MARKETING MANAGEMENT COMPANY PROJECT

BY GROUP 8 ABHISHEK GUPTA CHANDRA KISHORE BHARTI MEGHNA GAHLOT SHRADDHA KOTHARI

ABOUT INDITEX
INDITEX is a Spanish multinational clothing company headquartered in Arteixo, Galicia, Spain. It is made up of almost a hundred companies dealing in activities related to textile design, production and distribution. Amancio Ortega, Spain's richest man, and the world's third richest man, is the founder and current largest shareholder. The current chairman of Inditex is Pablo Isla. Inditex operates over 5,500 stores worldwide and owns brands like Massimo Dutti, Bershka, Oysho, Pull and Bear, Zara, and Tempe and also a low cost brand Lefties. The majority of stores are corporate-owned Franchises are only conceded in countries where corporate properties cannot be foreign-owned. The group designs and manufactures almost everything by itself, and new designs are dispatched twice a week to Zara stores. Most manufacturing is now in low labor cost countries, mainly in Morocco, China, and Turkey, although much production continues in Spain and Portugal, particularly for its Zara brand. In addition, Inditex has a factory for shoe design, production and distribution in the town of Elche, on the Spanish Mediterranean coast.

ABOUT ZARA
Zara was founded in 1975 and is the flagship chain store of the Inditex group. It is claimed that Zara needs just two weeks to develop a new product and get it to stores, compared to the sixmonth industry average, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead. This has increased the idea of Zara as a "fashion imitator" company and low cost products. Lack of advertisement is also in contrast to direct competitors such as H&M and United Colors of Benetton. Zara was described by Louis Vuitton Fashion Director Daniel Piette as "possibly the most innovative and devastating retailer in the world."

ZARA INVENTORY MANAGEMENT

Zara develops a business model that incorporates moderate prices with new clothing styles faster than its competitors. It maintains design, production and distribution processes well to respond to the quick shifts in consumer demands. They are flexible enough to produce 12000 new items annually. The company can design a new product and have finished goods in its stores in four to five weeks. They believe in shortening the product life cycle =greater success in meeting customer preferences They have a design team of 200 people, which produce 12000 new styles a year. They keep a close watch on new trends and buying behavior through market research.

VALUE CHAIN OF ZARA

Zara is an example of a company which exploited the value chain to get competitive advantage. The company aims to achieve the customer satisfaction by introducing variety of fashionable products One distinctive feature of the value chain system of Zara is its agility. In other words, flexibility and quick response to the market demand. Zara excels by targeting technology investment at the points in its value chain where it will have the most significant impact, making sure that every penny spent on technology adds value.

ABOUT H&M (COMPETITOR)

H & M Hennes & Mauritz AB (H&M) is a Swedish multinational retail-clothing company, known for its fast-fashion clothing for men, women, teenagers and children. H&M exists in 43 countries and as of 2011 employed around 94,000 people. The first store was opened on the high street of Vsters, Sweden in 1947. It had 2,325 stores at end of 2011 and 2,629 stores at end of August 2012. It is ranked the second largest global clothing retailer, just behind Spain-based Inditex (parent company of ZARA), and leads over third largest global clothing retailer, United States based GAP Inc.

The design team in the companys Sweden office controls the steps of production, from merchandise planning to establishing specifications, and production is outsourced to approximately 800 factories in Europe and Asia. These facilities are used for horizontal division of labor, rather than being integrated.

ZARA COMPETITIVE EDGE

Zara, unlike its competitors DOES NOT use outsourcing Zaras competitors face a lack of flexibility in changing orders based on current trends. Inventory costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until periodic shipment to stores. Thus, Zara has a competitive advantage especially in the area of product development

ZARA CUSTOMER SATISFACTION ANALYSIS

What we did in the project:

COLLECTED SECONDARY DATA

We collected secondary data for the reference of further analysis using following modes:

Desk Research Online Journals Collected reports from consulting firms like QUANTCAST

MYSTERY SHOPPING

To observe the perception of the people regarding Zara and H&M stores, we did mystery shopping in which we went to Zara and H&M stores in Dubai Mall, Deira City Center and Mirdiff City Center as a customer. There we observe the following things: PARTICULARS Promotional Offers Price Tags ZARA Less Consumers were less concerned about the price of the apparels H&M High Consumers at H&M had been observed to be conscious about the price tags of the apparels

COMPARATIVE MARKETING STRATEGIES ANALYSIS

Through mystery shopping, secondary data and customer surveys, we get to know about the both the stores marketing strategies:

PARTICULARS Direct Marketing Buzz Marketing Promotions Banner Ads Celebrity Endorsements

