School of Business and Management

INSTITUTE TEKNOLOGI BANDUNG

MASTER OF BUSINESS ADMINISTRATION

MM5012 - Business Strategy and Enterprise Modelling

ZARA STRATEGY ANALYSIS

Mid-Term Exam

Student Name: Ayunda Utari

Student ID: 29119196

Semester II – 2019/2020

MASTER OF BUSINESS ADMINISTRATION

School of Business & Management
INSTITUTE TEKNOLOGI BANDUNG
 I.   INTRODUCTION

I.1. Company Background

Zara is a Spanish brand of clothing founded by the visionary Amancio Ortega Gaona and Rosalia
Mera in Artexio, Galicia. Zara was founded in the year 1975. It is one of the major selling brands
of one of the biggest fashion retailer "INDITEX". Zara is now available in 86 countries with total
of 1,763 stores worldwide.

Inditex itself is a huge fashion retailer company

which owns 8 brands namely Zara, Pull &Bear,
Massimo Dutti, Bershka, Stradivarius, Oysho, Zara
Home and last but not the least Uterque. Amancio
Ortega is the founder of Inditex, which was
established in 1963. Amancio Ortega adapted unique
business model, which were innovative and flexible.
This made Inditex one of the biggest retailers in the
world. In 1975 Inditex established Zara’s first store
in downtown A Coruna, Spain. Zara offers
fashionable designs for men, women, and kids. They
also sell accessories to complete their product lines.

I.2. Strategic Problem

Zara is a vertically integrated retailer, controlling the supply chain, design, manufacturingand
distribution of all its products worldwide. Zara currently has 1,751 stores worldwide. They incur
annual revenue of over $9 Billiondollars (2009). There are three key pillars Zara is running its
business on. First of all, time between new collections deliveries is very small. Stores are
supplied every two weeks with new fashionable garments and in small batches in order to
achieve an effect of scarcity, which is a second key element of the Zara business model. The
third one is delivering many different styles in all forms and shapes so that there are more
chances customers will like the clothes(Inditex website). Zara has a unique approach to handle
changing demand, which has allowed the company to become widely successful and a leading
business organization in the fashion retail industry, in which many corporations struggle to deal
with fast-changing environments, operations, and inventory costs. The arrival of new trends
forces retailers to adapt their collections, causing what James (2011) calls the Forrester or
bullwhip effect. Zara relies heavily on outsourced manufacturing, even though most operations
and inventory decisions and strategies are still held, taken, and based out on their headquarters in
Spain. Every time an order is placed, all items are shipped to Spain for final design adjustments
and inventory stocking. With the use of technology and collaboration with its store managers, the
company can produce only what is currently trending, which results in a significant reduction of
unsold items caused by the rapidly changing tastes of consumers in this fast-changing industry
(Berfield and Baigorri, 2013). Such a strategy allows Zara to maintain high standards of quality
besides keeping inventory costs at low levels. That all being said, one of the biggest challenges
that Zara will most likely face is the increased costs in its distribution chain associated with
widening operations outside Spain (Berfield and Baigorri, 2013). Other challenges are the
increased costs for establishing new warehouses, acquisition of high-tech equipment, and labor
costs for new facilities. It is worth to mention that cultural issues and language barriers may also
be an issue since Zara relies on direct and continuous communication and collaboration with its
store managers.

I.3. Objective

Beside due to fulfill the midterm exam of Business Strategy & Enterprise Modelling subject, this
paper make due to analys the business strategy of ZARA which is adjusted with the company
objectives itself. Inditex group has specific and explicit concepts and plans defined for the future.
Their mission statement contains clearly mentioned priorities and processes that are carefully
chosen for the organization. The founder has selected a precise set of strategies to ensure a
sustainable, promising,successful career. Through zara’s business model, company aim to
contribute to the sustainable development of society and that of the environment with which
company interact. From the Website, The company states the following as their objectives, which
are :

