Zara Apparel 1

Zara Apparel Retailing Chain

Radostin Chernev MB 545 Robert Stevenson Marketing Plan June 27th, 2009

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I.

Executive Summary
Zara is the most popular brand in the portfolio of Inditex, the Spanish fashion group,

which is now the best performing vogue retailer by revenues in Europe. It is the largest and most industrialized of Inditex apparel retailing chains, which offers its clothing lines worldwide towards diverse market segments- the childrens apparel segment as well as the mens and womens apparel segments. The major international competitors of Zaras brand in the apparel retailing are The Gap (U.S.), Hennes & Mauritz (Sweden) and Benetton (Italy). Due to its unique positioning as low cost producer of high quality and fashionable products, it manages to offer cheaper price than Benetton and Gap, but at the same time still being fashionable. Furthermore, the unique core competency of Zara to design and finish goods in stores within four to five weeks as well as its product customization and variation capabilities add further value to its brand name. The company is characterized by being futuristic as well as growth oriented, thereby a major challenge facing Zara is to increase its revenue by 25% in two years. An evaluation of the Zaras internal strengths and weaknesses and external opportunities and threats as well as the firms macro and micro environments served as a foundation of this strategic analysis and marketing plan. The plan focuses on suggesting Zaras growth strategy, which would involve market penetration in the Bulgarian and Australian apparel markets as well as increase of the companys promotional initiatives to reach new customers. It might also contribute towards achieving revenue increase by developing a new product line for the baby apparel segment. The plan further suggests unexploited potential opportunity of Zara in terms of entry into the online market by developing e-commerce systems, which might further lead towards revenue growth as well as an increased profitability of the retail chain. Followed by the above marketing objectives, the author of the marketing plan aims to present various analyses such as PESTEL analysis, SWOT analysis as well as Porters Five Forces Model analysis, which will serve as cornerstone fundamentals for devising Zaras growth strategy.

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II.

Environmental Analysis
Zara apparel retailing chain was founded by Amancio Ortega Gaona, the owner of

Inditex. During 1975 the first Zara store was opened on the up-market retailing street of La Corua, Spain. From the beginning, Zara was positioned as a store, which sells medium quality fashion clothing at affordable prices (Ghernawat & Nueno, 2004, p.824) to evolve as one of the most profitable Intidex retailing chains operating 1,314 stores worldwide (Intidex, 2009). The chain achieved its highest profitability during the course of fiscal year 2001 as posted EBIT of 441 million (85% of the total) on sales of 2,477 million (76% of total) (Ghernawat & Nueno, 2004).

A. The Marketing Macro Environment PESTEL Analysis

Political factors Political events as reflections from the past towards the future: Political events affect not only the producer, but also the consumers in diverse ways. The political changes and activities have a tremendous influence over the peoples moods. The strong ideological drive related to private ownership in the period of the early 1980s not only facilitated the rapid expansion of businesses with a fast pace, but also created a desire for inspirational dressing, as individuals started to buy clothes, that reflect an affluent style (Bohdanwoicz & Clamp, 1994). The trend remains valid nowadays, as eminent designers such as Channel, Prada and Gucci mastered the style of the business people to create non obvious affluent look indicating prestige and prosperity. The global political events strongly influence the fashion industry. The single European market has put UK fashion industry under pressure to match the rivalry under several fronts

Zara Apparel 4 such as design, costs of production and manufacturing quality as it has increased the field of competition (Bohdanwoicz & Clamp, 1994). The collapse of the communistic regime, regardless of the fact that presented opportunities for corporations such as Littlewoods, which made a tremendous success in its stores in St Petersburg, has also created a threat in the shape of availability of cheap labor and textiles closer to the European markets than to other rivals from the Far East. Definitely, the threat posed by war to lines of supply couldnt be ignored with ease. In the beginning of the war, shipments of shirts from Serbia for Marks and Spenser were suspended (Bohdanwoicz & Clamp, 1994). All the above have direct impact on the way fashion retailers operate nowadays and substantiate that the political factors and changes directly impact the fashion industry. Economic factors Foreign trade regulations: World trade in apparel and textiles was regulated by the Multi-Fiber Agreement [MFA], which had limited imports into particular markets such as the U.S., Canada and West Europe from 1974 to 2004 (Ghernawat & Nueno, 2004). During the GATT, Uruguay Round, it was agreed to bring the textile and apparel trade under the WTO jurisdiction. The Agreement on Textiles and Clothing provided for gradual termination of the quotas under the MFA. This was completed on January 1, 2005. The agreement to phase out the MFAs quota system aimed to further reduce tariffs, which were relatively high 7%-9% in the major markets; however despite that fact high tariffs are still imposed on many apparel and textile products (Ghernawat & Nueno, 2004). Cheaper labor and inputs: About 30% of the global apparel production is exported. The developing countries usually generate larger share, about 50%, of the total exports. These cross-boarder flows of apparel reflect cheaper labor and inputs-partly due to cascading labor efficiencies in the developing nations (Ghernawat & Nueno, 2004).

