ZARA CLOSING STATEMENT
What is Strategy? Michael Porter states that companies must be flexible to rapidly to competitive and market changes. They must benchmark continuously to achieve best practices. A company can outperform rivals if they can establish differences they can preserve. It must deliver greater valuable to customers to create comparable value at lower costs, or do both. Competitive strategy is about being different it means deliberately choosing a different set of activities to deliver a unique mix of value.
Furthermore, Porter believes that the desire to grow has the most perverse effect on strategy. Tradeoffs and limits appear to constraint growth. Serving one group of customers and excluding others, for instance places a real limit on revenue growth. ...view middle of the document...
The growth imperative is hazardous to strategy.
For example, based on its successful experience in operating in New York Zara pursued a strategic market expansion strategy in the outskirts of Buenos Aires. This strategic choice did enhance the competitive capabilities of Zara in terms of short lead time and effective logistics control but added to pressure from competitors who sourced abroad resulting in competitive pricing in the middle market by rivals such as H&M and GAP.
The essence of Zara's strategy is in its activities. Choosing to perform activities differently is key. Like Southwest, Zara has a unique selling proposition and competitive advantage. They are customer centric, they are giving the customer what they want while staying exclusive. Competitors mass produce to reduce costs and stay competitive. Zara has a different approach; their designs are locally relevant and limited life creating buzz and excitement in-store. Zara can offer a large variety of the latest designs quickly and in limited quantities, it collects 85% of its of the full ticket price of its retail clothing; while the industry average is 60% to 70%.
Expansion overseas Zara is seeing an immense amount of growth despite a slowdown in the global economy. Their methods prove to be efficient and highly profitable year after year and their success hasn’t even reached its full potential yet. In 2011 Inditex consolidated its strategy of global expansion with commercial operation in the five continents and its commitment to its multichannel presence with its online sales. Their rapid inventory has enabled them to spread into 23 new markets and open 483 new stores since 2011. E-commerce is currently the best avenue for Zara to explore opportunities in this receding GDP global economy.