Zara: The Desires

Question:

Zara is committed to satisfy the desires of its customers. Explain.

Answer:

Zara is one of the finest clothing brands in the world that is based in Arteixo, Galicia. The company was started in 1975 by two partners – Amancio Ortega and Rosalia Mera. The company is the main brand of the Inditex group, which is the largest apparel retailer in the world. The company was started in 1975 but started expanding to other parts of the world in 1988. Some of its recent expansions have been in India, South Africa and Australia while it launched its online boutique in 2010. Zara has been one of those companies that have shown exceptional supply chain management and operational strategies and have achieved market competencies through it. 

Zara’s operations management is highly reputed in the entire world and is considered for many case studies to study the efficiencies and competencies that can be achieved by lean principles and proper operational management. 

STRATEGIC ANALYSIS

The vision statement of the company, according to its official website is, “Zara is committed to satisfy the desires of its 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.” (Academia.edu, 2016)

The mission statement of the company 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 interact”.

The company has been performing exceptionally well and its mission and vision statements are being fulfilled (Farfan, 2016). The fulfilment of their mission and vision statements can be judged from their performance, competitive edge, brand image and customer satisfaction. Let us now discuss some of the objectives of the company:

LONG TERM OBJECTIVES

The long term objectives of the company are discussed below:

• To save energy and to be an eco friendly store ? the company has been trying its best to implement eco friendly management models in their retail outlets and have successfully brought down their energy consumption by at least 20%. The model includes recycling furniture and décor and also stretches out for heating and cooling systems (Academia.edu, 2016). 

• Reduce waste and recycle ? Zara has an objective of reducing the waste it produces and recycle its waste products and to achieve this, the company recycles its hangars and alarms into other plastic elements. The company recycles millions of plastic elements every year and reduces the amount of waste material that it produces. 

• To show commitment towards the staff and to increase the awareness among the team members ? the company holds a lot of regular training and development programs, along with self awareness campaigns to educate the staff in sustainable practices so that the staff can too fulfil their role in saving energy and making the business more eco-friendly. 

• Using ecological fabrics and organic cotton ? the company supports organic farming and makes a lot of its garments out of organic cotton. The company has marked its organic and eco-friendly fabrics with symbols that can be easily identified (Academia.edu, 2016). 

• Use biodiesel fuel ? the company is strictly working towards achieving its mission and vision statements and to establish itself as a big eco-friendly brand. To reduce its carbon-dioxide emissions, the company uses biodiesel fuel in its lorries, which transport around 200 million clothing articles every year (Academia.edu, 2016). 

From the long term objectives of the company, it is evident that the company has been working hard to establish itself as an environment friendly company as eco-friendly business practices have been set up as the top most priority till 2020 by the company. 

The company has been formulating its long term objectives around its mission and visions statements as it is evident from its eco-friendly business practices and operations management. The objectives of the company are actually appropriate for the organisation because of the following reasons:

• The company has already established itself as a major clothing brand in the world. The present scenario is where the companies are stressing more on going green or following sustainable business practices to contribute more towards the environment that they work in. Therefore, Zara is now on the way to establish itself as one of the big eco-friendly companies. 

• The company aims at improving the customer experience and satisfaction by providing them with better quality products and experience. The objectives of the company are totally aligned with its strategies as it is already working towards the improvement of the skills of its workforce and to improve the customer experience and satisfaction by improving their operations and activities. 

POTENTIAL IMPROVEMENTS AND OBJECTIVES

The company is one of the best companies in the world and has very less potential for making improvements in objectives, strategies or operations except for one thing. A major problem of the company has been that the customers are not properly assisted by the store employees during their visit. Such issues have been reported by many employees as they find it difficult to search for specific products without getting any assistance from the employees. Therefore, a major area of improvement in the objectives of the company should be to improve the experience of the customers while they visit the stores of the company. 

The company can increase their workforce by hiring new employees and can employ them to provide assistance to the people who visit the stores. The appropriateness of the change in objective is justified because some people do not make a purchase decision until they are properly assisted by the store employees. Thus, if the company is able to provide more assistance to the customers visiting the stores, it can increase its sales even further. 

ENVIRONMENT ANALYSIS

An environment analysis scan of the company provides a detailed information about the internal and external, micro and macro factors that have or can have a potential impact on the business of the company in the near future. The internal environment analysis includes an analysis of those factors that are in the direct control of the company whereas an external environment analysis provides information about those factors that are not in the direct control of the company. Let us now conduct an environment analysis of the company:

EXTERNAL ASSESSMENT

The external environment analysis of the company is conducted according to the five forces model given by Michael Porter. The model aims at identifying and analyzing five different competitive forces that help in the determination of the competitive position of a firm in the market or the industry in which it operates (Mindtools.com, 2016). Let us now take a deeper look in the five factors:

1. Barriers to entry ? the industry in which Zara operates has high barriers to new entrants. The industry requires a lot of heavy investment if a new entrant has to set up its business and compete with the existing brands. Further, the industry also requires high promotional and advertisement activities. Therefore, it makes it difficult for any new entrants to enter the market. 