Zara Apparel 5 Highly labor intensive apparel production: Regardless of the extensive investments in substituting capital for labor, apparel production continues to be highly labor intensive. Thus, even large manufacturers in developed nations outsource labor-intensive production to lower-cost labor sources nearby (Ghernawat & Nueno, 2004). Sociocultural factors Diverse attitudes and preferences for apparel : Due to the differences in lifestyles as well as the cross-cultural differences, the preferences of apparel vary among countries. Britons often choose stores based on social affinity, the French emphasize on variety and quality, the Germans are claimed to be highly price sensitive (Child, Heywood & Kliger, 2002). The Spanish consumers demand low prices and are not considered very discriminatory or fashion conscious as Italians (Ghernawat & Nueno, 2004). Social Strategy: Since 2001 Inditex progressed towards implementing social strategy. Initiatives including dialogues with NGOs, local communities and stakeholders lead to approval of internal code of conduct, the establishment of CSR departments, social audits of suppliers and external workshops in Spain and Morocco. Furthermore, the company participated in pilot developmental projects in Venezuela and Guatemalla and entered the Global Compact during 2001, an initiative headed by Kofi Annan, which focused on amelioration of the social responsibility and performance policies of global companies (Ghernawat & Nueno, 2004). Different positioning of Zaras apparel retailing chain due to social classes: Zara positions differently worldwide due to differences in social classes. For example, Zaras participation in Mexico focuses on the upper and middle class, others cannot afford it due to the low average income in Mexico. In Spain, however, with the same prices set, about 80% of Spanish citizens are able to afford the product of Zara, which increases the companys target

Zara Apparel 6 base there. The same is valid for Europe and the U.S. due to the relatively high income levels there (Ghernawat & Nueno, 2004). Religious Differences: The differences in religion are playing major role in shaping strategies and marketing products across cultures. For instance, there are specific restrictions on the marketing communications as well as the design of women apparel, while targeting the Middle Eastern countries. Women are required to wear hidjab there as well as clothes, which completely cover their body. Men should wear long trousers, regardless of the season. Thereby, the fashion companies should be conscious about the religious differences for the purpose of creating a suitable and adequate promotional and marketing mixes towards nations with specific religious customs and traditions such as the Middle Eastern countries (Minkov, 2007). Technological factors Quick Response: Quick Response [QR] , which is a set of organizational practices and policies aiming at amelioration of the coordination between retailing and manufacturing to raise the speed and flexibility of responses to global market shifts, was promoted by larger apparel retailers (Hammond & Maura, 1991). QR involved changes and restructurings in the technological, geographic and organizational boundaries, but was able to help retailers to reduce forecast errors and inventory risks. QR further lead to vital compression of cycle times facilitated by cardinal information technology improvements and encouraged by shorter fashion cycles. Spain- relative productivity by the EU standards: In Spain are located eighteen of Zaras manufacturing factories. The country has relatively productive apparel manufacturing base by the EU standards but lacks Italys completely developed threat-to-apparel-vertical chain that includes machinery suppliers, as well as its leading edge high-quality fabrics and global fashion image (Ghernawat & Nueno, 2004).

Zara Apparel 7 High Usage of Internet Technology: Technology is claimed to be one of the most powerful sources of marketing in todays era. Nowadays, the huge innovations in technology contribute towards the homogenization of the world as well as especially the increase of global internet usage helps firms to cover huge number of buyers, which would contribute businesses to reach large target markets in relatively short time span. Estimates of 2009 indicate that the global internet usage accounts for 23.8%, an increase with 1.9% from 2006. Furthermore, the percentage of users in some countries such as USA reaches 74.4%, followed by Australia with 60.4% and Europe 48.9% (see Appendix A, Figure 1) (Internet World Stats, 2009). This reveals for a potential opportunity for many fashion retailers, such as Zara to establish market presence in the online market. Environmental Factors CSR and Environmental Protection Responsibility: By 2002 Inditex has established presence in Dow Jones Sustainability Index. No other Spanish firm is able to compare with the high rate of expansion, the Corporate Social Responsibility as well as the environmental protection policies that Inditex managed to sustain through the years (TriplePundit, 2006). Eco-Fashion Trends: A growing trend of eco-fashion defined as the clothes that take into account the health of consumers, the environment and the working conditions of people in the apparel industry emerged during a party of a Fashion Week in February 2005. This event, attended by eminent fashion designers was the starting point of the creation of this new trend suggesting apparel production through usage of environmentally sensitive fabrics and green production techniques (West, 2009). Legal Factors UK legislation: Zara UK has to operate in accordance with Sales of Goods Act 1979. EU legislation: The commercial relationships of the EU in textiles and clothing are generally governed by the WTO Agreement on Textiles and Clothing [ATC], which

