swot analysis of zara

swot analysis of zara

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• High Quality Product with reasonable price

Zara production is well controlled. It can produce a number of well-designed and high quality clothing products with low cost of production. Therefore, its price is not too high but reasonable.

• Innovation and Freshness

Zara frequently launched a series of unique products. Its clothing are fashionable and innovative. They are neatly designed and tailored. In addition, Zara has a good strategy to sell their products. They always rearrange their shelves by replacing old products with new products. This action attracts customers to keep tracking the movements of the products in the store, and finally creates the brand loyalty.

• Prime location and beautiful display

Zara store is located in downtown of the city where is the center of fashion (ig. Siam Paragon, Central World, etc.) . The stores’ atmosphere are high end but classy, high lighting. The stores decorated in modern and outstanding theme and are often large store to attract both new customers and old customers.

Zara tracked the consumer behavior and found out that they will feel embarrassed when they see someone wearing the same clothes as them. In order to eliminate the problem, Zara changes the styles every week, and the style liked by one customer would very likely be unavailable later by providing limited amount of the same design. As with all things fashionable, the less its availability, the more desirable the object becomes and it also create an artificial scarcity.

Zara SWOT Analysis, USP & Competitors

SWOT Analysis of Zara with USP, Competition, STP (Segmentation, Targeting, Positioning) - Marketing Analysis

Apparel and Accessories

Lifestyle and Retail

Zara offers perfect combination of high end, chic clothing at premium prices

Clothes for people with a combination attitude of work and play

People with Medium to high purchasing power who love to look glamorous at all times

Zara offers classy high quality clothes based on consumer trends

1. Zara have more than 2000 stores all over the world

2. Part of one of the most biggest Spanish retailers in the world

3. Zara have a well established brand name worldwide

4. Their supply chain management is extremely low cost as well as most of their processes like operations, manufacturing are all vertically integrated

5. Strong online presence through their own website and other ecommerce platforms makes Zara a popular brand name

6. Clothes are produced at a competitive price with the most innovative and fashionable designs

7. Zara offers extremely trendy, well designed and fast delivery of new products

8. Apart from clothes, Zara also offers handbags, shows etc

1. Limited marketing and advertising as compared to some other brands

2, High competition for Zara means limited market share and high brand switching

1.There are more global markets which Zara can explore

2.They can also enter into segments and expand those areas where they haven’t

3.Online marketing and ecommerce is gaining importance which can be tapped by Zara

1. The high end fashion merchandisers can be a major threat to them

2. Economic downturn can also be a threat to their target segment

3. There is a large amount of consumer switching taking place

4. Fake imitations can decline the sale of Zara products and hurt business

SWOT analysis of Zara – Zara SWOT analysis

One of the stores which gives marketers lessons on how to keep customers coming back is Zara. It is the flagship brand of the Inditex group, which has more then 8 brands and subsidiaries in its belt. Out of all these, the one brand driving a lot of revenue towards Inditex is Zara.

Zara is known for its fresh designs and for keeping the designs on rotation so that the customers always get new designs whenever they walk into the showroom. Consequentially, till date, there has been almost zero advertising expenses by Zara and yet, the brand is one of the most powerful retail brands across the world. If there was an epitome of pull strategy based on product and strategic design, then Zara would be among the top 10 contenders of that price.

Here is the SWOT analysis of Zara.

Strengths in the SWOT analysis of Zara

Unique designs – One of the first and foremost advantages of Zara lies in its design abilities. It has a plethora of designers on board who understand the Zara brand and the psyche of the customers who visit Zara very well. The clothes are elegant, superior quality and have fantastic finishing. They come in a lot of varieties including party wear, office wear, for kids, for men and women, casuals as well as several others. Even accessories are an integral part of Zara wear.

Strong presence – Zara has kept expanding its presence across the globe. On latest count in 2015, it had 2100 stores worldwide with an average sale of 15.9 Billion per annum. In 2016, it has expanded even further. If it has to survive in retail, Zara has to keep expanding its presence and it is good to know that the brand is doing exactly that.

