Zara Fashion Company SWOT Analysis

Paper Type:  Case study
Pages:  7
Wordcount:  1914 Words
Date:  2022-03-19

Introdution

Zara is a global fashion company that has approximately 2,000 stores globally. The company is owned by a Spanish clothing retailer that operates seven other brands. Zara was founded in 1975 by Amancio Ortego (Hanbury, 2019). The fashion company belongs to Inditex distribution group, which is one of the largest globally. Through SWOT analysis, companies such as Zara can determine their performance in comparison to that of the competitors as well as the entire fashion industry.

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SWOT Analysis

SWOT analysis is a management tool that has been proven effective in determining the performance of a company. Through SWOT analysis, the company's strengths, weaknesses, opportunities, and threats are evaluated. The strengths and weaknesses are the internal factors while opportunities and threats are external factors. Through a thorough understanding of the strengths, weaknesses, opportunities, and threats, a company can compete effectively.

Strengths

The principal strength of the company lies in its unique design. The company prides itself incompetent designers who understand the Zara brand and what the customers' needs are. The designers have well understood the psychology of the customers, so what they design is perfectly suited to what the customers need (Pratap, 2019). This is very significant in the fashion industry because the customers purchase what they find appealing. Additionally, the clothes are designed with quality fabric, and the finishing is not only elegant but also exceptional and fantastic. Zara wear includes office wear, party wear, and clothes for men, women, and kids, accessories as well as casual wears.

Exceptional Supply Chain

Zara design team is very hardworking, and within two weeks, a conceived design reaches the stores globally (Pratap, 2019). This is a short duration of supply advantages Zara at the expense of other fashions companies whose designs takes a minimum of two weeks before they reach the stores. Also, Zara is very trendy and consistent as every year they produce an average of 450 million products. Of these designs, thousands are new designs. This makes the marketing of the items easier because consumers keep visiting stores that deal with Zara items to check whether they have stocked new designs.

Affordable Pricing

This another key strength that makes Zara performs better than many other fashion companies. Among the Inditex brands, Zara is the most affordable, and its target customers are mainly the youth (Pratap, 2019). The reason why the brand is affordable and at the same time of high quality is because they can cut down costs such as those incurred in advertisements. This is due to their physical evidence globally and the design advantage. These two are very critical and are the secret behind the low operational costs and high-profit margins.

Use of Technology and Innovation

Zara has acknowledged that technology plays a critical role in the success of a company, especially in the fashion industry. The company has therefore invested largely in the information technology, which facilitates sharing of the information as well as flexibility (Garcia-Alvarez, 2015). The information technology also helps in providing ideas that are then used to quicken the design process. The company has also made use of RFID technology that is very crucial in inventory management of the stores. The technology has a great impact on the performance of the company because they make use of both online and offline retail. In this era, technology is essential because the majority of the target platforms are on the online platforms hence the need to make use of their online presence.

Weaknesses

Lack of Presence in Growing Markets

One of the weaknesses of Zara is that it is that there are few stores in markets such as Malaysia and India, which are growing at a significant rate (Pratap, 2019). In Malaysia, Zara has only 10stores while in India it has just 20 stores. In countries such as Thailand, there are only 11 stores, and in New Zealand, Zara has only a single store. The number of stores is low as compared to markets such as Spain, the United Kingdom, and China. India has been growing in the recent past and therefore is a market that the fashion brand should think of when opening new stores.

Less Advertising Activities

Zara is less aggressive when it comes to marketing of its items. This places the company at a disadvantage because the rival companies invest significantly in promoting the products. Instead of advertising, the company has derived sales by ensuring that they meet the needs of their customers (Pratap, 2019). This is, however, not enough in the fashion industry, which is highly competitive. To keep up with the increasing pressure to advertise, the company needs to rethink about investing in sales and marketing.

Opportunities

Use of E-Commerce

In this era, a significant number of potential customers are on online platforms. Zara can, therefore, leap a lot of benefits by investing in online E-commerce (Pratap, 2019). They can increase sales by making their products available on online platforms in addition to the physical stores. In the online platforms, customers can view different products and also be able to order online after which the product will be delivered to a location convenient to them.

Flagship Designs

Some of the notable brands in the fashion industry back up flagships designs from which they benefit greatly from (Pratap, 2019). Zara has not made use of this strategy, and it is an opportunity that is worth trying to boost sales. The flagship designs should only be available on Zara stores which will increase demand and make the Zara brand even more identifiable.

