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ZARA: Fashion Follower Industry Leader

Agenda. Zara has a Sustainable Competitive AdvantageStrategic Advantages Financial Analysis and ComparisonStrategic DrawbacksPossibilities for FailureOpportunities and Recommendations. Strategic Advantages. Strategic Advantages. 1. Vertical IntegrationMerchandising strategyScarcity and Oppor

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ZARA: Fashion Follower Industry Leader

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    1. ZARA: Fashion Follower Industry Leader Business of Fashion Case Study Competition Amanda Craig, Charlese Jones, Martha Nieto Philadelphia University April 17, 2004

    2. Agenda Zara has a Sustainable Competitive Advantage Strategic Advantages Financial Analysis and Comparison Strategic Drawbacks Possibilities for Failure Opportunities and Recommendations

    3. Strategic Advantages

    4. Strategic Advantages 1. Vertical Integration Merchandising strategy Scarcity and Opportunity Buy now, not later Fast Fashion Up-to-date designs

    5. Strategic Advantages

    6. Strategic Advantages 3. Centralized Distribution Center Place to move merchandise Minimizes lead time Shipped by time zones

    7. Strategic Advantages 4. Economical International Expansion Low advertising 5. Prestigious Image Real estate department Window display department

    8. Strategic Advantages 6. Broad Market �A young educated market that likes fashion and is sensitive to fashion� (ZARA VIDEO)

    9. Strategic Advantages

    10. Financial Analysis and Comparison

    11. Comparison Why compare and analyze? H&M is Zara�s biggest competitor Differences Similarities To prove that Zara has prospect of sustainable growth must compare financial differences to a major competitor, one that has more experience in the global market. Differences: H&M outsources all production, spend more on advertising, price-oriented as seen in ads Similarities: european based, fashion forward at lower price, strong international expansion strategies First compared their operating incomeTo prove that Zara has prospect of sustainable growth must compare financial differences to a major competitor, one that has more experience in the global market. Differences: H&M outsources all production, spend more on advertising, price-oriented as seen in ads Similarities: european based, fashion forward at lower price, strong international expansion strategies First compared their operating income

    12. Financial Analysis

    13. Financial Analysis Inditex is more efficient in generating profits relative to sales as seen in their higher operating profit margin 21.6% or .21 euros for every euro in sales H&M is only generating .13 euros for every euro in sales. Although H&M�s sales were higher in 2001 their operating income was lower due to their high cost of goods sold.Inditex is more efficient in generating profits relative to sales as seen in their higher operating profit margin 21.6% or .21 euros for every euro in sales H&M is only generating .13 euros for every euro in sales. Although H&M�s sales were higher in 2001 their operating income was lower due to their high cost of goods sold.

    14. Financial Analysis Inditex has 1,284 stores but profit per store is 54.8% H&M has 771 stores and profit per store of 76.4% Inditex is building more stores based on projections and anticipated future valueInditex has 1,284 stores but profit per store is 54.8% H&M has 771 stores and profit per store of 76.4% Inditex is building more stores based on projections and anticipated future value

    15. Strategic Drawbacks

    16. Strategic Drawbacks 1. Inability to penetrate U.S. market Poor supply chain strategy Diseconomies of scale 2.Vertical integration Lack of economies of scale Higher costs Technology Research & Development

    17. Possibilities for Failure

    18. Possibilities for Failure 1. Euro changeover Increased production costs Higher prices for consumers Decreased sales 2. Prices of competition Quota elimination of 2005

    19. Possibilities for Failure 3. Direct competition Department stores H&M Quick to internationalize Broad merchandise assortment

    20. Possibilities for Failure 4. Cannibalization Location strategy Spain example

    21. Opportunities and Recommendations

    22. Opportunities and Recommendations 1. Specialized Products 2. Internet Retailing www.zara.com 3. Second Distribution Center in the Americas Expansion in Brazil, Argentina or Mexico

    23. Conclusion Potential for sustainable growth High operating income Unique and strong business model Ability to face weaknesses and challenges Various opportunities of expansion Establishing new standards for retailers

    24. Thank You

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