Brand value – The brand is ranked number 53 by Forbes in its brand ranking and is valued at a whopping 10.7 Billion dollars. There are several positive points leading to the excellent brand equity of Zara. The performance over the years and the consistent quality it has provided has given a boost to the brand in recent years. Besides this, the brand has stayed away from controversies and tried to stay humble even when it came across them. Such a healthy culture has resulted in the brand being loved by its consumers over and over again.

Superb supply chain – Zara is known to get its designs from conception to the stores in 2 weeks whereas it takes other competitors minimum 6 weeks or more, automatically making Zara the trendiest store which has the latest in fashion. On an average, 450 million items are designed every year by Zara. This naturally pushes the consumers to visit the store again and again to check out the latest designs.

Design advantage – Zara has the reputation of launching 1000’s of new designs every year across the globe. As a result, a customer who might visit other stores twice or thrice a year to check out the latest in fashion, might have to visit Zara every month to see whats new in Zara. Because of their strong design advantage, the customer keeps buying fashion forward clothing from Zara besides purchasing the basics from the brand as well. Some customers dedicate their complete wardrobe to Zara clothing. All of Zara’s designs are elegant yet trendy, and are loved by their customers.

Low cost and higher profits – Because of their design advantage and fantastic physical evidence in stores, Zara rarely advertises its products. It relies completely on its trendy image to pull the customers to its stores. This is the reason that Zara has very low cost of operations and at the same time has high margins. It spends most of its earnings and profits on backward integration and on supply chain rather then spending it on Advertising.

Physical evidence of stores – Another strong positive of Zara is that the service has very good physical evidence of the stores. Whenever you walk into the store, you will get this open minded feeling instead of feeling cramped like you do in other showrooms. Zara uses a wide and deep store layout so that customers would love to walk around the store while picking up and trying out their favorite designs.

Weaknesses in the SWOT analysis of Zara

Generalised collection – Zara does not specialise in anything and has everything for everyone. One of the reasons that a customer shifts to a competitor is when the competitor is focused on one thing. It might be shirts, it might be pants, it might be dresses or party wear or whatever. Such immediate focus is lacking in Zara and it is good for the day to day wear or trendy wear.

Lack of advertising – While it may lead to a cost advantage and cost is one of the strengths of Zara, the lack of advertising is a weakness because the brand can double its profit and its turnover by advertising its collection. It is known to be a trendy fashion outlet and it can easily pull in more customers with advertising which will generate a lot of positive word of mouth for the brand.

Low safety stock – A regret which Zara stores have is that stocks which are fast moving rarely have a safety buffer behind it. Low inventory is kept at Zara as a strategy to keep customers walking into the stores to check out the latest items. But it also means that if a particular design is a hit with the customers, it wont reach its potential because there is no safety stock or buffer for this design.

Opportunities in the SWOT analysis of Zara

Online E-commerce – Zara can definitely take advantage of the online buying trend and make its clothes available not only in its own stores but also on other E-commerce stores as well thereby bringing a hike in sale.

Backing some flagship designs – One of the common traits of top brands is that they have some designs which are flagship designs of their stores. This is lacking in Zara and hence, there should be some designs which should always be sold from a Zara store, bringing in great demand for these designs and building even more brand identity for the brand.

Growing market potential – Wherever Zara is currently existing, he brand is becoming more and more popular, thereby resulting in growing market potential. A rise in earning potential of consumers results in rise in demand for status symbols. Zara is one such status symbol in clothing industry which consumers love to wear. Hence, Zara needs to capitalize on the growing market potential of existing markets.

Market expansion – New markets will always give new business and potentially profitable business to Zara. It needs to keep a constant eye on emerging markets, where the spending power is rising and where people can spend on a semi premium brand like Zara so that they can wear better and more stylish clothing. Such market expansion insures the clothing brand against saturation in developed countries where the competition is too high.

Threats in the SWOT analysis of Zara

Low advertising – Zara needs to ask this question to itself. Looking back, will Zara think that it made a mistake by not advertising its unique brand proposition from the start? The way that Zara keeps rotating design, it can rope in a lot more consumers if it advertises the fact that you will get the latest in designs from Zara. But maybe, if its consumer base increases tremendously, coming up with new designs and differentiating itself will become more and more difficult. So, the debate of whether Zara should advertising or not, will be going on in the management room of Zara itself.

