ZARA Strategy

Corporate and business strategy of Zara
1. Business Level Strategy – Cost Leadership:
Zara emulates modern haute couture designs as well as similar clothes by using inexpensive
fabric for achieving low costs and maintaining high fashion (Ferdows et al., 2005). Moreover,
Zara only manufactures small amounts to sell for every latest design. In this way, Zara can
reduce losses more rapidly when a particular design becomes unpopular. Moreover, this can also
reduce inventory costs in effective manner.
2. Corporate Level Strategy – Single Business:
Above 95% sales revenue of Zara is generated from clothing business. Though Zara is also
engaged in home furnishing named as ‘Zara Home’ but this business just adds 2.3% revenue to
the total income (Zara, 2017).
3. International Strategies–Transnational Strategy:
Zara desires to attain both social responsiveness and worldwide efficiency. Zara has better
flexibility with respect to its products’ mobility in comparison to its competitors as a result of
vertical integration (The Economist, 2012). Zara directly conveys customer feedback to its huge
design team in Spain with the intention of responding to the local consumer preference changes.
This transmission is facilitated by the information technology (Hume, 2011). Format, governance
and activities are the 3 key elements of Retail Business Model. These factors assist retailers to
strategically think about the maximum focus of business model novelty (Sorescu et al., 2011, p.
13). All these elements are vital for the success of Zara in the multinational market. For instance,
activities’ format may fluctuate on the basis of technological advancement within industry as
well as cultural connotations of activities within a certain country. Quality structures and
governance are enormously different globally; therefore, Zara should do a comprehensive
strategic examination before entering into new market.
Strategic options available for Zara:

According to Christodoulou and Patel (2012) it is highly useful for international companies to
effectively manage the challenges as well as competition to get develop and grow.
Ansoff matrix for Zara

As per Ansoff matrix proposed by Porter, the strategic options available for Zara are:
1- Market penetration:
Zara can penetrate in existing markets by focusing on exclusive and interesting marketing
campaigns. Companies can focus on social media campaigns and various promotional activities
(discounts, buy one get one free) to penetrate in the current markets. Likewise, Zara can also
penetrate in the market through identified means to grow and develop.
2- Market development:
There is possibility for Zara to grow and develop by focusing on market development option.
Zara can enter in new markets to increase its market share and to realize economies of scale
through strategic expansion in new countries (Economist, 2012).
3- Product development:
The companies operating in the fast fashion sector need to make continuous improvements in its
products to beat the competitors and to effectively fulfill the customers’ needs. Zara is focusing
on JIT for production of products and chances of imitation are low (Sanders and Gearard, 2007).
However, to attain more growth company can focus on innovation and add new product line for
attracting the customers.
4- Diversification:
Zara can focus on growth and development through diversification. In case of diversification, the
new related or unrelated product is produced by company and offered to the new segment of
customers for growth purpose (Haberberg and Rieple, 2008). Zara can offer unstitched clothing
(related product) or packed juices (unrelated product) and offer them to new customers for
growth and development.
Conclusion
It is highly recommended for Zara to use its skills, resources, competencies as well as financial
resources in the form of profitability to implement diversification strategy. Management should
make effective decisions regarding production of related or unrelated product for diversification.
It is concluded that there are certain external and internal factors that have an impact on the
operations of Zara. Zara can handle the impact of such factors through proper strategic
management. In addition, it is also found that company should focus on growth for sustaining
strategic position in the market. It can do so by focusing on its key strengths including short
production period, JIT as well as advanced technology, staff’s skills, and resources.
References:
 Bernstein Global Wealth Management. 2011. Inditex and H&M: Very Different & Very
Similar. London: Black Books
 Economist, 2012. Inditex Fashion forward Zara: Spain’s most successful brand, is trying
to go global. [Online]. Available
at: http://www.economist.com/node/21551063 [Accessed: 10 Jan 2017]
 Ferdows, K., Lewis, M.A. and Machuca, J.A., 2005. Zara’s secret for fast
fashion. Harvard Business Review, 82(11), pp.98-111.
 H&M. 2017. The H&M group. [Online]. Available at: http://www.hm.com/us [Accessed:
10 Jan 2017]
 Keane, J. and te Velde, D.W., 2008. The role of textile and clothing industries in growth
and development strategies. Overseas Development Institute. 12(4), 93-109.
 Suttle, R. 2011. The macroenvironmental factors affecting the clothing industry.
[Online]. Available at: http://smallbusiness.chron.com/macroenvironmental-factors-
affecting-clothing-industry37254.html [Accessed: 10 Jan 2017]
 The Economist. 2012. Inditex Fashion Forward: Zara, Spain's most successful brand is
trying to go global. [Online]. Available at: http://www.economist.com/node/21551063
[Accessed: 10 Jan 2017]
 Zara. 2017. Company. [Online]. Available at: http://www.zara.com. [Accessed: 10 Jan
2017]
 https://iide.co/case-studies/swot-analysis-of-zara/

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Corporate and business strategy of Zara

1. Business Level Strategy – Cost Leadership:

Strategic options available for Zara:

Ansoff matrix for Zara

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