Term Paper: Zara Breaks Industry Rules

By | April 27, 2011

Sample Term Paper

Company Overview:

Term Paper: Launched in the year 1975 as a local store, currently Zara is the world’s third largest clothing retailer. It is a privately held subsidiary of Inditex, which deals with clothing retail stores. The company offer products in men’s wear, women’s wear and children’s wear. The company functions mostly in North and South America, Europe, Middle East and Asia (Datamonitor).

External Analysis:

The success of Zara can be analyzed from the fact that the brand has expanded so swiftly in recent times that it has overtaken it s main rival in the industry that is GAP and hence become the largest clothing retailer in the industry.

As we have already identified that the main competitor of Zara is GAP and its performance as compared to GAP recent times has been phenomenal. The company has grown in stature because of the loyalty of their customers that are the proponents of fashion. This claim can be supported by the fact that Inditex which is Zara’s parent company recorded an increase in sales of about 9% in the first quarter of the financial year 2008. Zara’s sale was recorded around € 2.218 billion as compared to GAP’s sales which was € 2.169 billion. Although the difference is very nominal but for a new company like Zara it’s a very motivating thing to overpass its main rival (Clark).

Despite the fact that the other companies in the industry are a bit shaky and hesitant in their approach, Zara is experiencing a very aggressive approach. The company is going through a fast pace of global expansion which the fashion world have ever experienced. The company is opening a store every day in somewhere around the 68 countries in which they are currently operating, which has also resulted in the company’s profitability as the highest in the industry.

Also as a matter of fact the company has practically demonstrated that it’s not just about cheap labor and outsourcing which leads a company towards profitability, but market flexibility and slant inventories can also proves out to be a good option (Gallaugher). This strategy of Zara has become so much successful that it has become a case study in most of the top business schools like Harvard Business School. The company has changed the traditional approach of doing business which was to minimize the cost and earn profit, rather than that the company has changed its approach and through its tremendous success they have proven it that speed and flexibility matter more than price and cost cutting (Weine).

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