Zara Apparel 8 stipulates for the progressive application of the complete range of GATT rules to the industry, involving the incremental abolition of all remaining quotas by January 1st, 2005 (European Commission, 2009a). The EU applies quotas for the import of textile and apparel products from about 23 countries- either under ATC- fourteen countries or under bilateral agreements with nonWTO members- particularly countries such as Vietnam, China and Taiwan. Regardless of that, about 70% of the total EU imports are imported without quantitative restrictions (European Commission, 2009a). Furthermore, many third countries enjoy free access to the EU apparel market, through diverse preferential trade agreements (European Commission, 2009a). For the purpose of successfully offering products in the countries of EU, apparel retailers such as Zara have to comply with several directives such as: - Directive 2008/121/EC of the European Parliament and of the Council of 14 January 2009 on textile names- stipulating for labeling of the fibre composition of the apparel products. The directive requires checks to be performed in relation to whether the composition of apparel/textile products confirms the information supplied (European Commission, 2009b). - Directive 96/73/EC of the European Parliament and of the Council of 16 December 1996 on certain methods for the quantitative analysis of binary textile fibre mixturesencourages for uniform methods for analysis to be used by the Member States for determining the fibre composition to implement Directive 2008/121/EC/ (European Commission, 2009c).

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B. The Marketing Micro Environment Porter 5 Forces Model Analysis

Threat of substitutes Substitutes reduce the demand for a certain product by switching to alternatives (Johnson, Scholes & Whittington, 2005). The threat of substitutes in apparel industry is very high. Retailers from Turkey, China, India and Egypt are playing dominant role in shaping the imports into developed countries. These retailers are threat to established brand names like Zara on the fashion market, because they can offer products of satisfactory quality, but at lower price on the apparel market. As most of the customers are price sensitive, this will affect their willingness to pay for the original products of Zara, as they can find alternatives to switch to lower cost products. This price sensitivity on the part of customers is explained by the price elasticity of demand for the product. If there are close substitute products nearby, there is a limitation to the price that buyers would desire to pay; demand is elastic in relation to price, for that reason the customer will respond to a higher price by switching to a substitute product (Truett & Truett, 2004). Threat of Entry Threat of entry is medium due to the following barriers to entry: The capital requirements to entry: The costs of entry in fashion industry are very high. The competition globalizes and innovative technology is needed to outperform the competitors. Access to supply: Comditel, a 100% owned subsidiary of Inditex deals with more than 200 external suppliers and other raw materials. Further through the value chain 40% of finished clothes are manufactured internally, while two-thirds of the items are sourced from Europe and North Africa and one third from Asia (Ghernawat & Nueno, 2004). This reveals for well established relationships with global suppliers.

Zara Apparel 10 Differentiation: Zaras differentiation strategy is a potential barrier to new entrants. It can easily outperform its competitors by using its unique competences to produce goods earlier than them. Furthermore, the positioning of Zara- offering lower cost goods than its main competitors Benetton & Gap and still sells fashionable products, valued by customers is an indication for its strong competitiveness. Zara offers variety of clothes, staying in the shops for a week. This further reveals about wide variety of choice and high demand (Ghernawat & Nueno, 2004). Zara is placed on the board market scope of Porters Generic Strategy. The cost leadership and differentiation are unified to win the competition. Zara competes at reasonable price build on cost leadership strategy, so even they set at reasonable price they still could gain reasonable margin. Inditex net margin increases during the period from 1996-2001 from 7.21% in 1996 to 10.47% in 2001 (Ghernawat & Nueno, 2004). Experience: Zara has 1, 314 shops worldwide, which is competitive advantage in terms of experience. This experience has contributed to the establishment of customer loyalty towards Zaras brand name. Furthermore, Zaras CSR policies add value to its brand name (Ghernawat & Nueno, 2004). Rivalry among existing firms International Competitors: Zaras main competitors are the GAP, H&M and Benetton. All three are different in terms that they have narrower vertical scope than Zara, which has possession over much of its production and most of its retail stores. The GAP and H&M own most of their stores, but outsource their production. Benetton invests relatively heavily on production but licensees run its stores. The three competitors are positioned differently from Zara (Ghernawat & Nueno, 2004). Zaras competitive advantage is based on positioning- it is cheaper price than Benetton and GAP and sill offers more trendy clothes than them. H&M is considered Zaras

