Case Study on Zara

Introduction

This paper presents an analysis of Zara, a company that is involved in the retail of accessories and fashion clothes. Rosalia Mera and Amancio Ortega, are the Spanish investors behind the Zara brand that was founded in 1975 in Spain. The concept of fashion over time developed and accepted socially, therefore, it gained popularity and hence the founder was in a position to expand in cities such as Ourense, Santiago, Lugo, and Vigo. The genesis of the business was in 1963 when Amancio invested in lingerie and women pajama for garment wholesalers in 1963. The company engaged in both retail and manufacturing in 1975 after an experience of a cancellation of a sizeable order by a German client. It is from this experience and strategy that the company has evolved into a multinational corporation. In 1979, Zara established 6 stores and covered all the major Spanish cities in 1980. It went further to venture internationally by opening a store in Paris, New York city, Portugal and Puerto. The international expansion was necessitated by Inditex in the 1990s when it opened its doors in 29 countries in Asia, America, and Europe. For instance, Zara opened stores in Malta in 1995, Sweden in 1994, Sweden and Belgium in 1994 and in Mexico in 1992. Moreover, the diversification of Inditex through the acquisition of new brands and retail hence leading to a larger market of its products based on the different segments that it targets. Each brand has its own organizational structure, subcontractors, and distribution system, own stores hence each brand operates independently.

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Inditex owns this company which is one of the most significant internationalized retail business. The Inditex Company owns Massimo Dutti, Stradivarius, Oysho, Pull & Bershka, and Zara. Across the globe, the company was operating more than 1751 by the end of 2009 including some retail stores in Spain. Currently, the company sells its products across the world as it manufactures and designs its own products. The 75 percent of the Inditex sales comes from Zara as it is the largest brand in Inditex.Current business strategy-During its initial stages as a startup business, Zara could sell its popular high brand products at a lower price compared to its competitors with an aim of popularizing its brand and competing with its competitors. For instance, it organized for every two weeks clothes would be sold at a lower price. However, the more its market size increased, Zara went forth to open several stores across Spain. The company specialized in accessories, cosmetics, shoes, and clothing. The need for distribution and production network for Zara has been necessitated by Products and services of the business by its rapid growth in the last decade which has seen the number of its stores tripled. Currently, Zara Operates in 73 countries and its niche consists of young people of the age between 16 to 34 years. The mission of the company revolves around the contribution of its business model towards sustainable development of both the environment and the society it interacts with. On the global consultancy inter-brand list of 2015, Zara was number 30 in terms of the best brands in the world. The company has been able to create a competitive edge through its ease of coming up with new designs and investing in the changing styles of ideas (Alexis, 2012). Moreover, Zara adopts to new products based on its flexible business model and investment in affordable high-quality clothes. The display of unique accessories, children's, women and men fashions at a real-world fashion have partly contributed to the success of Zara.

Task one

Competitive advantage based on Porters 5 Forces Analysis

Porter's five forces is a significant tool the enables a business entity to identify the strategies for potential profitability and understand the competitiveness of the business environment. Therefore, this section provides an analysis of Zara Company competitive environment with a major focus on the competitive rivalry, supplier power, and buyer power, threat to substitution and threat of new entry.

Competitive rivalry

Zara is among the leading manufacturer and supplier of garments in Europe, Asia, and America. Marketing of new products is critical and used to persuade customers to buy products through advertisement, public relation, and sale promotion (Rafiq & Ahmed, 2015). Promotion is an important factor and helps in increasing sales through proper marketing. The advertisement may be done through online, newspapers, TV, magazines and Radio. Internet advertisement is highly embraced by Zara, for instance, the company has embraced the use of social media platforms and its website to reach most of its customers. Public relation is done through press releases, seminars and exhibition (Codita, 2011). Zara markets its products through the online Getting the right people is an important aspect of marketing. Zara has embraced the service personnel who participate in service delivery, initiate interactions between customers and represent the company's values to the customer (Magrath, 2016). The company has also created enough time to service personnel and customers. Workers welfare is significant to the motivation of employees. for instance, Zara has ensured that the welfare of its employees is promoted for example, through giving of uniforms and creating favorable working conditions to workers. On the other hand, customer's services have been enhanced through managing waits, improving the queuing system and handling complaints from customers (Hayes, 2014).