1.   Save energy, the eco-friendly store: They are implementing an eco-friendly management
model in their shops in order to reduce energy consumption by 20%, introducing
sustainability and efficiency criteria. This management model sets out measures to be
applied to all processes, including the design of the shop itself, the lighting, heating and
cooling systems and the possibility of recycling furniture and decoration.
2.   Produce less waste and recycle: Zara recycles their hangers and alarms, which are picked
up from their shops and processed into other plastic elements. This is an example of their
 waste management policy. Millions of hangers and alarms are processed each year and
both the cardboard and plastic used for packaging are also recycled.
3.   Their commitment extends to all their staff, increasing awareness among the team
members: The Company holds In-company awareness campaigns and specific multimedia-
based training programs to educate their staff in sustainable practices, such as limiting
energy consumption, using sustainable transport and modifying behavior patterns.
4.   Use ecological fabrics, organic cotton: Zara supports organic farming and makes some of
its garments out of organic cotton (100% cotton, completely free of pesticides, chemicals
and bleach). They have specific labels and are easy to spot in the shops.
5.   Use biodiesel fuel: Zara’s fleet of lorries, which transport more than 200 million items of
clothing a year, use 5% biodiesel fuel. This allows them to reduce their CO2 emissions by
500 tons.

We can see from the objectives that Zara is aiming to be an environmental-friendly company. It is
their top priority at least until the year 2020.

II.   ENVIRONTMENTAL ANALYSIS

II.2. Porter’s Five Forces Model

The model identifies and analyzes 5 competitive forces that shape and help companies to
determine their industry’s degree of competitiveness and therefore helping the companies to
develop their strategies. The following is the Five-Forces Model for Fast-Fashion with further
analysis relevant to Zara:

MODERA
TE

LOW HIGH MODERA

TE

HIGH
We can take a look at each one more specifically of their measurement:

1.   Barriers to entry: HIGH

a.   High fixed cost business requires economics of scale for sustained profitability
b.   High SG&A which includes advertising, in-store promotions, etc.; up to 3.5% of
its revenue, even though for Zara, the company is famous for spending minimum
level of advertisements and commercials. However, recently the company
announced that it invested €450 million in commercials as well as logistics area.
c.   Concept to store which takes 6 months to a year which refers to long sales cycle.
However, in case of Zara, the lead time of clothes first-designed by the designer
teams to finished products sold at the store take only about two weeks.
d.   Brand equity which is valuable to consumers

2.   Substitues: MODERATE

a.   Buyer propensity to substitute is high with several competitors to choose from

(H&M, Uniqlo, MANGO, and many other fast-fashion brands)
b.   Low buyer switching costs and easily substitutable where a customer can walk into
its neighboring store instead of Zara
c.   Zara has gained substantial customer loyalty which has more visits per year than its
competitor’s store
d.   Copying of styles is quite prevalent in this industry, which can attract the customer
who does not mind lower quality but “similar” looking apparel. The example will
be counterfeiting of Zara products in Indonesia which is currently trending.

3.   Buyer Power: MODERATE

a.   Trendy fashion wear is appealing to regular consumers and they would not shop
lower quality apparel or accessories
b.   Apparel consumers have lots of choices when it comes to trendy clothing and
accessories, but price can be a factor. In the case of Zara, for European, American,
and eastern Asian countries, Zara is positioned as the low-end products, however,
in emerging markets such as India, China, and Indonesia, Zara is considered as the
high-end products.

4.   Supplier Power: LOW

 a.   Contract based cloth production and stitching functions readily available
b.   Low price of fabric
c.   Local cooperatives work without contracts or labor unions

5.   Rivalry: HIGH

a.   High exit barriers due to high fixed and SG&A costs and excess inventory with lots
of cash tied up in out-of-fashion inventory
b.   High advertising expenses; 3.5% of revenue indicative of intense competition

II.3. PESTEL Environtmental External Analysis

The conduction of a PESTEL analysis is strongly recommended for organizations willing to

establish or further expand themselves on a new business environment. Through PESTEL, external
factors can be approached appropriately for designing the measures required for a successful
business endeavor (Martínez Barreiro, 2008). Zara is Spain based company and is dominantly
working there only. In this section its working conditions, industry surroundings, competitive
pressures, and other influencing factors. This section is also examining the available choices in
terms of opportunities and potential threats present in the existing environment.