Zara Apparel 11 closest competitor. H&M were able to quickly internationalize, by generating almost half of its sales outside its home country by 1990, 10 years earlier than Zara. H&M tended to have lower prices than Zara; however Zara outperformed H&M by its unique competences to finish goods in stores within 4 to 5 weeks. Zaras effective differentiation strategy facilitates the production of goods that have more value added- fashionable, quick delivery and customization. Furthermore, Zara is much more vertically integrated than H&M or GAP. The main local competitor of Zara is Mango. Mango is a small Spanish retail chain that relies on a franchising model with relatively returnable merchandise. Mango has market presence in many countries around the world, making it Zaras potential international competitor also (Ghernawat & Nueno, 2004). Bargaining power of suppliers The power of suppliers is relatively high. Zaras designers continuously track customers preferences and place orders with internal and external suppliers (Ghernawat & Nueno, 2004). This reveals that the organizational processes are dependant on the specialists products of the suppliers. One of the main strengths of Zara is its fast production and part of this is due to Zaras suppliers. Thats why the switching costs from one supplier to other will be high for Zara due to the uniqueness of its products. Bargaining power of buyers The fashion industry is portrayed by being buyer driven. Buyers have limited power to negotiate prices; however they are extremely conscious about the latest fashion trends. Thereby, in order to be successful in that industry, managers have to focus on staying up to date with the local and international fashions. Therefore, close coordination with manufacturers is pivotal for retailers in order to gain competitive advantage. On balance, if communication between retailers and production is inefficient, this will lead to excess of inventory and failure to satisfy the demands of the customers.

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C. Target Market(s)
By emphasizing on commitment to product quality and design of trendy and fashionable clothes at lower prices than competitors, Zara follows hybrid strategy (differentiation and cost leadership) combined to win the competition (Johnson et al, 2005). Zaras unique capabilities to differentiate its products by producing them faster than the competition and designing them by emphasizing on rich product variety and diverse styles contribute towards the achievement of high performance and efficiency on the apparel market (Ghernawat & Nueno, 2004). Zara offers its products to diverse target markets. The organization primarily focuses its marketing efforts towards the three major apparel segments- the womens apparel segment, the mens apparel segment and the childrens apparel segment. The organization designs its clothing lines towards these target markets by offering them in shops worldwide (Ghernawat & Nueno, 2004).

D. Current Marketing Objectives and Performance

Zara apparel retailing chain is the most efficient and high performing chain in the Intidex portfolio. The firm offers fresh assortments of stylish garments and accessories such as shoes, bags, scarves, jewelry and recently toiletries and cosmetics- for low prices in sophisticated stores in downtown locations to attract fashion-conscious people to repeat purchases (Ghernawat & Nueno, 2004). Zara emphasizes on using backward vertical integration for the purpose of being high performing fashion follower than to achieve manufacturing efficiencies through building high forward order books for the upstream operations (Ghernawat & Nueno, 2004). The company designers continuously track customers preferences and produce about 11,000 distinct items per year- several hundred thousand SKUs given variations in color,

Zara Apparel 13 fabric and sizes- in comparison with 2000-4000 items for key rivals. The products are shipped directly from central distribution to well located and highly attractive apparel stores, twice a week, by rejecting the need for warehouses and also maintaining inventory low. The vertical integration contributes towards the reduction of bullwhip effect- the trend for fluctuations in the demand. And more importantly, Zaras capabilities for design and finished goods in stores within 4-5 weeks in case of new designs and about two weeks for modification, sharply contrast the traditional industry model of up to 6 months for design and about 3 for production (Ghernawat & Nueno, 2004). These capabilities add further value to the brand and illustrate the companys high performance and efficiency. Considering that Zara is high-performing retail chain, it has marketing objective to increase its revenue by 25% in 2 years.

III.

SWOT Analysis A. Strengths

1. Effectiveness of Zaras Business Level Strategy: Cost leadership and differentiation strategy combined to win the competition (Ghernawat & Nueno, 2004). 2. Product Variation: Ability of Zara to launch new fashion tendencies and a rich design variation of products (Ghernawat & Nueno, 2004). 3. Top Speed Supply Chain in the Clothing Industry: Produces goods and delivers them to shops within four to five weeks. These short cycle times of production reduce the working capital intensity and facilitate continuous manufacture of new merchandise (Ghernawat & Nueno, 2004; Li, 2007). 4. Information Systems: Usage of Information Systems to facilitate smooth transmission of vital information related to design, purchase, production and sales (Ghernawat & Nueno, 2004).

