Strategic Business Options of Zara - Essay Example

?COMPANY ANALYSIS al Affiliation) Identify the business level strategy of Zara: Zara is d to be one of the world’s fastest growing manufacturers of affordable fashion clothing this can be attributed to Cost leadership business level strategy. Cost leadership level strategy is when a firm strives to acquire competitive advantage over the competitor by often reducing its economic cost (Frankl & Rubik, 2000). The fact that Zara has found differences that matter to customers and differentiated itself from its competitors is one of the reasons that keeps the competitors off since it becomes difficult to copy and imitate them. This difficulty of the imitation is one of the foundations the leadership strategy relies on. Zara has managed to successfully exploit its economic of scale through its size and volume of production. Passemard observes that there is a relationship between firm-size measured in terms of volume of production. Based on this understanding, and considering that Zara sells medium quality fashion clothing at affordable prices, its unit production is minimum. The optimum volume of production is reached when the average cost per unit production is minimal. (Passemard, 2006). Zara has also managed to sustain the leadership strategy because of its volume of production. Passemard, points out that with a high level of production, a company is able to purchase and use specialized manufacturing tools which other small companies are not able to afford (Passemard, 2006). The study indicates that the merchandize in the rain facility has a capacity of only 45,000 folded garments per hour and that this facility has its limitation unless more capacity can be created elsewhere. A further study by Adams observes that cost advantage may be associated with division of labor, which apparently is one of the key ingredients of Zara efficiency of work. The study indicates that at Zara, the design collections are developed by creative teams rather than groups of designers. In general implementation of leadership strategy requires firms that are able to produce relatively simple standardized products and at the same time are able to sell those products at comparatively low prices. This mechanism contrasts other companies who pursue business or corporate strategies from Zara. Zara has managed to keep its low cost production by ensuring that they maintain the supply and provide the variety to the taste of the supplier. The study points that Zara stores is stocked with items tailored to the taste of the local clientele and that one would never end up looking like someone else. According to Adams, for the cost producer strategy to work best, buyers must be able to use the product in the same way and have much same needs and requirement when buyers are large and have significant bargaining power (Frankl & Rubik, 2000). This is underscored by Porter in his analysis of the buyer power while examining the Porter’s Five forces. Porter points out that this strategy will be efficient if the industry’s product is a standard product which is readily available from variety of sellers. In the case of Zara, there are several outlets providing almost the same ambience all over Northern Spain and the rest of the world. In observation of the Porter Five forces, Zara has been able to protect itself from the rivals, buyers, suppliers, potential entrants and substitutes. The study reveals that Zara has managed to keep off the new entrant by sheer reduction of prices for artificial purposes as well as using its dominance and economies of scale to contain the competitors like GAP. Identify the corporate level strategies In identifying corporate growth strategies, this paper will consider that use of Ansoff matrix. Zara has exploited the use of the matrix.Ansoff matrix portray alternative corporate growth strategies. This strategy explores the present and future potential growth of the business based on the products and markets. While looking at the position of Zara, it is important to points out that Zara dynamically presents new models in the shortest time possible. Zara has considerably exploited the market that is always available for the new models rather than existing ones. The study indicates that the customers who do not strive to take the products they see on the shelves are likely not able to find them next time they come. Zara had successfully managed to implement three modes of corporate strategy. This includes the market penetration, market development as well as market diversification. It successfully managed market penetration in the clothing industry by trying to determine the model in which it would use from one country to another. According to Mahan, such a strategy would easily be implemented ones the company is able to target its existing products in their existing products in their current market segments, aiming to increase its market share. (Mahan, 1998) Zara has also worked convincingly to ensure that the exploit market Development as a strategy to target existing product to new market segments especially in the US and specifically the Northern America Though it might appear as if Zara doesn’t employ Diversification, it should be clear that the firm has been able to successfully keep itself moving by reading the trends and designing in the shortest time to ensure that they deliver new products in the market. The leadership strategy of Zara presents opportunity for it to be able to expand quickly. This also enables it to franchise, though in small level. Because of the nature of its production, Zara has been able to sustain leadership through direct investment. The study reveals that 99% of Zara stores are company owned the rest are franchises or joint ventures. Even though Zara uses sub-contractors, some sub-contractors, it carries out the bulk of the cutting itself. This strategy is acceptable since it is purely customer oriented in terms of their demand, needs and requirement. Recommendations One of the strategies that would also work for Zara is the corporate strategy. This strategy is appropriate since it is feasible and can be operated especially with the companies which are multinational in nature. It would also enable Zara to adopt other techniques such as merger with other companies. Additionally, the corpus of undertaking research and innovation is a crucial tool that would enhance modus operandi of Zara; it will enable the Company to undertake activities geared at identification and implementation of new ideas with an aim of improving their efficacy. It is also pertinent that the Company promotes networking with other companies; this is majorly undertaken through providing workers with an opportunity to interact with other workers, giving them the opportunity to share and exchange different ideas. Despite the fact that there is a high rate of competition and most companies tend to keep information ascribed to their modus operandi secret, successful networking is imperative for the efficient and effective operation of any Company. Bibliography Five Winds International & Pollution Probe 2004. Policy Framework for Environmental Sustainability Project: Case Studies. Frankl, P. & Rubik, F. 1999: Life-Cycle Assessment (LCA) in Business: An overview on drivers, applications, issues and future perspectives. Global Nest International Journal 1(3): 185 194 Frankl, P. & Rubik, F. 2000: Life Cycle Assessment in Industry and Business: Adoption Patterns, Applications and Implications. Springer, Berlin. 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