MARKETING STRATEGY PROJECT

Part 1
Submitted By:
MirzaAdeelBaig
QasimNasir Butt
ArslanSarwar

Submitted To:
Sir.ArshadMahamood

ZARA INTRODUCTION:
Zara is one of the biggest fashion clothing and accessories retailer founded by Amancio
Ortega and RosaliaMera in 1975. It operates under the shadow of Inditex group along
with Massimo Dutti, Bershka and Pull & Bear. Inditex group is one of the largest fashion
distributors with more than 4780 retail stores in 77 countries in Europ, Asia, USA and
Africa.
Currently Zara has 1751 retail stores worldwide with the annual revenue of $12 Billion
dollars in year 2012.
The first store of Zara with the concept of fashion garments opened in central street
Galicia, Spain with the name of Zorba in 1975. The name Zorba is an aspiration of
classic film Zorba the Geek but two blocks away there was a bar with the name of
Zorba. Two totally different stores with the same names can confuse the consumers so
one of the stores had to change their name. The Bar with the name of Zorba had
already signed latter for this name so Ortega had to change their store name to Zara.
Zara started their first store with the concept of high end fashioned products at low
price, the concept turnout to be great big success and Ortege started to open more Zara
stores all over the Spain.
With the expanding business Ortega defines a new strategy for Zara in 1980s, Ortega
had worked and had changed the design, manufacturing and distribution process for the
Zara. The concept behind was that Ortega wants to reduce the manufacturing selling
lead time so as to lunch new design in minimum time on stores shelves. He named the
concept as instant fashion.
Furthermore from 1980 company start expanding to overseas they have lunched stores
in Mexico, Greece, Portugal etc. It entered in USA in 1989.
Worldwide Zara has 1,751 stores. They annual revenue is of about $9 Billion plusit is
vertically integrated means that their control start right from supply chain than designing,
manufacturing and finally they got the control of their own distribution network with
which Zara supply their product worldwide.



EXTERNAL ANALYSIS (PEST):
1. POLITICAL-LEGAL FORCES
As Zara normally opens stores in different countries of the world so to be
successful the political situation of different countries and also the parent company
should be known.
The stability or instability of the laws have a big impact on the organizations
working
Political climate of the countries also impacts the growth of specific organization
or business
Political interference in the businesses and organizations also impacts the
decisions related to moving to the specific countries
Policies related to the taxes are different for different countries which impacts
the decision of an organization related to entering that country for business
Restrictions of trade is another point that organizations always look into before
entering to another area
POLITICAL FACTORS ANALYSIS GERMANY

Germany has become one of the major economic and political powers of the European
Union and is considered as historic leader in many cultural, theoretical and technical
fields.
Germany has an area of 357,021 Sq. Km, and is consisted of sixteen estates with Berlin
as largest city and capital of German federation. Germany is the most populous country
in European Union with population of about 82.2 million.
New Germany rise after the revolution process started from 1918-1919 with World War-I
and Worked War-II in 1945 and its reunification in 1990.Now the Germany has become
leader in many scientific and cultural fields.
No doubt Germany witnessed significant economic and political instability but now it has
evolved into a Leader of the European Union. The political system of Germany is based
on Federation System. Political Environment is stable and steady for decades due to a
widely technologically advanced Political Structure, is based on federal democracy.
Despite of all facts and figures of political and economic stability, Germany has a
continuous economic division through the estate, since the country was divided for more
than four decades into East Germany and West Germany. The purchasing power is
much stronger in the Western part of Germany as compare to that of people have in
East Germany. Although massive investments were made in the East Germany butt his
part of the country still has extremely high unemployment.
Where as in Northwest Germany people have a purchasing power above average,
indicating opportunities for the ZARA in fashion industry on this market. The total
unemployment rate of 5.1percent (Men 5.4%, Women 4.7%) is expected to remain in
2014, which will be lowest in 25 years data. After passing of only two decades to World
War-II, West Germany had developed as worlds richest nations, with privileged
circumstances that have extended to all segments of society. Moreover, the economic
composition of the country attracted foreign skilled labor to settle down and boosted the
economy and industrial production at remarkable speed.

