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Marketing Analysis

Created by:

Agnes Naomi / 1206289905

Ananda Gabriella / 1206290081

Deandra Bintarto / 1206221481

Dela Naufalia / 1206289911

Klemens Ismoyo / 1206290043

Executive Summary

ZARA: Fast Fashion

Fashion is the imitation of a given example and satisfies the demand for social
adaptation. . .. The more and article becomes subject to rapid changes of fashion, the
greater the demand for cheap products of its kind.
--- Georg Simmel, Fashion (1904)
Dress the World is Zara. Fashion is more than clothing: its a part of our live. We
live in fashion. Zara is a member of Inditex group, a Spanish group. Inditex, founded
by Amancio Ortega, operates eight different chains: Zara, Pull & Bear, Massimo
Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqe.
The retail chains were meant to operate as separate business within a structure, which
included six support areas and nine corporate departments. Each chain addressed
different segments of the market, but all share the same goal: to dominate their
segment using a flexible business model that could be expanded on an international
scale. As the parent company, Inditex focused on providing the corporate services to
its respectable chains so that they could accomplish their goals. Over 80% of Inditexs
total employees are part of the retail sales force and 8.5% are in manufacturing,
design, logistics, and distribution. The remaining 11.5% are part of the corporate
headquarters.
Zara is a fashion retailer that offers a wide range of clothing for men, women, young
adults, and children that fit the needs of the market and follow the instant fashion
trend, which puts them right in the middle of the highly competitive fashion market.
Zaras approach to fashion is very unique, responding only to the current trends as
oppose to the future trends in the industry, thus, continuing to be competitive. The
brand provides an alternative outlook to the fashion retail business model by rejecting
media advertising and blow-out sales, and maintaining the bulk of its production
process in-house rather than outsourcing to low-cost countries.
Zara is the most profitable brand of Inditex. It has opened its first store in 1975 in La
Coruna in Spain. Today, it has become the central headquarters for Zara. The
expansion into different parts of the world shows their potential and great success of
the business. The group is present in all continents: Europe, America, Asia, and
Africa.

Retail Organization Overview

Introducing ZARA Their Vision and Mission:
Zara offers the latest trend in international fashion in an environment of thought-out
design. Its stores are located in the main commercial areas of cities across Europe,
America, and Asia, offering fashion inspired in the tastes, wishes and lifestyles of
todays men, women of all ages, and children.
Zara has 650 stores in 72 countries. All of them have been designed to create a
special atmosphere that will allow the client to feel the pleasure of buying fashion. In
Zara, design is conceived as a process closely related to the client from the stores to
the creative teams, the concerns and demands of consumers are at the core of business
related decision.
Thus, this avant-garde organization works in the fashion industry with a very clear
vision of what it wants to offer today and in the future. Its mission is to offer
continually to its customer a product that corresponds to their needs, at the right time,
with the latest fashion trend.
One of its most important challenges is to always meet the satisfaction of its
customers while offering them the right balance of fashion, quality, and price, so that
the style and image stay unique. In order to reach their goals, Zara encourages
initiative and constant innovation. Zara strives to be in sync with todays everchanging trends and taste. Hence, its success among people, cultures, generations that,
in spite of their difference, share a special relationship with fashion and therefore with
Zara.
Zaras plan is to maintain and develop its position in the market by giving well in
time response to changing trends in consumer tastes through creating new designs that
are suitable for all customers at an affordable price.
Zara constantly updates its range. The company takes its inspiration from the
catwalks, targeting the fickle, fashionable young, one of the riskiest parts of the
clothing market. Unusually for a clothes retailer, Zara designs all its own clothes,
make most of them in Spain and distributes all of them itself. And many observers
attribute Zaras success to this control of the business from factory to shop floor.
It means that it takes just three weeks to move from notepad sketch to the clothes
hanger in a shop. Not bad considering the industry average is nine months.

