3.

4 Competitor environment analysis

The competitor analysis helps to better understand the competitors of Zara in terms of price,

branding and positioning. As there is no Zara store based in Mauritius, the analysis was

conducted on an international basis. The main competitor of Zara would include Mango, H&M

and Woolworths as they have similar style and price patterns. Indirect competitors are forever 21

and Tommy Hilfiger. The fashion industry tends to be very competitive (Macchion et al 2015).

The stores Mango, H&M, Woolworths and Forever 21 are very similar that sell trendy clothes

for men, women and kids. These brands operate worldwide, thus this can affect Zara’s sales.

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3.5 Opportunities and threats

Opportunities

1. Investment in better E-marketing: Zara has over 2000 stores worldwide but still lags behind

in terms of e-marketing, investing only 0,3% of sales. In this era of social media, e-marketing

is booming and Zara should take the opportunity to invest in this opportunity, that is selling

their products online. The strategy would increase their market share.

2. Investment in sustainable projects: As Zara is known to have reached the ‘C-label’ in

sustainable projects, the company could implement more changes to produce more

environmental friendly cloths to contribute significantly to the reduction of emissions (Rank

2017). The company could aim to reach the ‘B-label’ or even the ‘A-label’ which customers

would be more likely to buy their products due to the importance they give to protect the

environment.

3. Cultural research of countries where they operate: Zara could invest in research and

development of some of the cultures which their stores operates in, hence be culture sensitive

of the countries they are operating in (Martin 2000). For example, in China, they can analyse

what are the major trends within the country and get inspired for the new collection.

4. Expand with more stores worldwide

The fast fashion company could seize further opportunities to expand in more countries to

increase brand accessibility and revenues. For instance, Zara could sell in countries where they

do not have a physical store for example, Mauritius and they can invest to ship worldwide

(Petro 2015).

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5. Tackle emergent markets to grow revenues: here are also opportunities to expand in

emergent markets, namely in the BRICS: Brazil, Russia, India, China and South Africa. This

will increase their revenues and brand awareness and accessibility will be improved.

Threats

1. Fierce competition in the industry: The fashion industry is a very competitive market

(Gulberti 2018) and Zara tends to have major competitors such as H&M, Mango, Forever21.

The major competitors of Zara tend to have similar design which might affect the sales of Zara.

if Zara does not expose their products in the top marketing position, they might be losing

market share and revenue.

2. Lack of advertisement: Zara’s competitors advertise very often about their new collections

whether on social media or on their official website. Zara tends to lack creativity when it comes

to regular advertisement. Hence, due to poor adverts, they might lose their top position as low

awareness might make their customers switch brands.

3. Trade barriers imposed: As an international brand, trade barriers can be an issue. As Zara is

an international brand (Zara 2018), while importing and exporting in different countries, tax,

quota and tariffs of each country can affect the retail price. Often operating in countries with

high inflation and economic problems can affect the sales and revenue of the company (Sanders

2011).

4. Reputational risk with the problem of plagiarism: Zara has been facing accusation of

copying other designers which has led to several debates and hence, tarnished Zara’s brand

image.

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4.0 Internal Analysis

4.1 Resources and capabilities

Resources

Resources are the assets that an organization possesses in order to operate. These assets can be

classified into tangible, intangible and human (Diefenbach 2016). Figure 2 below shows the

different resources owned by Zara classified under tangible, intangible and human and an analysis

of those is given in the table below.

Tangible resources
2251 Physical stores
Prime store location
Manufactuting plants
Human resources Finance
Intangible resources
Designers
Brand value
Well trained
IT system
employees
Inventory model

Zara Resources

Figure 2: Zara’s resources

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Capabilities

A firm’s capabilities are what can be done with the company’s resources in order to achieve a

desired result (Feng, Morgan and Rego 2017). First and foremost, Zara has used its proprietary

information technology system to be able to respond fast to customer trends. As a result, a new

launched product can be in store within two weeks compared to six months for a competitor. With

Zara’s inventory model, it benefits the company as it cuts down inventory costs because they use

the just-in-time stock management. This involves manufacturing only the demanded quantity to

avoid wastage (Cortez et al 2014).

Moreover, with the use of its financial resources the company invests in opening new outlets

while minimizing the cost of advertising investing only 0.3 % of their sales on promotions which

made the company lose market share in 2017 (Roll 2018).

Also, designers introduce around 11,000 new styles each year giving customers a vast choice.

The outcome can be the retention of existing customers and attracting new ones as competitors

like H&M do not provide such a large choice (Lopez and Fan 2009). Unfortunately, in 2018, Zara

is short of ideas and has been involved in stealing other company’s designs (ENCA 2018).