National University

M. F. Jhocson St. Sampaloc, Manila

A Case Study Analysis

Case Study of Zara: A Better Fashion Business Model

Submitted to the College of Business and Accountancy

National University

In Partial Requirement for the course

Strategic Business Analysis

By:

Asis, Junica Mae R.

Catmunan, Christine Joy C.

Dantes, Melvin C.

Dela Cruz, Nichole Kate D.

Submitted to:

Mr. Roderick R. Ronidel. CPA, MBA

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 Case Analysis

Case Study of Zara: A Better Fashion Business Model

Zara is one of the world's most well-known brands and one of the world's

largest fashion corporations. They are a subsidiary of Inditex and are the third

largest brand in the clothing business. It is their flagship chain of shops, with

headquarters in Spain. In 1975, Zara launched its first store in Spain. The

company currently has 2600 stores in 76 countries in the world. The Zara apparel

line contributes a significant portion of the parent company's income. Kiddy's

Class (children's fashion), Pull and Bear (casual youth clothes), Massimo Dutti

(quality and traditional style), Bershka (avant-garde clothing), Stradivarius

(trendy apparel for young women), Oysho (underwear chain), and Zara Home

are some of Inditex's other clothing businesses (household textiles).

I. Viewpoint:

The researcher will use the point of view of Miguel Diaz, director of finance

and operations of Zara, because of the Centralized Logistics Model. The director

of finance and operations will determine and analyze the plan on how the

company will increase its growth in terms of the international market. In addition,

he will be in charge of the final recommendation on how will expand the

distribution area or the coverage of the Zara Clothing Company.

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II. Time Context:

It started when Zara Clothing became well-known worldwide and

conducted a Global expansion. In 1990, Zara clothing company decided to

expand its global market aggressively, including Portugal, New York (USA), Paris

(France), Mexico, Greece, Belgium, Sweden, Malta, Cyprus, Norway, and Israel.

Today, there is hardly a developed country without a Zara store.

III. Statement of the Problem:

• Foreign expansion is limited owing to its highly centralized logistical style. It

needs to expand its distribution area and improve its capacity is sensible.

Zara's main distribution area is in Spain, and it will be tough for them to

expand while their base is solely in Spain.

• Dealing with issues such as competitors, retailers, and severe competition,

as well as a need for plus-size clothing, high operational costs, and a

mature market.

IV. Objectives

• To increase growth internationally of the company will lead to a much

success worldwide

• To come up with a strategy so that the company can compete

aggressively against competitors

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 • To help to analyze where could the company expand the store as well as

for the benefit of the community

V. Areas of Consideration

Strengths Weaknesses

• Strong Supply Chain • Limited Inventories

Management • Expansion to US and Asia –

• In-House production Pacific

• Affordable Prices • Does not spend on Advertising

• Design Team

• Efficient Production

Managements

Opportunities Threats

• Growth in Online Market • High Competition

• Sustainability • COVID – 19

• Price War

• Imitation

Strengths

• Strong Supply Chain Management

Zara’s supply chain has become vertically integrated. It indicates

that their factories handle the majority of the stages of production. Zara

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 will be able to keep up with emerging trends and adapt to rapidly

changing demands. Unlike most of its competitors, Zara is known for taking

around two weeks to create, manufacture, and distribute to create a

new product that will be available at the stores and has been known to

come up with around 10,000 new designs every year, which is an industry

record.

• In-House production

The majority of the production takes place in their own factories.

Zara is in charge of the design stage, production, distribution centers,

transportation, and other aspects of the business. Zara does not outsource

its products in the hope of reducing labor costs. Instead of outsourcing its

work to cheap labor markets in Asia, it makes the most out of the cheap

labor supply of Portugal and Galicia. Because they produce everything in-

house, they may be more flexible with the quantity, frequency, and

diversity of new products that are about to be released.

• Affordable Prices

Zara sells high-end fashion and the latest fashion trends for

affordable prices. Zara’s business model is founded on the idea of selling

“medium quality fashion clothing at affordable prices.”

• Design Team

Zara knows what its customers want by tracking their preferences

on a year-round basis. They have their own team of designers who have

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 been recruited fresh out of fashion school. Zara does not make any losses

as they only order a limited quantity of each item that they believe is

stylish and will be more restricted season-wise.

• Efficient Production Managements

According to the Zara competitor study, Zara generates more

designs than all of its competitors collectively. It introduces over 10,000

new designs each year, significantly more than its competitors. Zara's

ability to respond quickly to client demands allows them to exceed

customer expectations, ultimately leading to success.

Weaknesses

• Limited Inventories

Zara’s product is shipped out as soon as they are ready, even

though the shipping timetable is just twice a week. Because of limited

inventories, if customers go to their stores looking for a particular item and

design, which item are not available anymore, they can lose that sale.

• Expansion to US and Asia – Pacific

Their growth in the international market will be curtailed due to the

reason that Zara has a very centralized logistics model. This will affect their

plans to go international and target more regions. They have a huge

presence in Spain but are quite limited when it comes to other countries.

They can easily opt for countries such as the South East Asian markets

South Asia which have a lot of potentials.