Competition – Zara is not the only one which is known for its chic design. Vero moda, H&M and Mango are also loved for its design. But the advantage to Zara is that the other brands are quite costly when compared to Zara whereas Zara gives much better designs at affordable prices. However, this competition leads to saturation in the semi premium segment indirectly affecting the margins.

Reach – Zara needs to increase its reach tremendously. Zara operates exclusively through its own stores and does not have shop in shop kind of stores or smaller displays (at least in Asia). This is where the competition gets its tremendous volumes from. But these volumes are missing in Zara and the only answer to this is that Zara increase its reach. If it does not, then competitors will eventually affect the brand equity of Zara because of their sheer power of penetration.

A Case Study Zara Swot Pestel Analysis

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A Case Study Zara Swot Pestel Analysis

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Zara is a Spain-based clothing and accessories retailer founded by husband-wife duo Amancio Ortega and Rosalia Mera under the umbrella of Inditex Group. Inditex is a large multinational conglomerate, which is made up of almost 10 companies, which specialize in clothing. Zara’s estimated share of the total revenue of Inditex Group is 80% (Włodzimierz, 2012). Its uniqueness of tracking and involving customers’ preferences made Zara the market leader in the apparel industry. The three products lines of Zara are women, men and children are showcased through its 1700+ stores and an online store all over the world. Zara is noted for selling modern designs that the public needs with quality at affordable prices. Fashion director Louis Vuitton described it as the most devastating retailer in the world. CNN has called it a Spanish success story.

Lifestyle and Retail

1923 in 88 countries

Mango, Uniqlo and H&M, GAP, Benetton

Perfect combination of high end fashion at affordable price

People with high and medium purchasing power who love stay in fashion

Clothing line for women, men and children

SWOT Analysis and PESTLE Analysis of Zara

TThis study is conducted to understand the market potential of Zara internally and externally. In this study, we are going to analyze the internal and external market environment of Zara and sharing some suggestions that the company should consider continuing their success. For the purpose of the study, the data presented here, is collected from various published sources and different case studies conducted on Zara. We have used two market analysis methods SWOT and PESTLE analysis to review Zara’s business frameworks.

SWOT refers to Strength, Weakness, Opportunities and Threat.

Strength stands for all those aspects of the company, which give it a competitive advantage over other company. Weakness stands for the all the aspects which give the rival companies a competitive advantage. Opportunities are the areas of potential advantage, which the company can use profitably in future in order to outpace its rivals. Threats are those areas, which the company needs to be careful about if it wants to dominate the market.

1. Strong Control Over Supply Chain:

Zara possesses 90% of its stores in 88 countries including United States, Europe, Asia, Middle East and many, and the rest is the joint ventures or franchises. It boasts in-house production factories within proximity of the headquarters (Hill, Jones & Schilling, 2014). It affords the company self-containment throughout the stages of its supply chain: raw material selection, production, distribution etc. Here is a graphical representation of Zara supply chain for better understanding,

Supply Chain Management of Zara:

Zara’s strong supply chain management gives it a unique advantage over its rivals since it can handle any breakdown in the supply chain.

Traditionally, fashion companies use media in order to promote season’s trend. On the other hand, Zara is called “fashion imitator” because instead of predicting trends, it imitates the trends of the season and provides such fashion trend to its customer at the minimum amount of time possible. Zara maintains a supply chain that enables them to embrace the fast-changing tastes of its customers. It introduces new clothing models within few weeks only (Crandall, Crandall & Chen, 2014). It reacts quickly designs new styles, gets them into stores in few days. Here are few factors that play favor in company’s success,

  • Delivers new products twice each week to its stores, which adds up 10,000 new designs each year
  • Takes only 10 -15 days compared to industry average of 6-9 months.
  • 12 inventory turnovers/year compared industry average 3-4 times

3. In-house production and no outsourcing:

Zara does not outsource its products in the hope of its reducing labor cost. Instead of outsourcing its work to cheap labor markets of Asia, it makes the most out of the cheap labor supply of Portugal and Galicia. This retailer giant is vertically integrated, unlike its competitors, H&M, Gap, Benetton, control its designs, and R&D facility production facilities, distribution centers, transport fleet, and 90% of its shops (Włodzimierz, 2012). When the company is paying for factory time in China, the company does not own the company, they are a number of uncertainties they will counter. It helps the company to reduce the cost of warehouses as shipping is done from production factories itself. Only, clothes with longer shelf life like T-shirts are outsourced to countries like Turkey, Bangladesh, etc.

