Introduction
Over the recent years, companies have been forced to review their production strategies to remain relevant and operational in the highly competitive market (Freeman, 2010). Strategic planning is the backbone of the company’s success. Zara Company was a leader in the fashion industry for many years, but in the last decades, they have significantly lost part of their market share to the majority of the foreign competitors. With these challenges, the company has greater opportunities to cut on their cost of operation, diversity their productivity, expand their market presence and adequately satisfy their customers. The management desires to increase their profitability and sales volume while making the company competitive to improve their market share. The paper seeks to establish a strategic plan to grow Zara Company over the next three years and how this will affect their success and create their competitive advantage and finally determine the method to measure the success of the strategic plan.
Zara’s History, Products, and Major Competitors
Zara is a popular fast fashion and accessories design and Manufacturing Corporation based in Arteixo, Galicia (Tokatli, 2008). It was declared as one of the most efficient and market responding company in the fashion industry in the UK. Mr. Amancio Ortega, the founder of the company, is globally acknowledged for his fundamental strategic decision and market competition winning strategies that are currently followed by the majority of the competitors throughout the fashion industry. Zara, a brand of Inditex was founded around 1975 and is presently a famous fashion icon. The brand generates high-profit margin for the organization, and the majority of the market captured by Inditex is for Zara. The company has been serving the industry for decades and continuously satisfies its customers.
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Among the most competitive apparels in this industry are Gap Inc., H&M, and recent Fast Retailing. According to Tokatli (2008), the management apparently has taken strategic decisions that are entrepreneurial, and still, the majority of the stores in the fashion industry heavily borrow from Zara. These decisions were arrived at after an intensive environmental analysis, external analysis, competitive advantage and stakeholder analysis to come up with the most effective strategy. As such, Zara has attained their primary objective and are currently leading globally. Zara has the potential of establishing more stores.
Situation Analysis
Based on the case study, it is clear that Zara has formalized their mission statement and currently, they strive to achieve their purpose through various adopted strategies. With a well-established a mission statement, it is clear that Zara will be able to meet uniformity of purpose, offers a strong foundation for the allocation of resources and establishing organizational climate. The mission statement of Zara emphasizes on their primary objectives which in this case are to become an environmental-friendly organization and contributes towards societal growth. They allocate more resources to the eco-friendly operations and boost their value and supply chain than investing in a marketing campaign (Tokatli, 2008).
Based on the fact that their mission is direct and clear, it becomes much easier for the staff to set their mindset and behavior to be aligned with the objective of the company. A mission statement ensures that employees understand what they are supposed to do and how to do it to accomplish the organization’s objectives. Zara’s purpose is to become a fast fashion store concerned with the sustained environment and long-term goals derived from the mission statement. Through their business model; Zara aims to contribute to the community development and environmental sustainability. Therefore being an eco-friendly company is actually what drives the company in the right direction besides fulfilling the fashion needs of their clients.
SWOT Analysis
Strengths
Zara has a highly innovative method of production which is a vital strength of the company success because it presents them with prospective new designs of brands. Zara has sound financial resources that will enable them to fund all their operation, materials and transportation. They have invested in brand differentiation where they produce different products which have a stronger marketing orientation (Tokatli, 2008). Zara has extensive critical experience in the production and distribution of the fashion and jewelry stores, therefore; they are in a better position to explore the market via their innovative cloth designs and jewelry stores. Zara operates in various parts of the world an aspect that has made their operation global, and they continue expanding their operations in prospective economies. Zara Corporation further prides itself on high-quality customer services. The employees form core strength of the firm because they are highly competent and well compensated which ultimately motivates them to attend to customer complaints immediately and offer services that meet customers satisfaction.
Weakness
Zara spends a lot of time to put their new products on the market which limits their competitiveness regarding targeting the clients first. They have further been recording consecutive losses regarding their net income. Subsequently, they currently lack a plan for executive succession within the short term meaning that in the event the management quits the job or die, they would have the greater problem in replacing him. With inefficient equipment, they might face enormous challenges to deliver high quality works demand in the modern day society. They further reported weak EPS in negative numbers that were very unattractive to all their current and potential investors.
Opportunities
The vast market is a more exceptional opportunity that Zara can exploit. Tokatli (2008) points that there exist an enormous market segment which the company can utilize and at the same time target potential clients which ultimately will increase their consumer base generating higher profits. Secondly, the market grows compared to the company’s current sales which imply that they have a higher chance to explore the massively expanding market through increasing their production to satisfy the needs of rapidly growing markets. Lastly, the consumer’s demand for fashion creates higher demand for innovative brands. With technological improvement, innovative brands will continue to gain attention from emerging customers which will increase the demand for Zara. Therefore, Zara will be able to diversify their products and improve its quality.
Threats
Competition is the main threat facing the company since they own huge market share and will reduce the capability of Zara to increase their sales volume and productivity. Secondly, there is the possibility of new entrants entering the market which would ultimately raise the level of competition hence Zara would not be able to explore the market to the maximum. Lastly, it is clear there are higher chances of trade secret’s theft; therefore, cases of software piracy are very high resulting from illegal brand’s copying. Such a situation might not be easy for Zara to control and will, in the long run, impact the market’s customer loyalty because the pirates would be of poor quality and highly un-innovative (Tokatli, 2008).
Strategic Plan
Competition
Competition in the fashion industry is one of the critical areas of Zara’s strategic plan because it would ensure that they remain competitive in the global market. The industry is significantly competitive with various rival firms operating in the market within the same line of production. Among the most competitive apparels in this industry are Gap Inc., H&M, and recent Fast Retailing. Among the significant specialty apparel retailers in the market globally, Inditex was reported to have taken the first position. Previously, Gap was well known globally for their simple basics such as jeans, khaki, and even T-shirts. They operated the ‘buying’ model for the products and manufacturing of their garments and sold them to other producers throughout the globe. The company should expand its operation in foreign countries to expand their market.
