Module 2 Q1 Apply the competitive forces model to the industry in which your company is based. What does this model tell you about the nature of competition in the industry? Q2 Are any changes taking place in the macro-environment that might have an impact, positive or negative, on the industry in which your company is based? If so, what are these changes, and how might they affect the industry?
Q3 Identify any strategic groups that might exist in the industry. How does the intensity of competition differ across these strategic groups? Q5 In what stage of its life cycle is the industry in which your company is based? What are the implications of this for the intensity of competition now? Its primary industry is the one in which it has the most sales. How does this exercise help you understand the performance of your company relative to its competitors?
Q5 Evaluate the competitive position of your company with regard to your answers to questions Opportunities are continuously presenting themselves within the fashion industry. Consumers require regular updates, particularly at the high street end of fashion, where items are perceived to be somewhat disposable, in order to keep up with the latest trends. This means that an organisation such as Zara can retain a large customer base, by continuously improving its range and developing new products, on an ongoing basis.
As noted in the case study, customers will tend to visit Zara stores considerably more frequently than competitor stores, due to the fact that new products are continuously being launched. This is a strong strategy and needs to be developed, as it offers substantial opportunities to gather greater customer support, on a regular basis Mittal, The other threats are the larger organisations and those that are able to reduce their prices below those which Zara can achieve.
Applying this in the context of the resource based view and the value chain, which Zara has established, it can be seen that the main reasons for this are its supply chain and ability to bring new products to market, on a regular basis, with the product then being made available, on an international basis, at a very rapid rate. Zara not only has access to product designers that enable it to produce desirable high-street fashion, at low prices, but it also has a strong supply chain in place which enables it to bring new products to the shop floor, within a time frame which is four months quicker than its competitors can achieve.
Although Zara has managed to retain itself is a well recognised, well-respected brand within the fashion industry, it has also suffered from PR difficulties, over the years. Concerns were also raised that the efficient supply chain which it had established was having a dramatically negative impact on the environment. As a result of this report, the organisation has had to review its supply chain and look at methods of reducing the amount of toxins that are seen to be contained in its clothes.
Back in August a television programme in Brazil accused the organisation of using sweatshops in order to produce its products through outsourced services. Following this statement, Zara acted quickly to mitigate the damage that had been done in the public face, by stating that it viewed the use of sweatshops by its outsourced suppliers as being entirely unacceptable and put in place a variety of different procedures, to ensure that production was monitored much more carefully.
Zara also works with various different government agencies, in order to ensure that this is happening. Further difficulties emerged, in early , when a journalist published a report looking at the treatment of shop staff, across the company, and found several instances of abuse. Again, Zara acted quickly to put in place an internal investigation and stated that abuse of this nature would not be tolerated. Although the company seems to be working with unions, in order to improve the position, the report clearly had an impact on the way in which the company was viewed, with concerns now being shown over the treatment of staff, as well as the treatment of individuals in developing countries who are producing the products, in the first place Balchin It is, however, noted that other organisations operating in a similar way to Zara have also suffered similar problems, with Primark being the main example of concerns over conditions for suppliers and the workers in the developing countries.
Pulling together both the external and internal factors impacting on Zara as an organisation, it is then possible to establish a strategic plan for the future, in order to ensure the ongoing success of this substantial fashion retailer.
The overall strategy for the company, referred to as the corporate strategy, looks at the general approach which the company should take, before going on to consider, in more detail, the business level strategy that can be used to achieve ongoing success Doherty, The corporate level strategies which Zara needs to focus on are doing what it does best, and where it has achieved the greatest efficiency, in recent years.
One of the key reasons that Zara has managed to achieve this success is down to its efficient supply chain, which is critical to the current demands of the fashion industry at to meet consumers demand regular updates of products and new and innovative fashion, on a regular basis. Zara has managed to ensure that it has a first mover advantage by being able to bring the product to the market, within two months, and this unique selling point needs to be exploited further, if consumers are going to be prepared to pay slightly more, in order to gain access to new products before others Coyne and Sujit Balakrishnan It is suggested that Zara needs to retain a cost base element, in terms of strategy, as it has gained a large amount of support from high street customers who are looking for fast fashion, at a disposable level.
