Zaras Success Based on its Marketing Strategy - Case Study Example

Introduction to Business process Name Institution Course Tutor Date Zara’s success is based as much on its marketing strategy as on its approaches to operation management. Discuss. Introduction As organizations or businesses are in a bid to increasing sales through attracting and retaining more customers, there is no harm to engage in strategic marketing as it is the cornerstone to the success of any profit-oriented business. However, this also relies heavily on the approach a business uses in its operation management. As the above question suggests, Zara’s success is based as much on its marketing strategy as on its approaches to operation management can explicitly be condensed into the marketing strategies and operation management that can actually result to success of a business. The approaches to operation management ideal for any business determine its position in the performance list with other competitors. Therefore, a combination of an effective approach to operation management and realistic marketing strategies can lead to success of a business. Therefore, this question requires me to analyze various marketing strategies and approaches to operation management that a business can adopt in order to achieve its long-term objectives and goals. It requires me to comprehensively discuss how the two aspects have led to the success of Zara business. In this essay I will justify the above argument in the question by explaining how marketing strategies and effective operation management can result to success of a business vis-à-vis goals achievement. Operation management Operation management is a means to efficiency and effectiveness per se and not actually a means to increasing revenues of a business directly. Operation management encompasses the process of product development, production and distribution. It is associated with value addition of a product since its early stages of development until it reaches the final consumer. It is part of business process management whose effectiveness has sought to place businesses at a higher level in the dynamic market. However, Trkman (2010, p125) argues that BPM has not been properly theoretically grounded resulting to problems of ‘identifying generic and case-specific critical success factors of BPM’. The success of Zara can be attributed to three theoretical application of business process management as an approach to operation management, directly related to information system process changes. It has been of a growing concern to many businesses. Taking into account one of the three theories, Business operation management capabilities development theory, Plattfaut (2011) points out that, ‘ In the past, scholars focused on the concept BPM and corresponding techniques, methods, and information systems, while today, the focus has shifted towards the development of BPM capabilities. a) Dynamic capability theory Dynamic Capabilities theory sets out an underlying concept of how a business can transform to a successful one. Using the baseline, ad-hoc capabilities and structure capabilities reveals the nature of dynamic capabilities that actually changes the information system and process change success as articulated by Niehaves, (2011). Business process management per se, involves a set of techniques to integrate, build and reconfigure organization’s business process for the purpose of achieving a fit with the market environment. The organization’s process should fit the market; no mismatch. Dynamic capability theory tries to put a business capability to organize resource within a dynamic environment (market dynamics) so as to identify any mismatch. Therefore, this implies that the effectiveness of BPM dynamic capability depends on the market environment and this automatically calls for a series of questions the management should ask themselves. The business’ operation should critically be assessed against the market environment. The BPM dynamic capabilities can be related to product development capabilities, acquisition, communication, manufacturing and distribution. The extent to which a business utilizes its capabilities determines the misfit with the environmental dynamics, (Niehaves & Becker, 2010, p292). A misfit may exist due to organizational culture, organizational learning and financial availability. The success of Zara therefore, based on this theory, can be attributed to the effective approach to operation management, such that, the understanding of environment dynamics based on aggressive research, has seen Zara adopt the BPM dynamics analysis where the organization’s capability to reconcile with the needs of environment have been taken into account. The transformation of managerial structure, use of proper information system, proper supply chain, inventory management and an understanding of the market has resulted to Zara’s success. b) Resource-based view theory This theory places a business in the context of sustained competitive advantage. This theory views a business as centre for collection of resources and capabilities. Dynamic capability can well be understood by extensively looking at the Resource-based view theory. Business process involves integration of resources within a business to achieve a desired goal. The resources available in the business are the ones that can used to gauge the dynamic capabilities of a business. Therefore, the BPM takes into account the assets available in the business and the extent to which they can be utilized to dynamically transform the business operation to enable it fit in the market. The success of Zara’s business can be attributed to selection of a better approach to operation management through resource organization and effective allocation of resources in order to cater for the dynamic needs of the market. This is because the business gains a competitive advantage over others by properly organizing and utilizing its resources. Cao (2014, p89) Points out that, ‘The resource-based view of the firm (RBV) argues that valuable, rare, inimitable, and non-substitutable resources are the source of a firm’s sustained competitive advantage (SCA)’ . From the above theories, we are able to critically understand why Zara is one of the most successful businesses with over 1500 stores worldwide. The success of Zara based on the above theories has been contributed by a collective force of interdependent variables. These include: 1. Supply chain: Zara has a strong supply network. The aspects of value chain analysis such as product development, logistic management, inventory management, suppliers’ selection and information dissemination has seen Zara create a wider market through expansion and opening of various branches and lowering prices for their attractive fashions. 