Zara: Strategy, Challenges, And Digital Marketing

Zara’s Strengths

Question:

Discuss the strategic issues of the organization Zara.
 

The selected company, i.e. Zara is a powerful brand with its marketing presence in the major countries as part of the major continents like America, Asia, Europe, and Africa. Therefore, the company faces high level of burden in meeting the various needs of its customers from different segments in order to retain the leading position in the fashion industry. The significant strength of the company depends on the prompt response of Zara regarding the designing process through the internal chain of operations (Cooperet al. 2016). Zara uses to design and manufacture new products according to the market demands and supply them to its various departmental stores in the multiple geographical locations within two weeks. Therefore, the promptness of the internal operations of the company is known to be one of the major strengths for facilitating the growth of Zara within the identified market. However, the company face challenges in terms of gaining competitive advantage in different countries as part of its international market (Sandbergand Mena2015). The particular constraint is faced by the company in the process of maintaining the flexibility in prices of its products due to the involvement of high shipping costs. As a result, the company is unable to supply the significant volume of products to the low cost countries. Nonetheless, as a devastating retailer in the world, Zara can apply its innovative strategies to counter the challenges and cope up with the latest trends of manufacturing and distribution process. 

Four of the major strategies applied by the company are outlined in the following paragraphs:

Cost leadership strategy – In the designing process of the business, Zara has adopted an haute couture process with the aim of minimizing the costs and maintaining the high fashion at the same time (Fink2013). The particular trend of the fashion world is largely maintained by the designing process of the company by using the less expensive fabrics. The effectiveness of the certain cost leadership strategy is based on the small quantity of production of each category of design. With the help of the identified process, Zara can effectively determine which specific design should need to be produced to a larger volume. Alternatively, the company can cut the production process of identified design at any time promptly.

Single Business Strategy – The business strategy of Zara is based on the production of clothing products, as 95% revenue of the company comes from the clothing accessories (Hill, Jones and Schilling (2014). Apart from that, the business model of the company is constantly focusing on diversifying the business products to capture expanded markets (Stuberet al. 2013). The business strategy of Zara is focusing on the development of products apart from the clothing items. For an example, the participation of Zara can be observed in the home furnishing under the brand name of Zara Home. It contributes 2.3% of the total revenue of the company (Pinkhasovand Nair2014). By looking at the scenario, it can be stated that Zara should need to emphasise more on the areas other than the fashion manufacturing process.

Challenges for Zara

Transformational strategy – The strategies developed by Zara are highly focused on achieving efficient regarding both global and regional responsiveness. From the analysis of the internal operations Zara, the company can avail more flexibility in terms of designing and moving products from the production centre to the department stores (Stacket al. 2014). The particular process provides benefits to the company through the vertical integration of its business strategy. Due to the proposed application, the possible transformation of the corporate strategy is observed, as it helps Zara responding to the local changes related to the customer preference. Additionally, the significant feedbacks of the customers are directly forwarded by the company to its massive designing team through the application of its transformation strategy.

Business model innovation – Innovation is an integral part of developing the corporate strategy by the chief level executives of Zara. According to Sorescuet al. (2012), the retail business model should need to comprise three critical elements such as format, governance, and activities. Effectively maintained business model helps the retailers to develop strategic options to include innovation in the corporate strategies comprehensively (Pinkhasovand Nair2014). Zara has fruitfully maintained the three mentioned elements in its strategies throughout its operating period to achieve success within the transformational market. For an example, technologic advancements of different regions determine the application of different format of activities for the company within the chosen industry. Moreover, different activities of Zara in the number of countries reflect unique cultural implications. Zara understands the vast range of difference between governance and quality structures in the various international levels to conduct significant strategic analysis for entering the new markets. 

As the business world is adopting the digital marketing marketers rather prefer to rely on the digital marketing campaigns. Likewise, the organization Zara has gained an enormous popularity after adopting the digital marketing strategies. However, the organization has to deal with some strategic issues that may appear to be serious challenge to the organization. While considering the internal strategies of the organization, it has been identified that most of the stores of Zara are located in Europe, which is making the organization vulnerable to anything that could cause disruption in the region.  The strategic issues faced by the Zara can be categorized while developing the marketing approaches.

The competitors are in the rush of reducing their lead-time. It has been observed that customer’s decision to buy the products depend on the personal state.  It has been identified that Zara has implemented different marketing strategies from the initial phase; however, the implemented strategies are not to advertise through the traditional media. One of the major issues found in the marketing strategies adopted by Zara is the pricing policy. In response to the aggressive pricing strategies of the competitors, the organization Zara set high price for the products. The organization Zara has been implementing competitive pricing strategies. Therefore, due to the high price of the products, the organization may lose its customers. In addition, due to the economic uncertainty in the economy, the people in European countries may not afford the price for the products.

Zara’s Business Strategies

Furthermore, it can also be added that the fashion industry in UK has been dynamic. The competitor determined to change their marketing strategies on a regular basis. Likewise, the entry of the new organization is also considered as the big threat for Zara. In order to resolve this particular issue, the organization has implemented the diversification marketing strategy(He 2012).However, the implementation of this strategy has not been effective, as the organization did not experience any growth in the business. As mentioned by Willemset al. (2012), almost 90% of Zara’s sales revenue usually come from their clothing business despite having home furnishing under the brand Zara Home. In addition, Zara seeks to achieve both global efficiency as well as responses from the local environment. In this context, Hill, Jones and Schilling (2014) added that Zara has more flexibility than its competitors with respect to the moving the products designing stage to the store shelf. Thus, to respond to the local customer preference, Zara tends to transmit the feedbacks directly to its design team in Span facilitated by the information technology. Nevertheless, the customers in European countries have not shown much interest in buying the products as the price for the products are comparatively high.  Although, the organization has focused on the quality of the products, the pricing is one of the major factors in the countries that have unstable economic environment. On the contrary, it has also been identified that the competitors such as H&M, Forever 21 and Uniqlo may harm the business of Zara in respect to the customer loyalty (Garrigos-Simon, LapiedraAlcamí and Barberá Ribera 2012). 

Recommendation and Conclusion

In order to deal with the above discussed strategic issues, the organization Zara could apply cost leadership strategy, which could help to reduce the price of the products and act as the low cost producer in the industry for a particular level of quality. The organization could sell the products at average industry price to gain profit higher than the competitors in the market or they could sell the products below the average industry price to increase the market share globally. Furthermore, it can also be added that in the event of the price war, Zara could maintain some profitability leaving the extent of competition behind. Conversely, without the price war, if the industry matures and the price of the products could decrease. Thus, it can be mentioned that if the organization could sell the product at the cheapest price, they will remain profitable for long time. As the cost leadership strategy is usually effective in broad market, Zara could implement the strategies in the European market. Some other ways that Zara could implement such as acquiring the cost advantages by developing the process efficiencies and deriving the unique access to a wide source of lower cos materials through optimal outsourcing. However, in order to adopt the cost leadership strategies, the organization needs to have effective distribution channels.  

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