ZARA No Yes Yes No No

H&M Yes No Yes Yes Yes

GRAPHICAL REPRESENTATION OF SECONDARY DATA

DEMOGRAPHIC PARAMETERS

60% 50% 40% 30% 20% 10% 0% GENDER Male Female 43%

57%

16 - 24 Years 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

25 - 30 Years

Above 30 Years 40%

32% 28%

AGE

SURVEY
SCALE DEVELOPMENT

LIKERT SCALE Scoring from 1 to 5 1 strongly disagree and 5 strongly agree

SAMPLING & PROCEDURE

Sample size 30 Method: Multi Level Sampling Reduces sampling errors Procedure survey questionnaire across 3 different locations (Dubai Mall, Deira City Center, & Mirdif City Center) Electronic Form technology used for the survey

MULTI LEVEL SAMPLING

We segregated our surveyed data on the basis of secondary data we collected earlier. Using this, we reduced the biases that might come in the data. Biases can be explained as if the firm is

having majority of customers between age group of above 30 and we are getting survey of age group between 24 to 30 years then the firm wont be able to relate the data to their firm. Multi Level sampling because we took two parameters age and gender to segregate the data we collected in the survey as shown below:

CUSTOMERS

MALE

FEMALE

16 - 24 YEARS

25 - 30 YEARS

ABOVE 30 YEARS

16 - 24 YEARS

25 - 30 YEARS

ABOVE 30 YEARS

PRIMARY DATA SELECTION

On data we surveyed and segregated on the basis of secondary data and we have selected the customer:

1. Gender based

2. Age wise

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SURVEY ANALYSIS PARAMETERS

We took the survey by taking certain parameters as a base:

Quality Price Deals Store Image Brand Association Loyalty Ad Campaign

And did further analysis of the data using the software IBM SPSS.

SPSS ANALYSIS
Step 1: MULTIPLE RESPONSE ANALYSIS

Step 2: TWO STEP CLUSTER ANALYSIS

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MULTIPLE RESPONSE ANALYSIS

We took the defined parameters and made the groups of the 2 questions each parameters carries. Then we analyzed these parameters using Multiple Response Method as provided by IBM SPSS as a macro level analysis. And here are the results:

1. Defined the Parameters

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2. Frequencies

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3. Data Analysis:

0.00% 0.00%

QUALITY
0.00%

Strongly Disagree
41.70%

Disagree Neutral Agree Strongly Agree

58.30%

PRICE DEALS
0.00% 6.70% 16.70%

Strongly Disagree Disagree

33.30%

Neutral Agree Strongly Agree

43.30%

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0.00% 1.70%

STORE IMAGE
0.00%

28.30%

Strongly Disagree Disagree Neutral Agree

70.00%

Strongly Agree

BRAND ASSOCIATION
0.00% 0.00% 0.00%

Strongly Disagree
45.00%

Disagree

Neutral
55.00%

Agree Strongly Agree

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LOYALTY
0.00% 0.00% 8.30%

31.70%

Strongly Disagree Disagree Neutral Agree

60.00%

Strongly Agree

AD - CAMPAIGN
0.00% 0.00% 0.00%

Strongly Disagree
40.00%

Disagree

Neutral
60.00%

Agree Strongly Agree

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TWO STEP CLUSTER ANALYSIS

Then at the micro level analysis, we performed cluster analysis. In this we were able to project the data on the basis of age group and also to see where the majority of the people are inclined towards the parameters on the LIKERT SCALE.

In the analysis, we first choose the categorical parameter i.e. Age Group and continuous variables i.e. the questionnaire as shown below

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Then we performed the test where we the cluster to be fair. So we had three cluster on the basis of age group defined as shown

1. Age Group (16 24 years)

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2. Age Group (25 30 years)

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3. Age Group (Above 30 years)

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Using these cluster analysis and the median values of the questionnaire which depicts the number of people inclination on the LIKERT SCALE and we came to the final analysis of agreement and disagreement of people on various parameters and they are shown below:

16- 24 years QUALITY PRICE DEALS STORE IMAGE BRAND ASSOCIATION AGREE AGREE AGREE STRONGLY AGREE

25 30 years NEUTRAL DISAGREE AGREE AGREE

Above 30 AGREE DISAGREE AGREE AGREE

LOYALTY AD CAMPAIGN

NEUTRAL DISAGREE

AGREE STRONGLY DISAGREE

NEUTRAL DISAGREE

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SWOT ON THE BASIS OF THE ANALYSIS

STRENGTHS QUALITY STORE IMAGE BRAND ASSOCIATION

WEAKNESSES Advertisement Lack of Promotional Offers Customers are not particularly loyal to the brand

OPPORTUNITIES Zara can increase the share of youngsters (16 24 age group)

THREATS Others brand can attract the customers who are not loyal

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SUGGESTIONS
From the analysis we have done, we suggest Zara two major things: 1. There is an opportunity to increase the customers between age group 16 24 years as they are generally satisfied on all the parameters. 2. As the age group of 30 + constitutes major percentage of Zaras customers, we should implement plans for their retention of this segment.

To achieve this we have proposed the following suggestions:

Price Deals Special promotional offers must be given to the young professional & senior executives like providing special discounts if they show their business ID.

Loyalty Loyalty Club Cards must be introduced to give rewards for frequent shopping

Advertisement Zara must increase their advertisement budget to attract more customers and increase awareness.

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