Keith Ivy M.
Acedillo
Zara: Integrating Both Sides of the Coin
I. Introduction
Zara is one of the world’s largest fashion retailers, founded by Amancio Ortega and
Rosalia Mera in 1975 as a family business in downtown Galicia in the northern part of Spain.
This paper studies the unique business model and strategy integrated by Zara in order to gain a
competitive advantage.
II. Background
The creation of responsible passion for fashion amongst a broad spectrum of consumers,
spread across different cultures and age groups, is what drives Zara to keep on improving. Zara is
one of the world’s largest and most successful fashion retail brands, founded in 1975.
Zara is a subsidiary of the world’s largest fashion group, Inditex, with more than 174,000
employees operating more than 7,400 stores in 202 markets worldwide, including 49 online
markets.
Zara is known for its continuous introduction of new collections based on the current
trends, which attracted more customers, making Zara known in the media as a brand that
produces “freshly baked clothes.”. Zara, in order to gain a competitive advantage amongst its
competitors, integrated both sides of the coin, which is using strategies that balance two
seemingly opposing aspects: speed and control. This was done through Zara’s implementation of
strategies such as, first, having shorter lead times that allow them to ensure that the supply meets
the demand of the customers, leading to higher customer satisfaction and higher profit margins
and lastly, creating more value for its products and altering the perception of its customers by
lowering the quantity of certain products which creates artificial scarcity, or what is known by
many as “limited editions.”. Moreover, rather than producing large quantities of the same style,
Zara leaned more on creating more styles in order to cater to the preferences of the customers.
III. Integrating Both Sides of the Coin
SPEED AND FLEXIBILITY
Shorter Lead Times – Zara is able to manufacture new products rapidly, which allows
them to meet the demand of the customers and deliver the products to them in a short
span of time leading to higher profitability.
Production of Different Styles – in order to attract new customers and retain their
existing ones, instead of producing large quantities of the same styles, Zara focused more
on frequently updating its inventories with new designs, which creates the need for the
customers to purchase Zara’s product before it runs out of stock.
CONTROL AND EFFICIENCY
Vertical Diversification – though Zara outsources some of its manufacturing, Zara
focuses more on in-house production in order to control their expenses and to have better
control over the quality of their product.
Just-in-Time Manufacturing – integrating this type of strategy, Zara is able to increase
efficiency, reduce costs, and speed up their product delivery.
Creation of Limited-Edition Products – Zara was able to make more profits in this type
of product by making it appear to customers that these products can only be purchased at
a limited amount which makes the product more valuable in the perception of the
customers.
IV. Case Studies and Examples
Environmental Pressure - Zara has faced criticism for its environmental impact due to its fast
fashion model. In response, the company has implemented sustainability initiatives, such as
using eco-friendly materials and reducing waste in its supply chain.
Technological Innovation - Zara has invested in technology to enhance its operations, including
advanced data analytics to monitor fashion trends and customer preferences. This data-driven
approach helps Zara make informed decisions about product design and inventory management.
V. Internal Analysis
VRIN Analysis
Valuable
- Zara’s ability to design, produce, and distribute new fashion items rapidly is one of its
valuable resources, which is perceived highly by customers. Moreover, another valuable
resource of Zara is its vertically integrated supply chain, which enables Zara to have
control over its inventory, quality, and cost of its products.
Rare
- One of Zara’s rare resources and capabilities is its ability to quickly turn their ideas and
concepts into a high-quality tangible product that attracts new customers.
Costly to Imitate
- It is costly for other companies to imitate Zara’s strategies, especially for those new
entrants, because of Zara’s economies of scale, extensive supply chain management, and
customer loyalty.
Non-Substitutable
- Zara’s global presence is non-substitutable or cannot be achieved easily by its
competitors. Moreover, its brand loyalty is something others cannot imitate.
VI. Strategic Recommendation
Zara is one of the leading fashion retailers in its industry. In order to maintain its
competitive advantage, Zara should enhance its sustainability measures which focuses on
mitigating the negative impact of their operations to their stakeholders. In addition, they should
invest in new technologies for the effectiveness and efficiency of their operations and make use
of these technologies effectively. Moreover, since one of the strengths of Zara is its ability to
offer new styles of products in a short span of time, Zara must ensure that this strength is
exploited effectively and must be further developed by Zara to keep its competitive edge.
VII. Conclusion
In conclusion, Zara’s journey to gaining a competitive advantage was achieved through
smart selection of strategies. The company’s ability to integrate both sides of the coin further
added to the company’s ability to maintain its competitive advantage and their ability to attain
continuous growth.
Reference: https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-
culture-of-customer-co-creation/
