Zaras Internet Marketing - Situational Analysis - Case Study Example

Internet Marketing: Situational Analysis Student Name: Student Number: Course Code: Word Count: Date of Submission Introduction The development of an organization or international company is, therefore, defined by the success of the marketing strategies and competitive forces that it employs. Exploration of new foreign markets is a necessary and an almost inevitable strategy that almost every retail manager embraces. It however, requires appropriate marketing strategies and business planning. In relation to this, paper discusses internet marketing in the fashion industry as used by Zara Inc. Internet marketing, also referred to as online marketing, is about advertising and marketing plans that use the web as medium to direct company sales via electronic commerce. With regards to the fashion and clothing industry, the paper also includes an analysis of the competitive issues and strategic issues that Zara uses to enhance its performance, customer satisfaction, public respect and earn appreciable returns. Such an analysis gives perspective on the business model that the company employs. Zara operates in design, manufacture, production and supply of clothing across preferences to its customers of the textile and fashion industry. Founded by Amancio Ortea Gaoa in 1975 (Pearson, 2008), it belongs to the Inditex Corporation and has since grown appreciably to expand outside of Galicia throughout the rest of the Spanish territory by exploring northwestern Spain and later on further parts (Hansen, 2012). Internal Marketing Strategy Audit The internal strategies that Zara lays out to operate are necessitated by the everyday challenges, competitions and issues that it faces in the industry. Achieving competitive advantage is, categorically, a primary goal for every organization or company that aims at advancing internationally. According to Kauffmann and Roesch (2012), this is achievable by designing and deploying marketing plans, logistics, production designs and business models that identify and meet customers’ demands. The environment created by international marketing is engulfed in various factors that influence the Zara’s marketing and expansion. Some of these aspects enhance while others hold back growth and development. These aspects are in particular categories of issues so as to facilitate a detailed understanding of the Zara’s position in the global internet marketing environment. Zara’s Internet Marketing The company has the department of Zara Online-Shops which provides a moderate choice of fashion for all of its customer categories. The company uses internet market effectively to allow online shoppers to select clothing items based on quality, characteristics, and color, size or prize categorization criteria. The service, therefore, gives the online shop user total control over how and what they chose to buy. Nevertheless, Zara’s online shopping service has a given functionality yet its presentation of the store’s collection is out of correspondence with the high-fashion flagship that one experiences when they personally walk into the stores. As indicated by Keller (2012), another problem is that the ordering process only shows the summation of purchasing cost of the items chosen but misses the delivery costs and time as well. Generally, the company has not effectively explored the aspects of online marketing given that its online shopping service is only for interested customers. It is doing much less to enhance its sales through internet marketing and encouraging more customers to embrace online shopping. The company is yet to explore the opportunities of internet marketing which are available by way of web marketing, e-commerce and social media marketing. Web marketing involves the product promotion and information provision through e-commerce websites. Email marketing encompasses advertising and promotional marketing by use of email messages to both potential and current customers. Social media marketing, on the other hand, is viral marketing through social networking websites. Zara’s Business Model Zara is principally the driver of the growth of the Inditex Corporation in terms of its profits and losses; Zara is the largest and most internationalized brand of Inditex's chain. It bases most of its production on the demands of the client and thus on demand manufacturing of a shop. This can be referred to as a pull strategy because it is a model of local production that enables a company to provide much faster. Notwithstanding the feasibility of this model, as indicated by Ferdows, Lewis & Machuca (2005), it also reduces inventory costs, lowers margins by working with the most competitive offer and eliminates the need to resort to traditional sales in the sector to provide an outlet for surplus production. For this model it is critical to have flexible production capacity (Dutta, 2010) to quickly adapt to changes in an always uncertain demand. Zara achieves the flexibility by subcontracting approximately 60% of its manufacture and production process. It therefore outsources some labor and professionalism but importantly, it does the crucial parts it like design by itself. Also important is the housing on one floor, of all related sections in the production line. Industrial issues Competition A financial review of the textile industry would place H&M as the closest competitor to Zara in many dimensions. Zara’s financial performance in terms of returns has been on the continuous increase as the data below shows. Financial hitches are inevitable and that is the sole reason that Zara should base its exploration of internet marketing possibilities. Figure 1- Financial performance between 1996 and 