Strategic management: Case ZARA Essay
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Discussion Questions:1.What type of generic business strategy is Zara pursuing?Zara has a low price strategy because they can use a lower cost structure than their competitors. The quality of the products is lower and they can cut costs so offer a lower price. So we can speak of a cost leadership strategy, low cost what gives low prices.
On the other hand, Zara has also a differentiation strategy. They are unique in a what that they see what the new fashions clothes are and that they are able to produce those clothes and bring them in the shops in a couple of weeks.
Zara also has a creative design team who give differentiation. So we can say that Zara is a story who gives design clothes with a normal quality for a very good price.
2. How did Zara’s business strategy allow the company to respond to the opportunities andthreats in the external environment? To answer this, you may need to first chooseappropriate set of international competitors listed in the case and think about Zara’srelative “operating economics.”We use the Business Strategy Diamond model to give an image of Zara’s opportunities and threats in the external environment. This model will helps us to exam Zara’s strategy with regard to competitors like Gap, H&M and Benetton.
-Arenas: in the text is written that Zara chose for areas of production, for women, for men, and for children. This chosen area is big enough to protect her against threats and actions of the competitors. Again her possibility to change her products so quickly is a strong strategy who offers a lot of solutions for problems.
-Vehicles: the use of the vehicles depends on the type of the markets. When there is a more stable market, Zara is able to expand with the help of company-owned stores. When the market has more cultural differences and therefore more risks full, Zara uses franchising to compete. Last but not least, the use of joint ventures in markets where there are barriers to entry.
-Differentiators: Zara differentiate with low prices, up to date design, the speed to bring products on the market.
-Economic logic: the most important are economic of scale, Zara has stores whole over the world, and is so more defended against competitors and can benefit from opportunities. Also economies of scope are essential for the strategy.
3. What evidence do you see of this strategy in Zara’s value chain? What is Zara’s corecompetence? How specifically do the distinctive features of Zara’s business model affectits operating economics?The increase of the level of Technology is essential in the support strategy of Zara’s Value chain and the decisions in the price setting are also important in the sales activities of the value chain.
For me it’s obviously that the ability to be up to date with the clothes and so maximize the satisfaction of the customers is the core competence of Zara. This core competence is not easy to imitate, is valuable, is unique and exploitable. All those characteristics give a strong differentiation and a good defense against competitors.
The distinctive features of Zara’s business model has an influence on the operating economies in some cases like,-Their decisions of the places where they are going to build the stores. How better the location, how better the can optimize the strategy and bring the products in a short time to the stores-Their decisions of the prices because low process is very important for Zara. Decrease the transportation costs gives them a stronger position, so produce more intern.
-And Zara’s expansion strategy4. Why might Zara “fail”? How sustainable would you calibrate its competitive advantageas being relative to the kinds of advantages typically pursued by other apparel retailers?What adjustments should it make, if any?Zara is a company that has stores around whole the world so we have to keep in mind that every country can have other beliefs, other values (economic, social, political and cultural). So Zara’s standardized strategy and production line and his strategy how to globalize can become a problem. And maybe lead to the failure of Zara. To be as successful as possible, Zara has to look to the needs and demands of every different country and region. Zara has to realize this without making more costs to become effective and insure his future.
Zara has al lot of competitive advantages, like his ability to satisfy the consumers needs and demands of quality clothes, Zara has an effective system for her distribution, he creates a huge turnover, doesn’t have a high inventory, and Zara’s culture wants to have a good relationship with the employees to have a good working environment because it will increase the companies profit. And is act immediately if there is a change in the fashion taste of the customers. Zara’s competitive advantage give the impression to be less sustainable that competitive advantages that H&M,GAP, and Benetton are pursuing. As adjustment, we can maybe think of a smaller arena to operate in, for example, take only the segment for men.
: – Strategic Management: Concepts, Second Edition (2008), by Mason A. Carpenter and Wm.
Gerard Sanders, Pearson Prentice Hall. ISBN-10: 0132341409; ISBN-13: 9780132341400- Harvard online, buy case Zara