Market penetration strategy
How does ZARA use intensive growth strategies to increase its sales? The first step is market – penetration strategy.
ZARA encouraged its current customers to buy more. This work when ZARA noticed major weaknesses in competitors’ product or marketing programs.
For example, compared with Swedish retailer Hennes& Mauritz (H&M), ZARA moves fast. With an in-house design team based in La Coruña, Spain, and a tightly controlled factory and distribution network, the company says it can take a design from drawing board to store shelf in just two weeks. That lets ZARA introduce new items every week, which keeps customers coming back again and again to check out the latest styles.
In contrast to ZARA, H&M uses a slightly different strategy. Around one quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories. As at ZARA, these items move quickly through the stores and are replaced often by fresh designs. But H&M also keeps a large inventory of basic, everyday items sourced from cheap Asian factories.
ZARA's success is because at least half its factories are in Europe, where wages are many times higher than in Asia and Africa. But to maintain its quick inventory turnover, the company must reduce shipping time to a minimum. The fast-fashion approach also helps ZARA reduce its exposure to fashion faux pas.
Philip Kotler discussed that, the secret to ZARA’s success is its control over almost every aspect of the supply chain, from design and production to its own worldwide distribution network. ZARA makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow –moving suppliers. New styles take shape in ZARA’s own design centers, supported by real-time sales data. New designs feed into ZARA manufacturing centers, which ship finished products directly to 450 ZARA stores in 30 countries, saving time, eliminating the need for warehouses, and keeping inventories low. Effective vertical integration makes ZARA faster, more flexible, and more efficient than international competitors such as Gap, Benetton, and H&M. ZARA can make a new line from start to finish in just three weeks, so a look seen on MTV can be in ZARA stores within a month, versus an industry average of nine months.
Market development strategy
How does ZARA use a market development strategy?
First, it identified potential users groups in the current sales areas.
For example, some customers believe that Gap is for highschoolers and college students. ZARA is timeless, classic and unique. In fact, it is a good idea to anaylze student ’s opinion on fashion. It is really a big market.
Second, ZARA consider selling in new locations in new market.
ZARA’s parent company, Inditex, got fastest growing clothing manufacturer in the world. ZARA, Inditex’s fastest growing division, turns its inventory twice as fast as major competitors, with an inventory-to-sales of 7% compared to an industry average of 14%. Their profitability in European operations (15%) is fifty percent higher than that of its major competitors. From the Inditex’ annual report, the researcher that ZARA focus on the developed fashion market (or country). For example, it has 20 shops in Belgium, 48 shops in Portugal, 98 shops in France. Compared with 7 shops in China, 3 shops in Thailand.
ZARA encouraged its current customers to buy more. This work when ZARA noticed major weaknesses in competitors’ product or marketing programs.
For example, compared with Swedish retailer Hennes& Mauritz (H&M), ZARA moves fast. With an in-house design team based in La Coruña, Spain, and a tightly controlled factory and distribution network, the company says it can take a design from drawing board to store shelf in just two weeks. That lets ZARA introduce new items every week, which keeps customers coming back again and again to check out the latest styles.
In contrast to ZARA, H&M uses a slightly different strategy. Around one quarter of its stock is made up of fast-fashion items that are designed in-house and farmed out to independent factories. As at ZARA, these items move quickly through the stores and are replaced often by fresh designs. But H&M also keeps a large inventory of basic, everyday items sourced from cheap Asian factories.
ZARA's success is because at least half its factories are in Europe, where wages are many times higher than in Asia and Africa. But to maintain its quick inventory turnover, the company must reduce shipping time to a minimum. The fast-fashion approach also helps ZARA reduce its exposure to fashion faux pas.
Philip Kotler discussed that, the secret to ZARA’s success is its control over almost every aspect of the supply chain, from design and production to its own worldwide distribution network. ZARA makes 40 percent of its own fabrics and produces more than half of its own clothes, rather than relying on a hodgepodge of slow –moving suppliers. New styles take shape in ZARA’s own design centers, supported by real-time sales data. New designs feed into ZARA manufacturing centers, which ship finished products directly to 450 ZARA stores in 30 countries, saving time, eliminating the need for warehouses, and keeping inventories low. Effective vertical integration makes ZARA faster, more flexible, and more efficient than international competitors such as Gap, Benetton, and H&M. ZARA can make a new line from start to finish in just three weeks, so a look seen on MTV can be in ZARA stores within a month, versus an industry average of nine months.
Market development strategy
How does ZARA use a market development strategy?
First, it identified potential users groups in the current sales areas.
For example, some customers believe that Gap is for highschoolers and college students. ZARA is timeless, classic and unique. In fact, it is a good idea to anaylze student ’s opinion on fashion. It is really a big market.
