Swot Analysis Zara

Analysis of the problem situation

The Inditex Group is relatively young but in this rather short period of time the company has experienced extraordinary growth. From 1999 to 2004, the company has grown rapidly in terms of sales, number of stores and number of countries in which it is located; thereby outperforming the major competitor H&M, as illustrated in table one (see Appendix). To decide the company’s future strategic direction in 2006, it is useful to conduct a SWOT analysis, whereby Zara is in focus, as it accounts for the biggest share in the corporate portfolio. This analysis facilitates the understanding of the company’s core strategic capabilities that enabled the previous strong expansion and the assessment of future courses of

227-229). This could be achieved by opening up new stores in existing markets of key importance. One of those markets would be Europe. The region is Zara’s most important market with the strongest competitive advantage as the centralised facilities are located there. The small geographical distance between these facilities and the stores maximises local responsiveness to new trends and changing customer desires. Thus, maintaining and increasing market power in that region is especially crucial for the company. In regards to choosing the particular country to penetrate, fashion conscious countries such as Italy, France and the UK could be particularly attractive. Hauge et al. (2009) argue that being located in fashion hot spots like these are crucial for the success within the fashion industry and the past success of Zara in these countries seems to support this view. In addition, Brazil could be attractive for further investment due to the growing importance of the BRICS

Vertical integration allows for manageable time schedules, focusing on one concrete system rather than juggling several processes simultaneously. On the other hand a vertical model can lead to major diseconomies of scale in the long-term when expansion is necessary. Prices and overhead costs continue to increase globally while retailers attempt to keep their pricing strategies on point in order to meet consumer demands, in this case it is vital for Zara to keep overheads as low as possible to meet their pricing strategy. Due to Zara keeping their distribution channels in-house this process may not be at its optimum level. Establishing design teams that are strategically located across differentiating markets can maintain Zara’s competitive advantage of fast fashion by remaining more creative and in sync with their associated markets and its demands. New channels of production that have been outsourced in emerging economies can be overseen by relative technological operating systems that are linked to the different distribution centres allowing Zara to be more effective and efficient in distributing their products to their retailers. Increased advertising and brand awareness campaigns may become necessary in newer