Political

Zara heavily relies on the European market for achieving positive revenues. Brexit and other
destabilizing decisions currently occurring within the European Union can severely affect the sales
revenue of the company (Chopra and Meindl, 2016).

Economical

It is a fact for the E.U that the economic indicators have begun going negative, Spain is also known
to suffer from economical disturbances. Many pinnacle economical scientists suggest that these
hardships shall continue to exist and this could severely affect the macro environmental health in
this region. Furthermore, tariffs and different duties may cause the prices of products to vary from
country to country (P. Abeles, 2014).

Social

Changes in social trends can have a great impact on the demand for Zara’s products. Although
Zara is more safeguarded than other clothing corporations, mostly due to its model that promotes
niche market penetration. This successfully counters social shifts that could disturb its revenues.
However, the company needs to implement better designing procedures to ensure adaptation with
the latest trends, which are in fact ever-changing (P. Abeles, 2014).

Technological

Advances in technology have forced companies into realizing that competition will never be the
same again. Zara has to provide innovative solutions and platforms which will lure customers into
using. In the internet marketing sector, the company’s current standards are online catalogues and
a limited online purchasing tool which frequently receives negative critiques and also does not
work on every country in which Zara is present. Although Zara invests respected amounts in
technology, improvisation is a must, as competitors have started to move more aggressively
towards technological services within their stores and cutting edge internet marketing.

Environmental

Environmental protection policies are over the years evolving, for facing the consequences of
climate change. Although Zara has made significant steps towards greener operations and the
production of toxin-free goods (Chopra and Meindl, 2016), major conglomerates are now being
required for large scale corporations. It is uncertain whether the company has up to now considered
redevising its production policies to accommodate these new rules of conduct, but it is certain that
they will be asked to do so in the near future.

Legal

Large scale corporations are more susceptible to legal implications, due to their multilayered
nature and Zara is no exception to this statement (Martínez Barreiro, 2008). More particularly,
industries in Spain are known to face several legal problems, especially when it comes to the
expansion of their products. Legal issues can be costly and generally demoting for the reputation
of the company; thus, the industry should devote itself onto diminishing such unwanted
implications.

II.4. SWOT Internal Analysis

Strengths

1.   Strong Control Over Supply Chain:

Zara possesses 90% of its stores in 88 countries including United States, Europe, Asia,
Middle East and many, and the rest is the joint ventures or franchises. It boasts in-house
production factories within proximity of the headquarters. It affords the company self-
 containment throughout the stages of its supply chain: raw material selection, production,
distribution etc. Here is a graphical representation of Zara supply chain for better
understanding,

Supply Chain Management of Zara:

raw  material
(  buys  material,  
designing  and  cut  its  
fabric  in-­‐house  )

Consumers  (   suppliers  situated  

Delivered  to  various close  proximity  of  
stores  ) zara  production

Distribution  
(overnight  trucks  are   manufacture
use  to  deliver  to  
European  stores  and   (  clothes  are  ironed  
air  freight is  use  to   in  advance  &  packed  
ship  to  other   securely  )
countries  )

Zara’s strong supply chain management gives it a unique advantage over its rivals since it
can handle any breakdown in the supply chain

2.   In-House Production And No Outsourcing:

Zara does not outsource its products in the hope of its reducing labor cost. Instead of
outsourcing its work to cheap labor markets of Asia, it makes the most out of the cheap
labor supply of Portugal and Galicia. This retailer giant is vertically integrated, unlike its
competitors, H&M, Gap, Benetton, control its designs, and R&D facility production
facilities, distribution centers, transport fleet, and 90% of its shops . When the company is
 paying for factory time in China, the company does not own the company, they are a
number of uncertainties they will counter. It helps the company to reduce the cost of
warehouses as shipping is done from production factories itself. Only, clothes with longer
shelf life like T-shirts are outsourced to countries like Turkey, Bangladesh, etc.

