Managerial Foundations of Zara Group - Essay Example

Executive summary Zara is a clothing chain store that is part of Inditex Group. The business model is aware of the customers changing need and need for modest prices. Marketing strategies of the company should be geared at ensuring market penetration through offering new designs and competitive pricing. The sales force should aim at creating brand awareness and loyalty in order to sustain the market share in the industry. The company products have short life span since the business strategy aims at eliciting customer demand through offering low quantity but new designs frequently. Introduction Zara is a flagship chain store owned of Inditex Group that owns other brands such as Pull and Bear, Bershka and Stradivarius. The first Zara store was opened in 1975 and featured low priced high end products that were mainly sold to women, children and men (Zara 2012). Zara business model aims at contributing to sustainable development of the society. Zara stores aim at saving energy, ensuring less waste and creating an environmentally aware team. Zara products are made with organic cotton, ecological fabrics and PVC-free footwear (Zara 2012). The empowered retail managers ensure customers are kept informed of the new offerings through word-of-mouth since the stores are regularly replenished with new and innovative products. Almost all Zara stores are company owned, and the rest are franchises thus customers entering the stores in any city experience a standardised shopping environment that involves modern, spacious and well-lit stores that are walled with mirrors. Unlike other clothing stores that spend much of the profits on advertising, Zara spends less than five percent of the sales revenues on advertising (Proctor 2000). Zara’s marketing and selling strategies focuses on product variety, the location of the store and speed of market penetration. Zara replenishes its stores with new items more frequently than any other clothing chain store in the world. Zara has implemented loyalty programs to create a link with the customers and ensure good working relationships with past customers (Ferrell and Hartline 2011). Zara relies on location of the store rather mass marketing in attracting customers and always produces few and scarce fashionable clothes that will have a short lead time in the stores (Proctor 2000). Some factors that have contributed to the success of Zara’s selling strategy include extensive market research that ensures products meet the clients’ needs and relationship selling (Proctor 2000). Zara also offers favorable prices and after sale services that ensure customer complaints are fully addressed. Additionally, the selling strategy ensures that the stores exemplify a high class and cool shopping atmosphere that is associated with Zara’s products (Kumar 2010). Zara marketing strategy is aimed at increasing the level of concentration and internalization of the brands (Proctor 2000). Some selling trends that Zara has utilized include tele-shopping and e-marketing. The main target market for the products includes the individuals aged between 18 to 40 years and those working in the large cities such as Madrid and London. The consumers sought benefits include the interest to appear trendy and enjoy shopping in a stylish environment (Zara 2012). According to PESTLE analysis, Zara should be conversant with the trading policies while importing the products to the numerous countries. However, numerous changes in taxation policies, exchange rates and recent economic slowdown have impacted negatively on the sales of the company. The social environment is positive for Zara since the global population has increased thus creating additional market that is fashion aware and educated. The technological environment has allowed Zara to utilize online shopping carts, bar coding and technology aided designs thus leading to more customer satisfaction and convenience. Zara has also responded well to the ecological environment since the company is committed to use of ecological fabric and organic cotton for its products (Choi 2012). Zara Ansoff’s growth matrix Ansoff’s growth matrix is a marketing tool that assists businesses in formulating their marketing strategies. According to the model, businesses should select the marketing strategies depending on whether the product is new or already existing in the market. The model outlines four strategies that include market penetration, product development, diversification and market development. The market penetration marketing strategy is utilized when the main focus is selling the already existing market to the same target market. The main ideology is to increase or sustain the market share of the product within the same market through competitive advertising, sales promotions and competitive pricing (Proctor 2000). Zara should use this strategy in the mature markets in order to drive out competition through aggressive pricing. In addition, Zara has the opportunity to increase the customer loyalty through establishing loyalty reward schemes for the existing customers. However, compared with competitors such as Hennes & Mauritz, Zara has in-house design teams that ensure stores are frequently updated with fresh designs thus attracting more customers (Kumar 2010). The second marketing strategy that Zara can use is market development strategy. Zara has the opportunity of selling the existing products to new markets. Some methods that can be employed in order to execute this strategy include expansion to new geographical areas through e-commerce and different packaging for each unique market (Zara 2012). Differential pricing can also be used to create a new market for the designs. The company has well established market presence in European market thus it should consider increasing the market share in Asian and Latin American countries. For instance, the company has more than 100 shops in France, more than 50 shops in Portugal and only less than 10 shops in Both China and Thailand (Zara 2012). The third marketing strategy according to Ansoff’s growth model is product development strategy. This entails introducing new products in an existing market especially if innovation is the leading competitive strength of a firm. In order for the strategy to be successful, Zara sales force should have detailed insights on changing consumer preferences in order to facilitate the new product development process. Zara targets customers who are eager to purchase new fashion while remaining cautious of the prices. In this case, Zara should continue with the development of small quantities of differentiated designs that meet the customers’ customization needs (Zara 2012). The last marketing strategy according to this model is the diversification strategy whereby new products are introduced in new markets. It is a risk strategy thus a careful evaluation of the risks and possible benefits is important. Zara has the opportunity of initiating computer assisted design technologies to meet the changing needs of style in the new markets. Zara Boston consulting group matrix (BCG) The Boston Consulting group (BCG) matrix is mainly based on the industry growth rate and market share of each product. The marketing tool classifies organisational products in to four categories that include cash cows, stars, question marks and dogs. The star products have a higher growth rate but limited market share thus companies should invest heavily in marketing these products (Baker 1998). The cash cows represent a mature market with limited growth rate but high market share thus the marketing strategy should aim at sustaining the existing market share. The Question marks have high market growth potential but low market share thus the company should aim at marketing these products. The last category is the Dogs that have low market share and low market growth potential thus the company should harvest these products. Most of the Zara products belong to the Stars category thus the selling strategy should aim at increasing the market penetration (Baker 1998). Zara SWOT analysis One of the core strengths is the ability to control all the supply chain functions such as design, production and distribution of the clothing designs. Another important strength is the brand loyalty and awareness that the company has created over the years due to efficient distribution network and quality products (Peng 2009). Use of information technology and modest prices has enabled the company to increase sales revenues. Zara can use its competitive advantages to exploit the numerous opportunities in the industry. Some of the opportunities include the internet market that will ensure global market reach. Another opportunity is the need to create brand image and offer differentiated designs in different stores that are located within the same city (Griffin 2012). On the other hand, Zara suffers from some weaknesses that may affect the future profitability of the company. Some of the weaknesses include the high operating costs due to vertical integration of the stores and intense competition in the same industry. The main competitors are Benetton, Gap and Hennes & Mauritz. The possible threats include local competition, constant changes in the exchange rates and threat of new entrants in the same market (Baker 1998). Zara product life cycle Zara is a high end fashion company that offers the latest designs in the market. The company products have a shorter life span compared with the offerings of the competitors. The product life cycle is based on lower quantities, more fashionable clothes that have short lead time and wide variety of the designs. Zara has created an artificial scarcity of the designs through limiting the quantities of each clothing style in the market. Zara replenishes the merchandise in the stores twice weekly unlike other stores than take more than four weeks to replenish the stores with new product offerings (Griffin 2012). Conclusion For effective market penetration, Zara Company must train the workforce on new customer prospection and skills in building working relationships with the existing customers. The sales staff should be knowledgeable of the company products and the changing tastes and needs of the customers. The sales staff should have effective communication and negotiation skills in order to persuade new customers to choose another product from the similar product range. The sales staff must positive emotions by informing the customers of the perceive benefits of stylish products and the quality of the products. Zara can utilize the existing competitive strengths such as innovativeness, brand recognition and excellent customer service to enter in to new market. The company should concentrate on differentiation and market targeting in order to remain competitive in the industry. The overall selling strategy should be geared at increasing consumer satisfaction and increasing the repurchase frequency since the overall strategic objective of the company is providing products with a short product life cycle. The selling strategy should increase the brand awareness across all major markets especially in the bigger cities across Europe and North American markets. Zara should also adhere to the external environment operating framework such as the social changes in the markets and need for conservation of the natural environment. Reference list: Baker, M.J. 1998. Marketing: managerial foundations. South Melbourne: Macmillan Education. Choi, T. 2012. Fashion supply chain management: industry and business analysis. Hershey: Business Science. Ferrell, O and Hartline, M.D. 2011. Marketing strategy. Mason: Cengage Learning. Griffin, R. 2012. Management. Mason: Cengage Learning. Kumar, D. 2010. Enterprise growth strategy: vision, planning and execution. Burlington: Gower. Peng, M.W. 2009. Global strategy. Mason: Cengage Learning. Proctor, T. 2000. Strategic marketing: an introduction. London: Routledge. Zara. 2012. Available at http://www.zara.com/webapp/wcs/stores/servlet/home/es/en/. Read More