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Agenda. Zara has a Sustainable Competitive AdvantageStrategic Advantages Financial Analysis and ComparisonStrategic DrawbacksPossibilities for FailureOpportunities and Recommendations. Strategic Advantages. Strategic Advantages. 1. Vertical IntegrationMerchandising strategyScarcity and Oppor
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1. ZARA: Fashion Follower Industry Leader Business of Fashion Case Study Competition
Amanda Craig, Charlese Jones, Martha Nieto
Philadelphia University
April 17, 2004
2. Agenda Zara has a Sustainable Competitive Advantage
Strategic Advantages
Financial Analysis and Comparison
Strategic Drawbacks
Possibilities for Failure
Opportunities and Recommendations
3. Strategic Advantages
4. Strategic Advantages 1. Vertical Integration
Merchandising strategy
Scarcity and Opportunity
Buy now, not later
Fast Fashion
Up-to-date designs
5. Strategic Advantages
6. Strategic Advantages 3. Centralized Distribution Center
Place to move merchandise
Minimizes lead time
Shipped by time zones
7. Strategic Advantages 4. Economical International Expansion
Low advertising
5. Prestigious Image
Real estate department
Window display department
8. Strategic Advantages 6. Broad Market
A young educated market that likes fashion and is sensitive to fashion (ZARA VIDEO)
9. Strategic Advantages
10. Financial Analysis and Comparison
11. Comparison Why compare and analyze?
H&M is Zaras biggest competitor
Differences
Similarities
To prove that Zara has prospect of sustainable growth must compare financial differences to a major competitor, one that has more experience in the global market.
Differences: H&M outsources all production, spend more on advertising, price-oriented as seen in ads
Similarities: european based, fashion forward at lower price, strong international expansion strategies
First compared their operating incomeTo prove that Zara has prospect of sustainable growth must compare financial differences to a major competitor, one that has more experience in the global market.
Differences: H&M outsources all production, spend more on advertising, price-oriented as seen in ads
Similarities: european based, fashion forward at lower price, strong international expansion strategies
First compared their operating income
12. Financial Analysis
13. Financial Analysis Inditex is more efficient in generating profits relative to sales as seen in their higher operating profit margin
21.6% or .21 euros for every euro in sales
H&M is only generating .13 euros for every euro in sales. Although H&Ms sales were higher in 2001 their operating income was lower due to their high cost of goods sold.Inditex is more efficient in generating profits relative to sales as seen in their higher operating profit margin
21.6% or .21 euros for every euro in sales
H&M is only generating .13 euros for every euro in sales. Although H&Ms sales were higher in 2001 their operating income was lower due to their high cost of goods sold.
14. Financial Analysis Inditex has 1,284 stores but profit per store is 54.8%
H&M has 771 stores and profit per store of 76.4%
Inditex is building more stores based on projections and anticipated future valueInditex has 1,284 stores but profit per store is 54.8%
H&M has 771 stores and profit per store of 76.4%
Inditex is building more stores based on projections and anticipated future value
15. Strategic Drawbacks
16. Strategic Drawbacks 1. Inability to penetrate U.S. market
Poor supply chain strategy
Diseconomies of scale
2.Vertical integration
Lack of economies of scale
Higher costs
Technology
Research & Development
17. Possibilities for Failure
18. Possibilities for Failure 1. Euro changeover
Increased production costs
Higher prices for consumers
Decreased sales
2. Prices of competition
Quota elimination of 2005
19. Possibilities for Failure 3. Direct competition
Department stores
H&M
Quick to internationalize
Broad merchandise assortment
20. Possibilities for Failure 4. Cannibalization
Location strategy
Spain example
21. Opportunities and Recommendations
22. Opportunities and Recommendations 1. Specialized Products
2. Internet Retailing
www.zara.com
3. Second Distribution Center in the Americas
Expansion in Brazil, Argentina or Mexico
23. Conclusion Potential for sustainable growth
High operating income
Unique and strong business model
Ability to face weaknesses and challenges
Various opportunities of expansion
Establishing new standards for retailers
24. Thank You