2007. Source: www.inditex.ex Researches indicate that the performances of Zara and its closest competitor, Hennes and Mauritz, are comparable. The net operating revenues are closer to each other than with the other potential competitors. Zara has less in current assets compared to Hennes & Mauritz and therefore more liquid. A logical conclusion is that this is because they have more fixed assets and turn their inventory over much more quickly, which is resultant of the pull strategy business model. As reported by Udalova (2012), Inditex turns over their inventory about 4.42 times annually but then they make better use of cash that they have than Hennes & Mauritz. The idea is that cash invested generate return so then the operating profit margin of Zara makes it more efficient financially than Hennes & Mauritz (Udalova 2012). Zara is much more efficient in generating a greater profit per currency unit, particularly the euro, than their competitors. Public Relations Apart from appreciable returns and competitive advantage public relations is also a vital aspect of business.  Zara has a consistent business system that gives it competitive advantages one of which is the economies of scale (Lukac 2006).  However, there are concerns on its centralized logistics model and diseconomies of scale as it grows. To address this issue, Zara should consider using internet marketing as a faster way of bringing its presence to new regions. That other concern is about facing the area of international expansion and its geographic scope, which is a critical aspect of international business as noted by Goddard and Ajami (2006). The company realizes that suitable regions are either unpredictable or limited by other factors.  Zara has implemented the same business model in almost all of its stores in the different regions. The practicability of this is questionable given that the behavior of the customers in one region is different from those in another area. Consequently the question of which models to be used in each country is another issues that Zara faces as it influences regional public relation. Corporate Social Responsibility A Report by Vu (2012) shows that the position of the Zara fraternity in terms of corporate social responsibility can be derived from the operating system designed by Inditex. The roles Zara plays to assert its social responsibility are evident. First, allowing their design to under the guidance of customer desires indicates respect for the different cultures of the regions of operation. Zara employs the locals of the region in which it establishes a new store (Craig, Jones & Nieto 2004). It therefore offers employment to the members of that society. It also articulates the responsibility of taxation by paying appropriate taxes in the region in which it operates. The business model adopted by Zara requires partnerships, an aspect that is new in the industry. The textile industry is quite labor intensive yet the fast fashion retailer and manufacturer makes Zara highly dependent on the labor. These labor providers and other subcontractors hired by Zara are really the determinants of Zara’s efficiency depending on their compliance and performance. Conclusion Zara springs out of the Inditex Corporation as a clothing manufacturer and retailer for children, men and women wear. The way in which its operation sets into the industry is almost an indication of a prior knowledge that the founder had. This is because Zara gets into the game with a different approach in aspects like business model, strategy issues and competitive forces implemented. The analysis finds that the Zara’s operation style studies the bargaining power of the customer’s consumption behaviour and utilizes it to, not produce the current fashion in the conventional seasons, but design fashion as desired by the consumer. However, it does not make much use of internet marketing, which this discussion conclusively finds as a probable medium of product marketing. Internet marketing reaches a larger audience on informative and promotional basis. This is because of the much digitalization and technological advancement of the business sector and the global economy. Additionally, there has been much networking and online connection of people and business entities. Therefore, online marketing and shopping service is a feature that the company must makes use to enhance production, marketing and sales. References Craig, A. Jones, C. & Nieto, M. 2004. Business of fashion case study. Philadelphia: Philadelphia University. Dutta, D. 2010. Retail at the speed of fashion. New Delhi: Third Eye sight. Ferdows, K., Lewis, M., A. & Machuca, J. A. D. 2005. Zara's Secret for Fast Fashion [online] Available at: < http://hbswk.hbs.edu/archive/4652.html> [Accessed 10 September 2013]. Goddard, G. J. and Ajami, R. A. 2006. International Business: Theory and Practice, M.E. Sharpe: New York. Hansen, S. 2012. How Zara grew Into the World’s Largest Fashion Retailer. New York Times, [online] Available at: < http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html> [Accessed 10 September 2013]. Kauffmann, L. and Roesch, J. F. 2012. Constraints of Building and Deploying Marketing Capabilities by Emerging Market Firms in Advanced Markets, (20)4. Keller, A. 2012. Zara marketing audit. Switzerland: University of Applied Sciences Zurich (HWZ). Lukac 2006. Zara, Inditex and Amancio Ortega – the Responsibility of International Success, [online] Available at: [Accessed 10 September 2013]. Pearson, A. 2008. The Story of Zara –The speeding bullet. Unique Business Strategies. Udalova, J. 2012. Zara Report, [online]. Available at: [Accessed 10 September 2013]. Vu, A. 2012. Corporate social responsibility: The Inditex Group Case. Read More