3.   Efficient Production Management:

Zara produces more designs than all its rivals. It launches around 12,000 new designs each
year which is far more than what its competitors prepare . Fast response to its customers’
demand enables Zara to meet customers’ expectations and ultimately leads it to success.
Such demand management lacked in Marks & Spenser and to some extent with Sainsbury,
they did not match their product with their customers’ expectations and this led the
companies into trouble. Zara’s design-to-stock-cycle varies from 4 to 6 weeks compared
to the average six months of the traditional industry. This reduced time enables Zara to
introduce new designs in every week and change its product catalog in 3 to 4 weeks

4.   Fast increasing sales:

ZARA’s sales have grown fast driven by its excellently integrated offline and online retail
channel. It has expanded fast globally in the recent years. ZARA’s total number of physical
stores is now past 2100. the highest number of them are in Spain followed by China. Based
on its pricing and customer service strategy as well as attractive designs which are the main
drivers of its demand, it has acquired global fame and success which can make any
other fashion brand jealous.

5.   Affordable Pricing strategy:

Another key strength of ZARA that has helped it to grow its customer base and revenue
faster is its pricing strategy. ZARA is among the affordably priced brands by Inditex. It has
released some higher priced brands too that cater to the higher end of the market. ZARA’s
pricing strategy and its affordable designs are targeted at the youth and drive higher
footfalls and conversion inside the ZARA stores. Infact, the pricing strategy of ZARA is
the charm of its business strategy. People want high fashion and ZARA makes it available
to them created from cheaper fabric but equally attractive. This strategy has been driving
higher loyalty and popularity. Moreover, people can buy new fashion regularly, since one
does not have to spend a fortune each time. Overall, ZARA has been able to create a win-
win situation successfully for its customers and itself.

6.   Highest focus on customer service and customer experience :

 ZARA is also known for its customer service. The brand has strengthened its value
proposition through exclusive focus on customer service and convenience. It has
strategically opened its retail stores in areas that attract highest number of footfalls. These
attractively designed retail stores are also equipped with technology to make shopping
more convenient. ZARA trains its employees to provide better customer service. The
brand-customer relationship is valuable for ZARA and by focusing on customer service, it
has been able to create higher loyalty and retention rate. Using RFID technologies in its
stores to track the location of its garments, ZARA makes the products its customers are
looking for available to them instantly.

7.   Investment in technology and innovation:

ZARA is making large investments in information technology, AI and other modern

technologies to bring greater efficiency in its supply chain and retail network. Apart from
the RFID technology which will enable better inventory management inside the stores, it
has invested in IT. IT tools enable better information sharing as well as higher flexibility
and enable the conversion of ideas into products faster. ZARA’s growth is also a result of
its focus on innovation throughout its value chain.

8.   Fast fashion cycles:

‘ZARA’ is Inditex’s first as well as the most profitable brand. The reason that it has become
a major hit in the world of fashion is because it could manage to defy conventional wisdom.
ZARA’s fast fashion model and its astounding success is often discussed in the form of
case studies in major business institutions. the fashion brand has adopted a unique model
and also found a unique balance between demand and supply. While on the one hand, you
will always find something new in its stores, on the other, there is no overstocking. The
result is that the stocks always remain fresh and the brand creates a sense of urgency among
its customers. Something you can see on the shelves today, might not remain available the
next week. Unlike most fashion brands that have limited fashion cycles, ZARA is able to
bring several fashion cycles with the help of a highly integrated supply chain and a highly
skilled team of fashion designers.

Weakness

1.   Self-Contained Distribution System Prone To Unpredicted Problems:

Centralized distribution system is the biggest problem of Zara. If any technical snag occurs
in the distribution network then the whole system can collapse. But in other apparel
companies, the distribution networks are decentralized and not self-contained like Zara. As
 such even if one part of the network falls, there is no wholesale collapse of the entire
network. Zara controls its production, suppliers, distribution system, retails stores, unlike
its rivals that make it prone to unforeseen problems.

2.   Imitator, Not Creator:

The Fast Fashion strategy also has its own set of weaknesses. Zara can never be one of the
premium luxury brands in the fashion world because it is considered as the great fashion
imitator since it usually imitates runway fashion rather than predicting the styles of the
season. No doubt it provides its customers high-end designs, but its designers play smart a
trick by copying designs of fashion week, rather creating some original on their own.

