Comparative Analysis of ASOS and Zara Business Models

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Types of Business Organisations: Ownership
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Table of Contents
1. Introduction............................................................................................................................3
2. Discussion on the organisation...............................................................................................4
3. Explain the main differences between the above chosen two companies..............................8
4. Recommendations................................................................................................................11
5. Conclusion............................................................................................................................13
6. Reference List......................................................................................................................14
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1. Introduction
The report focuses to evaluate the different organisational functions of online and franchises
model of business. The study elaborates the different approach of two-business models to
evaluate advantages and disadvantage of the businesses. The study with the help of examples
focuses to elaborate the effectiveness of the business model over. The report includes ASOS
an online fashion and cosmetic seller established in the year 2000 in London. The company
mainly focuses on the young generation of the economy (ASOS, 2019). ASOS currently is
functional in over 196 countries worldwide catering to the needs of the consumers. The other
company ZARA follows a Franchise model of business operation. The company founded in
year 1975 in Spain, today is the biggest retailer for fashion apparels and accessories all
around the world (Zara.com, 2019). The company manages over 20 different clothing lines
and follows a very holistic approach to deliver the best clothing fashion to its consumers. The
company incorporates a franchises model, operates stores all over the globe, and maintain a
very efficient revenue structure. The study with a brief comparison of the two companies
focuses to elaborate the benefits and operational excellence for the organisations.
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2. Discussion on the organisation
The ASOS is a company, which focus to target the youth of the economy and cater to their
needs of trending fashion and cosmetics. The company incorporated in the year 2000 in
London has shown a very rapid growth to expand its business to over 196 countries. Andrew
Regan, Quentin Griffiths, and Nick Robertson founded the company and listed it as an
Alternative Investment Market on the London Stock Market in the year 2001. The company
has shown a constant upward trajectory in its revenue since its inception. The company has
over 22 million followers of the social media platforms and maintain a website with option of
10 different languages. The company has posted a revenue of over £ 2355.2 for the year
ended 2018 (Asosplc.com, 2019).
Figure 1: Revenue of ASOS
(Source: Asosplc.com, 2019)
The revenue of the company has also shown very appreciable growth in different regions of
the world. The same could be better-elaborated form the image given below.
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Figure 2: Revenue Growth of ASOS
(Source: Asosplc.com, 2019)
The company with its association with different brands and global platforms has helped to
create an immaculate supply chain management system on a global scale. The company with
the use of the latest technology of AI and Machine Learning incorporated with the most
advanced Supply chain management system. The same has given the company a very strong
competitive edge in the market (Cheng et al., 2018). The company maintains two logistics
hubs and warehouses in London and the other in Europe. The company employs over 4000
people all around the world. The skilled and highly trained employees of the company help
deliver the best output for the company. The company recorded a sale of over 58% through
its mobile application. The company enjoys a feat of having over 10 million applications
downloads all around the world (ASOS. 2019).
The innovative and trending fashion line and cosmetics, which are specifically designed to
cater to the needs of the youth, has also helped the company to maintain a growing trajectory
for its sales records. The company follows a competitive pricing strategy to deliver value for
money products to the youths of the economy. The reason is the major criteria for the high
demand in the UK market for the products of the company in the period of economic
slowdown due to the phenomena of Brexit (Nazir, 2019).
Zara on the other hand is the biggest fashion retailer in the world. The company incorporated
in the year 1975 in Spain. The company founded by Amancio Ortega in Spain with a single
store. The skill and talent to recognise potential fashion trend gave him an advantage in the
economy. The company from a very humble beginning has spread its operations all around
the world, and now it is considered as the largest fashion retailer in the world. The company
through mergers and accusations has moved along with over 20 brands under its portfolio
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(Zara.com. 2019). The company is considered as the trend inventor and with a host of
talented designers working round the clock form around the world to designs new fashion
trends for the company. The company follows a brick and mortar model for its business
functioning. The company has over 2256 ZARA store and 595 ZARA home stores all around
the world. The company holds over 10000 stores through different brands in total
(Inditex.com, 2019). The stores are mostly on a franchise model where the company give a
franchise to and individual or a group of individuals. The same enjoys the right to sell the
products of the brand and has to pay a certain commission to ZARA through their income
(Mo, 2015).
Figure 3: Numbers of stores of ZARA Worldwide
(Source: Statista, 2019)
The company for the years ended 2018-posted net revenue of over € 18021 million. The other
brands and ZARA home helped the company to posted a collective net sale of over € 26145
million.
