Analysis of Zara's Competitive Advantage and Retail Mix

This report examines Zara's competitive advantage, focusing on its retail mix, cost leadership strategy, and pricing. Zara's success stems from its ability to quickly introduce new products, low marketing costs, and efficient supply chain management, including a centralized production process and str...Read More

2. Sustainability of competitive advantage of Zara’s retail mix
The company has gained the competitive advantage by offering good quality products at
reasonable price along with offering the products that are frequently being refreshed. In order to
follow that Zara has been adopting the cost leadership strategy. This ensures that all the
customers are coming to store frequently. Zara spends only 0.3 percent of their revenue on
marketing. Further the elegantly designed stores helps in attracting maximum customers. Further
the company does not even indulge itself in the large scale marketing therefore high quality and
word-of-mouth is highly important to the organization’s success. This has helped in enhancing
the customer loyalty. The production processes are seen to take place in the Spain headquarter
therefore providing the time required for the outsourcing manufacturing. The company breaks
down the tasks of their employees into various steps and levels and offers fresh products with
high speed in product, short lead period, less advertising cost etc. This helps in indicating the
sustainability of competitive advantage of Zara which is seen dependent on the company’s
ability for churning out new products at short lead times.
Therefore, the customers are exposed to various products under specific product range. Further,
Zara has also been offering specific product lines catering to the needs of their customers and
their related segment. As per the retail mix of Zara where the store formats is the weakest
element of the Zara as Zara has been utilizing the various formats in the stores even when all
these stores were termed as specialty stores. But such store formats are not being standardized by
Zara and is considered to be one of the few aspects of the various retail mix which is not
standardised in Zara. The company is further seen to reduce its cost by standardizing various
format of the stores.

The production cost of Zara has been reduced by streamlining their production. The company is
seen to use effective human resource management practices for managing the workforce of the
company in an effective manner along with reducing the costs using the adopting the automation
in the supply chain of organization.
. The main highlight of pricing strategy of Zara is that they tweak the cost leadership based
pricing to gain maximum profits by increasing prices in some countries where customers are
willing to pay more. For example, the prices of Zara products in France and UK tend to be
comparatively higher than that in other European countries such Spain and Portugal, notes Zhou
et al. (2015). This indicates that Zara utilises a pricing strategy in which the prices are varied in a
target market with respect to the demand for the product.

References
Zhou, E., Zhang, J., Gou, Q. and Liang, L., 2015. A two period pricing model for new fashion style
launching strategy. International Journal of Production Economics, 160, pp.144-156.