Marketing and Zara Essay Example
Marketing and Zara Essay Example

Marketing and Zara Essay Example

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  • Pages: 12 (3158 words)
  • Published: March 7, 2018
  • Type: Case Study
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The major competitors of Ezra include H&M, GAP, and Benton. Ezra employs efficient strategies such as adopting zero inventories and Just in Time systems, utilizing contract manufacturing for small orders, decentralizing warehouses for product delivery, and closely monitoring fashion trends. One unique strategy Ezra implements is zero advertising; instead of advertising, they focus on opening new stores. Additionally, Ezra avoids outsourcing to low-cost development centers as it will compromise the high-quality fashion they represent.

Ezra's initial success can be attributed to offering low-priced products that resemble those of more popular high-end fashion brands. Building on this success, Ezra adopted new design and distribution methods. Considering the long lead times in the fashion industry (around six months), Ezra aimed to reduce this timeframe and minimize uncertainties in fashion retail. They introduced the concept of "Instant Fashion" to respond

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quickly to consumer preferences and emerging trends. This strategy allowed them to bring in new products rapidly, in small quantities, and increase production if demand arose.

This approach helped them minimize inventory, accurately gauge demand, and reduce uncertainties. Later on, Ezra incorporated Information technologies to revolutionize their distribution processes.

Ezra utilized these strategies to develop fashion lines based on market trends and create their own designs through a team of 200 in-house designers. They also implemented a production system and warehousing mechanisms, with electronically linked stores and warehouses. This enabled them to exchange real-time information and reduce inventories, minimizing risk and capital expenditure. This agile system allowed for quick stock rotation and improved sales, as customers would return every two weeks to explore new designs before they became unavailable. Ezra's international expansion began in 1988 with Portugal, an

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they have since opened over 1,000 stores globally using company-owned showrooms, joint ventures, and franchisee models. Currently, Ezra offers men's clothing and women's clothing, each with five subsections including lower garment, upper garment, shoes, cosmetics, and complementary products. Around 50-60% of the demand is produced at the start of the season, with the remainder manufactured during the season. This occasionally leads to stockouts or markdowns, but compared to competitors, Ezra experiences relatively few service failures in terms of markdowns.Therefore, if the design is not to the customers' liking, it is removed from the shelves and any additional orders are canceled. This results in new designs and ensures that no designs remain in the store for more than four weeks, which encourages consumers to make purchases. In comparison to competitors, the average number of times a customer visits Ezra is 18 times per year, whereas the competition only sees 3-4 visits. In terms of mission, vision, values, and goals, Sara's Mission Statement states that "EZRA walks at the pace of society, dressing ideas, trends, and tastes that society itself has matured." By utilizing their unique business models and stores, Ezra has proven that success can be achieved with minimal or no advertising. This is made possible through their commitment to superior customer service, which includes rapidly restocking and responding to customer needs. This has given Ezra a competitive advantage. In order to uphold their mission, they continuously innovate their products to enhance the shopping experience and offer new designs at affordable prices, constructed from quality materials following the latest trends. Sara's strategy for growth and positioning includes zero advertising. They prefer to allocate resources towards store

expansion rather than advertising. However, they do engage in minimal advertising through fashion magazines. This decision is supported by the quick turnaround of store displays, which is approximately four weeks, making advertising an unnecessary expense.Ezra focuses on efficient design and showcasing a large number of designs annually. The workforce is essential to Ezra's success, as feedback from stores helps designers improve fashion performance, and the production and supply chain ensures the latest styles are available quickly. To determine these strategies, external analysis is necessary. In terms of demographics, Ezra targets young consumers with disposable income in both evolving and developed countries. Market research shows that customers in these countries are open to trying new brands, but are also price and quality conscious. Taking advantage of weak currencies, low labor costs, and proximity to customers in other locations is important for Ezra's economic segment. Competition in these markets can significantly affect profits.Due to rising labor costs and strict labor laws, the current production processes in the mentioned countries may not be favorable as they will increase production costs. In addition to this, Spain/Europe has a concentration of designers, which can be advantageous as labor laws permit it. If Ezra does not wish to decentralize these functions, there are no regulations governing their decisions as the fashion industry is not regulated. Furthermore, Ezra efficiently utilizes IT in managing their supply chain, resulting in lower operating costs. Expanding the use of IT to their procurement and manufacturing activities outside of Spain is a possibility. Globalization and advancements in technology have led to the emergence of several low cost production centers. To further reduce costs and maintain quality, Ezra