4. Efficient Production Management:

Zara produces more designs than all its rivals. As we mentioned earlier it produces about 10,000 designs annually as opposed to only 2000 designs for its rivals. Fast response to its customers’ demand enables Zara to meet customer’s expectations and ultimately that lead them to success. Such demand management lacked in Marks & Spenser and to some extent with Sainsbury, they did not match their product with their customers’ expectations and this led the companies into trouble. Zara’s design-to-stock-cycle varies from 4 to 6 weeks compared to the average six months of the traditional industry. This reduced time enables Zara to introduce new designs in every week and change its product catalog in 3 to 4 weeks (Christiansen, 2014).

Zara commits six months in advanced to only 15% to 25% of a season’s line, which means it produces 50% of its clothes are designed and manufactured in the middle of the season. If trends change, Zara reacts quickly, designs new styles according to the new fashion trends. With the help of their efficient vertically integrated supply chain, they get the designs into the stores while the trends are still peaking.

5. Large Distribution network and greater Reach:

Zara has 1923 stores across 88 countries in Africa, America, Asia-Pacific and Europe. Higher number of stores means greater distribution network and greater reach to the customers.

How Zara Become a Global Brand?

Opened its first Zara Store in downtown A Cortuna, Spain

Opened first Zara store outside Spain in Oporto, Portugal, then expanding to New York (1989) and Paris (1990)

Introduced its new distribution hub in Zaragoza, Spain

Opened first Zara home outlet

Unveiled store in Hong Kong, expanding global footprint to 56 countries

Introduced first online store to global consumers

Opened its first store in Bulgaria, India and Kazakhatan, increasing its presence to 77 countries, Inditex Group reached the 5000-store mark with the launch of a cutting edge, eco-efficient Zara store in the heart of the Rome, Italy.

Opened online Zara stores in the USA and Japan

Revamped image based on four principals – beauty, clarity, functionality, and sustainability.

6. Strategic Locations of the Stores

Zara stores have been popping up all over the world. The company invests a handsome amount of money buying storefronts beside luxurious brands to own the label of luxurious brands. It choose its locations very carefully to cater local customer by understanding their needs. They also follow tailored retail strategies to satisfy customers according seasonal trends.

Owing to its affordable brand label, customers get to enjoy high-end fashion clothes at affordable prices. Zara’s apparel pricing ranges from $5 to $322, however, the average price point at Zara is $48. While comparing its prices with its one of the biggest competitor H&M, the differential pricing structures of these two brands can be noticed. H&M’s most priced bracket in tops is $20 - $30, whereas, Zara’s is $40 - $50. When it comes to discount strategies, these two brands follow very different approaches. H&M currently have 24.2% of their entire online offering on discount, with 9.3% discounted by 50% or more. In contrast to H&M, Zara only offers 3.2% of their online offering discounted, and only 0.2% of the offering discounted by 50% or more (Edited.com, 2016).

1.Self-contained Distribution system prone to unpredicted problems:

Centralized distribution system is the biggest problem of Zara. If there is any technical snag occur in the distribution network then the whole system can collapse. But in other apparel companies, the distribution networks are decentralized and not self-contained like Zara. As such even if one part of the network falls, there is no wholesale collapse of the entire network. Zara controls its production, suppliers, distribution system, retails stores, unlike its rivals that make it prone to unpredicted problems.

The Fast Fashion strategy also has its own set of weaknesses. Zara can never be one of the premium luxury brands in the fashion world because it is considered as the great fashion imitator since it usually imitates runway fashion rather than predicting the styles of the season (Hansen, 2012). No doubt it provides its customers high-end designs, but its designers play smart a trick by copying designs of fashion week, rather creating some original on their own.