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Figure 4: Sales Figure of Different Brands of ZARA
(Source: Inditex.com, 2019)
The company has steadily projected a stable growth in the profits of the company. This has
helps the company to maintain a very stable financial status and deliver higher returns to its
investors worldwide (Inditex.com, 2019). The company incorporates over 150000 employees
all around the world. The company also follows a premium pricing strategy where the
company charges a premium for the products and services provided to its consumers. The
company over the period has created a very prominent brand image, which helps the
company to charge a premium for the products they deliver to their customers. The
dominance of the organisation is witnessed in the previous segment and it needs to be
maintained like this by the organisation.
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3. Explain the main differences between the above chosen two companies
Key features
ASOS primarily has an online presence and operates in the through multiple platforms such
as Facebook, Twitter, and others in order gain more visibility in the eyes of its consumers.
The social media is considered the most important place to market the products and hence
ASOS considers the aspects more important than any other promotional strategy. The
company has focused on the digital ventures recently and it is reported that the CEO has been
astonished by the improvements (Marketing Week, 2019). On the other hand, Zara initially
did not consider the fact that the business development can be done with digital marketing. In
recent context, Zara has started to make some online ventures as well. This is a major factor
to make some modification and Zara has acknowledged it. An example can be introduction of
online support to the different parts of the world and one of the finest examples is launching
women’s garments in India (Zara.com, 2019).
Zara on the other side has physical stores present in places such as New York, Edinburg and
others. The belief is elated with the business management and development prospect and it is
seen that they have managed the entire prospect very assiduously. The number of physical
stores of Zara is in more than 10000 places, which is higher than ASOS. Giving the physical
feeling is a necessary thing and they try to make the senses satisfied of every customer. In
addition to that, ASOS focuses more consumer service management through tele calling
while Zara focuses more on resolving issues through in personal experience.
Advantages vs. Disadvantages
The biggest advantage, which ASOS has, is that the number of intermediaries between the
manufacturer and consumers is low. This eliminates the overall overhead cost and reduces
item pricing to a point where more affordable clothing items can be provided. In addition to
that, ASOS does not have any physical limitation because of which, the number of selection,
which the company can offer to the consumers, is almost limitless. Furthermore, consumers
do not have to wait no queue. The possibility of having better kind of services in a time
convenient manner is the best thing to be managed properly. Considering the changes that
have been introduces, it can be said that the demand in the business is going to rise
productively.
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However in the case of Zara, the company is able to provide a more personal and interactive
experience with the consumers which allows the company to connect with consumers deeply
and increase customer retention. Furthermore, Zara has premium trail rooms as well, through
which, the consumers are able to try out the clothes and items they wish to purchase
immediately.
The best thing that Zara gives is nothing but giving an efficient line up of employees from the
production line to sales. It is the most important thing to be managed and this has made them
one of the leading premium service providing organisations in the retail genre. There is a
simple difference with the company ASOS. They do not promote making products, which is a
major factor to consider. However, ASOS has sustainable sourcing system, which is a needed
thing to remain unharmed from the ethical issues of any legal system. They promote
corporate social responsibility in an environment friendly manner to ensure proper
connectivity with the people who are primarily targeted by the ventures (Asosplc.com, 2019).
Financial performance
After studying the annual report of ASOS, it has been observed that the revenue of the
company is over $2,400 million along with which the cost of sales is around $1,800. In
contrast, it has been observed that gross profit around $1,200, this indicates that the number
of taxes and expenses is relatively high. This is because when calculating core profits, taxes
are reduced from the above mention amounts. The issues associated with the market
constraints have made the company suffer in the recent days and it is seen that the customers
have been affected due to the changes that have been imposed by the government of different
countries. For an example, British government has banned employee engagement from the
outer part of the country (Uk.practicallaw.thomsonreuters.com, 2019). This has marred the
relationship of the company to some extent. On the other hand, the business development
process has stumbled a little as well. In order to ensure a proficient and integrated system the
management system needs to incorporate some audacious steps to have proficient betterment.
Similarly, after observing the annual report of Zara, the Net Sales of the company is around
$25,336 as of 2017 and within the same year the cost of sales is around $11,076. When
making sales, operating expenses has been estimated to be around $8,944. Owing to the
physical storage issues, it has been estimated that the amortization and depreciation cost of
the company is around $963 and $106.
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After studying both the companies it can be deduced that, the Zara has a larger range and
limit of profit than ASOS. This huge difference might attribute to that fact that Zara has been
present in the market for a longer period of time and a more aggressive marketing approach.