can establish offshore production facilities in low cost locations. This will allow them to localize their brand and cater to local preferences. The Asian markets of India, China, Malaysia, Indonesia, and Taiwan are projected to be the critical markets for Ezra in the future. Relaxation of trade norms would help reduce transaction costs if Ezra plans on expanding their activities beyond Spain. The fashion industry undergoes rapid changes in terms of demographic and global segments, making environmental characteristics highly dynamic.

Ezra, a core player in the fashion industry with fast cycles, has a unique strategy that focuses on the leading edge of the product cycle, allowing them to deliver "Instant Fashion". We will discuss the external and internal variables in detail to understand why Ezra needs to act in a specific way.

As a group, Inedited is a prominent fashion distributor with over 100 associate companies worldwide. Their stores are located in more than 400 cities worldwide. This presents a new opportunity for Ezra to enter foreign markets in the international fashion retailing segment. Additionally, Inedited can showcase its group brands when exploring international expansion, offering a wide assortment of goods replenished quickly to establish a niche for itself.

The group company of Ezra, Inedited, has shown strong revenue growth year on year. The revenues have increased at an annual CARR rate of 18%, while the operating profit represents a CARR rate of 21%. The profits also experience an annual increase at a CARR rate of 25%. These impressive financial performances lead to increased investor confidence in the company.

Furthermore, Inedited boasts a strong distribution network.

In Inedited, an efficient supply chain management ensures that goods

are delivered within 24 hours in Europe and approximately 40 hours in overseas outlets. The centralized warehouses in Europe, Asia, and America handle the majority of the supply. The company's logistics department, consisting of over 4,000 people, delivered 627 million garments in the financial year 2008. Despite zero advertising policy to cut expenses, Ezra focuses its capital on expansion in newer markets by relying on its strong brand name, store ambiance, and product quality. However, there is an overconfidence on the European market as a significant market presence is in Spain and surrounding countries. Despite this, only 40% of group revenues come from Spain, while 60% come from international operations with 43% from European operations and the remaining 17% from outside Europe. As a result, the group heavily relies on the Spanish and European markets for revenue sustainability, making it vulnerable to economic, political, and social changes occurring in these markets, particularly in Spain.Despite Ezra's reliance on local designers, the fashion tastes of the brand may heavily reflect a European perspective. However, as Ezra seeks international expansion, it is imperative to cater to global customers. This poses a challenge as most of the designers are from Spain, resulting in designs that may be too localized. In order to achieve a global presence, it may not be feasible to localize the core designing and manufacturing processes. To better cater to local tastes and fashion, it is advisable for designers to be located closer to the respective markets.

In terms of opportunities for expansion, the group has invested over â?2 billion to open new stores internationally, both in countries where it already has a presence and in new

markets. The growth rate of stores has been significant, with up to 640 stores opening per year. Ezra's fashion will soon be available in Korea, Ukraine, Egypt, and Montenegro. To achieve its corporate objective of international expansion and sustained revenue growth, a well-defined expansion plan is crucial.

Furthermore, there is a growing apparel retail market in Asia, particularly in China, India, Malaysia, Taiwan, and Indonesia. This market is witnessing a high rate of growth.

Due to the rise in affluent households, higher disposable incomes, and consumer knowledge of international brands, Ezra sees an opportunity to enter and expand its operations in the Asian market. This will help shift the burden of growth and diversification from mature and highly competitive European and American markets to the developing Asian markets. Additionally, there is a growing trend of online sales, with over ?1 billion spent on online shopping in the UK alone. Ezra should consider opening online retail shops to cater to customers who prefer standardized versions of Sara's products. This will allow for the display of their entire product line and facilitate both online and offline sales growth. However, competitors are also exploring new avenues such as China, India, and Eastern Europe for cheaper manufacturing locations. This creates a threat as lower procurement costs can enable competitors to offer lower prices to customers. One advantage of Sara's vertical integration is the frequent replenishment of its stores and valuable feedback from store staff for product design.

