Memo Zara Case (Essay Sample)

Memo Zara Case
Overall strategy and market positioning
Inditex, GAP and H&M are well-known organizations that are famous to the potential consumers. In terms of the overall strategy and their market positioning, these companies have done extremely well over the past decades though they have been influenced with economic crisis in the late 20th century. Despite the success that the three companies have realized within the short period of operation, their strategies and market positioning differ. H&M has focused on sustainability as the core marketing strategy, and this has enhanced its success in the business sector. The aim of this strategy was to ensure that H&M is well-known through advocating intensive advertisement, ensure that the sales prices for its commodities are lower than the price for both Zara and GAP brands. In the case of Zara, the marketing strategy focuses on the faster and stronger lead time. About 25% of the organizations stock is made of products that are fast-fashion. As such, the H&M is appealing to the masses in the young adult and American segment. (Capell, 2008). Finally, GAP strategy is to ensure that it maximizes its revenue outlay while maintaining the cost incurred at its lowest level. Its marketing strategy is to undertake mobile marketing campaigns by using mobile banner ads, and SMS coupons. This will promote the company's latest collection and meet the seasonal demands of its customers. Zara's brand is unique and offers an efficient market positioning as compared to the other competitors. Though H&M and Gap brands are also unique, Zara's brand is competitive in the economy.
Performing the clothing design function
Zara manufactures most of its clothing internally. It does not outsource its products as it aim at producing products that are fashion sensitive and relevant to the consumer at a given season or time. The organization uses just-in-time process of manufacturing its products. The production facilities and the design process have been centralized in order to enhance smooth flow of information across all the sectors and processes. With the quick response system characterizing the clothing design function, it has allowed Zara to design and produce apparel that is relevant to the season in place, thereby reducing inventory risks and forecast errors. Under the unique information system of Zara, the management can contact its retail stores with ease, and also get some pertinent information on the impressions and the changes in the fashion trends in the economy. The clothing design function also relies on fabric sources and other raw materials from the external suppliers. This ensures that it lowers its cost of goods sold thereby attaining competitive advantage over H&M and Gap. In the case of H&M and Gap most of its finished goods are outsourced (Butcher, 2009). The design function has limited work, in terms of production and designing the products to be relevant in the economy. The suppliers of the clothing are the ones bestowed with necessary design functions and are required to ascertain that the products they deliver to these companies meet the fashion trend in the economy.
Manufacturing and sourcing the products
Although H&M is considered as Inditex's closest competitor, there are several significant differences between these two retailers. H&M operates a single format and tends to have slightly lower prices than Zara. This might be due to the fact that H&M outsourced half of its production to low-wage countries. In contrast to Zara, H&M's expansion strategy is characterized by entering one country at a time (MarketLine, 2008). This led to the fact that Zara, albeit H&M started selling outside its home country ten years earlier, has a wider international presence. To entice customers in their stores, H&M hires celebrity designers such as Karl Lagerfeld and relies on extensive advertising. In contrast to Zara, H&M employs fewer designers and they furbish their stores less frequently. H&M has 1,700 stores spread over 34 markets, with Germany being its biggest market. Gap focuses on internationalization of its product and business operations. The company focuses on the sale of clothing, accessories, and personal care products. In the early years of 1990, the operations of Gap were extended to Japan and France. Like Inditex, Gap contains five store chains located in different store chains, namely banana republic, Gap, Piper lime, and Old Navy. Gap has ensured that all of its production has been outsourced across the US and across the globe.
Distribution of the products to the stores
In the distribution of products, Zara relies on quick response throughout its production, design, distribution and the process of retailing its products. Unlike most retail designers, the Zara design team tracked customer preferences and used sales potential and consumption information to determine new designs and repeat orders. Because the designers had access to this information, Zara could get the right products into the stores in the shortest of time. The shipment of the products is done twice a week, and the orders are made between 24 and 48 hours (Tiplady, 2006). On the other hand, GAP and H&M have invested extensively on distribution of its products on local markets and abroad. As H&M is refurbished with five retail stores, the clothing design is distributed to each retailer of easy access of the product by the consumer (Capell & Khermouch, 2002). It outsources all of its production and relies extensively on the small number of distribution facilities to route its products across the globe to its network of retail stores. Though it may be perceived that the higher number of distribution outlets the organization has will result to high profit outlay, H&M has relied on only five of its retail outlets, and it has made it grow to be among the top clothing and fashion design companies. By contrast, G...