A Case Study

By Group 3

I. Situational Analysis

Based in an industry thats highly competitive and labor intensive and in a country with high
labor cost, Zara is able to beat competition not only through product innovation but on the
whole innovative business processes. It manufactures and delivers volume of models each
year to customers with high flexibility. It utilizes high technologies for effective and timely
customer feedback system to monitor its inventory levels and most importantly, to feed
information on customer preferences into the design and distribution system.
Zara also pushes the game by making sure no model is kept on sale for more than four weeks
no matter how well it is selling giving strong impacts to their brands.

Despite high

success, Zara should look into the vulnerability to replications by

competitors and the long-term sustainability of its existing business model.

II. Problem Statement

What type of innovation must Zara

do to sustain its competitive edge its business model in the next ten
(10) years?

III. SWOT Analysis (1)

Strengths and Opportunities
(S2) Best known global brand in the fashion industry
(S3) Strong design and fashion identity through both its clothes and its
stores themes
(S4) High fashioned designs at a moderate price
(S5) Standardized, highly automated and innovative process
(S7) Leader in exploiting some of the key non-price trends such as
variety, speed, brand, and quality
(S8) Able to provide variety of clothing model its year to its target market
(S9) Effective and timely customer feedback system

III. SWOT Analysis (2)

(O1) Huge global industry suggest a large market to serve
(O2) Huge demand for differentiation and personalization in the industry
(O3) Few major players in the industry
SO Strategies
(SO1) Expand its market and move to new areas without Zaras presence
and still using its effective business model in conducting its business.
(SO2) Differentiate itself to the other players in the industry by entering
into new business ventures, again, using their existing business model

III. SWOT Analysis (3)

Strengths and Threats
(S1) Active in 70 countries with more than 2,000 stores
(S9) Highly flexible and innovative coordination system responsive to customer
preferences
(S11) Fast planning and production of new lines of designs
(S10) Fast shipment
(S13) Efficient distribution system
(S6) Extensive quality control
(T1) Competitors
(T2) Dominance of Asian countries in the clothing industry

III. SWOT Analysis (4)

ST Strategies
(ST1) Enter into new business venture catering existing
and new market of Zara
(ST2) Add new product line to its brand in existing stores
like cosmetics and accessories

III. SWOT Analysis (5)

Weaknesses and Opportunities
(W1) Long-term sustainability of its business model and
applicability of its model in Asia
(W2) Labor intensive
(W3) High labor cost in Europe
(O1) Huge global industry
(O4) Few major players

III. SWOT Analysis (6)

WO Strategies
((WO1) Improve existing business model to ensure its
sustainability and stay ahead of the other players in the
industry
(WO2) Improve the whole business processes to save cost
on labor to be able to serve the huge market and compete
with other players

III. SWOT Analysis (7)

WT Strategies
(WT1) Continuous improvement on its existing business
model by making their feedback mechanism system real
time using sophisticated IT system
(WT2) Demand planning to save cost on overproduction of
clothing models
(WT3) Used of social networks as digital surveys on the
customer preferences

IV. Critical Success Factors

Impact on Profitability (35%)

Impact on Business Model Sustainability
(35%)
Impact on Market Share(30%)

V. Alternatives

1.

New Venture Innovation:

.Add new product lines: Zara Make-up and Zara Accessories

Advantages and Disadvantages Against the CSF:
.target their regular customers who visits their stores
.business model will be further enhanced as new product lines are introduced
.will contribute to the increase of its market share and profits
.the need to improve their systems will be the challenge
.the need to expand the design team
.has to adapt with the fast turnover of their clothing designs
.there is a high risk that the new product lines will not sell as much as the clothing line

V. Alternatives

2. Incremental Process Innovation:

Improve its existing business model by adding POS real-time database system
Advantages and Disadvantages Against the CSF:
having the fastest product turnover and fashion adaptability, Zara will be able to maximize its
market share.
Zaras expansion plans will be made possible without forgoing their existing core processes and
business model
being able to respond quicker to fashion trends and customer preferences than it used to be will
be able to boost its sales dramatically.
not just maintaining but developing further its core competency by improving its existing
business model will transform into a leader in the textile industry
installing a system and its maintenance requires considerable investment such as putting an IT

V. Alternatives
CSF

Weight

Alt 1
New Venture Innovation

Alt 2
Incremental Process Innovation

Raw
Sc.

Wtd.
Sc.

Raw
Sc.

Wtd.
Sc.

Impact on Market
Share

35%

3.15

3.15

Impact on Business
Model Sustainability

35%

2.8

10

3.50

Impact on Profitability

30%

2.7

2.7

Total

100%

27

8.65

25

9.35

VI. Recommendation

Thus, the proponents recommend the new business

model innovation as the course of action that Zara
should take, gaining an overall score of 9.35 which
impacts positively all critical areas -- market share,
profitability, and business model sustainability.

VII.i Implementation

Product Development
Manufacturing
Supply-Chain
Marketing and Distribution

VII.ii Evaluation and Control

Market Share Monitoring

Innovation Review on its Impact on
Profitability
Review on Business Model Sustainability