Store History A Look at Zaras Business Model:

Located on a central street in La Corua, Spain, the first Zara store opened its doors in
1975 by founder Amanico Ortega, the head of Inditex. It featured low-priced look-alike products of popular, higher-end clothing and fashions. The store proved to be a
success, and by the early 1980s, more Zara stores were beginning to open up
throughout North-Eastern Spain. At the same time, Ortega had begun formulating a
new type of design and distribution model.
The clothing industry followed design and production processes that required long
lead times, often up to six months, between the initial design of a garment and its
delivery to retailers. This model effectively limited manufacturers and distributors to
just two or three collections per year. Predicting costumer tastes ahead of time
presented difficulties, and producers and distributors faced the constant risk of
becoming burdened with unsold inventory. Ortega sought a means of breaking the
model by creating what he called instant fashions that allowed him to respond
quickly to shifts in consumer tastes and to newly emerging trends, together with
computer expert Jos Marie Castellano, they developed a distribution model that
revolutionized the global clothing industry.
Zara has developed a business model based on short deadlines; decrease quantities
and a great choice of style and clothes. The company succeeds to make moderate
prices with a large choice of new clothes every time.
Zaras business model can be broken down into three basic components: concept,
capabilities, and value drivers. Zaras fundamental concept is to maintain design,
production, and distribution processes that will enable Zara to respond quickly to
shifts in consumer demands. Castellano stated, the fashion world is in constant flux
and is driven not by supply but by customers demands. We need to give consumers
what they want, and if I go to South America or Asia to make clothes, I simply cant
move fast enough. This highlights the importance of this quick response time to
Zaras operations.

Under Castellanos computerized system, the company reduced its design-todistribution process to just 10 to 15 days. Rather than depending on a single designer,
the company developed its own-in-house team of designers, consisting of over 200
professionals, who began creating clothes based on popular fashions, while at the
same time producing the companys own designs. In this way, the team was able to
respond almost immediately to emerging consumer trends as well as to the demands
of the companys own customers; for instance, by adding new colors or patterns to
existing designs. Therefore, their business model is characterized by a high degree of
vertical integration compared to other models developed by international competitors.
A flexible structure with a strong customer focus shapes each phase of the process:
design, production, logistics, and distribution to their own stores.
In addition, state-of-the-art production and warehousing procedures, as well as the
installation of computerized inventory systems linking stores to the companys
growing number of factories, enabled Zara to avoid taking on the risk and capital
expenses of developing and maintaining a large inventory.
The success of Zara is based on two principles: follow the trend to be able to sell
garments at a moment where people want this kind of style, without using any
advertisements as the concurrence does. They dont want to convince people to buy
their clothes but give the public what they desire at the moment. Secondly, the trust
that had been given to the employees allowed the company to delegate. They decide
what clothes should be in stores. Their role is to create clothes not to be sold for a
long time but only a short period in appropriateness with the current trend.
Capabilities of Zara, or the required resources needed to exploit the opportunities and
execute this conceptual strategy, are numerous for Zara. Zara maintains tight control
over their production processes keeping design and manufacturing in-house or with
some strategic partnership located nearby headquarters. Currently, Zara maintains
80% of its production processes in Europe, 50% in Spain. They have strategic
agreements with local manufacturers that ensure timely delivery and service. Through
these strategic partnerships and the benefits brought by this proximity of
manufacturing and operational processes, Zara maintains the flexibility necessary to
design and produce over 12000 new items annually. This capability allows Zara to
achieve their strategy of expedited response to consumer demand.

Macro Analysis
ZARA Culture
At Zara, the employees work as a team to get the job done successfully. When they
are considering a new product, it gets designed, made and critiqued in a matter of a
few hours. All the employees have to work together to finish this process. The article
states that Zara Requires employees who are humble enough to accept feedback
from colleagues, share credit with their team for winning ideas. Having these
standards has really helped Zara grow as a company and create a strong
organizational culture. When employees go on a business trip, they fly coach. This
company has a built in safety net to keep group work effective. Team members are
switched around to create fresh ideas; there is competition among the teams, and
continuous feedback.

