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Masters in Financial Management
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2011 - 2012

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Zara: responsive, high speed, affordable fashion
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Strategic Management

Prof Dr Peter Verhezen

Quynh Lan Nguyen

Engaging in irregularities is severely sanctioned in correspondence with article 34 of the Examination rules.

We hereby declare that we have not engaged in any such irregularities.

Student(s)’s signature(s) Table of contents
Introduction 2
Challenges 2
Industry competition 3
Positioning and competitive
Supplier’s bargaining power: There is no negotiation power for suppliers as the number of suppliers is large (Garcia, 2010, pp.47, 48)
Figure 2: Zara five forces analysis

Positioning and competitive advantage
As analyzed above, the fashion industry is highly competitive. The threat of new entrants and the bargaining power of customers are medium, and there is no threat of substitute products; however, the market growth rate is small and global competitors are strong. How Zara was successful and thrived in the global fashion industry relied on its distinct strategy.
Vertical integration is a distinct feature of Zara’s business model. Zara works differently from traditional retailers who outsource all of its production. Traditional retailers take advantage of lower cost production in developing countries and try to focus on marketing and distributing goods. In the meanwhile, Zara owns its in-house production to manufacture products that are more fashion-dependent. It does all production, distribution and marketing activities for these fashionable clothes. By owning in-house production, Zara gain a lot of flexibility as it can easily change designs, materials, amounts and frequency of new clothes. This allows Zara to provide its customers with updated products every two weeks. Traditional retailers never achieve this flexibility, as they have to place production orders to oversea manufacturers at least 6 months