Supplier power

The Global Supplier Relations department through a global basis procures the raw materials for Zara. Therefore, the improvement of quality, the increase in the speed to market and innovation and reducing costs is the major objective that helps in reviewing the supplier base with an effort in supplier rationalization. However, this type of model is prone to dependency on suppliers. There is a need for physical evidence when launching the product. The product should be located in an impressive building to attract buyers. Zara Company has ensured that the right person has been employed in the production plant to ensure the new product meets the need of the customers. Technological advancement has made marketing easier for the company to venture into the international market despite the various risks faced such as government policies and high costs of doing business in some countries. The success of any organization depends so much on the leadership style used by the organization. Leadership style can be defined as the provision of direction, implementation of plans and motivating employees towards achieving the desired goals and objectives of an organization. Participatory, democratic, autocratic and transformational leadership styles can be used to implement change in an organization (Ott, 2015). Democratic leadership style allows subordinates to participate in the decision-making process. The final decision and responsibility rely on the leader but he has to delegate authority to other people that determine various projects. Jan should listen to all leaders including production and marketing managers and allow them to contribute to the decision-making process. The subordinates are allowed to contribute to decision making and allow the final decision on the leader. Transformational leadership allows initiate change in the company. The company adopt transformational leadership and motivate other juniors to accomplish the visions of the organization beyond their expectation (Ott, 2015). The managers will set more goals. Zara has committed subordinates if he chooses to use transformational leadership. Similarly, a company can use an autocratic leadership style where everything is centered on the boss. The CEO will be the final decision maker and holds all the authority as well as well as responsibility. He will be making a decision without consulting other subordinates (Kotter, 1995). The organization uses a Participative or democratic leadership style whereby every member of the organization has a say in the organization's activities. Leadership is a process of motivating other individuals to act specifically way with the aim of accomplishing particular goals (Argyris, 2013). The success of any organization depends on the leadership styles used by the leaders in influencing their followers towards achieving certain goals. The motivation of other individuals might be accomplished in an assortment of ways which influence management styles and the way a man practices initiative can be recognized as a progression of activities which are coordinated towards a specific objective (Kotter, 1995).

Buyer power

The garments and accessories products of Zara to the premium market and are highly priced. However, it could be difficult for affluent buyers to switch to lower-priced products as they tend to be less sensitive to prices.

Threat of substitution

There is a large number of substitute's garments and accessories products. However, the replacement of a product with high reputation brand is invented through new technologies. The research and development department of the Zara develops its unique fashion, therefore, becoming its major competitive advantage.

The threat of New Entry

The income levels forms the basis for the purchase of garments. Therefore, unless a new brand features an advanced unique technology it is difficult for a new enterprise to venture into the fashion industries. Therefore, Zara which is a high-end company compete mainly on product differentiation, brand recognition and product quality and heavily repeat customers.

Task two

Primary activities and support activities in Porter's value chain and strength and weaknesses of Zara

The concept of a value chain was first introduced by Michael E. Porter of the Harvard Business School. Many companies and businesses figure out how they can compete at the marketplace by the use of the five forces model as developed by Michael Porter. These concepts were first discussed in the "Competitive Advantage" that he published in 1985.

Porter argued that it is not possible to understand competitive advantage by looking at a firm as a whole. He argues that there many discrete activities that have to be analyzed such as supporting its product, marketing, producing and designing. These activities can create a basis for differentiation and a firm's relative cost and contribute towards the relative cost position of the firm. When learning the market, Michael Porter in his book proposes that the activities in business adds value to the products and services that the firms deal with.

According to Porter, the primary activities are those that have an immediate impact on the services or products to be supplied, sales, maintenance, and production. The primary activities consist of elements such as inbound logistics, production, and outbound logistics, marketing and sales and service. While support activities consist of the firm's infrastructure, human resource management, technological development, and procurement. The inbound logistics under the primary activities involve the internal distribution of basic ingredients of a service, product or raw materials.

Technology development

For an organization to develop, technology development plays a critical role in this process. For instance, the company is able to keep its position in the retail industry, improvement of the services to satisfy its clients and the launching of new products. For example, Zara has enabled its customers to order products through its online shopping channel. Moreover, technology advancement can enhance the relationship between suppliers and the company. However, the costs incurred for the procurement and maintenance of the online shop has proved to be an expensive...