Can you graph the linkages among Zara’s choices about how to compete, particularly ones

connected to its quick-response capability, and the ways in which they create competitive
advantage? What does the exercise suggest about such capabilities as bases for competitive
advantage?

Experiencing competencies in market, regardless of the type of business, is an

understatement. But when it comes to apparel market, it can be evidently observed that the
brands tend to go overboard. Zara, owned by Inditex of Spain, did not only have to compete
with its own retailing chains but its international competitors, GAP, H&M AND Benetton
too. if a brand wants to stand out, first and the foremost step would be to know which market
region will get it more sales. Zara had to be aware of the market trends followed by various
countries, for instance, France being more inclined towards quality, Italy looking for the
latest fashion etc. it very easy for Zara to deduce that Europe is far trendier when it comes to
fashion than the US. To implement a certain strategy, it is crucial to be equipped with all the
facts, which is exactly what Zara did as it believed that to have a competitive advantage, it
must get skilled enough to excel at planning cross border activities.

GAP, a US based brand, had higher revenues as compared to Zara and kept progressing
extremely until it could not as it failed to maintain the pace of fashion and its exceptionally
high prices did not do any favor either which the reason why it failed to generate as much as
it used to, even its popularity in US couldn’t save it from enduring a heavy loss. Hennes and
Mauritz, another one of Zara’s closest competitors chose a different approach by targeting
one country at a time to not lose focus while trying to generate revenues as much as possible.
This focused strategy helped it survive in the market for a long time but not enough to save it
from the declining popularity as a consequence of not keeping up with the fashion even after
lowering the prices of the apparel in contrast to Zara.

GAP and H&M had a powerful grip over their stores, but their production was outsourced
unlike Benetton which had managed its production fairly well as compared to GAP and
H&M, but its stores were run by its licensees. The reason why H&M is considered as Zara’s
closest competitor is lowered prices. GAP and Benetton had higher prices and they couldn’t
keep up with fashion too which is the major cause of losing customers. Customers would
rather prefer the brands that offer them with latest fashion along with reasonable prices which
is exactly why Zara had to compete with H&M as it was also one of those brands that was
willing to offer reasonable prices along with improved fashion trends. But Zara took over
with fashion sense leaving behind H&M to fend for itself.

Including Zara, Inditex had 5 more apparel chains, Massimo Dutti, Bershka, Pull and Bear,
Stradivarius and Oysho. Even amongst its own retailing chains, Zara was tough to compete
with as its competitive advantage overcame all the others. Zara was not restricted to a certain
age group, it was a clothing brand for infants to grown up adults of both genders unlike
Inditex’s other clothing chains which also had less number of clothing stores as compared to
Zara and had less exposure to international market unlike Zara. Even though almost all of the
retailing chains of Inditex followed the same protocol with the drill of lesser prices and latest
fashion, except for Massimo Dutti which was expensive than all the others, Zara was the one
to generate more profit due to its competitive advantage described above along with another
exceptional strategy that was to manufacture its fashion products internally unlike the other
chains that depended on Europe for supplying purposes.

Zara used to implement focus strategy in all the departments for instance producing in
smaller batches to avoid compromising on time sensitive items. In order to maintain a low
inventory system zara reduced the cost of keeping excess inventory. Zara must also be
recognized for how it keeps up with its own fast pace. When all the other apparel brands
finish the process of designing and manufacturing in almost nine months collectively, Zara
does that within 4 to 5 weeks if it’s a new product, for the restocking of its older products
only 2 weeks which is exceptionally illustrious as it may seem that Zara is trying to break its
own record. The reason behind Zara always pacing forward was that all its clothing lines
were always upgraded with the outfits suitable for the new season. Zara tried its best to keep
its products aligned with the preferences of the customers. Huge number of new outfits
would be designed out of which only one third would go into production and after producing
them several stores would display them to analyze the feedback of the customers to ensure
whether to waste the raw material on producing products on a large scale without even using
it.

Zara always chose such locations for its stores to draw people towards it. Any other clothing
brand would entitle 3-4 times visit a year brand loyalty but for Zara it was not less than 17
times a year. Latest fashion trends with modest prices were Zara’s treasure but it also had to
project a sense of limited time offer. So that, the customers can get a clear idea that its either
now or never. Zara’s objective was to induce scarcity in the minds of its customers by
deliberately displaying limited stock to make it seem like there is undersupply of the
products.

When a company aims to expand its business internationally, it is supposed to stay well
informed about the economic conditions of the country it is intending to target. The reason
why Zara was progressing effectively in Spain was because it was affordable to 80% of the
population of Spain, just like GAP which was flourishing in US as it was US centric. But
while expanding business in Mexico, Zara had to consider its economic, social, and cultural
issues too as the average income of Spain is more than 4 times that of Spain’s average
income, which made it evident that Zara can target only a certain class of people in Mexico as
the rest of the population won’t be able to afford it. Even though targeting 14 million people
of upper class in Mexico is less than 36 million mass customers of Spain yet it was enough to
have its stores in Mexico too.

To evaluate Zara in terms of generic competitive strategies defined by porter, it can be clearly
concluded that while aiming for large markets, Zara had implemented cost leadership strategy
by offering quality products at lower prices. However, differentiation strategy can be
evidently observed in both sizes of the market, large and small considering Zara has
influenced itself with Fast Fashion which is the reason why every new collection that gets
launched doesn’t stay in the market for more than two weeks, the uniqueness of the collection
keeps it distinguished from all the other brands. When it comes to focus strategy, Zara made
sure to stay focused on small groups of customers while gradually increasing its horizons.

The reason why Zara achieved a phenomenal success in the market is because Inditex
launched in 60s and Zara was its oldest brand which stayed in the market for more than 50
years. It developed a trustworthy reputation amongst its customers gradually without
compromising on its quality. However, Zara’s competitive advantage can be summarized by
enlisting some attributes starting from the high turnover of its products, low level of
inventory, structured distribution system and inclination of customers to stay committed to
such a brand that offers latest fashion in affordable prices.