3. Spends Zero Revenue on Their Advertisement:

Zara does not spend much money on advertising. It has a zero advertising policy unlike its rival Benetton, H&M and GAP (Hansen, 2012). However, some of the major names of the glamour world are the brand ambassador of these companies. One of the biggest marketing moments for Zara was when Kate Middleton wore Zara dress ($49.99) the day after her wedding to Price William (Dailymail.co.uk, 2016). However, this zero ad policy gives its rival greater public exposure.

Zara has global market penetration. The company has market presence in all the four major continents. However, it still needs more expansion in Africa and Asia. In Africa, it has stores only in Egypt, South Africa, Morocco, Tunisia and Algeria. The company has more opportunities here. Africa has full potential stored for this company. Similarly in Asia, countries like China and Japan have more stores than India, Singapore, UAE and Saudi Arabia despite that fact that these countries have a substantial number of rich people.

2. Opportunity to expand in e-commerce sector

AAnother area is online marketing where the company needs to concentrate. The reason is most of the other companies like Benetton and GAP do not have good online marketing channels. Zara is already operating numerous online stores for a number of countries. However, it needs to expand its base for other countries as well in which online shopping is not available. It needs to invest more revenue in e-commerce sector in giving their products more exposure in front of their customers.

3. More Attention to Distribution Network

Finally, distribution network in the US needs to increase while keeping the basic elements in mind. Statistics projects that US has only 52 Zara stores as compared to 453 in Spain, 157 in China, 92 in Japan and 84 in Russia. The huge geographical expanse of US calls for a greater number of stores. A large population of US requires more stores to satisfy the needs of the growing customer base in the US.

Zara experiences fierce competition, not only locally but also globally. Locally Zara faces competition from Sweden’s H&M and in-house brands like Massimo Dutti and Stradivarius, whereas, on the global platform, it faces competition with international brands such as in the US, the toughest competition is from the US based GAP.

2. No Collaboration with International Designers:

Zara shares no collaboration with international designers unlike H&M, which has collaborated profitably with international designers like Karl Lagerfeld, Lanvin, and Alexander Wang. This can be a serious threat to the company. When a company collaborates with an internationally noted designer, young shoppers get interested in buying designer labels.

PESTLE, one of most popular marketing tools, helps to analyze the external factors that affect an organization. PESTLE is mostly used when manager attempt to identify factors pose as threats to the organization or the opportunity that company can use to climb the ladder of success. PESTLE is acronyms of six essentials factors,

  • Political factors refer to the policy of the government that involves legal and economic aspects
  • Economic factors mainly demonstrate the changes in taxation, inflation in economic growth, the rate of exchange and rates of interest.
  • Social factors mainly highlight any alteration in trends in the society, and its potential effect on the company’s consumers. Technological factors concentrate on the advancement of technology and how the development of technology benefits to the customers.Legal factors purely talk about litigation or legal procedure that company has to undergo
  • Environmental factors refer global situations like global warming, greenhouse effect, natural calamities, etc.

Whenever, Zara plans to expand its roots to another country. It has to know the entire system before taking any permanent step. The reason is, the government of a country can easily change its policy, which will affect on the company’s operation.

Whenever, Zara plans to expand its roots to another country. It has to know the entire system before taking any permanent step. The reason is, the government of a country can easily change its policy, which will affect on the company’s operation.

Zara is planning to expand its business in the Europe Union because of its safe and prediction economic circumstances. It will help the company to predict its market growth because Europe economy rarely changes.

Zara has been witnessing fluctuation in last few years, but Zara is drawing its revenues successfully for last years. The recession in 2011, has not affected the company as such. The reason is, Zara deals in dollars and safer currency for its dealings. The company always evaluates the economical condition and currency rates of that country before entering its new markets (Knox, Agnew & McCarthy, 2014).

•Prices differences in various countries:

Due to different customs duties and level of tariffs in various countries, the prices of Zara products vary in different countries. Here is a comparative study conducted by newspaper El Confidential demonstrating pricing differences in various countries, 22% to 24% higher in France, Italy and Germany.

Source – AlphaWise, Morgan Stanley Research, Zara websites (April, 2015)

Keeping societal factor in mind, Zara creates its products while keeping the basic factors like, geographical position, race and origin of the country population. So you can find clothes for someone who is very skinny or for someone who is heavyweighter. It gives the company a societal advantage.