Zara Apparel 14 5. Maintain Low Inventory: Zara maintains low inventory in their stores by keeping sales from marked down prices at industry low to 15-20% compared to 30-40% to their competitors (Ghernawat & Nueno, 2004). 6. Distribution System: Zaras logistics depend on an efficient distribution centre, which distributes products worldwide from the companys headquarters. The webbased Suppliers Management Platform further helps the headquarters to observe the entire process of goods delivery and customs formalities (Li, 2007) by saving costly time, facilitating the coordination of activities and also removing the work inconsistencies. 7. Just- in-Time Manufacturing: Zara schedules materials to arrive exactly when they are needed in the production process. With its effective JIT system, Zara is able to customize its production process for achieving greater flexibility (Ghernawat & Nueno, 2004; Li, 2007). 8. Vertical Integration: Zara is able to create and sell products cheaper and faster than any other apparel companies, because it owns and controls all the levels of production in its value chain. Zara also controls its own materials, production, design, delivery and sales. Furthermore, Zaras vertical integration is such that every single product, even those produced externally, is received at their distribution center and is then shipped from there to their retail stores twice a week (depending on the communication received from the managers of the stores).This quick response system reduces the lead times, backorders, the need for warehouses and the inventory pile up. Thus, these activities ensure superior coordination, quality control and creates economies of scale (Ghernawat & Nueno, 2004). 9. Flexibility and control in the supply chain: Zara is able to effectively control the raw material suppliers in the fields of cloth, dye as well as other upstream areas, which

Zara Apparel 15 help the organization to receive the order of raw materials quickly for the purpose of manufacturers to start producing immediately (Li, 2007).

B. Weaknesses
1. Centralized Distribution System: Might be subject to diseconomies of scale, which poses risks of cost per unit increase (Ghernawat & Nueno, 2004). 2. Limited Advertising: Only at the start of the sales period and at the end of the season (Ghernawat & Nueno, 2004). 3. Risks of Scarcity of Clothes: The available clothes are staying in the shops only for one week, which makes them unavailable for the next week (Ghernawat & Nueno, 2004).

C. Opportunities
1. Entrance of New Markets: Entrance of the Bulgarian and Australian Markets. Zara has no shops there. 2. Establishment of an Online Market Presence: This will be helpful to save costs of creating new shops, but to utilize its distribution systems in full. 3. Reaching New Unexploited Segments: An opportunity for Zara to utilize its unique production capabilities towards new segments such as the baby segment. 4. Increase its Promotional Activities: This will contribute towards reaching new customers. Zara spends only 0.3% of its revenue on media advertising, compared with 3% - 4% for most specialty retailers (Ghernawat & Nueno, 2004).

D. Threats
1. Local Competitors: Mango (Ghernawat & Nueno, 2004). 2. International Competitors: The GAP (U.S.A.), Benetton (Italy), H&M (Sweden) (Ghernawat & Nueno, 2004).

Zara Apparel 16 3. Product Cannibalism: The various methods of growth and diversification implemented by Inditex may affect Zara. Purchases of other retail stores could make harder for the headquarters to focus on the management of Zara. This pose a risk of cannibalization between the diverse brands of Inditex, which might negatively affect the coordination and efficiencies, from which Zara has been able to benefit.

E. Matching Strengths to Opportunities/ Converting Weaknesses and Threats

1. Zara should consider its strong manufacturing capabilities revealed in fast production, product design and variation as well as just-in-time manufacturing for the purpose of utilizing them effectively towards producing new product line for the unexploited by the company baby segment. 2. The chains relatively high information orientation revealed in the usage of IS for various purposes can be extended further by implementing high-quality e-commerce systems for entering the online market. 3. The effective and reliable distribution center of Zara, as well as the companys top speed supply chain and resultful business level strategy are strong foundations for further expansion in foreign markets such as the Bulgarian and Australian apparel markets. 4. Zaras strength in terms of maintenance of low inventory of goods into stores reveals for high demand of its products as well as relatively high revenue, which could be utilized for higher investments in advertising for the purpose of attracting new customers as well as boosting the interest among them for the companys products. 5. The distribution center of Zara, although effective, could be a subject to diseconomies of scale. This suggests that the organization could establish several localized

Zara Apparel 17 distribution centers in key areas, for the purpose of preventing increase of distribution costs per unit. 6. Zaras threats in terms of competition could be regarded as a potential opportunity for the organization to find diverse means to improve its brand performance and efficiency and to seek for new rare capabilities to outperform the competition. 7. Intidex should foresee the threat of product cannibalism and beware of the importance to focus its growth strategies and product diversification methods equally towards all retailing chains in order not to harm the efficiency of some of them. This will be an opportunity of Intidex to achieve an overall excellence and outstanding performance.