2. Procurement: Zara does much of material production in-house. Approximately 50% of their products they manufacture themselves. This makes it easier for Zara to design fashions and manage time to meet their customers’ needs. 3. Low marketing cost: Zara is able to charge lower prices due to reduced cost of production and distribution. Zara promotes its products from a different approach. It does not incur the cost of advertising. Zara promotes its products through expansion and establishing new branches and quick customer feedback. 4. Fashion and variety of designs: In understanding the dynamic environment, Zara produces a variety of designs since they deal with young and mature customers who are usually drived by new fashions. This operational management strategy has seen Zara getting a lot of customers. 5. Just-in-time production: Through understanding the dynamics of the market and analysing the resources of the organization, Zara found that there was a need to produce as they make sale so as to ensure that products are always available when neede by customers. Zara produces their products after every two weeks and sourced to branches. This ensures availability. Marketing Strategy Marketing has been the key factor determining the success of any business. Marketing by itself is a means of achieving higher sales and gaining competitive advantage. Business formulate marketing strategies that suit the nature of their market. Businesses pay greater attention to marketing because they are usually trying to maximize shareholders wealth and financing futre operations, that is, to remain a going concern. Marketing has been necessitated with the skyrocketing level of competition in the market, with each player forced to ascertain marketing strategies that would give them a competitive advantage over the others. Zara is a business in UK that has several competitors across the board. Its success can be attributed to its marketing strategies that have sought to give it a competitive advantage over its competitors. The main competitors of Zara retailers are H&M and Gap. Marketing is an effective means of increasing inflows and consequently increasing the value of shares of a business. The values of shares are depend on the shareholders earnings generated from the operation of the business. The value shares are a basis for investment decisions and valuation of a business. Zara’s marketing strategies Zara’s marketing strategies are fore far a bit from advertising. Zara has embraced a unique way of penetrating the market and out scaling their competitors by far. Zara has rather been focusing on customers. The following are some of the marketing strategies used by Zara in succeeding in the competitive market. 1. Low-prices of their products The first marketing strategy of Zara was setting lower prices that actually attracted many customers in Spain. This can be explained from the demand and supply theory, where a decrease in price results to increase in the quantity demanded. Zara has later seen to expand and many branches opened at international level. This pricing strategy is to provide inexpensive goods and affordable to both low income earners and middle income earners too. The Zara’s main targeted customers are young people and mature adults, who are basically interested in fashion and reasonable prices. Zara has used a different approach from its competitors, who have been charging high prices for their products due to high cost of designing and manufacturing. 2. Product availability strategy The process of product development, manufacturing and distribution actually takes very long. This is because it requires proper market research and effective stages of values chain analysis. The use of information systems and transporting system which tend to affect availability of products to consumers has seen Zara make their products available at any given point of demand. Zara uses the shortest time possible to renew their products and deliver them to other retailers to ensure that they meet the needs of their targeted customers. 3. Understanding their targeted customer through customer profiling Through a vigorous market research, Zara has been able to understand the tastes and preferences of their targeted consumers who are young people and mature people aged between 18 and 35 respectively. Therefore, Zara have able to adjust their designing to meet the preferences of their customers. With this, they have been able to maintain their customers. They ensure that they gather all information relevant to the adjusting needs of their products. Zara adjusts its products in terms of colour, design and style on a seasonal basis. This strategy has seen their revenue growing at the rate of 30% according to sources. 4. Location strategy One of the factors deterring success of any business vastly depends on the location in which the business is situated. For instance, if the business is situated in areas where there are sufficient resources in terms of labour and raw materials, then the business is likely to succeed given that other factors are held constant. Zara has 500 shops around the globe. All of these shops sell on different fashions and styles and according to Ferdows, et al, (2003, p62). With so many operational branches across the world, Zara has been able to create a huge market for its products. This has been catalysed by their appealing trending fashions that have seen to hit the market. 