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 • Does not spend on Advertising

Zara does not spend on advertising because they concentrate on

opening a new store. It has a zero advertising policy, unlike its competitors;

because of that, it gives its competitors greater public exposure.

Opportunities

• Growth in Online Market

In the 21st century, the world is getting technological, and people

are changing how the way they shop because of the online market.

Almost all brands are investing online because of the growing market

every year.

• Sustainability

Customers in today's generation look for sustainable and

environmentally friendly items on garments. Zara needs to be aware of

and address this growing need. It strongly supports campaigns for the

preservation of our natural resources.

Threats

• High Competition

The fashion industry is growing every year, and over the years, more

than brands have been created. As the years go by, the competition is

getting bigger and bigger.

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 • COVID – 19

The sudden outbreak of coronavirus strains and their subsequent

global spread has had a negative impact on economies around the

world. The coronavirus greatly affected Zara hard due to store closures

and changes in consumer preferences and spending patterns.

• Price War

Fast-Fashion offers the latest fashion products at a lower price than

Zara.

• Imitation

The company is also threatened by the counterfeit and imitation of

low-quality products, especially in emerging and temperate markets.

VI. Assumption

1. Planning to go internationally and target more regions will lead them to

much success worldwide.

2. Increasing international growth leads to more fashionable ideas that are

prevalent around the world.

3. Finding a new distribution center and expanding its operations can

minimize the time in creating a product.

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VII. Alternative Course of Action

ACA 1: Establish a new distribution system

The business will be able to access a larger market and generate revenue

by building a distribution system. It can be a new strategy so they can compete

aggressively with their competitor.

ACA 2: Customer Service

Zara has a reputation for exclusivity. It would be a great move to listen to

their customer closely and offer them all types of sizes and fashions they prefer. It

would promote a strong public image that attracts new customers and gain

their loyalty.

ACA 3: Build up geographic segmentation

Building up geographical segmentation can be an effective route into

personalized marketing and can offer tangible ways to reach potential

customers of Zara using their location. This will improve the relationship between

the customer and the company.

VIII. Analysis

ACA 1: Establish a new distribution system

Advantages Disadvantages

• Larger market • Additional expense

• Provide more controls toward

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 the product

• Additional profit

• Direct customer

ACA 2: Customer Service

Advantages Disadvantages

• Availability of all sizes • Increase of raw materials

• Better public image • Spent Money

• Customer Relationship

ACA 3: Buildup geographic segmentation

Advantages Disadvantages

• Strong relationship with • Take’s time to be recognized

customer

• Personalized marketing

• High quality of Products

• Affordable Price

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IX. Conclusion

Decision Matrix

Criteria ACA 1 ACA 2 ACA 3

Ease of Implementation 1 2 3

Acceptability 1 2 3

Cost Effective 2 1 3

Practicality 2 1 3

Beneficial 1 2 3

Timeliness 3 2 1

Total 10 10 16

Legend: 1-good 2-better 3-best

Operational Definition of Terms

Ease of implementation: It is when the work is to perform/execute or carry out

Acceptability: A process that confirms the product's utility, and efficacy

Cost Effective: Making a product that is affordable and high quality.

Practicality: Seasonal producing new products

Beneficial: Affordable and high quality of product

Timeliness: Producing a product for a short frame

We, therefore, conclude that ACA 3 Buildup geographic segmentation is

the best option to improve the Zara Fashion Business Model among the

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Alternative courses of Action. This is both advantageous to the company and its

consumers.

Justification:

Developing geographic segmentation can be a good method to get

started with personalized marketing and can provide concrete ways for

Company to reach out to potential customers based on their area. The

customer-company relationship will improve as a result of this. It is beneficial for

the Company to grow its economy by innovating a good product that gives

satisfaction to the customers. The Company makes the affordable price for the

customer to patronage the product that has been produced as well as to make

sure that the products are high quality. Through its worldwide impact and

competitive pricing, the brand leads the fast fashion market. Moreover, the

industry is rapidly increasing, and Zara must keep developing its marketing

strategy, improve its social media presence, and maintain its approach to

sustainability.

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X. Plan of Action

Activities Person Responsible Time Frame and Budget

1. Conduct a meeting in General Manager Time Frame: 3 Days

preparing and Supervisor and Sales Budget: 4,000 for food

improvement Team allowance

2. Data Gathering or Research Team, General Time Frame: 2 – 3 Months

Surveying to the Manager and Sales Team Budget: 10,000 for food

consumer and transportation

allowance

3. Conduct meeting to General Manager Time Frame: 2 Days

different distributor Supervisor and Distributor Budget: 3,000 for food

allowance

4. Budgeting for raw General Manager Time Frame: 2 weeks

materials and finding And Sales Team Budget: 6,000 for food

affordable but the allowance

best factory

5. Advertising of New Marketing Team and Time Frame: 2 Months

Products Sales Team Budgets: 20,000 for

advertising expenses

(Magazine, Pictorial0

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6. Launching and Marketing Team and Time Frame: 6 Months

promotion of product Sales Team Budget: 15,000 for social

media promotion and

food and transportation

of the employees

7. Seasonal Sale General Manager Time Frame: 3 Days

Marketing Team and NO BUDGET INVOLED

Sales Team

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