Zara: Global Marketing and Online Business Practices

This report discusses a critical evaluation of Zara's online business practices, including Porter's five forces analysis, PESTLE analysis, SWOT analysis, and marketing strategies. It also explores Zara's internationalization models and theories.

Running Head: BUSINESS 0
ZARA
Global marketing and online business practices
2/22/2019

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Introduction
Zara is a Spanish clothing brand established in 1975 by Rosalia Mera and Amancio Ortega
Gaona. It is one of the most selling brands of INDOTEZ, which is the biggest fashion retailer
in the universe. It is now accessible in around 90 nations and in 6344 stores internationally.
They are popular for its innovative designs as each line is encompassed of 5-divisions
involving cosmetics, upper garments, lower garment, shoes, and complements (Islam, 2016).
They have the capability to launch new designs and trends in a shorter span. Despite the
operation conducted by ZARA, it has become a prominent fashion retailer in the world
(Anwar, 2017). In the following report, an effort has been made to discuss a critical
evaluation of Zara online business practices, which discusses Porter’s five forces analysis for
identifying the competition of the business. Apart from that, it also discusses the PESTLE
analysis, which is a tool utilized to monitor and evaluate the macro-environmental aspects
that have a major influence on an organization. SWOT analysis recognizes strength,
weakness, opportunities, and threats associated to the competition of the business.
Additionally, it elaborates the marketing strategies, which discuss the segmentation,
targeting, and positioning associated with the consumer trends. Considering the fact that Zara
is a global company, the analysis has been done in support of the internationalization models
and theories adopted by the organization.
Organization and Industry analysis
Zara was founded in 1975, which is the flagship of the organization Inditex, a holding
company situated in Galicia. In a relatively short span, they have become the second leading
clothing retailer in the world. Their mission is to get a hold of large market share in respect to
the fashion conscious urbanites all over the world and concentrate on fulfilling the needs and
preferences of their customers (Toivonen, 2016).
Industry analysis
The model analyses and recognizes 5 competitive forces that develop and assist the
organizations to evaluate their industry degree of competitiveness. The following is the
description of Porter’s five forces analysis of Zara-

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(Abalkhail, 2019)
 A barrier of Entry- It is stated that the apparel industry is developing; the average
growth rate is slightly low because of the high saturation point of market potential.
When it comes to quality and assurance of products, it can be argued that it does not
vary too much but as a brand, it makes worth of it. Zara owes its parent growth and
retail chains involve 448 new stores as Bershka and Massimo Dutt which states that
its cost growth is exceeding its sales growth (Moutinho and Phillips, 2018).
 New Entrants-It is stated that the local market is not saturated, there are almost no
hurdles for acquisition as the store, and storage can be rented. Zara invests in real
estate business to recognize prime locations for its outlets. Therefore, the risk for the
organization is relatively low as compared to its competitors.
 The threat of substitutes- It is stated that consumers are always attracted to quality
trends products at more affordable prices. The threat from other organization can
deliver better quality products at minimum possible prices. Their main competitors
are Gucci, Louis Vuitton, and H&M. In this case, the substitute products are a weak
factor in the apparel industry as there are products, which are available with poor
quality and costly. On the other hand, Zara products are more reasonable with
exceptionally high quality. They have the highest sales growth as a comparison to
their competitors as well as it is noted that in online also only 10% of the stock is
Competitive
Rivalry
Substitute
products
Bargaining
power of
Consumers
Entry
barriers
Bargaining
power of
suppliers
High
Low Medium
Low
High

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unsold. Zara has very good quality and H&M have very competitive pricing strategy
as in respect of high quality, their low-price products suffer (Gassmann,
Frankenberger and Csik, 2016).
 Bargaining power of consumers- Zara has grab the minds of the customers by
delivering limited stocks and by rapidly replenishing its products. They are not
capable of protecting their interests as the discounts are provided after a specific
period. Consumers are rarely capable to identify exactly what they need on every
product. Zara invests around 0-0.3% of its overall budget, satisfy the needs of the
clients, and strive to maintain loyal customers (Di Benedetto, 2017).
 Bargaining power of suppliers- It is stated that Comditel, a wholly owned subsidiary
of Inditex is in control of traders’ association and it has a categorization of more than
200 external providers. Zara offers its suppliers with license contracts so that they are
stuck with the variations in designs that lessen their position in the market (Danemo,
2018).
 Competitive rivalry- It is stated that the competition among existing organizations in
the clothing industry is very vicious. Zara does not only contend with Spanish brands
as Springfield, but it also strives with European brands as Louis Vuitton and H&M.
The chance of buyers cost of switching towards another brand, which is more
focussed towards the reputation of the brand (Trapanese et al., 2015).
Situational analysis
PESTEL Analysis
It is stated that analysis of the Zara model elaborates the external aspects impacting its
operations is described below-
 Political factors- It is stated that political parties in a country are accountable for
maintaining the political scenario. Zara has been in Spain until now and has acquired
in the U.K. For expansion in business in the U.K. and more countries, political
support should be needed significantly. The most common political factor affecting
Zara is the financial regulation of U.K. Their biggest export market for apparel
industry for about 74% of its exports, which has motivated its sales growth
(Thompson and McLarney, 2017).
 Economic factors- Economic forces can have a considerable effect on operations of
the company subsequently apparel industry is very price conscious and in crisis,

