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Zara Functional Strategy

1510 Words7 Pages

1) Introduction
In the last two decades, the fashion industry has grown rapidly and expanded all over the world. Numerous global fashion retailers’ successful story draw public attention. How can they survive in the cut-throat competition and become the leader of the fashion retail industry with different strategies. In this essay, I would like to discuss the corporate and functional strategies which are used by Zara and Gap, two of most popular retail fashion chain company in the world. The discussion would be mainly focus on the three parts, (a) Comparative strategy, (b) Directional strategy, and (c) Marketing strategy. Moreover, this essay would also discuss which company will likely to be the future winner regarding these strategies.

2) Zara
a) Comparative strategies
Zara is categorized as using cost leadership strategy. Zara’s selling price is derived from the market information, which “cost plus margin” …show more content…

On the other hand, Zara can maintain a high level of control by adopting backward integration. Although Zara is a cost leadership industry, internal production is consider not a suitable strategy for cost leadership company. However, it is believed that the effective supply chain management is crucial to Zara’s success because of the importance of quality control (Ferdows 2004). Under backward integration strategy, Zara can make changes and correct "fashion mistakes" flexibly. Furthermore, the manufacturers are located closely to the headquarters, which has a faster and more advanced workforces and communication system. Also, internal production can significantly decrease the production lead time and shorten product life cycle (Goransson, 2007). An article found that fast-fashion model allows companies like Zara to decrease unwanted markdowns and lost sales and enabling firms to increase profits by as much as 28 percent (Petro, 2015). In addition, Zara’s agile supply chain could meet what wants, as mentioned above, buying cheaper clothing

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