However, presently, the country is facing challenges like high numbers (almost 9%) of
foreign settlers that have obtained German nationality along with the affects of global
economic recession on German market also. The Government is also trying to help
market with worth 80 Million bailout package to support market to recover from
recession like infrastructural investments and tax relief.
tax reliefs. The aim of the initiatives is to kick start economy and to stimulate a number
of areas to support an increased demand that will hopefully spring from this. The
financial and political initiatives mentioned before aim at the government Is also taking
initiatives for stimulation of society in a broader terms from economic and social point of
view. Also the revised federal policies are playing important role in recovering German
market from recession aftershocks. However, the Political stability of Germany is the
strong positive factor when it comes to livelihood on the future for ZARA to plan its
business in Germany.

2. ECONOMICAL
Type of economy (free economy or planned economy) impacts a lot on the
decision related to investments in different countries
Strength of the currency impacts the profits and loss of organizations working in
that country so exchange rate also impacts the decision of organizations to
invest
Inflation is another major factor that effects decisions of countries to enter in the
country as it affects rate of interest, exchange rate, living cost etc.
Cost of labor also affects the profits and loss of organization and also decides
that either entering in that country will be feasible of not

ECONOMIC FACTORS FOR GERMANY

German market is considered as social market economy resulting into free enterprise
and competition based market with a high level of social services.
Germany is comprised of worlds fifth largest economy; however, the country entered
into the recession of 2009, the effects of recessions appeared in terms of high
unemployment rate and decrease in consumer consumption power. But due to
government policies and companies measurements the country is trying to meet the
recession by products e.g. the companies through internal adjustments measures such
as by reducing working hours rather than workforce are trying to decrease
unemployment rate.
Due to recession, the German consumer behavior has changed, people attract towards
off-season sales rather buying at full price but the consumers prefer to buy fashioned
clothes, ZARA is considered as one of their favorite brands. The point of real worry is
that brand clothes especially designers outfits are losing their grounds.
By offering mid-season sales the ZARA can penetrate into the market due to the low
buying power and recession after effects which are expected to recover in 2014
completely.
3. SOCIO CULTURAL FORCES
The values and the attitude shared by the people in the country are important
factor for businesses
Education and social mobility is another factor effecting the business to enter in
a country
Population demographics also have an effect on decisions related to entering
another country
Social factors of Germany
More than 90 percent of German population lives in cities, the ZARA fashion could have
good projections of distributing their products to a large part of the market. Developed
Welfare system of federation is extremely benefitted to citizens for example pension
schemes, un- employment insurance, social assistance, health-care, accident- and
long-term care insurance. In presence of such social support from the government,
Germans are focused on health and physical activities, resulting increased demand for
sportswear, however due to external factors such as recession people are careful while
spending on their shopping. But the interesting factor is that the new German
generation is more attracted towards fashioned clothes as compare to old traditional
and classical outfits. Also the interest of consumers has increase in ecological friendly
clothes, and they prefer to buy fashioned clothes of the brands which fulfill their green
responsibilities.
4. TECHNOLOGICAL FORCES
Advancement in the technology decides about the entry of some business in
the country
IT and infra-structure of country impacts the entry of external people in country
for business
Technological factors of Germany

Being a part of European Union Germany has naturally hightechnological development.
Majority of Germans collect information through internet. In this regard, vide internet
advertisements ZARA can attract large consumers. In German language website could
be an idea to attract more customers, as majority of the German prefers to do business
deals in their own language.
Also because of recent recession many consumers have turnedtowards online shopping
looking for clothing at more affordable prices. As estimation almost 29 million of
Germans prefer onlineshopping andmorethan, 50,000 stores offer their onlineproducts.
An Eighteen percent growth of internet buyers is reported; the large part of young
Germans visit online stores whereas the old ones prefer to go market for shopping.
CONCLUSION OF PEST ANALYSIS
As a nation German always try to do different both from cultural point of view as
well as when they do business in the same way their sense of fashion is also
different from rest of the Europe.