IV.

Marketing Objectives
Zara apparel chain is in the business of fashion apparel retailing for the main purpose

of selling medium quality fashion clothing at affordable prices (Ghernawat & Nueno, 2004, p.824). The mission of the company remains successful, as it continues to grow internationally and still is an unbeatable competitor in todays competitive apparel environment due to its sustainable competitive differentiation and positioning largely based on its effective supply management, forward looking corporate culture and overall business process excellence. Based on its efficiency and high performance, the company should establish an objective to achieve cumulative growth in revenue of about 25% in 2 years. This target seems realistic, if the organization focuses on effectively achieving several marketing goals, for the purpose of accomplishing this objective. To reach the goal of revenue increase of about 25% in 2 years, Zara should utilize its unique manufacturing and rare product design and variation capabilities for the purpose of entering the baby apparel segment. The author believes that by targeting the baby product line in its current target markets as well as enters the apparel markets in Australia and

Zara Apparel 18 Bulgaria, where the company does not have market presence, the revenue and the overall profitability of the firm are likely to increase. The company should penetrate the apparel markets in Australia and Bulgaria by seeking to minimize the costs of expansion and building of new stores. Thereby, it can rely on franchise contractors, from the two countries, who are ready to run their own Zara stores. Furthermore, third objective for the company is to focus on implementing high quality e-commerce systems, which will help it to enter the online market. Nowadays, the people are seeking quicker way to purchase. The technological advances evolved towards m-commerce and the world became highly technologically oriented (Laudon & Laudon, 2007). Furthermore, target groups such as disabled people, as well as women in the Muslim world, who spend most of their time at home, would benefit from the launch of Zara in the online market. Zara should also utilize more than 0.3% of its revenue on advertising. In comparison to the industry competitors, which invest 3%-4% of their revenue on promotional campaigns, Zaras advertising effort seems insignificant. Thereby, the organization should increase its promotional effort in all target markets by focusing the advertisements in a way to create prestige image of the brand by emphasizing on its fashionable and stylish apparel / clothing design as well as its low cost products. This would further contribute towards increasing the popularity of the brand and making it present in the peoples minds. The investment in advertising often provides high returns, not only because it helps the brand to enter into the peoples minds and daily life, but also because it stimulates peoples needs, inner drives and desires to purchase (Pride & Ferrell, 2006). By following the four objectives proposed, the author believes that the organization would be able to achieve it major target of revenue increase by 25% in 2 years.

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V.

Marketing Strategies A. Target Markets

Target market 1: Fashion conscious women, who have the desire to wear fashionable clothes at moderate prices. Zara does not segment the target markets by age or lifestyles as most of the retailers, but launches fashion lines applicable for sensitive to fashion as well as to price women. Target market 2: Men, with taste of trendy clothing and desire to dress with quality clothes at relatively lower prices. Zara offers mens suits and shoes lines also, from which the business people would be able to benefit. Target market 3: Children (boys and girls) at pre-school, elementary school period. Target market 4: Babies (boys and girls).

B. Marketing Mix
1. Products. Zara produces apparel for men, women as well as children, who like to wear clothes of reasonable quality at moderate prices. The company organizes collections for men, women and children for spring/summer season and autumn/ winter season. Behind its clothing production, the organization also offers accessories such as shoes, bags, scarves, jewelry and also toiletries and cosmetics for relatively low prices in elegant stores to attract fashion conscious buyers (Ghernawat & Nueno, 2004). 2. Price. Zara sells its products at lower price than its major competitors Benetton & GAP to satisfy its clients needs (Ghernawat & Nueno, 2004). The company can be classified as a low cost retailing chain, regardless of the fact that the quality of garments, accessories, shoes and toiletries as well as the excellence of customers

Zara Apparel 20 service in the Zaras shops definitely suggest for prices that are higher from those, which the company sets. 3. Place. The retail chain relies on its effective distribution centre based in Spain to ship its products to its stores worldwide. The company has stores in 71 countries throughout the globe (Zara, 2009). 4. Promotion. The company spends only 0.3% of its revenue on promotional activities, compared with 3% - 4% for most specialty retailers. This relatively limited advertising occurs at the start of the sales period and at the end of the season.

VI.