ZARA Technology
Zara is careful about the way it deploys the latest information technology tools to
facilitate these informal exchanges. Customized handheld computers support the
connection between the retail stores and La Corua. These PDAs augment regular
(often weekly) phone conversations between the store managers and the market
specialists assigned to them. Through the PDAs and telephone conversations, stores
transmit all kinds of information to La Coruasuch hard data as orders and sales
trends and such soft data as customer reactions and the "buzz" around a new style.
While any company can use PDAs to communicate, Zara's flat organization ensures
that important conversations don't fall through the bureaucratic cracks.
Once the team selects a prototype for production, the designers refine colors and
textures on a computer-aided design system. If the item is to be made in one of Zara's
factories, they transmit the specs directly to the relevant cutting machines and other
systems in that factory. Bar codes track the cut pieces as they are converted into
garments through the various steps involved in production (including sewing
operations usually done by subcontractors), distribution, and delivery to the stores,
where the communication cycle began.
The constant flow of updated data mitigates the so-called bullwhip effectthe
tendency of supply chains (and all open-loop information systems) to amplify small
disturbances. A small change in retail orders, for example, can result in wide
fluctuations in 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 percent
to 50 percent. In this way, Zara avoids costly overproduction and the subsequent sales
and discounting prevalent in the industry.
Harvard Business Review, Vol. 82, No.11, November 2004.

ZARA Legal Issues

A group of labour rights organizations has accused leading US and European clothing
retailers and brands of failing to push for improved safety conditions in factories in
Bangladesh, following the latest in a series of fatal fires at factories in the country.
Jonathan Birchall, Financial Times 15 Dec 2010
Eighteen months ago, BBC radio highlighted the appalling conditions in one of
Windy Groups city centre factories, Windy Apparels. Two of its workers said they
were making clothes for Zara. In Business, alerted Inditex, the owner of Zara, and
their Director of Corporate Social Responsibility, Javier Chercoles, flew to
Bangladesh. He said "Conditions were bad no evacuation stairs, too many people."
Javier Chercoles gave the factory owner an ultimatum: Close this factory and
improve conditionsif you want Inditex to remain a customer. Neil Kearney,
General Secretary of the International Textile, Garment and Leather Workers
Federation said "It's what every factory should be moving towards if the buyer
makes the demand, the industry has to respond..."
Caroline Bayley, BBC Radio 4 In Business Programme 20 Jan 2010
British woman Samantha Morshed, representing a growing number of businesses
pushing to channel Bangladesh's cheap labour into ethical, fair trade labels. She now
employs more than 3,500 women in rural areas who make 30,000 items a month that
are exported to developed countries and fashionable shops, including London-based
retailers JoJo Maman Bebe and TopShop. Article also refers to Metro Group, Zara
(part of Inditex)
Fashion firm Zara has forced the closure of a supplier's factory after workers told the
BBC they had suffered harsh treatment there...
BBC 23 Jun 2008

ZARA Economical Analysis

Inditex, the fashion group that owns Zara, Bershka and Massimo Dutti, saw its
sales and profits rise significantly in the first quarter of its 2011 financial year.
Sales across the group increased 11pc to 2.96bn in the three months to end-
April 2011, while gross profits rose by 9pc to 1.74bn.
The group operates a mammoth 5,154 stores across 78 countries after opening
110 new stores in 29 countries during the quarter. The new stores include the
first Zara shop in Australia. Today, the group opened its second Australian store
in Melbourne, while more firsts are being prepared in South Africa, Taiwan and
Peru.
Inditex plans to launch online collections from September in selected European
markets. Zara also plans to begin e-commerce sales in the US from September 7,
according to the parent firm.

Inditexs net income came in at 332m for the three-month period, about 10pc
more than in the first quarter of 2010.
Its share price rose some 26%, adding to the excitement already generated by
Spain's biggest share sale in 2001 and 2007. The shares sold internationally
were more than 53 times oversubscribed. Many investors have been attracted by
the company's growth, with the firm reportedly opening a new shop on average
every three days.(news.bbc.co.uk/business)
Zara links customer demand to manufacturing, and liking manufacturing to
distribution. Zara has been running their business in fashion industry, which is
susceptible to seasons and quick changing customer tastes. Zara has been
approached to and considered their business as a perishable commodity
business just like a fresh baked cake or bread to be consumed quickly.