3.   Spends Zero Revenue On Their Advertisement:

Zara does not spend much money on advertising (marketing). It has a zero advertising
policy unlike its rival Benetton, H&M and GAP. However, some of the major names of the
glamour world are the brand ambassador of these companies. One of the biggest marketing
moments for Zara was when Kate Middleton wore Zara dress ($49.99) the day after her
wedding to Prince William. However, this zero ad policy gives its rival greater public
exposure.

Opportunity

1.   Expansion of retail channels:

ZARA can expand its retail channel to several corners of the world including the fast
growing Asian markets like India. While it has an impressive presence in China, in other
markets like India, Malaysia and Singapore, it still does not have an extensive retail
presence. India can be a highly profitable market for any fashion brand. Apart from being
the fastest developing country, it is also a large market with immense potential.

2.   Scope For Global Expansion

Zara has global market penetration. The company has market presence in all the four major
continents. However, it still needs more expansion in Africa and Asia. In Africa, it has
stores only in Egypt, South Africa, Morocco, Tunisia and Algeria. The company has more
opportunities here. Africa has full potential stored for this company. Similarly in Asia,
countries like China and Japan have more stores than India, Singapore, UAE and Saudi
Arabia despite that fact that these countries have a substantial number of rich people.

3.   Investment in marketing :
 ZARA can grow its customer base and sales by investing in marketing and promotions.
Till now it has been known to invest very small sums in marketing. However, with
competitive pressure rising, investing in marketing can be good for ZARA and help it
increase its sales and customer base further.

Threat

1.   Fierce Competition

Zara experiences fierce competition, not only locally but also globally. Locally Zara faces
competition from Sweden’s H&M and in-house brands like Massimo Dutti and
Stradivarius, whereas, on the global platform, it faces competition with international brands
such as in the US, the toughest competition is from the US based GAP.

2.   Competitor Collaborating Concept Strategy :

Zara shares no collaboration with international designers unlike H&M, which has
collaborated profitably with international designers like Karl Lagerfeld, Lanvin, and
Alexander Wang. This can be a serious threat to the company. When a company
collaborates with an internationally noted designer, young shoppers get interested in
buying designer labels.

3.   Rising cost of raw materials:

Costs of raw materials have kept rising. It has managed a well integrated supply chain that
caters to its needs for raw materials successfully. However, rising costs of raw materials
and labor can raise the operational costs of the brand. This can negatively affect the revenue
and profits of the brand.

4.   Regulatory threats:

Legal and political regulation of the business industry has grown high. Around the world,
governments and legal agencies are regulating businesses including those in the fashion
industry. There is a large set of rules of regulations to be complied with in the fashion
industry too. From labor to quality and other several areas, there are laws to be complied
with. These laws differs from market to market and from nation to nation. High level of
regulation can become a roadblock to fast growth.
III.   BUSINESS STRATEGY FORMULATION
III.1. Proposed Strategic Position

Porter’s generic Strategy

According to Porter, strategies allow organizations to gain competitive advantage from

three different bases: cost leadership, differentiation, and focus. Porter called these
strategies the Generic Strategies. The following is the framework of Porter’s Five
Generic Strategies and the position of Zara in this classification.

GENERIC STRATEGIES
Cost Leadership Differentiation Focus
Large Type 1 Type 3
SIZE OF Type 2
MARKET
Small Type 3 Type 4
Type 5

In Zara’s case, when it comes to cost leadership it implements both types, 1 and 2 which
are both focused on large markets selling standardized products at the low cost and best
value strategy. Another type of strategy is used, differentiation, which is used in large
and small markets, in case of Zara is production of services for consumers that are
price insensitive. So we can conclude that Zara is classified as Type 3 in both markets.
Another concept can be included under differentiation that is fast fashion, or changing
the collection after two weeks. The last base is focus, which means production of goods
that are for small groups of consumers. In this case we have two groups as in cost
leadership, low cost strategy so called type 4 and best value cost strategy type 5. In
Zara’s case, customer focuses in on large market.

Cost leadership
Cost leadership strategy involves gaining a competitive advantage by lowering the cost.
Cost leadership is the main generic strategy that ZARA uses in various consumer
markets.