Marketing Implementation A. Marketing Organization

For the purpose of effectively achieving the marketing objectives, the marketing

function should be organized by delegating responsibility to managers as well as employees to focus towards an adequate and effective achievement of the proposed targets. The entrance of the online market requires to clarify this target to the IT manager. Then, the IT manager should seek a reliable IT agency for the purpose of building high quality IT systems such as e-commerce payment systems as well as order processing systems, which will be necessary for the e-commerce effort to take effect (Laudon & Laudon, 2007). The IT systems implementation would be completely outsourced to the external IT agency, which will deal with the processes of research, identification of the basic requirements, development of systems working prototype, testing, implementation of the systems , pre-e valuation, systems launch and post-evaluation of the systems implementation (Laudon & Laudon, 2007). The introduction of the systems would also involve changes in the organizational routines and the ways of doing things around here, thereby strategies such as user education, training and better incentives for users who participate should be planned and

Zara Apparel 21 introduced for the purpose of managing change ( Johnson et al, 2005; Laundon & Laundon, 2007). The penetration of the markets in Bulgaria and Australia would require approval of potential franchisees requests to be signed a contract with them to enter into franchise agreement. It is the duty of Zara to sign a contract with reliable franchisees, who will run effectively their stores. Deankins and Freel (2005) reveal that it is the franchisors long-term interest to succeed as the firm provides continuing support related to various marketing and business process endeavors. For that reason, Zara should carefully consider, who the franchisees are for the purpose of preventing eventual conflicts and misunderstandings during their mutual collaboration. The development of new product line for the baby segment would require organization in terms of coordination with suppliers in order to inform them for the necessity of specific materials for the production of baby clothing. Furthermore, the schedules of the manufacturing departments should be restructured in a way to be fitted in the production of baby clothing, by assuming that time limit would be imposed for production in accordance with the introduction of the baby apparel collection. Moreover, the company should seek to recruit designers with expertise in baby fashion to design the apparel in best way. For the purpose of increasing the promotional effort in all target market, Zara should delegate responsibility to the marketing personnel to research for a reliable advertising agency, which will devise an effective strategy towards all target markets of Zara.

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B. Activities, Responsibility and Timetable for Completion

For the achievement of the proposed marketing objectives, several activities should be implemented beginning of the next fiscal year on January 1. Market Penetration in Australia and Bulgaria January 1, 2010- Arrange meetings with potential franchise contractors, who are ready to open Zara stores in Bulgaria and Australia. February 1, 2010- Negotiate terms of the contract and specifics related to its signing with the approved contractors. March 1, 2010- Finalization of the contract signed by all parties. April 1, 2010- Ship the products manufactured for the stores in Australia and Bulgaria. May 1- June 31st, 2010- Organize advertising effort towards the apparel markets in Australia and Bulgaria. Celebrate the official opening of Zara stores there. Start recruitment campaign for designers with expertise in baby fashion beginning on May 1st. Online applicants, if approved, will be shortlisted and invited to 3 stages pre-selection process.

Entry into the baby apparel segment July 1st, 2010- Appoint shortlisted designers, with outstanding record, graduate degree in fashion and textile design and proven long years expertise in baby apparel design. July 15, 2010- Start the design of the baby product line. September 1, 2010- Start the production effort. October 7, 2010- Products are produced and shipped in stores for the customers to buy.

Zara Apparel 23 Promotional Activities October 11, 2010- Start advertising the baby product line. November 1, 2010- Use the services of the advertising agency to devise a global promotional strategy for all target markets. Narrow advertising effort towards the peculiarities of each target market.

E-commerce Systems Development December 1, 2010- Research for a reliable IT agency for building systems necessary for ecommerce. December 15, 2010- The agency appointed starts to build IT systems for the e-commerce initiative to take effect. February 15, 2011 Training programs and seminars are organized for employees to prepare them to work with the systems. March 15, 2011- Zaras participation in the online market channel becomes a reality.

VII.

Evaluation, Monitoring Procedures and Verification Procedures A. Evaluation

The evaluation of the results of the marketing plan will be based on the major

proposed objective- to increase the revenue of the firm with 25% in two years. All the four marketing strategies will be evaluated in accordance with the above objective: E-commerce entry: The evaluation of the e-commerce entry will be based on measuring the percentage of online sales revenue, tracked by the order processing system. The organization should perform variance analysis measuring the difference between the planned and actual revenue generated from online sales. By assuming that the organizational