Micro Analysis

ZARA Product Offerings

Zara is a high-fashion concept store offering apparel, footwear and accessories for
women, men, and children, from newborns to adults aged 45. Zara stores have two
basic product lines: mens clothing (approximately 22% of sales) and womens do
thing (about 58%). Each of these clothing lines consists of 5 sub-categories. Such
categories include: Lower Garment, Upper Garment, Shoes, Cosmetics and
Complements. In addition, Zaras catalogue also includes a childrens clothing line,
accounting for an additional 20% of sales.

ZARA Pricing Strategy

Zara offers unique, high quality clothing and products at affordable prices compared
to designer stores, thereby, implementing a blow price strategy. It can do this
because they use a lower cost structure than their competitors through the
manufacture of their own merchandise in-house and dramatically cutting inventory
costs. Therefore, it strives for a cost leaders hip strategy, as low costs enable them to
give lower prices.
Most importantly, Zara has quite a different pricing strategy compared to many others
in this business, which set prices equal to cost plus a target margin. Instead of using
this typical cost oriented method, Zaras prices are based on comparables within the
target market. For example, a coat in Spain could be priced at 90 Euros, and the same
coat in France could be priced at 118 Euros. Therefore, they are willing to pay.
Previously, Zara use to print price tags for multiple jurisdictions showing on one
single tag all of its different prices by country. This simplified the tagging procedure
and also permitted goods to be moved from store to store and shipped between
country to country without retagging. Zara has now switched to a system of local
price marking in the stores, using a device that reads the barcode and prints the
appropriate local price.

ZARA Distribution Strategy

State-of-the-art distribution facility functions with minimal human intervention.
Approximately 200 kilometers of underground tracks move merchandise from Zaras
manufacturing plants to chutes that ensure order reaches its right destination. The
merchandise does not waste any time waiting for human sorting. Optical reading
devices sort out and distribute more than 60,000 items of clothing an hour based on its
barcode. Zara has a centralized distribution system, which operates, out of two
primary warehouses located in Spain. About 2.5 million garments could move
through the distribution center each week. This location periodically receives
shipments of finished clothes from suppliers and ships replenishment inventory
directly to every Zara store in the world twice a week. These shipments are made by
truck to Europe and by airfreight to stores outside of Europe, so that stores received
goods within 24-36 hours of shipment in Europe and within 1-2 days outside of
Europe. No inventory was held centrally, and there was almost no inventory at the
stores that was not on the selling floor.

ZARA Promotion Strategy

Zaras unique approach to advertising and marketing is an additional factor that adds
to their success. Zara spends 0.3% of total revenues on advertising and marketing.
This is significantly less than their competitors who an average to their competitors in
marketing activities. In order to effectively compete with their peers Zara mostly
relies on word-of-mouth advertising to attract customers and uses location, store
layout, and product life cycles to act as their marketing tool to consumers. For
instance, Zara strategically locates all of their stores in prime retail districts for
visibility marketing. For example, a couple of their locations in Toronto include
Yorkdale Shopping Center and the Eatons Shopping Center downtown.
Additionally, because of the rapid product turnover mentioned earlier, costumers are
trained to visit Zara stores often because new items are presented weekly and are
often not restocked. This feeling of scarcity encourages costumers to come to the
stores and buy frequently. In fact, Zara costumers visit on average 17 times a year;
that number being only 3 or 4 times a year for their major competitors. Lastly, in
order to keep the stores looking fresh and trendy; Zara invests heavily in their store
layouts. They have a testing facility nearby their headquarters in Spain where
different types of store layouts are tested. Each Zara store is remodeled every 5 years
in order to keep up with current trends. Zara does not invest heavily in direct
marketing, though their efforts in image/brand marketing do a great deal to attract a
loyal costumer base. Their cost advantage and ability to maintain brand recognition
and costumer loyalty are essential elements of Zaras promotional strategy.

