Table of Contents
Introduction
Business effectiveness and efficient is highly dependent on the management to assumes various strategies that ensure that the business gains milestone to maintain its market leadership position. Importantly, to ensure smooth running of operations within a given organization, it is the role of the top management to formulate and implement the major goals and initiatives on behalf of the owners based on the available human, capital, financial resources, as well as assessing the external and internal environments in which the organization finds a cutting edge and competes for market position for a given target population. Many economists and business analysts have noted that, the success of any given organization is majorly dictated by its ability to pursue and incorporate strategic management (Ansoff, 2014).
Mintzberg defines strategies differently from what many researchers and scholars have suggested. In essence, he uses different perspectives and reflections to identify what a strategy is, he fails to define strategy based on a single process but rather he identifies strategies to be a plan, a pattern, a position, a ploy, and a perspective. Porter defines strategy based on the Mintzberg schools of thought, therefore, it involves the broad formula for how an organization will compete, what the goals should, what plans and policies should be incorporated to execute the objectives and goals for which the entity is striving to achieve. Hence, goals and objectives forms a combination of ends, while the plans and policies combine to form the means of arriving at the ends. Some of the available strategies include; corporate strategy, business strategy, acquisition strategy, product differentiation strategy, price-skimming strategy, and growth strategy among many others.
Porter, a renowned business scholar, identifies several principles underlying strategy; some of the principles include creating a valuable and unique market position, choosing what to do and aligning the organization’s activities with one another to support all the chosen strategies.
In SWOT analysis, the following strengths and weaknesses are considered: strengths include; information technology, fast delivery of new products and trends in the market, and management strategy-effective and efficient distribution. Weaknesses include; centralization of activities, less money spent in advertisements, one production and distribution industry in the world, some of the opportunities available include; online market distribution, world market penetration. In addition, some of the threats faced by Zara Company include; global and local competitors.
In this essay, will identify and critically evaluate Zara’s strategies in pursuant of maintaining its market leadership position, and evaluate its market identification through SWOT analysis. Also, I will carry out a competitive strategy analysis through the application of the value chain, strategy clock, and the Porter’s five forces. Lastly, I will conclude the essay by highlighting the overall reflection of the strategic management in Zara Company.
Background information
Zara Company
Zara is a company that was founded in 1975, and specializes with the retailing of clothes and accessories. The company is based in Arteixo, Galicia. Most importantly, the company forms the main brand of the Inditex group and is the largest apparel retailer in the world. The company obtained the name Zara after the classic film zorba the Greek. The company operates as many stores as possible across the Spain and commenced by storing low-priced lookalike products of higher-end clothing fashions. The company was subjected to a serious change of designing, manufacturing, and processing due to the fact that, there were new trends coming into the market, and this required a quick and instant change of fashions. Some of the changes that were evident and remain evident include the use of groups of designers as opposed to individuals as well as the use of information technologies.
Products
Zara stocks women’s clothing and men’s clothing. The company has expanded further to store children’s clothing which has been renamed Zara kids. Of importance to note than anything else, Zara products are stocked and supplied based on the consumer trend, therefore, the company stores what is readily need in the market in terms of fashions and designs. One of the major reasons that make the company to world leading is because it is very responsible to changes and it takes the company several hours to react to a new fashion desired in the market as opposed to other companies that delay for almost six months. The company ships the products to the stores within fifteen days after they have been designed. Also of importance is that, the clothing is processed and distributed through a center in Spain, and the new products are inspected, tagged, and loaded in the trucks ready for shipment to the various supply stores. To be exact, Zara Company produces an estimate of 455 million items within duration of one year (Nguyen, 2017).
Manufacturing and distribution
Notably, Zara Company requires less than two weeks to establish and develop a new product and consequently transports it to the stores compared to the five to six months averages, and launches close to 12,000 new designs each year. The company does not engage into serious advertisements but rather relies on new investments by setting up new stores everywhere around the country. To show the modernity and advancement made by the company, it established its own factory in 1980 and upgraded to a more sophisticated and focused organization within a span of ten years. The company established a business model that allows formative, summative evaluation, and self-containment through the various stages of production which include; assemblage of the materials, manufacturing, product packaging and completion, and lastly the product distribution to their stores within the various stores in Spain and worldwide. Most the products stocked and supplied by Zara Company are manufactured in the proximity countries such as Morocco, Turkey, and Spain. The competitors of Zara have found it easy to outsource products from Asia but Zara has focused on the fashionable items produced by a dozen of companies that have been established in Portugal, Turkey, and Spain (Ferdinand, 2013).
From its website, it was realized that the company designs a new item and have ready products in its stores within duration of five weeks. Zara is known to modify and alter the existing products within a short period of time; estimated to be close to around two weeks. The company has identified a variety of strategy among them being the ability to shorten the life cycle and meet the consumer preferences. The company ensures that, if a given design does not sell within a given period of time, it is withdrawn from the shelves and further orders are made concerning the new designs that are desirable in the market. The company has worked to the required standards by customer’s fashion changes. Zara relies on a variety of designs that are adopted every year and this helps the company to enjoy the benefit of repeated visits by the raving fans (Tiwari and Herstatt, 2012).