The target market selection is one of the essential aspects of the determination of the success of the firm in a highly competitive industry that forced the players hence the need to adopt an expansion strategy. Zara was the first retailer to ever opened new stores in various countries outside their states of origin continent. To ensure that the company stays ahead of its competitors in the market, Zara should apply the forwards integration. Freeman (2010) posits that the company should further undertake some horizontal integration via acquisition, which helps to strengthen their power and visibility in the industry. Diversification Strategies will also play a considerable role to enhance the competitiveness of Zara in the global fashion industry where it completes their products lines by selling accessories that complement their major brands which are the apparel.
Adoption of modern technology to automate all the production process
Automation of the production processes through the adoption of new sophisticated technologies is a critical area that should be included in the company’s strategic plan. Its overall business operation is comprised of the design, production, and even distribution processes and all should be automated to enable Zara to become a key player in the industry. Tokatli (2008) posits that automation will allow the company increase their productivity, reduces wastage and errors and widen their production line. Competitive advantage arises because the business operations are combined with client-responsiveness that distinguishes them from their competitors. Zara is the only brand in the market with the capacity to produce latest designs demanded by consumers and make it available at their stores within 14 days. Since Zara would always be the first to introduce a design in their store, clients tend to make the company their first choice when it comes to shopping or even browsing for clothes which gives them a competitive advantage.
The retailing firms in Spain often go through an intense technological progression and advancement. Most competitors in the fashion industry have managed to introduce new technologies and innovative concept in the market regarding sales point setting and production procedure. Zara on the other hand successfully launched their technological growth by opening an eco-friendly store which seemingly has worked for them by positioning them strategically in the market. Additionally, their processes of production have been improved and made more manageable by breaking down their methods into uncomplicated tasks. Most of the tasks should be completed using sophisticated modern technologies and the final assembly done by employees (Freeman, 2010).
Customer Focused Strategies
Customer satisfaction is arguably another major area that should be included in the strategic plan of Zara. The primary competitive advantage that Zara prides itself of is the customer-responsiveness). In all their operation and strategies, Zara always ensures that they put the interests of their customers first. Once a client has been satisfied, it becomes much easier to retain and change him to a repeat consumer who gives the company a competitive advantage over its rivals (Cachon & Swinney, 2011). Although Zara lacks significant investment in the marketing, they much rely on the most critical aspect of the business which is the consumer; therefore, there is the need for them to focus on customer satisfaction to attract new customers and retain them. The company strategically focuses on its clients, listen to what they have to say regarding the business and at the same time obtain necessary feedback and utilize the collected information to evaluate their next production that would satisfy their customers.
They have efficient systems of communication with their clients meaning that changes in the market will flow directly to Zara’s designers. Freeman (2010) asserts that an unremitting and balanced market communication that was adopted by Zara has enabled them to understand and respond to clients quickly. Additionally, it has helped them to meet customer’s needs and expectation on time resulting in the massive success of the company. They also provide their customers with the higher satisfaction which is apparently accomplished via their value chain emphasis in addition to monitoring products’ flow.
Method to Measure the Success of the Strategic Plan
It is true that strategic planning is merely a process that will yield the greater level of alignment and agreement within Zara Company. An efficient strategic planning process will yield a list of precise commitments which are measurable objectives to be worked on. For the strategic plan adopted by Zara, the outcome and success will be measured regarding the performance measures (Freeman, 2010). The first strategy was focused on improving the competitiveness of Zara in the domestic and global market. The competitive nature of Zara in the market would measure in terms of the overall market share acquired, customer base, and sales volume in addition to profitability. It is evident that when a company becomes competitive, its market share will expand, will be able to attract and retain more customers who will translate into increased sales and profitability.
Investment in modern technology to automate all its production process was the other critical strategy adopted by Zara. Under this strategy, the company would employ the use of new and sophisticated technologies that will help automate all the process. The success of the strategy will be measured regarding reduced level of flaws and errors, increased productivity and product diversity that is associated with the use of modern technologies (Cachon & Swinney, 2011
The last strategy was customer focused to ensure that they apparently address all the current and emerging needs of their customers. The success of the strategy will be measured regarding the customer satisfaction which would be regarding the number of retained customers, referral, and new customers.
Conclusion
The paper has critically focused on Zara Corporation as a case to establish a strategic plan that would enable the company to grow within three years and ways to measure potential success achieved. It is evident that Zara is enjoying a robust competitive leadership within the global fashion industry. Fundamentally, the strategies adopted will offer them a stronger base that distinguishes them from other rival organizations. The introduction of a strategic change is a complicated procedure ranging from the generation of ideas, adoption, and implementation. Nevertheless, to stand out in both the scope and business within the currently growing markets and globalization, Zara should formulate and implement the identified innovative strategies. No single strategy will entirely accomplish the intended objective; therefore, Zara will have to determine the most critical and implementable strategic combinations for their future.
References
Cachon, G. P., & Swinney, R. (2011). The value of fast fashion: Quick response, enhanced design, and strategic consumer behavior. Management science , 57 (4), 778-795
Freeman, R. E. (2010). Strategic management: A stakeholder approach . Cambridge university press.
Tokatli, N. (2008). Global sourcing: insights from the global clothing industry—the case of Zara, a fast fashion retailer. Journal of Economic Geography , 8 (1), 21-38.