•   The primary objective of using this strategy is to preserve the market leadership
position through efficient value chain management.
•   This strategy allows ZARA to expand the market share by targeting the middle
class, which makes the largest proportion of overall consumer market mix in most
 of the countries. Middle class consumers generally place high importance to the
pricing factor and cost leadership is the best strategy to cater the needs of this
consumer segment.
•   ZARA focuses on affordability and easy accessibility of its produce across the
globe, which leads towards high brand awareness and high sales growth and
provides a strong competitive advantage basis.
•   Other than charging low prices by lowering production cost and maximizing supply
chain efficiency, ZARA frequently offers discounts and coupons to achieve sales
targets and handle the competitive pressure by its closest rival. The intended
outcome of these discount and promotional campaigns is to increase brand
popularity and encourage consumption.

Differentiation
Differentiation is another most commonly used generic strategy to build a competitive
advantage. ZARA uses differentiation in combination with the cost leadership strategy
to achieve growth objectives.

•   The adoption of differentiation as a secondary generic strategy allows ZARA to

expand the customer base by emphasizing over the unique product features.
•   ZARA's strategic objective of using this strategy is to differentiate by embedding
the innovation and address the consumers’ growing health concerns. For example,
ZARA has extended its product line after studying the consumers’ changing
interests to differentiate itself from competitors and expand the scope of
opportunities within the industry. The combination of the differentiation and cost
leadership has helped ZARA build a strong and loyal customer base.
•   Through differentiation generic strategy, ZARA positions its product offerings in a
way to stand out and be different from the available alternatives. Being the
experienced brand with strong foothold, the company uses differentiation as a tool
to reduce the pressure by other brands. Heavy investment in marketing,
advertisement and celebrity endorsement is made just to differentiate the ZARA
from other brands.
•   Extensive experience, the oldest brand and strong presence in all over the world are
some differentiation factors that are highlighted in the company's marketing and
communication strategies.
•   Other than these, the brand logo is also used to set the differentiation basis. The
unique and distinctive brand logo has established a strong brand image in
consumers’ mind. Although the brand has undergone many revisions, the essence
has remained the same, which also serves as a strong differentiating factor.

Focus strategy
Focus is the third generic competitive strategy that encourages companies to
concentrate their resources on expanding the narrowly targeted segments. When
companies adopt the focus strategy, they serve particular market segments and base
their competitive advantage on niche marketing.
•   ZARA adopts the focus strategy both in terms of low cost and offering the best value.
The low-cost focus strategy is adopted by serving the needs of a niche market segment
at the lowest possible price. While, best value focus strategy is adopted by emphasizing
over the taste, size and design of the product that could best match the customers’ needs
and requirements.
•   By focusing on product attributes, ZARA revises its branding strategies and brings
continuous changes in the product designing and packaging to satisfy the customers’
psychological expectations and maximize value for money.

III.2. Proposed Overall Strategy

The Hambrick and Fredrickson Diamond Strategy

Retailers frequently use their web presence to show off their products; but they have
never (to date) considered giving the consumers a picture of the status of the stock of
goods inside the store. This strategy will reinvent online retailing practices.

Arenas

Zara will make use of technology to facilitate customers in online shopping. The maverick
development in Zara's online shopping strategy will be to allow customers to look into
upcoming fashions that have not hit the shelves as yet; in addition to items that are being
bought rapidly and can be expected to go out of stock soon. The geographic areas covered
under this strategy will be established with respect to the regions in which Zara stores are
currently operating; as well as joining areas from where customers can be expected to visit
the Zara store.

Market segments will not be expanded since doing so will demand channeling resources
towards marketing; hence violating one of Zara's oldest principles of business
management. All of Zara's currently offered product categories will be integrated in this.
Value creation will take place as a result of the consumers' desire to catch hold of products
as soon as they arrive; while simultaneously tempting them to consider the purchase of
items that are rapidly running out of stock.

Vehicles

Zara will not need to engage in any new acquisitions or joint ventures for the
implementation of this strategy. Licensing and/or franchising will not be necessary.
However, effective implementation may help Zara reach in a position where other
companies might offer to buy license for Zara's content. Internal development will be
essential in order for the strategy to become effective and efficient. Coordination between
stores will need to be perfect; hence demanding the complete automation of the supply
chain.