If this feedback yields the expected results, Ezra will be able to sustain higher manufacturing costs than its competitors in the future. The competition is also working on reducing lead times, which, if successful,

could lead to erosion in market share and a decrease in revenues. Counterfeit goods in both new and existing markets adversely affect sales of branded accessories. This widespread counterfeiting reduces brand value and exclusivity, especially for high-end fashion products, resulting in customer dissatisfaction. The rising labor cost in the European region is impacting Inedited's profits as they primarily focus on Sara's designing and manufacturing activities there. This increase in operating expenses negatively affects the group's margin. In terms of internal analysis, Sara's main assets are the designers, logistics process, in-store salespeople, and store availability. After receiving feedback, they have approximately two weeks to deliver the garment to the store. Each designer is a valuable and costly resource, and Ezra exploits their quick turnaround time to the fullest, giving them a competitive advantage over their competitors who have not been able to match their speed in turning around designs.The success of Ezra relies heavily on customer satisfaction and word of mouth advertising, as the company follows a zero advertising policy. New designs that satisfy customers contribute significantly to Ezra's brand recognition. The logistics process is another factor that gives Ezra a competitive advantage, allowing them to showcase 12,000 new designs every year. Assisted by IT and the workforce, this advantage can be imitated by competitors and does not provide a long-term sustainable advantage. However, it still plays a critical role in preventing stock shortages and reducing unnecessary costs. Other aspects such as salespeople, staff, and store ambiance are valuable but can be easily replicated, resulting in comparable performance between competitors. The company's capabilities include sourcing materials, inbound logistics, flexible manufacturing/outsourcing, outbound logistics, in-store sales, market research,

product design, procurement outsourcing, distribution, centralized planning, corporate vision and mission, brand image, and competitor analysis. The main competitors are H&M and GAP Inc., with the latter having a large store network and strong financial leverage. GAP Inc. aims to tap into the growing online retail segment, expand through franchising into new markets, and target the global footwear market.The text highlights the weaknesses and strengths of a company, specifically in terms of geographic concentration, comparable store performance, customer loyalty, rising labor wages, designing capabilities, procurement practices, collaboration with designers, market presence, target niche, and issues with customer loyalty and product recall. The industry is described as attractive due to high entry barriers and high profit potential. The financial data shows that although H&M has higher sales revenues than Inedited, Inedited has lower operating expenses as a percentage of sales due to its operational and marketing strategies that reduce inventory and generate more sales through instant fashion. The corporate level strategies of Ezra are similar to its parent company, Inedited Group. These strategies can be classified based on three frameworks - Market Consolidation and Product Development by bringing in the latest fashionable designs from the design stage to distribution within 2-3 weeks.Ezra, a multinational retail company, is focused on market development through the expansion of its stores to new locations and countries. As of December 2008, Ezra had approximately 1500 stores in 78 countries worldwide and their presence continues to grow. With a high market share in most countries and operating in an industry with a growth rate of 40%, Ezra is positioned as a star in the Growth-Share BCC Matrix. The company's business strength is

also high, placing it in the Investment and Growth direction of the directional Policy Matrix. In fact, Ezra is a major revenue generator for its parent organization, accounting for about 67% of total revenue. When it comes to business level strategies, Ezra targets a broad market of fashion-conscious individuals with a preference for trendy and stylish products. This target market is not segmented by age or lifestyle, giving Ezra a wide scope in terms of potential customers. Moreover, Ezra employs both cost leadership and differentiation strategies. To achieve cost leadership, they focus on reducing lead times and inventory costs within their supply chain. Additionally, they differentiate themselves from competitors by providing exceptionally low lead times that surpass industry standards.Ezra is a leader in the fashion industry, producing approximately 11,000 designs per year compared to their competitors' 4,000 designs. They go above and beyond by replenishing their stores twice a week, whereas major competitors only do so once. Additionally, Ezra takes advantage of shortages in stores by replacing them with new designs and producing in small batches. This strategy creates a sense of urgency for customers who find a design out of stock, motivating them to purchase a new design for fear of missing out. As a result, customers visit Sara's stores around 17 times per year on average, while competitors only see customers three times annually.

