern about developing
an extensive CSR initiatives. On the other hand, they put more consideration to the
operations in their outsourced companies, including strict regulations banning child labor,
also improvement of labor education, as well as the quality of product that will be
produced. Each Inditex’ outsourcing partner must have a quality of A or B while in this
industry, the outsourcing company quality is usually B or C or even D.
As for the environmental objective, Zara puts more emphasis since this is their
mission. Therefore, the responsibilities are many including the ISO 14001 compliance,
56
the emission control through the use of thermal energy, and finally the Dow Jones
Sustainability Index.
Last but not least, as a public company, Inditex must be able to ensure its stakeholders
that the company can last a long time. Inditex needs to show how can the company
sustain itself and maintain its profitability in the long-term. Therefore, the company
should practice the TQM or the Total Quality Management continuously. By means, the
company should continuously improve the customer service, quality, accessibility, and all
other key critical success factors in the industry. Furthermore, since the Asian market is
booming nowadays, then the company should optimize this situation to generate as much
profit as possible.
8.2 Globalization Culture
As mentioned in the previous sections, Zara is a highly vertical-integrated company.
Even though Inditex enters many markets through another retailer, however the concept,
decision-making, and business operations and standards are always centralized and
standardized universally. For example in Indonesia, Zara is brought-in by PT Mitra Adi
Perkasa which comply all Inditex’s regulations from the importing process down to the
post-purchase customer service. PT Mitra Adi Perkasa is not able to make any decision
regarding the brand without the permission from the headquarters. Moreover, they need to
report to the headquarters daily about activities in the store. As a result, we can find that
the culture of Zara, or the concept of Zara, or pretty much everything about Zara will be
the same regardless the location of the store. This includes the store layout, the store
design, lighting, window displays, and other physical resources, as well as the
management of the store. The following pictures will show how Inditex as the owner also
the headquarters of Zara controls all of its retailers in order to vertically-integrate Zara’s
overall business operation. Moreover, Inditex actually applies this policy to all of its
brands sold by other retailers worldwide.
57
PT Mitra Adi Perkasa Company Logo
Zara store Cape Town, Africa
Zara store South Coast, California, USA
58
Zara store in Spain
Zara store in Jakarta, Indonesia (Senayan City)
Zara sales assistants across the world, all dressed formally
59
Chapter 9
CONCLUSION
9.1
Zara’s Competitive Advantage
After analyzing the success factors both internally and externally, in this section,
we will derive the core of this analysis, which is the reason why Zara can become
such a strong player in the industry or in other words, the competitive advantage of
Zara.
In our opinion, according to what we found during our analysis, one of the
competitive advantage that Zara has and its competitor lacking is the customerresponsiveness. Even though Zara does not have many investments in Marketing, but
Zara relies on the most important aspect of the business, the customer. They focus on
their customer, listen to what their customers have to say, obtain their comments and
feedbacks, and then use those information to evaluate the next production, meaning
on the next production, they will produce based on the information given.
Consequently, the results will be gratifying for the consumers.
Next competitive advantage that Zara has will be its business operation. Zara’s
overall business operations, including the design process, production process, and the
distribution process, all are so sophisticated that it enables Zara becomes the forefront
in the industry. Especially because it is combined with their customer–responsiveness,
imagine how impressive it is. Zara is the only brand that has the capacity to produce
the latest design that the consumers demanded, and make it available at the stores in
just 14 days. Because Zara will be the first one to place a certain design in the store,
hence the customers will tend to make Zara their first choice in shopping or browsing
for clothes.
Finally, the excellent business operation together with customer–responsiveness
will lead to customer loyalty, creating a cycle of growth; the secret success of Zara.
60
Customer responsiveness
Business
Operation
Customer
Loyalty
9.2
Vision, Mission, and Strategies
Throughout the chapters, we have seen the analysis of Zara’s strategies that they
currently have and the ones they should have. Now let’s recall the vision and mission
that underlies the whole strategies and see whether the strategies that Zara has now
are sufficient in order to achieve the stated vision and mission.
Zara in its vision stated that it aims to satisfy the desires of its customers. They
pledge to continuously innovate their business to improve customer experience. Up to
this point, we think that Zara’s strategies are already aligned and so far effective
enough to drive the company closer to achieving the vision. Think of Zara’s effort in
obtaining feedback from consumers in order to understand the consumers and
therefore able to produce the designs that the consumers love. Moreover, Zara also
never stops improving its in-store customer experience through employee trainings
and direct communication with the consumers. Further, in the vision statement Zara
also promises to provide new designs made from good materials and also affordable.
With the information Zara gets from customers, Zara is able to provide good designs
with available materials and therefore can lower the production cost as well as the
production time. As a result, a more affordable outcome of products can be distributed
to end consumers.
In addition, in its mission statement, Zara states that it aims to contribute to
sustainable development of society and environment it interacts with. In this case,
Zara proves that its decision to outsource its manufacturing process to other countries
61
has brought a positive impact for the host country, as we recall the example of India.
Moreover, especially for environmental issues, Zara has committed to help reduce the
emission and create an eco-friendly business and the commitment is still strongly
upheld until today. Even now there are more and more concrete moves that the
company is doing in order that this mission can be achieved, including investing more
money on creating a eco-friendly business operation starting from the headquarters,
the manufacturing plants, and all the way down to the stores across the globe.
In conclusion, looking from the strategies that Zara is doing now, we can say that
these strategies are aligned with the vision–mission and that these strategies are
effective and sufficient enough for the company to achieve the stated vision and
mission.
62
BIBLIOGRAPHY
David, F. (2013). Strategic Management: Concepts and Cases. New Jersey: Pearson
International Edition.
Ghemawat, P., & Nueno, J. L. (2012). ZARA: Fast Fashion. Harvard Business Journal , 135.
Inditex. (2013, September 18). Inditex’s net sales rise 6% to 7.7 billion euros. Retrieved
November
28,
2013,
from
Inditex:
http://www.inditex.com/en/press/press_releases/extend/00001019
Inditex. (2013, November 28). Our Team. Retrieved November 28, 2013, from Inditex:
http://www.inditex.com/en/who_we_are/our_team
Inditex. (2013, November 28). Timeline. Retrieved November 28, 2013, from Inditex:
http://www.inditex.com/en/who_we_are/timeline
Keller, A. A. (2012, October 26). Zara Strategic Marketing Plan. Retrieved December 1,
2013,
from
Oeconomicae:
http://www.oeconomicae.com/documents/Author/Strategic%20Marketing%20Plan,%20Za
ra,%20Arteixo,%20Spain.pdf
Sandoval, B. (n.d.). Zara: IT for Fast Fashion. Retrieved November 28, 2013, from UHV:
http://www2.uhv.edu/luj/MGT6352/Samples/Student%20Sample%203.pdf
Wikipedia. (2013, November 19). Fast Fashion. Retrieved November 28, 2013, from
Wikipedia: http://en.wikipedia.org/wiki/Fast_fashion