Differentiation

Consumers will not be given the choice to have their products customized through the web-
based service. The idea is to tempt consumers and engage them in a race to the nearest Zara
store; eventually giving Zara a brand image in which every consumer interested in online
shopping decides to visit Zara's website to check out the designs at the local Zara store.

Zara can focused on “eco-friendly” issues on their product, which delivered a sustainability
product for consumer.

Staging

The project will begin with the development of a clear understanding of the internal
functioning of Zara's stores. A virtual team will be formed comprising of representatives
from each region in which Zara stores operate. Another team will be formed to coordinate
with the IT department and go over issues pertaining to information of zara products. Zara
also can do the virtualcampaign about eco friendly product and sustainability.
IV.   ETHICS AND SOCIAL RESPONSIBILITY

In addition, in its mission statement, Zara states that it aims to contribute to sustainable
development of society and environment it interacts with. In this case, Zara proves that its
decision to outsource its manufacturing process to other countries. has brought a positive
impact for the host country, as we recall the example of India. Moreover, especially for
environmental issues, Zara has committed to help reduce the emission and create an eco-
friendly business and the commitment is still strongly upheld until today. Even now there are
more and more concrete moves that the company is doing in order that this mission can be
achieved, including investing more money on creating a eco-friendly business operation
starting from the headquarters, the manufacturing plants, and all the way down to the stores
across the globe.

Over the year, Zara has focuses on sustainability issues involving material, producing and
shipping for products. The company also apply the sustainability aspect become their store
regulation which are saving energy, producing less waste and recycle ( hangers, security tags,
cardboard and plastic ), employees awareness, recycling decorations and bags ( biodegrable ),
store design ( heating and cooling systems ). On the production, Zara use the ecological fabrics
such as organic cotton which produced with free of bleach, chemicals and pesticides.

Zara also very social responsibility in consumerism. Zara never stops improving its in-store
customer experience through employee trainings and direct communication with the
consumers.With the information Zara gets from customers, Zara is able to provide good
designs with available materials and therefore can lower the production cost as well as the
production time. As a result, a more affordable outcome of products can be distributed to end
consumers. Zara also has a good community relations, especially with the employees. Not only
educates them on the sustainability issues, zara also prides themselves in being an equal
opportunity for employees. the company cooperates with the United Nations and the
International Labour Organisation in different programs to promote better practices and
IndustriALL a global union that is involved in the process of controlling the respect of rights
in their factories. Also, the company is working in transparency, publishing an Annual Report
verified by external companies in which they provide information about suppliers, employees,
revenue, countries in which they operate, audit. Last, Zara is involved in social programs, last
year 48 million euros were invested to contribute to community welfare.
V.   CONCLUSION

After analyzing the success factors both internally and externally, in this section, i will derive
the core of this analysis, which is the reason why Zara can become such a strong player in the
industry or in other words, the competitive advantage of Zara.

In my opinion, according to what i found during our analysis, one of the competitive advantage
that Zara has and its competitor lacking is the customer-responsiveness. Even though Zara does
not have many investments in Marketing, but Zara relies on the most important aspect of the
business, the customer. They focus on their customer, listen to what their customers have to
say, obtain their comments and feedbacks, and then use those information to evaluate the next
production, meaning on the next production, they will produce based on the information given.
Consequently, the results will be gratifying for the consumers.

Next competitive advantage that Zara has will be its business operation. Zara’s overall business
operations, including the design process, production process, and the distribution process, all
are so sophisticated that it enables Zara becomes the forefront in the industry. Especially
because it is combined with their customer–responsiveness, imagine how impressive it is. Zara
is the only brand that has the capacity to produce the latest design that the consumers
demanded, and make it available at the stores in just 14 days. Because Zara will be the first
one to place a certain design in the store, hence the customers will tend to make Zara their first
choice in shopping or browsing for clothes.

Finally, the excellent business operation together with customer–responsiveness will lead to
customer loyalty, creating a cycle of growth; the secret success of Zara. In conclusion, looking
from the strategies that Zara is doing now and their vision and mission, I can say that these
strategies are effective and sufficient enough for the company to achieve the stated vision and
mission.
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