Ezra keeps their designs in stores for about four months before removing them. This is significantly less than competitors, as only 10% of Ezra's designs are taken off the shelves, compared to 17% by their competitors. To further meet customer needs, Ezra takes feedback from customers into consideration when determining

their product offerings.

Ezra also utilizes IT in the vertical integration of their supply chain, ensuring smooth information flow throughout the chain. This integration allows for optimal efficiency.

Based on Mile's and Snow's Adaptive Strategies model, Ezra can be categorized as a Prospector due to their focus on innovation and constantly adapting their designs to match the latest fashion trends and customer preferences. Competitors have been unable to replicate Ezra's successful supply chain strategy.Functional Level Strategies: The manufacturing systems at Ezra need to be flexible in order to accommodate the weekly changes in designs. To achieve this, Ezra utilizes Flexible Manufacturing Technology or Lean Production. These strategies reduce equipment setup time, increase machine utilization through better scheduling, and are outlined below.

Marketing Strategy: Ezra employs the following strategies to attract and retain customers. Only one item of each size in each color option is stocked on the shop floor, requiring stores to maintain a robust restocking policy. Sales personnel at the stores gather customer feedback to determine the needs for new product introductions, which are planned twice a week to keep up with fashion freshness. By locating stores in prime retail areas, advertising costs are minimized as customers are naturally drawn to these locations. Marketing expenses amount to 3% of sales compared to competitors' 3.5%.

Materials Management Strategy: Raw materials are stocked in advance based on forecasts and sourced from countries such as Spain, the Far East, India, and Morocco. Due to short lead times, inventory levels are kept low. High inventory turnover results in reduced capital needs. Sewing activities are outsourced to contractors, leading to cost savings.

R&D Strategy: The design team at Ezra consists of young individuals who

are well-versed in the latest fashion trends.During the year, approximately 40,000 designs were created, with around 11,000 selected for production. Ezra's Human Resource Strategy emphasized the importance of learning from mistakes and accepting criticism, while also promoting open expression of opinions. Instead of a formal performance appraisal system, immediate feedback from colleagues at all levels was implemented. Recruitment focused on personal empathy rather than just qualifications, and a significant portion of salaries were based on performance.

In terms of Information Systems Strategy, IT was utilized to vertically integrate the chain and horizontally facilitate the smooth flow of information across functions. The company had a relatively flat organizational structure compared to others in the industry, and cross-functional integration ensured the development of customer-oriented designs, swift information flow, reduced time for manufacturing new designs, and low development costs.

At the global level, Ezra had already established 1,500 stores in 78 countries by December 2008 and continued to seek expansion opportunities. The main factors contributing to their global competitiveness included rapid growth in the Spanish market, high export demand from Spain, and competition with other firms such as H and Gap.Ezra had several main reasons to expand globally. Firstly, it wanted to take advantage of its "instant fashion" concept in order to expand its market, increase market share, and generate more revenue. Additionally, Ezra aimed to provide customers with the latest fashion at the lowest cost by supplying stores with low quantities. To decrease costs, Ezra decided to expand globally, leveraging economies of scale. The company followed a strategy of global standardization, providing standardized products in all the countries where it operated. By reducing costs and achieving economies of scale,

Ezra hoped to increase profitability. Ezra entered different markets using various entry strategies. It exported its products to certain markets, like Monaco and Oman, where establishing manufacturing facilities would not be profitable. Additionally, it opened stores in various locations through franchised deals, avoiding the costs and risks associated with entering a foreign market independently. Examples of these locations include Cyprus and Venezuela.and China.

In the US, Ezra opened a wholly owned subsidiary in 1992 to establish a strong presence in the American market. In the UK, it established a wholly owned subsidiary in 1994 to tap into the British market. In China, Ezra opened a wholly owned subsidiary in 2001 to exploit the opportunities in the Chinese market.

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