Second, ZARA consider selling in new locations in new market.
ZARA’s parent company, Inditex, got fastest growing clothing manufacturer in the world. ZARA, Inditex’s fastest growing division, turns its inventory twice as fast as major competitors, with an inventory-to-sales of 7% compared to an industry average of 14%. Their profitability in European operations (15%) is fifty percent higher than that of its major competitors. From the Inditex’ annual report, the researcher that ZARA focus on the developed fashion market (or country). For example, it has 20 shops in Belgium, 48 shops in Portugal, 98 shops in France. Compared with 7 shops in China, 3 shops in Thailand.
Product development strategy
Management should also consider new- product possibilities. ZARA develop new features quickly because it has a fast development from concept to point of sale. On average, this takes 6 weeks. ZARA’s “affordable fashion” positioning clearly denotes that it’s not a luxury brand, its target customers are a great number of people that are eager to purchase fashion while quite sensitive to prices. They want to be different, unique. The relentless introduction of new products in small quantities at fast speed and at affordable prices seems to be the answer to the large scale customization requirements of the target customers.
ZARA also has super business teams which constantly monitor external developments – consumers on catwalks, at airports, shopping areas, sport events, movies and other events. It seems that ZARA, has some 200 of such teams traveling the world with the aim of discovering new fashion behavior and trends. This helps explain why ZARA’s team, which consists of passionate and able designers, experienced market specialists and procurement and production planners, is able to annually create approximately 40,000 new designs from which about 10, 000 are so quickly selected for and put into production.
Most important thing is, instead of more quantities per style, ZARA produces more styles, roughly 12,000 a year. Thus, even if a style sells out very quickly, there are new styles already waiting to take up the space.
Diversification strategy
Diversification growth makes sense when good opportunities can be found outside the present business. A good opportunity is one in which the industry is highly attractive and the company has the mix of business strengths to be successful.
ZARA could seek new products that have technological or marketing synergies with existing product line, even though the new products themselves may appeal to a different group of customers. It might start a computer – tape or information technology aided manufacturing operation . for example, Once the team selects a prototype for production, the designers refine colors and textures on a computer-aided design system. If the item is to be made in one of ZARA's factories, they transmit the specs directly to the relevant cutting machines and other systems in that factory.
The constant flow of updated data mitigates the so-called bullwhip effect—the tendency of supply chains (and all open-loop information systems) to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations in factory orders after it's transmitted through wholesalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, ZARA lets them adjust 40 percent to 50 percent. In this way, ZARA avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.
Management should also consider new- product possibilities. ZARA develop new features quickly because it has a fast development from concept to point of sale. On average, this takes 6 weeks. ZARA’s “affordable fashion” positioning clearly denotes that it’s not a luxury brand, its target customers are a great number of people that are eager to purchase fashion while quite sensitive to prices. They want to be different, unique. The relentless introduction of new products in small quantities at fast speed and at affordable prices seems to be the answer to the large scale customization requirements of the target customers.
ZARA also has super business teams which constantly monitor external developments – consumers on catwalks, at airports, shopping areas, sport events, movies and other events. It seems that ZARA, has some 200 of such teams traveling the world with the aim of discovering new fashion behavior and trends. This helps explain why ZARA’s team, which consists of passionate and able designers, experienced market specialists and procurement and production planners, is able to annually create approximately 40,000 new designs from which about 10, 000 are so quickly selected for and put into production.
Most important thing is, instead of more quantities per style, ZARA produces more styles, roughly 12,000 a year. Thus, even if a style sells out very quickly, there are new styles already waiting to take up the space.
Diversification strategy
Diversification growth makes sense when good opportunities can be found outside the present business. A good opportunity is one in which the industry is highly attractive and the company has the mix of business strengths to be successful.
ZARA could seek new products that have technological or marketing synergies with existing product line, even though the new products themselves may appeal to a different group of customers. It might start a computer – tape or information technology aided manufacturing operation . for example, Once the team selects a prototype for production, the designers refine colors and textures on a computer-aided design system. If the item is to be made in one of ZARA's factories, they transmit the specs directly to the relevant cutting machines and other systems in that factory.
The constant flow of updated data mitigates the so-called bullwhip effect—the tendency of supply chains (and all open-loop information systems) to amplify small disturbances. A small change in retail orders, for example, can result in wide fluctuations in factory orders after it's transmitted through wholesalers and distributors. In an industry that traditionally allows retailers to change a maximum of 20 percent of their orders once the season has started, ZARA lets them adjust 40 percent to 50 percent. In this way, ZARA avoids costly overproduction and the subsequent sales and discounting prevalent in the industry.
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