Zara business strategy analysis
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Transcript of Zara business strategy analysis
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Alptuğ İkaSelen Yeniçeri
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Why We Are Here?• Highlight what are the Strengths,
weaknesses, opportunities, threats of Zara.
• Explain the target market and active customers of Zara
• Focus on the potential customer’s Value Proposition and the reasons why people prefer Zara.
• Then, analyze of marketplace and fashion industry and position of the Zara among the industry by regarding prominent competitors.
• Examines financial analysis of Zara and whole industry.
• Determine the strategy the firm pursues and develops.
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Customer / Market• Young people who want be fashionable but at a low cost.
• All price sensitive fashion-enthusiasts!• young professionals• university students• high school teenagers• children.
• Big Cities• Istanbul, Ankara, İzmir, etc.
• Target Market• 4-40 age• Mid-range income• interested in fashion trends
• located in big cities.
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Customer’s Value Proposition
Why customers use our and our competitors’ product ?
• Why do you think fashion has importance among people ?
• Basic needs
• External conditions.
• Self expression.
• Looking good.
• Self-confidence.
• Dress codes
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Customer’s Value Proposition
• Fashionable, affordable clothes
• Fast-changing product variety
• Large choice of styles
• Scarcity
• Prime locations
Why our products over our competitors ?
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Marketplace AnalysisGeneral Economic
Conditions
• Population 80 million• GDP Growth 4,1%• GDP per capita 10.971
dollar
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Marketplace AnalysisSocietal Values and
Lifestyles• Advanced communication technologies.
• Similar demands with Western societies.
• High brand consciousness.
• Like shopping
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Marketplace AnalysisLegislation and Regulation
• Additional tariffs
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Marketplace AnalysisPopulation Demographics
• Young population• 0-14 (25.5%)• 15-24 (16.8%)• 25-54 (42.9%)• Big cities• Istanbul, Ankara, Izmir, Bursa, Adana• Upper middle income• Highest income group (46.6%) contribution• Lowest income group (5.9%) contribution
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Marketplace AnalysisTechnology Infrastructure
• Improving technology
• High technology products create value
• Flexible production
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Analysis-Industry
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Driving Forces• High population
• Shopping is a trend
• Fashion followers
• High income group
• Flexible production
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Key Success Factors • Utilizing shops actively.
• Brand image.
• High quantity production.
• Creating the value from product differentiation.
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Porter’s Five Forces Model
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•Rivalry
•Threat of New Entrants
•Supplier Power
•Threat of Substitute
•Buyer Power
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Sales growth of Zara as follow so we can say that now it is on the maturity
stage
6.16% 13.39% 10.11%
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ZARA H&M
• Smart casual style• Branding style is
based customer experience
• Prices/quality ratio is high
• Better brand image
• Target market much more narrow
• Practical life• Quality lower
than Zara• Designer collaboration
• Price/quality ratio low (is good)
• Sales growth higher
• Target market has wide range
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Strategic Group Map Of Turkey Textile Industry
GAP ZARA Tommy Hilfiger
H&MBenetton
Lc Waikiki
PRI CE
QUALITY
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Financial Analysis 2014 2015 2016
Net Sales
Turkish liras
11084 12527 13793
COGS
Turkish Liras
4756 5105 5612
Gross Profit
Turkish Liras
6328 7422 8180
Net profit
Turkish Liras
1322 1741 1946
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year 2014 2015 2016
ratio
Sales Growth 6.16% 13.39% 10.11%
profitability growth 4.75% 31.69% 11.77%
Assets Growth 6.87% 7.17% 17.88%
Debt Growth -81.99% -83.81% -82.50%
Financial Analysis
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SWOT
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Strength
High Turnover of product
Ability to recreate of fashion
Active use of stores
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Weakness
Middle Priced Goods
Low quality
Limitations on Services
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Opportunities
Global Fashion Product
Growth of fashion market
Diverse cultural area
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Threats
Emerging New Comers
Limitation of Design Copies
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Generic Strategies• Cost Leadership Strategy
The company has to decrease their cost, and to achieve cost advantage below its competitors in the market. By doing this, a company is able to lower prices and performs above the average performer in its industry thanks to the fact that the cost for the company will be less than its rivals.
• Differentiation Strategy Customers look at the attributes of the products other than looking at the price. To apply
this strategy, the firm has to differentiate itself in terms of its products for instance by focusing on the quality of the products or in terms of provided service by focusing on the delivery system by means of decreasing the lead or delivery time.
• Cost Focus StrategyThis strategy has two variants which are differentiation focus and cost focus. Differentiation focus aims at differentiating a segment or a group by satisfy their unusual needs and the in Cost focus, the firm seeks to achieve low-cost advantage in order to provide the products at cheap prices and the concentration is made only for a small number of the market segments. However, the risk of these strategies is that competitors can easily recognise the success and may copy them
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Environmental Factors
Organic food products have become popular, it is inevitable that consumers will extend their scope of purchase to the organic textiles and this trend is already started as some retailers such as Marks and Spencer introduced range of clothes made with organic cotton. As a result of the pressure on environmental issues, Zara implemented a framework called the Environmental Management System which is the pursuant to ISO 14001 standards. This is a good opportunity for Zara because the company can now position itself as a socially responsible for environment. In addition, emerging trend for organic cotton can be an opportunity for Zara to strength its image and help the company to attract customers who prefer made with organic materials.
Social Factors
The social factors are one of the most important factors which affect the fashion industry. Culture of the society is viewed as the most significant factor in terms of its effects in fashion since it is different from one country to another, even it might be different in the same country. Moreover, culture changes as time passes and these changes affect preferences in fashion. As a result, predicting changes become difficult since taste of consumes can be influenced by several factors, such as weather, movies, or even footballers or pop stars.The impact of this would be a threat for Zara if they company cannot be able to adapt themselves with ever-changing nature of tastes.
Threat of Entry
Threat of entry indicates the entry barriers to an industry. Since there is several numbers of clothing companies in the Turkey, it is a highly competitive market. This makes difficult for the new entrants to compete in this market as there are some barriers to enter and compete in the market. One of the barriers is the need for large sum of financial resource to compete in the market as entering requires building both tangible and intangible assets which can be achieved by investing in advertising, customer service to build a customer loyalty as well as investing in physical facilities for stock holding and distribution.
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Strategic Map
Improve new products each
year by regarding changing
fashion trends
Select qualified Factories for
production and regularly control
them
Developing new fabrics via
cooparation of suppliers
Mass produce targeted items by imroving
their quality
Spread value added information through marketing channels
Focus on potential customers and giving
quick response to their changing needs
Work with the fashion professionals a
introduce advanced technologies
Expand pr activities by using
TV, newspaper,
social media
Providing strong employee motivation
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Possible Implementations• Cross functional business intelligence department
could be establish to give quick response for external changes.
• Collaborative network with a local firm could be conducted.
• Invest in R&D department for different type of organics cotton, especially for long stable superior types.
• Find vocal people of influence who are within your target market who can be brand ambassadors for your company.
• Host or be sponsor for an local Interactive Fashion Show