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consumers will be willing to expend less on luxurious clothes. Zara works in the
whole universe involving the U.K., which impacts on regional economic crises can
be avoided at some point. It is stated that the British exit from the European Union
has resulted in pound devaluation leading to higher costs of living and inflation rates
with less disposable income (Stewart et al., 2017).
 Social Factors-These factors are significantly analyzing the specific aging structure
of consumers of Zara apparel as young personnel striving for fashionable clothes
mostly wear it. For ex., the U.K. market has high purchasing power as compared to
Zara do not match with the demand of the potential customers. It is indicated that
people commonly purchased things associated with their culture. Therefore, they
have to believe in experimentation and sells fashion that is suitable for local
individuals.
 Technological factors- Technological factors are not commonly important when it
comes to the clothing segment as because of its business model, which is an
exception. They have implemented an RFID system for enhancing the responsiveness
of the customers and increases their reach and efficiency. Zara is utilizing the
advancements in technology largely in U.K. as all information is flowing on a daily
basis (Li and Alexander, 2017).
 Environmental factors- These factors play a significant factor as the clothing
industry utilizes energy, water, and other resources, which should be wisely utilized
and align with environmentally friendly policies. They have also invested in
environmental sustainability to make its stores 100% eco-efficient and committed to
utilizing the resources in a worthwhile manner.
 Legal factors- Legal factors might have an impact on the performance of the Zara.
However, it involves changes in the procedures of countries and executes the
operations, which may need additional cost. It is stated that their target apparel
organization is being sued for invading Burberry’s scarfs, which cost a lot of effort
and time (Liu and Alexander, 2017).

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SWOT Analysis
 Strength-
 They are the largest Spanish retailer and
have more than 2000 stores with a sale of
15.9 billion per annum in the whole world.
 Their clothes are sold at a competitive price
with the most fashionable and innovative
designs (Liu, 2017).
 Weakness-
 There is high competition for Zara,
which means high brand engagement
and limited market share.
 They involve around 80% of Inditex
business, which is a failure for Zara.
 Opportunities-
 There have many international markets,
which they can explore.
 They can also enter into segments and
diversify the extents in other markets
(Mierzejewska, 2017).
 Threats-
 The high-end fashion merchandisers
can be a risk to them.
 Their sales growth is increasing at
around 25% over the past 5 years,
(Wang, 2016)
Marketing strategies
Zara STP
Segmentation-

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It is important to conduct customer segmentation before a target market is selected so that an
organization as Zara is capable to satisfy the needs and demands of the consumers in respect
to the affordability and fashion of designer clothes. Their segmentation is as follows-
 Geographic segmentation- Zara has around 2000 outlets all over the world as it can be
said that there is no geographic segmentation due to the reason that they sell the same
designs, sizes, and clothes in every region without ant alterations (Brito et al., 2015).
 Demographic segmentation- Their segmentation is depending upon age, income level,
and gender. They sell clothes to men along with women and children. Their main
concern is for women and the primary age group is 25-40 as every day they want to
look fashionable and well dressed. This 75 % of segmentation will earn around £8700
to £35000 by 2024.
 Behavioral segmentation- It is based on the diverse trends and fashion regarding
clothes in the market. Men and women buy clothes because of their new designs that
are initiated by the Zara almost every week. It can be stated that they manage to
concentrate on a niche market. The consumers, which shop from Zara, are those who
follow their fashionable clothes and designs very carefully. They constantly follow
them as they have the latest trend in their collections every week.
 Psychographic segmentation- This particular segmentation is differentiated into two
groups depends upon the consumers’ gender i.e. male and female. Men want to be
established and successful and they are indulged into sports and other activities so
they are seeking for good quality clothes. They develop the objective of maintaining a
strong brand position and obtain a 3% market share in other countries as well as
involving France and Japan to build a consistent brand internationally. On the other
hand, 65% of women want to be like sophisticated and fashionable and they are
indulged into socializing and shopping so they are seeking for trendy clothes (Yang et
al., 2017).
Targeting-
It is stated that Zara tends to target a wide gap in the retail industry. They are targeting those
customers that are seeking for fashionable clothes and want to keep up with the latest trends
that are occurred in the fashion industry. There are approximately 50% of the population,
which are trended by the fashion and able to deal with Zara’s shipments in their target