Expansion to the Fast-Growing Markets

Zara has few stores in rapidly growing markets such as India and Malaysia (Pratap, 2019). There is an opportunity in these countries since the growth means that the income levels of people are increasing so they can be able to purchase items such as clothes. In this view, Zara should, therefore, consider opening mores stores in such markets.

Threats

Increasing Cost of Raw Materials

The cost of raw materials used in the production of all wears and accessories has been increasing, posing a threat to the fashion companies, including Zara (Pratap, 2019). Although the company has suppliers, who have provided raw materials for the years without shortage, the rise in the cost is a danger for the company. This is because it can raise the cost of operating and subsequently reduce profits.

Rising Competition

Over the recent past, many people have invested in the fashion industry. Zara fashion is not immune to competition from other exceptional brands such as Vero Moda, Mango, and H&M (Cortez et al., 2014). Although the brands are quite expensive, unlike Zara, which offers quality designs at affordable prices, they still affect the company, and their presence cannot be ignored. This is the reason why the brand needs to invest more in advertising so that they can reduce the impact of rival designs by making their products known both to the average income earners as well as high-income earners. Inditex in general needs to focus more on marketing to create awareness of other fashions, including those targeting high-income earners.

Prioritized List

Among the strengths that Zara have to include online presence through the company website and other marketing platforms that the company uses to market its fashion products (Pratap, 2018). The potential to utilize online platforms to market the products. Many online platforms are used for marketing purposes. Hence, Zara can use such platforms to sell its products to potential customers located in different parts of the world. The main goal of the Zara fashion company is to make a profit from the sale of its products, and the profit is made through sales; hence, the company can increase the sale through online trading.

Zara Fashion Company also has the potential to set up new branches in foreign countries where their demand is high, and there is potential for growth (Saraswat, 2018). Setting up branches in foreign countries might help the company grow because areas such as Africa, the middle class is growing, increasing the demand for Zara products. The production costs in Africa and India are a bit low; hence, the company will have an opportunity to increase its profit margin. The demand of the fashion products vary from the market group the other; the local presence of the company allows the company to learn the needs of the customer and deliver.

The company also enjoys the use of technology and skilled labor but only specializes in a few types of cloth. The market for the rest of the clothes that the company does not produce still exist in the market (Saraswat, 2018). The diversification can help Zara increase revenue generated. There are no significant competitors in the market; hence, the company can take up the challenge. The company has the resources, and the technology required; hence, the diversification will increase the customer base and profit earned.

However, the company also has weaknesses that influence its ability to produce fashion products and earn more profits. One of the most significant weaknesses of Zara is poor marketing strategies where the marketing tools that it uses are not effective in terms of reaching potential customers. Majority of the customers that purchase their friends refer its products after they have purchased and liked the products. The mitigation of this challenge can be done through massive marketing using technologies that are likely to get potential customers. The company should carry out market research to help in identifying the best marketing channels that are effective and suitable. The budget for marketing should also be increased to cater to the marketing costs.

The other limitation that Zara has include lack of proper branding of its products that it produces. The branding of the company makes the company customers want to be associated with the brand because the brand creates a name in the market that the people can refer to. The branding can be used as a marketing tool because people associate the brand with a specific quality and ability to meet certain needs. The solution of this weaken is to develop the brand and market for the people to know it belongs to Zara. Once people know the brand, there will be no need for further marketing because the brand and the quality of the products will market.

There is also the challenge of new entrants into the industry that comes with new designs that people like (Garcia-Alvarez, 2015). The new companies carry out market research before entering the market; hence, they know what the people want in fashion. The fashion keeps on changing from time to time; hence, when Zara fails to carry out market research, it might suffer by becoming irrelevant. Zara Fashion Company has to invest resources in market research and survey to identify new market trends and the needs of the people.

Readiness

Zara Fashion Company has had an exceptional supply chain over the years because of its many stores located in different parts of the world (Saraswat, 2018). The effective supply chain is critical for the success of the company in terms of creating an environment where the customers are confident that the supplies are available whenever they need to purchase an item. Having its retail shops helps in regulating the price at which the fashion products are sold to the customers. The company can keep its customers because the price remains constant for some time. The products do not take a lot of time from production to the market. The model makes the company able to compete with other emerging competitors in the market.

The other major factor that makes Zara Fashion Company co...

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Zara Fashion Company SWOT Analysis. (2022, Mar 19). Retrieved from https://proessays.net/essays/zara-fashion-company-swot-analysis

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