SWOT Analysis

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Competitor Analysis

H&M Hennes & Mauritz AB (H&M, a Sweden-based Company active in the

retail clothing industry. The Company, like Zara, is engaged in product design,
manufacturing and retailing of clothing and as well as accessories. The companys
products range from various clothing, which including underwear and sportswear, for
men, women, children and teenagers, and cosmetic products and accessories. The
Company has 20 production offices around the world, buying goods from
approximately 700 independent suppliers in and around Asia and in Europe. H&M
operates 1,345 retail outlets in 24 countries with its largest markets in Germany,
Sweden and the United Kingdom. During 2006, H&M opened 168 new stores,
primarily in the United States, Spain, Germany, France and Canada, and launched of
online sales outside the Nordic region. The Company's head office is placed in
Stockholm, Sweden.
Competition in the fashion industry has always been tough. H&M Hennes &
Mauritz , has always been Zara competitor in this industry. H&M has been in
business since 1947, while Zara started business in 1975. Experience can play a big
role in business, but strategy has been the edge of Zara to gain competitive advantage
in the business. Zara has gone against the conventional strategy where other company
dare not pursue. The strategy of Zara is unconventional, other companies in fashion
retail uses a different strategy. Zaras strategy works in making the products of the
company more anticipated by the customers. The strategy also gives the company the
full responsibility in managing all the business processes; form designing, to
production, to shipment, etc. This allows the company to focus on each process,
making each process vital.

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Zaras Marketing Mix For Indonesia

Product

Clothing for:
1. Up to date trends.
2. Zaras products are adapted from high fashion brands.
3. MAP and Zara will select the appropriate clothing to be sold in
Indonesias market. For instance: during fall and winter they will only
bring few of the coats/jackets to be sold in Indonesia Zaras store.
4. Zaras women collection divided into two sections. First Zara Basic,
that would more focus on adults. Its products ranges from smart
casual to formal, while Trafaluc (TRF) focus on teenagers.

Price

1. In Indonesia Zaras price ranges from 200.000-2.000.000 rupiahs.

2. Price level Pull and Bear > Zara > Topshop.
3. Zaras target market in Indonesia is from middle class and above.

Place

1. Zaras stores are located in middle class and above malls, such as:
Plaza Senayan, Senayan City, PIM, Grand Indonesia, Plaza Indonesia,
Central Park, etc.
2. Basically, Zara has stores in prime locations of major cities.

Promotion

1. Zero Advertising. As we can see that Zara never put advertisement

on billboards, magazines, nor commercial. They dont want to
convince people to buy their clothes, but if the public want they desire
at the moment.
2. Focus on location and in store dcor and shop window decoration.
3. The store window is the first meeting point with the customer and the
place where Zara advertises the next seasons look.
4. Zara renews the store image every six to eight months in all of its
stores.

People

1. Zaras target market in Indonesia is for middle class people and above.
2. Zara is providing clothes for teenagers, adults, women, men, and also
kids.

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References

Jones, Gareth. Introduction to Business: How Companies Create Value for People.
Information Technology and E-Commerce (pp. 295). New York, NY: McGraw-Hill
Irwin.
Jones, Gareth. Introduction to Business: How Companies Create Value for People.
Finance (pp. 494) New York, NY: McGraw-Hill Irwin.
Jones, Gareth. Introduction to Business: How Companies Create Value for People.
Human Resource Management (pp. 426-427) New York, NY: McGraw-Hill Irwin.
Ferdows, K., M.A. Lewis, J.A.D. Machuca. (2004). Rapid-fire fulfillment. Harvard
Business Review, 82(11)
Retrieved from http://www.Zara.com
123HelpMe. Zaras Business Model www.123helpme.com/view.asp?id=97642
Columbia Business School. Zara.
www4.gsb.columbia.edu/caseworks/abstract/2711/Zara
Free Presentation Slides. Zara Case Study
http://freepresentationslides.blogspot.com/2008/09/zara-case-study.html
http://news.bbc.co.uk/1/hi/business/1346473.stm
news.bbc.co.uk/1/hi/business

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