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Pestle Analysis Of Zara

1902 words - 8 pages

SOE11108

Sources of Competitive Advantage

Assessment 1

Group Presentation

PESTEL – Analysis

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Contents

1 Introduction 3

2 Overview 3

3 Business Environment 3

4 Political 4

5 Economic 4

6 Social 5

7 Technological 6

8 Environmental 6

9 Legislative 8

10 Conclusion 8

References 9

Introduction

The global apparel market is a consumer-driven industry. Also, globalization and new technologies have allowed consumers to have more access to fashion. As a result, consumers are changing, competition is fierce, and companies are evolving to meet these demands. Zara, a Spanish-based chain owned by Inditex, is a retailer who has taken a new ...view middle of the document...

Main competitors: H&M, Gap and Benetton (Ghemawat & Nueno, 2006)

Dynamic and innovative sector (Nordas, 2005)

High quality fashion market vs. lower quality products (Nordas, 2005)

Production in Europe vs. Production in low cost (Nordas, 2005)

Political

Internationalisation:

The key pull factors that explain the internationalisation of Zara include Spain’s entry into the European Union in 1986, the globalisation of the economy and thus potential economies of scale, the homogenisation of consumption patterns across countries – Zara’s belief is that “national frontiers are no impediment to sharing a single fashion culture” – and the abolition of barriers to export as well as the development of information technology (Lopez & Fan, 2009).

Indian Market:

India provided open market for Zara as Indian government is willingly to provide foreign investment in their country, but Indian Govt. Has their own policy which are to be adhered by organizations as Zara formed joint venture with TATA (Shah, 2011).

Economic

Production NOT transferred to low cost locations

Zara resisted the industry-wide trend towards transferring fast fashion production to low cost countries like for example China. Zara states that this gives the greater control as it controls most of its steps on the Supply Chain, designing, manufacturing and distributing of products (CNN, 2001). In the UK 50% of the product Zara sells are manufactured in Spain, 26% in the rest of Europe and 24% in Asian and African countries → clothes with longer shelf life like for example basic t-shirts are outsourced to low cost suppliers mainly in Asia and Turkey (Business Week, 2006).

Zero Advertising Policy

The most unusual company policy is its’ no advertising policy. It is worth noticing that Zara competitors rely heavily on costly advertising campaigns. However, Zara prefers to invest money in opening new stores instead (CNN, 2001).

Producer of about 11 000 items annually

The product range of Zara company is significant. It produces nearly 11 000 items annually whilst its competitors produce only about 2000 – 4000. Moreover, Zara changes its designs every 2 weeks which encourages customers to repeated visits and builds the brand loyalty. An average high street store in Spain expects customers to visit three times a year. It is 17 times for Zara. (The Guardian, 2002).

Shortening Product Life Cycle

Additionally, Zara needs just 2 weeks to design a new product and get it to the stores whilst industry average is 6 months (Business Week, 2006).

To sum up, Zara breaks all the rules but this strategy proves to be successful as Zara is one of the biggest retailers in the industry.

REFERENCES LIST entrys

Social

Rising of income

With the rising of disposable personal income, people began to pursue a high quality and comfortable life. This tendency provides Zara quite wide market share. Personalized consumption become the mainstream...

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