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market. These clothes are accessible to the consumers at a fraction price of the designer
couture apparel (Harris, Roby and Dibb, 2016).
Positioning
It is stated that the main objective of Zara is to the positioning of the products within the
market to initiate trendy products. Their main aim of the organization is to deliver trendy
clothes, which are considered as a fast fashion product (Nobbs, Foong and Baker, 2015).
Internalization
Zara is the most internationalized chain of Inditex within the Spanish market with a
population of more than 150000 inhabitants. International sales have been generated for
around 76% of its total turnover in 2016. The internationalization theory is been applied by
the Zara is the Eclectic paradigm theory, which states that it is based upon the transaction
cost theory and are produced in an institution in which free market is greater than the internal
cost. Zara applies this theory, as their USP is trendy clothes at the minimum possible rate.
They have become the supreme example of agility, speed, and innovation in the retail
environment. Their theory of Eclectic paradigm theory centres on Zara, as it is commonly the
supreme brand to break the grounds in emerging countries and transform the way for the
other brands (Jiang, 2017).
The cultural factors affecting the globalization strategy of Zara as it operates on the domestic
as well as global level. The internationalization extent of Zara entered the foreign market and
opened their stores globally. They have a very entrepreneurial culture and manage a lot of
new talent and culture encourages risk-taking and fast implementation. The global strategy
utilizes by the company is the assets needed to build a strong team that allows modernizing
their online platform and global recognition (Mapanga, Miruka and Mavetera, 2016).
The internationalization strategy adopted by Zara is both standardization and adaptation.
They do not choose a concept and adapt to it but combines to diverse parts of the adaptation
and standardization concept in each country. The expansions were at the initial stage into
countries with the economic situation and similar culture. They carry their prices as per the
market situation as they need to be more adaptive and conservative. The diverse entry modes
they select for Zara were the economic complexities, regulations, and entry barriers. They can
take on a local strategy by acquiring products that emerge from the Middle East and in the

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United Kingdom. The way of doing it must be in a small way, as this can enhance the success
and positive image of an international brand (Arrigo, 2018).
(Rodrigues and Khan, 2015)
Porter’s diamond model initiated four factors that are majorly responsible for the competitive
edge of a country. These factors are factor conditions, home demand conditions, firm
strategy, and related industries. Factors conditions illustrate technological, strengths,
knowledge, and assets. Demand condition states that local demand is significant for the
global development of the company. Then, a firm strategy located in a competitive industry
with high extent of national rivalry in the global market. Support industries play a major part
in development and growth. In respect of Zara, it is stated that factors condition of Zara states
that for attaining the success they need to keep their prices reasonable, build strong
infrastructure, and enhances productivity. Demand conditions stated that Zara should they
need to develop their more and more outlets and as a requirement of the customers’ prices
can be kept low to attract the customers so that it is available for everyone. Firm structure
states that Zara concentrates on building a relationship with customers, boost the morale of

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employees and management in diverse cultures. Relating and supporting industries states that
they need to develop their business in all over the world and attain success so that they can
stabilize in future (Guan et al., 2018).
Recommendation
 Zara has to start fashion online orientation and expand its operations in several ways.
They can improve their online presence in the market and spread its brand
engagements through social media i.e. Instagram, Facebook etc.
 They need to expand its operations in Eastern Europe and further Asian markets by
launching Tmall.com, which contained several brand flagships. This made people buy
the products easily as this is the one-stop solution for them.
 They need to enhance social media active performance for brand performance as
WeChat delivers multimedia communication and encourages social networking.
 They need to give priority to design, experience, and style of the clothing of Zara
along with the quality.
 They should concentrate on middle to a high level of consumers as their target
segment is highly broad and they determine their target segment through ages or
lifestyle of their consumers.
 They should initiate online advertising and market, which is gaining immense
significance and can be tapped significantly.
 They should also deliver well-designed, trendy, and fast delivery of new products
(Byun, Lee and Kim, 2016).
Conclusion
In conclusion, it has been stated that Zara is maintaining its competitive advantage in the
apparel and fashion industry. They need to advance its business and develop its
competitiveness internationally. In the above, the discussion has been made on situational and
industry analysis, marketing activities associated with the organization, and
internationalization theories associated with Zara. Their main objective is to provide
customers with trendy clothes and satisfy the demand of the customers. They should be able
to utilize the recognition and respect of the customers to encourage new brands with
internationalization.

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