Generic and Intensive growth Strategies of Zara Fashion
Zara is among the leading names in the world of fast fashion. The brand has grown fast in terms of market size, global presence and sales and revenue. While the sales of the brand have surged fast, so has its market size. It is now in 93 countries with more than 22,000 stores. The flagship brand of Inditex is known for turning product ideas into products fast. A product idea on the table takes the form of a finalized product and reaches the stores in a span of time as short as just two weeks. While this is a sign of excellent supply chain management, it is also a critical ability which has helped Zara outshine the other brands.
Currently, Spain is its largest market followed by China, France, Italy and Japan. The brand now also features on the Forbes’ list of world’s most valuable brands. Its brand value in May 2017 was $11.3 Billion. All of this success has come at really no costs related to marketing. The brand invests really nothing in this area. However, its business strategy has a very important role to play in this regard. This is a discussion of the generic and intensive growth strategies Zara followed to grow its brand and market share and generate sustainable competitive advantage.
Michael E Porter has outlined three generic strategies that can be used by a business brand to acquire a source of competitive advantage. These strategies are cost leadership, differentiation and focus. You can become a cost leader by providing products at lower prices than your competitors or you can differentiate your product from others to provide differentiated value. You can also focus on a distinct customer segment and its needs and accordingly deliver a product or service. The third strategy he has further subdivided into two – cost focus and differentiation focus.
The generic strategy that Zara has used is called cost leadership. It has provided Zara with a distinct source of competitive advantage. Apart from that to a small extent it has also used differentiation for advantage over other brands. The brand provides high end fashion at low prices. The designs and styles it sells is similar to those provided by designer brands. However, the clothes are of average but good quality. It is how Zara has become a favorite of the millenial generation and the middle class. The modern generation wants trendy fashion bat lowest prices. Middle class people want affordable fashion and if it is trendy, nothing can be better. Zara does not just make affordable fashion, but something that is as good looking as the designer brands. This has led to both popularity and brand loyalty.
Apart from it Zara has also used innovation to build competitive advantage. Based upon innovative technology and supply chain management it has been able to reduce the time between fashion cycles. From bringing an idea to the table to the finalization of the product and in-store demonstration, it takes Zara only two weeks. The other brands can take up to 6 months to complete the process. However, at Zara the fashion cycles are shorter and their number high. So, fashion can change inside Zara stores within a period of weeks. This is an important source of competitive advantage because it does not just work to retain the customers but also to engage them. Since prices are very low, customers get back within weeks to check out new styles and designs.
Intensive Growth strategies used by Zara:
Apart from Intensive strategies brands use intensive strategies to grow their market and sales. There are four intensive strategies as highlighted in the Ansoff matrix which brands can use to grow their market share and customer base. These strategies are market penetration, market development, product development and diversification.
This is the strategy of selling more to the existing customer base and thus growing sales and revenue. As Zara’s products became popular and well known the existing customers were willing to buy from the fast fashion brand. This is how market penetration worked in its favor and helped it grow its sales. It did not invest in marketing but the popularity of the brand and its products grew based upon its low prices and excellent designs.
Market development is the strategy of entering new markets or geographic regions. Zara has expanded globally fast and today it is present in 93 countries with its more than 2200 stores. In 2015, it added total 65 stores and 50 Zara home locations. Its biggest market is Spain with 436 stores. Apart from it China, France, Japan and Italy are also among its big markets. This shows how fast, it has expanded into the foreign markets.
A key strategy used by Zara to grow its market base and brand. It is the strategy of developing new products to lure more customers including new and existing ones. Fashion cycles at Zara are shorter and it takes only a few weeks for new fashion to arrive. Moreover, the brand has managed its supply chain so well that it product ideas take just two weeks to become products and reach the stores.
These are the three main intensive strategies that Zara has used to grow its market and customer base. However, its popularity mainly rests on its excellent designs and lower prices. Today, it has become a major competitor and tough contender for the other fashion brands and all of this has been made possible without any investment in marketing.