It is in our habit to incline to perceive add-ons such bonus packs as gains so as price discounts. Zara provides promotional codes, vouchers and offers deals to its customers. Zara promotes its products by various coupon sites where one can find its discount codes, which can be redeemed at their online shopping site or store.

•Launching Apps for Feasibility of Customers:

Zara tactfully uses information technology to support its international logistic system and an online store where exchange and return of products are involved. Zara gives its customers the chance to buy its products by iPod and in-house apps (Forbeswelcome, 2016).

•Interactive Maps to locate the store:

Zara projects a store locator on the website where you can easily locate a store by entering your desired region and location. The store locator will show you the closest stores around the entered location. Hence, it gets easier for the consumers to discover stores as the online maps show the exact location of the store.

•New Experience with Zara iPad app:

Zara’s attempt in online shopping is revolutionizing the entire online buying experience. With just a few clicks on your iPad’s Zara online shopping app, you will now be able to conference with your friend while looking at the clothes on your tablets. This technology gives any buyer the opportunity to involve their friend’s suggestions while shopping for their own. The options like video chat, instant messaging and voice chat are available (Thestir.cafemom.com, 2016).

A series of disasters struck Japan in 2011, the tsunami was one the biggest one that devastated Japan in many ways. For the apparel industry and its supply chain, the short-term impact can affect organizations in log term. Damage to local infrastructure, power irruptions, closed ports are many few among the problems that apparel industry faced during this time.

• Asian Countries require rapid fashion change:

Weather in Asian countries is totally different from the European countries. Five extreme seasons rule the weather, whereas winter rule in European countries. Variation in seasons requires rapid fashion change based on the local weather. Instead focusing on seasonal changes, Zara sells clothes for the normal weather.

•Litigation changes in different countries:

The government of Russia, India and Mexico provides their own version of corporate policies, and the company has to alter operation according to the set policies. In this manner, the pressure is always on the Zara products in terms of ensuring that they are following proper litigation in their business operations.

Big fashion retailers like Zara value their brand equity because they develop a bond with their customers through their brand names and trademarks. But sometimes, it becomes impossible for the organization to implement copyright law. It is true that the Zara launch its new design, you will find the same design at lower cost at some local shops. But sometimes the company itself face few copyright issues, the recent one with global brand Fendi. Roman fashion brand Fendi claimed that Zara had unlawfully used their photographs that had been taken from Fendi’s show in the 2013 fashion week.

It might be said that Zara has the potential to be largest clothing retailer in the world. However, fast fashion policy must also go hand in hand with aggressive marketing using all modes of marketing channels. Distribution network must expand especially in Africa and America to get the maximum exposure for the brand. After assessing its internal and external factors, it is noticed that Zara manages to stay up at the revenue growth due to its unique and strong model of the business. It is advisable that the company should continue to launch creative and fresh fashion to satisfy the need of customers. Based on SWOT and PESTLE analysis, Zara will stay as the leader in the apparel industry is spite of the challenges and threats it would face. Its unique supply chain infrastructure and efficiency of the business operation give the company the competitive advantage, which reflects in their sales and revenues.

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Crandall, R. E., Crandall, W. R., & Chen, C. C. (2014). Principles of supply chain management. CRC Press.

Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Jaouhari, C., & Wu, M. D. (2013). Company’s History.

Christiansen, B. (Ed.). (2014). Handbook of Research on Global Business Opportunities. IGI Global.

Hansen, S. (2012). How Zara grew into the world’s largest fashion retailer.The New York Times, 9.

XIONG, Q., JUNG, H., KITAGUCHI, S., & SATO, T. (2015). Color Feature of Fast Fashion Brand Outerwear on Official Online Store. International Journal of Affective Engineering, (0).

Włodzimierz, R. (2012). Business model design and its importance in successful strategy–the case of Zara. Вісник соціально-економічних досліджень, (3 (1)), 129-134.

Knox, P., Agnew, J. A., & McCarthy, L. (2014). The geography of the world economy. Routledge.

Zara SWOT Analysis Profile

Click the edit link to start a description for Zara. (read full profile)

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