Zara Apparel 24 target is 4% revenue increase, generated from online sales by the end of year 2011, the company would measure the results related to whether or not the company managed to accomplish it. Global Promotional Effort: The evaluation of the global promotional strategy will be based on seeking correlations of sales revenue to advertising. Based on the major aim of the marketing plan, the evaluation of the global promotional strategy would be based on whether or not it contributed towards increasing the demand of Zaras products and thus raising the sales revenue. The evaluation would involve measuring the sales before the campaign and comparing the figures after the campaign. The aim of the advertising effort is to contribute to revenue increase by 4% at the end of year 2011. By performing variance analysis to measure differences in the sales revenue, the marketing manager could precisely indentify whether or not the promotional effort contributed towards achievement of this objective. Entry into the Baby Apparel Segment: Zaras major objective related to this entry is 12% revenue increase by the end of 2011 generated from sales of baby apparel. By the end of the year the actual sales from baby apparel would be measured to identify whether or not the planned target has been achieved. Market Penetration in Australia and Bulgaria: The penetration of the apparel markets in Australia and Bulgaria definitely would increase the revenue of the firm, by assuming that forecasts indicated relatively high demand of the Zaras products there. A 5% increase in the total sales revenue, from sales generated from the Bulgarian and Australian stores, is aimed. By the end of the year 2011, the company should measure the actual with planned performance to see the results.

B. Monitoring Procedures
For the purpose of analyzing the effectiveness of Zaras marketing plan, it is cardinal to make comparison analysis related to the actual performance with the plan objectives. To

Zara Apparel 25 facilitate this analysis, several monitoring procedures have to be initiated for the diverse activities required to bring the marketing plan in action. These procedures include: a) A project management effort involving evaluation of the precision of implementation of the plan by establishing criteria related to: Adequate observation of time requirements. Satisfaction of the human resources needs. Reasonable spending of financial and budgetary expenditures. Strict observation of the requirements for manufacturing of baby apparel. Control of the labeling of the fibre composition of the apparel products in accordance with the EU Directive 2008/121/EC of the European Parliament and of the Council of 14 January 2009 on textile names. Monitoring and control of the franchisees activities based on the terms of the franchise contract. b) Constant comparison of the actual and planned activities will be initiated on weekly basis till all proposed activities are completed. The business analysis team will report the comparison of the actual versus planned performance directly to the CEO. c) The acts of conducting the activities in accordance with the planned sequence will be monitored and whether or not their implementation fit with the control parameters and measurements imposed by the project manager.

C. Verification Procedures
Verification procedures involving application of procedures, tests and other evaluation methods in addition to monitoring would be imposed to confirm the effectiveness of the implementation of the marketing plan. Such procedures would involve:

Zara Apparel 26 a) Assessment of the monitoring procedures. b) Requirements imposed on the staff to review records for completeness. c) Assurance that an adequate corrective actions are taken in case of events of deficiency. d) Establishment of verification frequency assuring that the processes are in control of any hazards (staff responsible for monitoring the manufacturing of baby apparel, constant control of machinery in the manufacturing departments, verification conducted daily would be required to ensure that processes occur in accordance with the companys policies).

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Appendices Appendix A
Figure 1

Zara Apparel 28 References

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Zara Apparel 29 Inditex. (2009, April 30). Stores around the world. Retrieved June 18, 2009, from http://www.inditex.es/en/who_we_are/stores Internet World Stats. (2009). Internet usage statistics: The internet big picture. Retrieved June 15, 2009, from http://www.internetworldstats.com/stats.htm Johnson, G., Scholes, K., & Whittington, R. (2005). Exploring corporate strategy (7th ed.). Harlow, UK: FT Prentice Hall. Li, L. (2007, May 18). Fashion magnates supply chain contest. Retrieved June 17, 2009, from http://www.cbfeature.com/multinational/news/fashion_magnates_supply_chain_conte st/P2/ Laudon, K. C., & Laudon, J. P. (2007). Management information systems:Managing the digital firm (10th ed.).Upper Saddle River, NJ: Prentice Hall. Minkov, M. (2007).What makes us different and similar. Sofia, Bulgaria: Klassika. Pride, W.M., & Ferrell, O.C.(2006). Marketing (13th ed.). Boston: Houghton Mifflin. TriplePundit.(2006, August 18). Zara, Intidex and Amancio Ortega- The responsibility of international success. Retrieved June 15, 2009, from http://www.triplepundit.com/pages/zara-inditex-an.php Truett, L.J., & Truett, D.B. (2004). Managerial economics: Analysis, problems, cases (8th ed.). Hoboken, NJ: John Wiley & Sons. West, L. (2009). Why is eco-fashion so hot?. Retrieved June 15, 2009, from http://environment.about.com/od/earthtalkcolumns/a/ecofashion.htm Zara. (2009). Our stores. Retrieved June 18, 2009, from http://www.zara.com/#/en_GB/shops/Store%20Finder/

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