5. Product promotion Zara has not been engaging in advertising like its competitors do despite being a cornerstone to the success of many businesses. Zara uses a unique way of promoting its product through branding. There branding has really attracted many customers. They focus on expansion rather than advertising. They believe that the image of the business and its reputable culture provides them with a better platform to communicating with their customers, which actually enhances their customer relation and through their quick response to customers’ needs, they are able to satisfy them, (Su, 2014). The success of Zara retailers can well be explained by the porters five forces theory. This theory highlights powerful tools that precisely show determinants of business competitive advantages and include supplier power, buyer’s power, competitive rivalry, threat of substitution and threat of new entry, (Porter, 2008). Zara does is not controlled by its suppliers since most of its products are in-house manufactured. Its competitors such as H&M and Gap face a challenge of sourcing some of their input components from suppliers who now tend to have power over them. This is where Zara gains its competitive advantage. In a bid to prevent consumers from having a great control on its operation, Zara usually releases 10,000 designs seasonally and in scarce so as to still make customers come frequently to look for latest trends. Zara usually faces threat of substation since its competitors also produce almost similar products as Zara’s. But Zara has a competitive advantage over them since they are very quick at responding to customers’ needs in terms of fashion and styles. Their ability to respond quickly gives them an advantage as it is able to sell quickly before its competitors. Zara also poses difficulties for new entries into the market. This is because they enjoy the benefits of expending their operations. These benefits include low cost of production and promotion, management economies and marketing economies through opening branches beyond boarders. Zara’s competitors and a comparison of their marketing strategies Zara has several competitors in the clothing industry. The greatest competitors of Zara are H&M and Gap. H&M uses a marketing strategy that seems to scare Zara retailers. One of the strategies that H&M used to put them in that position is the outsourcing strategy. H&M has outsourced its production to countries where labour is cheap so as to cut on the cost of production and eventually lower their prices. This is in effort to charge lower prices as they compete with Zara. However, this is a very big challenge to H&M since striking a satisfactory balance between price and fashion has not been easy. Zara therefore, faces this competition because H&M have also strategies on reducing their prices. H&M uses multi-channel promotional platforms such as internet, advertising and promotional advertising which has really expose them. This has enables them penetrate the market. However, this marketing strategy is quite expensive because other incremental costs are inured. Zara gains a competitive advantage of carrying out a no-advertising strategy in creating market for their products. This is cheaper. Gap is also another competitor of Zara. Gap uses a different approach to marketing their products in a bid to create market for their products. Gap tries to compete with their rivals on the basis of product differentiation. One of their marketing strategies is huge number of physical stores. Gap has many stores, over 1000 store, all over the world. This has made it be able to create a wider market for their products. The problem facing Gap is that its profit margin has been downscaling despite having so many branches than Zara. Zara remains to be on the league with the two companies that are posing threats to it. Therefore, from my point of view, the marketing strategy of Zara has made it become successful since it uses a marketing approach that is quite unique from its competitors. This marketing strategy gives it a competitive advantage in that it can quickly reach customers and create market through building a reputable organizational image that attracts customers, and benefits from lower prices and cost-leadership advantages. Conclusion The success of Zara retailers is much on its marketing strategy as on its operation management is justified by the fact that actually these two aspects are contributively towards success of any business. The success of Zara based on operational management can be attributed to the operation management strategies that it has put in place. These operation strategies include, supply chain management, just in time production, in-house production and inventory management. All these are related to the two theories of BPM which include the dynamic and resource-based theories. Apart from operation management, Zara has also employed marketing strategies that have also sought to increase the marketing for their goods. This is in an effort to gain a competitive advantage over its competitors such as H&M and Gap. Some of the marketing strategies Zara uses are low prices, product availability, location strategy, and product promotion through non-advertising means. Zara still continues to face stiff competition from H&M and Gap as they all have almost similar objectives of lowering prices to increase the market. However, Zara still remains to be above them. Recommendations With the escalating levels of competition in the market, there is a need for businesses to adopt effective operation management and marketing strategies. I recommend that owners of business undertake good research in order to understand the market dynamics. This will help them know develop an approach that will cater for the dynamic needs of the market. I recommend that SWOT- analysis be conducted to identify areas where focus should be places, and also identify the competitive advantage. I recommend that owners of business undertake research on supply chain management so as to understand the need for inventory management, logistic management, product design, product development and the enter stages of value chain analysis. References Trkman, P. (2010). The critical success factors of business process management. International Journal of Information Management, 30(2), 125-134. Plattfaut, R., Niehaves, B., Pöppelbuß, J., & Becker, J. (2011). Development of BPM Capabilities–Is Maturity the Right Path?. DEVELOPMENT, 10, 6-2011. www.aisel.aisnet.org/cgi/viewcontent.cgi?article=1026&context=ecis2011 Niehaves, B., Plattfaut, R., & Sarker, S. (2011). Understanding dynamic IS capabilities for effective process change: A theoretical framework and an empirical application. Niehaves, B., Plattfaut, R., & Becker, J. (2010). Does Your Business Process Management (Still) Fit the Market?-A Dynamic Capability Perspective on BPM Strategy Development. In AMCIS (p. 292). Cao, D., Berkeley, N., & Finlay, D. (2014). Measuring Sustained Competitive Advantage From Resource-based View: Survey of Chinese Clothing Industry. Journal of Sustainable Development, 7(2), p89. Ferdows, K., Lewis, M., Machuca, J. A., & Laurent, R. (2003, December). Zara. In Supply Chain Forum: An International Journal (Vol. 4, No. 2, pp. 62-67). KEDGE Business School. Su, Y. T. (2014). Marketing Communication Strategy of Masstige Apparel Brand-A Case Study in ZARA. Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior performance. Simon and Schuster. Read More