zara fashion swot
6.0 STRATEGIC ANALYSIS & RECOMMENDATION FOR ZARA
6.1 PORTER 5 FORCES ANALYSIS
1. Barriers to entry: HIGH a. High fixed cost business requires economics of scale for sustained profitability
b. High Selling & Administration Expenses which includes advertising, in-store promotions, etc.; up to 3.5% of its revenue, even though for Zara, the company is famous for spending minimum level of advertisements and commercials. However, recently the company announced that it invested €450 million in commercials as well as logistics area (Inditex, Inditex‘s net sales rise 6% to 7.7 billion euros, 2013)
c. Concept to store which takes 6 months to a year which refers to long sales cycle. However, in case of Zara, the lead time of clothes first-designed by the designer teams to finished products sold at the store take only about two weeks.
d. Brand equity which is valuable to consumers
2. Substitutes: MODERATE
a. Buyer propensity to substitute is high with several competitors to choose from (H&M, Uniqlo, MANGO, and many other fast-fashion brands)
b. Low buyer switching costs and easily substitutable where a customer can walk into its neighbouring store instead of Zara
c. Zara has gained substantial customer loyalty which has more visits per year than its competitor‘s store
d. Copying of styles is quite prevalent in this industry, which can attract the customer who does not mind lower quality but ―similar‖ looking apparel. The example will be counterfeiting of Zara products in Indonesia which is currently trending
3. Buyer Power: MODERATE
a. Trendy fashion wear is appealing to regular consumers and they would not shop lower quality apparel or accessories
b. Apparel consumers have lots of choices when it comes to trendy clothing and accessories, but price can be a factor. In the case of Zara, for European, American, and eastern Asian countries, Zara is positioned as the low-end products, however, in emerging markets such as India, China, and Indonesia,
6.1 PORTER 5 FORCES ANALYSIS
1. Barriers to entry: HIGH a. High fixed cost business requires economics of scale for sustained profitability
b. High Selling & Administration Expenses which includes advertising, in-store promotions, etc.; up to 3.5% of its revenue, even though for Zara, the company is famous for spending minimum level of advertisements and commercials. However, recently the company announced that it invested €450 million in commercials as well as logistics area (Inditex, Inditex‘s net sales rise 6% to 7.7 billion euros, 2013)
c. Concept to store which takes 6 months to a year which refers to long sales cycle. However, in case of Zara, the lead time of clothes first-designed by the designer teams to finished products sold at the store take only about two weeks.
d. Brand equity which is valuable to consumers
2. Substitutes: MODERATE
a. Buyer propensity to substitute is high with several competitors to choose from (H&M, Uniqlo, MANGO, and many other fast-fashion brands)
b. Low buyer switching costs and easily substitutable where a customer can walk into its neighbouring store instead of Zara
c. Zara has gained substantial customer loyalty which has more visits per year than its competitor‘s store
d. Copying of styles is quite prevalent in this industry, which can attract the customer who does not mind lower quality but ―similar‖ looking apparel. The example will be counterfeiting of Zara products in Indonesia which is currently trending
3. Buyer Power: MODERATE
a. Trendy fashion wear is appealing to regular consumers and they would not shop lower quality apparel or accessories
b. Apparel consumers have lots of choices when it comes to trendy clothing and accessories, but price can be a factor. In the case of Zara, for European, American, and eastern Asian countries, Zara is positioned as the low-end products, however, in emerging markets such as India, China, and Indonesia,