2. Substitute products ? the threat to the company from substitute products is relatively moderate. There are a number of brands that offer similar products that Zara offers and are also competing with the company on the basis of prices. Further, the buyers can also switch to other brands because the cost of switching to other brands is low but the brand has successfully gained a lot of loyal customers with the lapse of time, which is evident from the number of footfalls that the Zara stores experience (Zara, 2016). 

3. Buyer power ? the bargaining power of the buyer is also moderate in the case of Zara. Trendy clothes are appealing to the customers and they prefer to buy products with higher quality. Further, the prices of the products can also play a major role in the bargaining power of the buyer. Products from Zara are considered to be on the lower end in some of the markets but in some developing countries, products from Zara are considered to be high end products.

4. Supplier power ? the bargaining power of the supplier is low in the case of Zara. The company has centralized all its work and is into organic farming itself. The prices of the fabric that the company uses is also low and the company is into contract based cloth production. The company also has a large pool of local labor, which work without any labor union. Thus, the bargaining power of the supplier does not pose a major threat to the company. 

5. Rivalry amongst competitive firms ? The rivalry amongst competitive firms is quite high in case of Zara. This is not just about Zara but the rivalry in fashion industry has actually reached a global level where millions of brands are competing with each other in terms of fabric quality, design, prices, etc. Therefore, the rivalry amongst competitive firms pose a great challenge to the company.

INTERNAL ANALYSIS

Let us now conduct an internal environment analysis of the company using a SWOT analysis:

STRENGTHS:

• One of the major strengths of the company is that it has a global outreach. The company has around 74 stores around the world and is part of the biggest Spanish retailers in the world. 

• The company has a very well established and planned system of supply chain. The company takes less than 2 weeks to design, manufacture and make a product available in the shelves of its stores. 

• They use Just-in-time manufacturing system to bring down their manufacturing and operating costs.

• The in-house production helps them in maintaining the quality of their products (MBA Skool-Study.Learn.Share., 2016).

WEAKNESSES:

• The company does not invest in any kind of promotional or advertisement activities which might harm its business sooner or later. 

• The company targets those customers which are not very loyal and can shift to other brands if they are offered new collections at lesser prices. 

OPPORTUNITIES:

• The company can still explore some other markets in the world which are not yet saturated. 

• The company still has some opportunities for expanding into new segments and areas which they have not yet entered (prezi.com, 2016).

• The company has recently started its online boutique which can open up new and great future opportunities for the company (MBA Skool-Study.Learn.Share., 2016).. 

THREATS:

• The high end fashion brands can prove to be a great threat for the company

• Any situation of economic instability can cause a lot of problems for the company 

• The habit of the customers to switch to other or new brands is also a big challenge for the company. (MBA Skool-Study.Learn.Share., 2016).

CONCLUSION

Zara is one of those companies which have achieved market competencies using their operations management and have maintained them in the long run. The company has a very clear vision statement, mission statement and sets of strategies that enable it to think clear and formulate its long term and short term objectives accordingly. Though there are some areas where the company can still improve, such as advertisement and providing assistance to the customers, but on the overall, the company is one of the best fashion brands in the world that gives neck-to-neck competition to many big players in the industry. 

REFERENCES

Farfan, B. (2016). Company Mission Statements - Complete List of World’s Largest Retail Missions. [online] About.com Money. Available at: http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/ [Accessed 1 Aug. 2016].

Mindtools.com. (2016). Porter's Five Forces: Assessing the Balance of Power in a Business Situation. [online] Available at: https://www.mindtools.com/pages/article/newTMC_08.htm [Accessed 1 Aug. 2016].

Mindtools.com. (2016). Porter's Five Forces: Assessing the Balance of Power in a Business Situation. [online] Available at: https://www.mindtools.com/pages/article/newTMC_08.htm [Accessed 1 Aug. 2016].

Academia.edu. (2016). The Strategic Management Analysis of ZARA (Relative to the Case in Developing Countries). [online] Available at: http://www.academia.edu/5492552/The_Strategic_Management_Analysis_of_ZARA_Relative_to_the_Case_in_Developing_Countries_ [Accessed 1 Aug. 2016].

Zara. (2016). Zara. [online] Available at: http://zarafashion2013.wixsite.com/zara/swot-analysis [Accessed 1 Aug. 2016].

Zara. (2016). Zara. [online] Available at: http://zarafashion2013.wixsite.com/zara/swot-analysis [Accessed 1 Aug. 2016].

MBA Skool-Study.Learn.Share. (2016). Zara | SWOT Analysis | USP & Competitors | BrandGuide | MBA Skool-Study.Learn.Share.. [online] Available at: http://www.mbaskool.com/brandguide/lifestyle-and-retail/3814-zara.html [Accessed 1 Aug. 2016].

prezi.com. (2016). ZARA: BRAND STRATEGY ANALYSIS. [online] Available at: https://prezi.com/gnkhmmwaje1p/zara-brand-strategy-analysis/ [Accessed 1 Aug. 2016].

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 , 1-35. 

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