German those who live in Western part of the country has high purchasing
power, North West Germany has average buying power, due to this reason
ZARA should focus in these two markets. This is also noticeablethat the
Germans prefer shopping in sale seasons where clothes are discounted, but
offering mid-season sales ZARA can take advantage over market.

ZARA can also take advantage of increased trend of internet users, especially
young German prefer to visit online stores which is also the target market
segment of ZARA.

German fashion market is favorable for ZARA to distribute across the country
with promise of care take of mother planet and environment friendly brand.

INTERNAL ANALYSIS:
Zaras mission statement is to be the environmental friendly company and also to
contribute to development of society and also wants to be the fast fashion company.
Main points in which Zara is above his competitors are below:
Vertical integration model
Quick response to change in fashion
High quality
Short production lead time
Toxic free products
From the point of view of physical, human and organizational resources, Zara is very
strong apparel brand which is also another reason of the success of this brand, some
points are discussed below:
1. PHYSICAL RESOURCES
Perfect location of stores
Normally Zara stores are located in the best places of the cities which allows
maximum people to visit the store
Display
The display of the Zara stores is much attractive and also the ambience is
maintained in each and every store


Up to date collection
The collection present in the stored of Zara is up to the market trends and even
they are the innovators in the fashion industry so they have the best collection
available in the stores
Integrated Information system
That they are using in the stores is another internal strength of the Zara
Vertical integration
Of Zara also helps in the efficient working of the brand
2. HUMAN RESOURCES
Designers
To meet the requirements of the fashion market, Zara has a team of
professional designers that work on the new collections throughout the year
Professional Employees
To give best service to the customers Zara has trained employees having a
professional attitude

3. ORGANIZATIONAL:
Clear vision and knowledge of the strategic goals
Companys culture is much strong
Structure of Zara is much flexible and managers of stores are also allowed to
be involved in the development of products
Effective communication between the stores and headquarter

4. Management Practices:
Being one of the fast fashion brand in the world is because of the visionary
management style of the founder of Zara, he had a view point that clothes should also
be regarded as the perishable thing and people should consume immediately and rush
for the next. Zara has a strong management with a strong organizational culture
5. Vertical Integration Structure:
Zara has a vertically integrated structure that its competitors do not have because the
others rivals have to outsource all the production but Zara can also perform tasks in the
in house units. Due to all this the production lead time of Zara is much better than that
of the other brands and it can quickly respond to the changes in the fashion

6. IT and Communication System:
Zara has one of the best IT instruments and systems, online data for products,
developments stocks is available to all relevant persons and one can easily get idea of
the current position and performance of the company. Also the requirements of the
developments and sales strategy can also be checked from this data.
7. Distribution:
Zara has a very good logistic system and requires very less labor for the stacking
and handling of the logistics. Due to the high efficiency of the logistic system they
are able to move goods to stores (European) within 24 hours. They also keeps
the stocks for very less time and focus on the strategy of finishing the inquiry as
quick as possible. But issue related to the supply to other countries is very much
expensive and this cost is transferred to the consumers in the form of high
garment pries.
8. Marketing and sales:
Zara do not spend a lot of money on the advertising but focus mainly on the in
store displays and also the store locations, which is also very much beneficial.
Regular customers visit their shops regularly and due to the attractive
environment they are forced to purchase the goods.