In adding to that ASOS online relies on word of mouth advertisement because of which the
organisational reach of the company is low. However, it is a fact that the digital market
presence is higher for ASOS and it may provide them the support required for better kind of
assessment as well. It is seen that the issues related with less understanding of the employee
concerns is dominant in Zara but in ASOS, the employee retention rate is better.
Employee base
In the case of ASOS, it has been seen that the company only has a mere number 2000
employee to overview its large operations. These employee members mainly consist of
managerial heads and logistic professionals who overview if the products are correctly
moving to the customers. However, in the case of Zara, it has been seen that the company has
over 17,000 employees working within various branching of the business. This huge
subordinate base can be attributed sales professional, cashiers and other professionals who
operate within the physical stores. The difference in employee number is a proficient fact
because the organisation is present in more locations in a physically. The other thing to be
considered is management of the retail outlet. It is important to make the physical store more
appealing, which is done by the help of efficient employee line up (Viardot and Nylund,
2017). Apart from the management employees, the ASOS employees are mainly IT experts.
The employee diversity is maintained in both the companies and this is a good organisational
culture to consider.
Number of branches
Zara has over 10,000 stores that are present all over the world through which the company
has a large base of loyal customers almost everywhere. In the case of ASOS, the company
does not possess any physical stores; however, there are service centres, which the company
has that are limited in nature. Both the companies should focus on increasing the numbers of
stores in order to ensure a proficient growth in the market.
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4. Recommendations
In the case of both Zara and ASOS, multiple recommendations will be made so that they can
perform better in the market.
Zara
Product development - Owing to the fact that monsoon and winter are approaching various
major countries where Zara operates, it can be suggested the company incorporate a new
trench coat. In order to raise the sales of the company in a quick time, various discounts, sales
and others strategies can be provided (Lasserre, 2017).
Employee motivation - In order to motivate the employees of the enterprise, motivational
frameworks such Maslow’s hierocracy of needs can be utilized in order to ascertain if
customers have intrinsic or extrinsic needs (Cherry, 2014).
Creating online presence- Furthermore, the company can use strategies such as boost
posting, online target, video sponsorship and other strategies in order to reach more number
of people. Increasing digital reach is the need of the hour for Zara because other organisations
are having a good time in this segment. The company needs to make sure that they are in the
correct path of making modification of their business venture. It is seen that issues
concerning with the marketing management process can be solved if digital presence is
magnified and Zara is focusing on it. The services need to be highlighted in the digital plat
form and continuous modification is needed. They have to ensure that the other retail
domains like Amazon, Flipkart and others are prioritising their products over others.
Marketing process- it is highly recommend to the organisation to focus on the online
marketing process they are one of the dominant names in the retail industry but focusing on
the online process of marketing is going to magnify the sales rate as well. There are many
other methods of conducting marketing, and the best and psychologically effective one is
using the word-of-mouth technique to make sure that the issues are being sorted proficiently.
The management process should include this measure to ensure a profound culture of
improvement in the system.
ASOS
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Market development - The Company has a very limited presence in locations such as India,
Australia and others, due to which the company can focus on expanding its physical stores
reach. This will the company create a more initiate connection with new and established
consumers as well.
Employee recruitment - In order for the company to be successful in a short period,
diversified employees must be brought on board within the company. This will allow a single
employee to look over various aspects such as stock management, consumer relationship and
others (Dany and Torchy, 2017).
Capital gains - In order to perform a market expansion, the company has the ability to
purchase land in various locations in prime places such as Edinburgh, Roman, and others.
Utilizing taxes exemptions laws such as The Income Tax Act 1961, Deductions as per
Section 80CCG, 80EE and others, the company has the ability to higher increase its amount
of reserves.
Quality improvement- Quality assurance service is one of the most important facts to
consider because a quality assured service will help in making a productive culture in the
work place. The selection of stakeholders and product suppliers need to be redesigned. This
ensures a strategic advantage in the market where high competition is prominent. The
management process should be diversified and distinct as well, to make the difference from
other substantial companies from the online market. Better technical approach and improving
the system is the most necessary factor for the service providers.
Market position development
The business progress is an effective thing to consider and it is seen that the company is not
in line with the requirement. The market position the company has needs to be improved in
the recent times. It is seen that the business process is depending on the market requirement
and the market is highly concerned about quality. In accordance with the current market
consideration, it is highly necessary to place the company to the higher price and higher
quality domain because people are looking forward to luxury goods. Development of the
internal ambience can be managed with proper kind of situational betterment but it needs to
have an idea of approach. The idea can be derived from other organisations, which have
better market reputation and demand.
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