By maintaining this price position, the company can then encourage consumers to renew their fashion products, regularly, thus offering continuous revenue for the company. Looking more specifically at the business level strategy, it is suggested that certain product lines need to be focused on, in order to keep the look within the high street stores fresh, as well as looking towards new opportunities for improving the supply chain, particularly given the recent PR crisis associated with its supply chain choices.
It has been identified that one of the major advantages and strengths of the company is the fact that it can achieve a very rapid link to the market. Whilst it is currently the case that Zara has an unrivalled supply chain, it should not be accepted as the forever position and continuous efforts need to be made to improve the supply chain and to form alliances with appropriate third parties. Technology plays a huge role in this, and therefore having a strategic business unit which is entirely focused on technology and the use of technologies to create internal efficiencies, needs to be one of the primary business level strategies Murphy, A greater focus also needs to be placed on the team that is responsible for producing the designs which will ultimately make it onto the high street.
Zara has achieved a position within the market that encourages individuals to look towards the brand as a means of gaining cutting-edge fashion, at a low cost, and the design of these products is therefore critical, if this position is to be maintained. Continuous evolution within this area is a necessary part of retaining the position and also looking towards cutting costs, by altering product designs to take into account the cost of production Finch Several future strategies are now suggested for Zara, moving forwards.
Economic pressures are likely to remain substantial, across the whole industry. Therefore, cost reduction needs to be critical and continuous, without potentially putting the company in a position where it may face questioning in relation to the ethics of third party suppliers, particularly when it looks towards outsourcing into the developing regions.
Several other competitors within the market have suffered negative press, due to the use of suppliers associated with unethical practices. This presents Zara with a real opportunity to set itself apart from other low-cost retailers, by developing a specific ethical strategy that will enable it to retain a relatively low cost, but also allow it to sell itself as an ethical producer Okumus The company, therefore, needs to look towards other opportunities, for example, by changing the design of the product to reduce production costs, or looking at creating efficiencies in the supply chain, by transporting goods to a central warehouse that can then reduce the cots of transportation, overall.
A substantial focus needs to be placed on the design team and ensuring that it is continuously developing new products which are able to be produced at a relatively low cost. This will enable the company to retain its position for supplying fast fashion within the high street and continuing to attract customers into the store, on a regular basis.
Throughout the implementation of the business strategies, it is necessary to continuously evaluate whether or not certain avenues of activities are successful and whether alterations are necessary, in order to establish greater efficiencies.
For example, the supply chain needs to be monitored, on an ongoing basis, in order to identify any losses, either in time or money, so that these can then be reduced or even removed Grundy, The decision in relation to which products to design and produce is very much customer driven; therefore, it is suggested that customer reviews are obtained, on a regular basis, so that, where the customer is not being provided with a product that they choose, or are unmotivated to revisit the store, these instances are captured and dealt with, in the future.
Zara is in a particularly strong position within the fashion market, having established itself as a brand name that produces cutting-edge fashion ahead of its rivals, and at a low-cost. Despite this, it is important that the organisation recognises the forces that are impacting on the external market and uses its own internal strengths to ensure that it retains a competitive advantage, thus enabling it to maintain its position within the market, as one of the brand leaders.
A particular emphasis should be placed on the strengths within the supply chain, as this enables the organisation to bring products to the market, at a particularly rapid rate. Furthermore, cost pressures are also being placed on the organisation, which requires the design team to become more efficient when creating designs that can be turned into garments, at the lowest possible cost, without sacrificing ethical standings.
Simply put, it is argued that Zara needs to continue to do what it is doing, currently; however, it needs to do it better, with greater emphasis being placed on ethical behaviour, meeting customer demands for new and innovative fashion, while at the same time retaining low-costs, across every aspect of its operation. Building the Research Agenda. Emerald Group Publishing Limited. An International Journal , Vol. Kumar and Linguri, , Zara: If you enjoyed this article, subscribe to receive more just like it.
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