Strategies pursued by Zara in maintaining market leadership
With the understanding that, Zara focuses its attention on understanding the fashions that fall within the customer’s preferences and delivering the products right on time, as opposed to constant advertisements and promotions it is possible to identify some of the strategies employed. The company has constantly employed and dependent on strategies such as; identifying the potential competitors – Gap, H$M, and Benetton form the international competitors and hence Zara has worked closely to identifying which products the companies are stocking and has consequently adopted a way to find its target population. Notably, it has been established that, Zara stores more fashionable products and items than the three companies and this is one way by which the company establishes its market leadership position (DiMatteo, 2010).
The norms, values, and success of the company are highly attributable to the professional ethics, continued commitment, customer loyalty, customer satisfaction, confidence, and creativity. Importantly, the company has enjoyed the practice of changing designs within a short duration of time and this has helped in maintaining the customers and also giving them a wide variety to make alternatives from. Upon gaining customer’s loyalty and satisfaction, it follows that, the company is now able to make raving fans from the customers and consequently sell more than anticipated.
Zara’s brand success and SWOT analysis
There are five key factors to success of the Zara Company namely, creating value for product differentiation, utilizing shops effectively and efficiently – the company has significantly changed the store layout within a short duration of less than two weeks and ensured location of the chops in every center as well as advertising and collecting information from the customers which is useful in the next round of planning, short period of adoption, collection, and preparation – the company spends the shortest time in conducting research about their products and what improvements is required in the market fashions and designs, the use of merit of geographical condition – utilizing the favourable geographical condition by hiring Portuguese and Spanish people as opposed to people from third world countries, and lastly, the principal of small quantity production – Zara has ensured a continuous production of new items without considering and relying much on the HIT products. The combination of these factors has enabled the company to make fast actions and has made the market situation possible (Mayer, 2011).
Strengths
Information technology
The company has relied on the agile and dynamic informational technology to cope with the world market. The use of fast distribution and order of new products has given the company a ground from which to remove what does not seem to bring the expected smile on the customers and replace with the new designed items that are preferable to customers over others. Through information technology, dissemination of information has been made possible across all the departments without delay and consequently resulting to expansion in the company.
Fast delivery of new products and trends in the market
The new products by the company have diversified and allowed the company to stoke different products from which the consumers can visit and identify the products that seem to satisfy their desire. On the same note, absence of specific preference by the company is ordered with a very short duration.
Management strategy-effective and efficient distribution
Importantly, Zara has specialized with opening new stands from which to stock the available fashions and designs. The fast distribution and shipment of the product has enabled the company to increase the target population and consequently gaining market advantage.
Weaknesses
Centralization of activities
The act of concentrating on one region has an advantage of gaining the local customers but this may not be the case with other companies coming up. Therefore, its centralization in the Spain reduces the customer base and this may advantage competitors who decide to go international or who exercise decentralization.
Less money spent in advertisements
It has been established that the company exercises reduced promotion which may significantly affect the number of customers visiting the company.
One production and distribution industry in the world
Overreliance of one factory may hurt the business in case of mechanical breakdown in the business activities and operations.
Opportunities
Online market distribution and world market penetration
The company can improve its market by pursuing new opportunities of acquiring new markets and new customers. The company has the opportunity to break into the world market by establishing new supplies in the different outlets.
Threat
Global and local competitors
The companies face competition from other two companies. Gap, H$M, and Benetton form the international competitors that could significantly interfere with the companies (Mohammad Arabzad an, 2012).
Competitive strategy analysis (Porter’s 5 forces)
Based on creativity and intervention by Zara, it has launched an estimated 12,000 new products per year in the recent times as compared to 199 and 4500 for H& M and GAP. Zara Company focuses more on reducing time which is between four to six days worthy of inventory as opposed to H&M which hold for more than 50 days. In another case, the Spain retailer holds for more than 90 days and this really gifts the company under study an upper hand towards establishing its market leadership.
Further, the company has adopted a low-price strategy which leaves the other three companies with questions to ponder and provide answers to before losing all the customers to Zara. It is important to note that, customers are at the heart of any unique business frameworks and models which include among others, production, design, distribution, and the sales through which the company channels its goods into the market (Petit, 2012).
The company has adopted the mission of getting into a more fashionable, stylish, and classy designs. The company has developed a link from which individuals can research and access its compatible market strategies among them being, to sell a modern design which is desirable and trades at affordable prices by the ordinary citizens, having a perfect distribution channels – delivery within the specified time, to adopt to quick fashions demanded by the international customers, and lastly to improve the quality of the products (Chapman, Ferris and Zachary, 2017).
Lastly, the company has employed the capital intensive technique to gain competitive advantage. In this case, the company has invested a lot of resources opening new stores across the world. Zara’s quick response to human, financial, and capital resources coupled with the information technology has allowed the company to respond effectively to the customer needs and demands. By working through the whole value chain, Zara Company is vertically integrated which allows the organization to develop a reliable and strong merchandise strategy leading to creation of climate scarcity and opportunity (Fleisher and Bensoussan, 2015).
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Conclusion
Strategic management provides an enterprise with directions and involves highlighting the organization’s goals and objectives, developing plans and policies that aid in the accomplishment of the set goals. In order to meet the aforementioned goals and objectives the right resources must be made available to implement the plans. Practicing managers and economists have developed a variety of models and conceptual frameworks that have proved to assist in making strategic decisions in the context of competitive dynamics and complex environments. The models are useful since they include feedbacks which provide information about the project execution. Summative and formative evaluation is done ensured which provide consequential diagnosis and remedy of the faulty actions and practices within the business company. The information born of this process is of paramount importance in that, it provides the managers with alternatives in the next round of planning.
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