Zara Case Study Analysis

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In today’s highly competitive fashion industry where companies operate in a very dynamic and turbulent environment, retailers need to adapt to shifts in customer behaviour and respond to competition. For these reasons, it is important for them to be agile and innovative, so as to gain competitive advantage and stay ahead of their rivals. In order to achieve this, they have to follow a strategy that will differentiate them from the rest of the industry.
Zara is the flagship chain store of the spanish international group Inditex, founded by Amancio Ortega and his then-wife Rosalia Mera. Headquartered in the town Arteixo, Zara opened its first store in 1975. Since then, the company has witnessed an unprecedented growth. Going from a little known,
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Production moves on automated conveyor belts at distribution centers. The company utilizes a hub-and-spoke distribution system to ship merchandise brought to distribution centres, or redistribute it among the stores when needed, within 48 hours.

Operations: Zara operates more than 2.100 stores in 88 countries in the form of company-owned stores or franchised stores when needed. The company generates almost two-thirds of parent company’s sales revenue annually. Most of manufacturing is produced in Spain or in proximity markets.

Marketing and Sales: Zara’s marketing strategy relies on word-of-mouth communication and the low price appeal it makes to the customers. A Goldman Sachs analyst has described Zara as “Armani at moderate prices”. The most important channel to communicate the brand image is its stores windows displays which are changed twice a week, creating a sense of scarcity for brands clothing. So, executives invest in company-owned stores located in highly trafficked, high-end retail locations. This practice has proven effective as it induces customers to visit more often a Zara store than any other retailer. Zara’s targets young, price-conscious and interested in the latest fashion trends

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