SWOT ANALYSIS OF ZARA:
Strengths:
Zara is overseas brand operating in 77 countries as USA, Europe, Asia and
Africa.
The one of the major strength of Zara is their concept of Instant fashion as per
the article on Best Global brands 2010, Zara needs only two weeks time to
design any new product and bring it on the shelves while their competitors takes
8 weeks for the complete process.
Zara production houses are in underdeveloped countries like Portugal, Pakistan,
Bangladesh etc. it will help Zara to take advantage of low wage rates.
But Zara kept most of their production houses in Spain and Portugal where
wages are relatively lower than Western Europe with this they can take
advantage of lower cost labor along with shorter lead time to bring new product
on shelves to quickly respond customer demands according to a statement by
Louis Vuitton Zara is Possibly the most innovative and devastating retailer in the
world.
Zara is the only brand which is providing new trends in fashion with the highest
turnover at low prices.
Zara has designers working innovatively compared to its competitors like GAP,
H&M and others.
All of the Zara stores are owned by the company and its a vertically integrated
starts from designing of the product to their distribution.
As like Zaras competitors it doesnt do any advertisement for their product they
just deliver their products directly to their customers by selling it on stores.
Reference article the Secret of Zaras Success, Store Magazine.
Zara has highest product line due to their fastest turnover rate, each product in
Zara store has been replaced after two weeks.
With the fastest product turnover rate company has low inventory cost.
In a year Zara store in Spain being visited 17 times by their customers compares
to 3 times/year of their competitors according to article Zara a Spanish Success
Story.

Weaknesses:
Due to the companys giant size in the retail industry, it could also count as its
weakness that if there would be any trouble in some part of business it would be
very difficult to control.
Zara try to provide a cutting edge products to their consumers, but normally it has
been seen that fashion industry is very volatile so more cutting edge designs
means more riskier the product if fashion will change (Zara 2.0- Fashion
index.com).
Zara is reputed to develop and new design in the market but it would be riskier if
their innovation gets stumble.
In inditex group Zaras share is of 80% which failure of this group can put whole
group into jeopardy.
Advertisement has been proven as the most efficient tool in the marketing which
can lift up your sales, Zaras policy of not doing advertisement for the promotion
of their product if not work in coming future could hart their business of the whole
group badly.
In Asian market most of the people belong to the low income scale group, so
trendy store like Zara which requires customer to visit their store with high
turnover rate would not be possible in these countries. So Zara fast trendy
strategy may not be workable in these countries.

Opportunities:
Being a part of Inditex group, Zara has opportunity to open new stores in different
countries.
Zara has a great potential to invest more as they are already operating in 77
countries so they knew the dynamics of each country.
People in counties like India, China are also getting toward high fashion so Zara
has opportunity to capture maximum share from these markets as well.

Threats:
H&M, GAP and Benetton which are the biggest threat for Zara.
New entrants in market are also a threat for Zara.
Increasing the labor and raw material cost in underdeveloped countries shrinking
down their profits margins.
Zara is operating in 77 countries so any economic crisis would be great threat for
Zara.
Zaras net cash flow is lower than its competitors because Zara has a huge
investment in real estate choosing prime locations in the market, introducing new
product line in every two weeks.








Zara
Stretegic
Position
Barriers to entry: HIGH
Major barrier to enter in the
apparel market is the resources that
are needed to fulfil new fashion
requirements, the entry cost is also
high for this industry as a huge
investment is needed to enter the
market, due to the already present
giants in the market achieveing a
better place is really tough
Threat of substitutes:
MODERATE
The threat of substitute in
this case is not directly the
alternative of the clothing
but is the other alternatives
available in the market that
are offered by other brands
Zara is an exlusive fashion
brand and their product has
it own uniqueness, so in
market zara has morderate
threat of substitutes.
Buyer power: MODERATE
Because of the brand identity,
diffrectiation in the product offered and
also the quality the buyer power is less
but due to high price and availability of
substitute for the same product the buyer
have strong hold over the brand so averall
the buyer power is moderate
Supplier power: LOW
Supplier power against Zara is much low as
there are a lot of producers that are willing
to work with them due to the good image
and its Zara's choice to select the
producer, contract based working also
lowers the supplier power. Zara only works
with the suppliers that are corporately
responsible and can shift the business if
found any thing against this
Rivalry: HIGH
Zara's direct rivals are H&M,
Esprit, Benetton and
switching cost is very low so
customers can easily switch
the brand, another factor is
that the rival brands are also
much aggressive in product
development which is also a
threat for Zara