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The Zara case of creative business

This is a report on the ‘Creative Businessman ship in the Textile Value Chain’ course taught by Anders Heden and Jane McAndrew at the University of Boras, Sweden. The report includes the selected product line for Zara (women’s wear) and a selected geographical market (Sweden). Author tried to make a simple definition of industry for the company, Zara. Two competitors in Sweden have been considered for Zara who are H&M and Gina tricot. In addition, a simple diagram of five force analysis for the company Zara and a simple SWOT analysis have been done. Moreover, a strategic map for the company Zara has been done with its competitor’s in Sweden. The study was done around 2010 but the methodology can be used now as well.

Keywords: SWOT analysis, The Five Force model, Strategic maps.

1. Introduction:

1.1. Product line of Zara:

Trendy clothing brand Zara is introduced around the world for dressing men, women and children in a luxurious retail environment that feels a lot more expensive and exclusive than it is. Zara the largest international fashion trade chains, works as an integrated retailer in the value chain and designs, produces and distributes high and fast fashion to a comparatively reasonable price. According to Zara website of 2007, Zara stores have men’s clothing and women’s clothing. Both of them are subdivided to: Under garment, upper garment, shoes, cosmetics and complements. Zara’s catalogue also adds a line for children’s clothing. For this assignment, author concentrated only for the women’s clothing. [2]

1.2. Geographical market of Zara:

According to August 2009[update], there are 1,560 Zara stores around the world in more than 70 countries. But for this case study, Zara’s product line of women’s clothing in Sweden was considered. [2]

2. Industry definition:

Zara is a fashion brand that has a vertically integrated production system. It has four step business systems: Design, sourcing and manufacturing, distribution and retailing consecutively. [8]

Zara was illustrated by Louis Vuitton fashion director Daniel Piette as possibly the most innovative and devastating retailer in the world. Zara has also been described as a Spanish success story by CNN. [2] The blend of technology that helped to make a strategy that Zara has used seems to break all of the laws of the fashion industry. The firm avoids advertising, rarely run sales, and an industry where nearly every major competitor outsources manufacturing to low cost countries. But Zara is producing lot of its production in house [so can offer shorter lead time]. The excellent management system and strategy are beating the competitors, and it has turned the founder of Inditex, Amanico Ortega, into Spain’s wealthiest man and world’s richest fashion executive. [3]

3. Competitors:

3.1. H & M:
It is a fast fashion chain offering clothing and cosmetics under its own brand. It opened its first store in Sweden in 1947. The H&M, with the aim to offer fashion and quality at the reasonable price, has an in-house design and purchasing department whose goal is to give their customer the newest fashion trends. The collections of H&M are wide and new items come into the stores every day and its assortment is based on specific apparel like outerwear, shirts, pants, sweaters, and jeans. Different concepts for women are: H&M ladies and cosmetics, H&M sports and accessories, H&M organics and under wear, H&M trends and ladies shoes, H&M BIB, H&M Mama and LOGG, H & M denim. [5]

3.2. Gina Tricot:
It has a fast fashion chain, which offers mainly tops in tricot with high quality to a little price. It opened its first twelve stores in Sweden in 1997. At the time of study, it had almost 110 stores in Sweden, Norway, Finland and Denmark and over 80 stores in Sweden. Its head office is in Boras, Sweden. It has 150-200 independent suppliers in Europe [Turkey and Greece] and in Asia [Hong Kong, China, Bangladesh and India].The turnover of 2007 was over 1 billion SEK. Sales in Sweden 2007 were 650 MSEK. [6]

Gina tricot always offers a lot of fashion with expectable price and weekly new products for the girls and women’s of all ages. Their principle of business is to have stores in the best places where demand of new items constantly can be fulfilled, mainly tops in Gina Tricot of own design at a lucrative price to fashionable women. When girls go out on every Friday, they like to put on a new top and it is mainly the cheap tops speeding up the sales. The secret of success is a combination of knowledge, in-house design, short lead times, ability to recognize the actual demand, and particularly due to the market’s highest turnover rate.

They have the following collections- Tops, Sweaters and cardigans, skirts and shorts, trousers and jacket, dresses and tunics, Jeans and under wear. In addition, Accessories- jewellary, bags, belts etc. [7]

The Five Force Model:

Schematic diagram of the Five Force model for Zara
Figure-1: Schematic diagram of the Five Force model for Zara

The five force model describes the competitive advantage of Zara over H&M and Gina Tricot in Sweden.

4.1. Strategic Maps of the Zara with its competitors H&M, Gina Tricot:

The comparison was done depending on author’s points of view. It may differ in reality.

 Price versus Product Quality
Figure-2: Price versus Product Quality

Although products from Zara are costly, it is good for use.

Product range versus Product Quality
Figure-3: Product range versus Product Quality

Zara has more product range as well as product quality.

Ethics versus Product Quality
Figure-4: Ethics versus Product Quality

Zara has best ethics as well as product quality.

5. SWOT [strength-weakness-opportunities-threats] analysis:

05Zara is performing fashion business in the world with high quality not only in Sweden but also in the world. Although Zara’s products are costly than the products of H&M and Gina Tricot, it has very authentic characteristics like- product quality, ethics and product range. As it is using modern production techniques and it has production facilities in Europe, Zara has a bright future in the Sweden. They can introduce a new product in market very easily and rapidly. The techniques are, for instance- Just-in-time manufacturing system, point of sales tracking, electronic data interchange etc. It has helped the company to reduce the forecasting error tremendously. Moreover, the company is introducing organic cotton dresses which have helped the company to become famous.

6. Conclusion:
The research work can help finding a way to know or examine about the fashion companies. Zara, H&M and Gina Tricot are some real example. I can be suggested to the fashion company Zara to increase marketing activities. This model would help examining other brands in a particular perspective.

7. References:

    1. www.zara.com

    2. http://en.wikipedia.org/wiki/Zara_(clothing)

    3. http://www.gallaugher.com/Zara%20Case.pdf

    4. http://en.wikipedia.org/wiki/H&M#cite_note-AR2008-0

    5. www.hm.com

    6. http://sv.wikipedia.org/wiki/Gina_Tricot

    7. ginatricot.com

    8. Zara DVD: supplied by Jonas Larsson, Course leader: The textile applications of supply and demand chain management, University college of Boras.

    9. Oral sources: Anders Heden & Jane McAndrew, Creative businessman ship in the textile value chain course teacher, University of Boras.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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