MKT41010
KANIKA VERMA
15204010

BUSINESS OVERVIEW
Zara is one of the largest Spanish clothing and accessories retailer based in Arteixo, Galecia,
founded in 1975 by Amancio Ortega and Rosalia Mera. Being a flagship retail store of Inditex
group, the fashion group also owns several other brands like- Stradivarius, Pull and Bear,
Bershka, Massimo Dutti and Ulterque. The first store provided the customers with low- priced
products, this gained popularity and became successful, that’s how a chain of stores were
opened throughout Spain. Zara is a vertically integrated retailer, controlling the design, supply
chain, distribution and manufacturing of its products worldwide. It has 6,500 stores across 88
countries.
Zara’s business overview can be understood by explaining its vision and mission statement:-
MISSION STATEMENT
Zara’s mission statement says ‘the world is getting smaller; we want the whole world to dress
in style, class and experience new designs weekly.’ Zara always try to keep its customers up to
date about the latest trends and fashion and provide them with the best clothing experience.
VISION STATEMENT
Zara aims at becoming the number one fashion retailer throughout the world.
Zara is at the peak of success because of the ways of keeping the street fashion adaptive in
nature with the changes in the market. The brand deeply went through the changes in fashion
world, opted for innovative approaches and trendy designs to put them into the stores within
a week or two and lived up to the expectations of people, where else other retailers take
almost 6 months to get this done. That is where Zara beat other fashion outlets and became
the favourite brand among people all over the world.
THE EXECUTIVE SUMMARY

• CONCEPT
Zara basically pays a lot of attention on the designs, process of production and the
distribution of its products; it’s the fundamental concept of Zara. It always focus on what
the customers want and desire and then works in the direction of making the best possible
product available to them to satisfy their needs.
Zara thinks that the firms have to be flexible in terms of providing products and delivering
services to the customers as the customers are surrounded with lot many options and
choices in the market place.
• CAPABILITIES
Capabilities of Zara are required for exploiting the market opportunities to get the
profitable results and Zara tries to put control over all its activities like designing,
production, manufacturing, strategic partnerships, etc for getting maximum out of its
capabilities.
Zara always maintains the required flexibility and speed in the designs as well as the
production of its products that is how it is able to produce 12000 of new items annually.
This defines the capability of Zara that allows it to attain the set objectives and strategies
helping Zara to flourish and expand in the market overseas.
• VALUE DRIVEN
The Value drivers of Zara can be categorized into two- Tangible and Intangible.
OVERVIEW OF ZARA’S BUSINESS MODEL

• CO-ORDINATION - The Coordination between the Inventory distribution and Pricing
markdown is the key ingredient of Zara’s business model.
• COMMERCE- Zara earns revenue from in- store, online sales, and special offerings of it
products. But, mostly it fetch great revenues from its in- store operation and provides almost
18% of overall discount.
• COMMUNITY- In Zara’s business model its customer segment (Girls, Women, Men) plays a
vital role and build its community.
• CONTENT- The content related to the products, their different categories, discounts and
special offers on Zara’s website seems attractive to the customers and provide relevant
information to them.
• COMMUNICATION- Zara mostly communicates with its customers with the help of fashion
shows where it portrays its collections. It also make use of social media platforms like Face
book, Twitter, Instagram, Pinterest as well as its online shopping website to do the same.
5 C’s OF BUSINESS MODEL

KEY CHALLENGES
• Miraculous level of competition amongst various international brands in the Chinese market
where the biggest challenge for Zara is cultural differences. China has the largest amount of
online population so, Zara faces a challenge to convince these people to buy its products.
• Another challenge is rising transportation cost if, the fuel cost rises then the model of twice-
weekly deliveries that plays an important role in defining the Zara experience becomes more
expensive to maintain. The key factor of differentiation in Zara is its updated collection which
can be at risk due to the raise in the cost of transportation.
• Inability to penetrate American apparel market, the reason behind this is the differences in
the tastes of Europeans and the Americans. This is a great challenge on the part of Zara to
influence the Americans to buy its products.

THE BUSINESS
Environment of Zara can be understood by throwing light on its Situation Analysis i.e., SWOT
Analysis.
THE BUSINESS MODEL ENVIRONMENT
STRENGHTHS
-Well known and established brands
-High quality products at low price
-Becoming highly innovative with
technology
-Centralised distribution system
-Standardized product delivering services
WEAKNESSES
-Online customer service is somewhere lacking
behind
-Online pricing is not consistent with in- store
pricing
- Weak Online presence
-Don’t incur much cost on advertising
OPPORTUNITIES
-Development of products and improving
them for giving best shopping experience
-Further global expansion
-Product collaboration with outside sources
-Demand for high fashion at affordable
prices
THREATS
-High Shipping Cost
-Market Demand is often based on the current
economic state
-High level of competition in the fashion
market
-Emergence of newcomers with new ideas and
creations

VALUE PROPOSITION
•Factors that Zara delivers that is of value to the customers
-Women/M en - Zara is delivering value to its customers by providing unique, customized and
fashionable clothes as well accessories at affordable prices that have some added
value( sentimental value, emotional value, beauty, heritage, etc) to the customer.
-Designers- Zara is delivering value to its designers by giving them a platform to present their
quality creations to the customers.
• Needs that Zara satisfies that helps the customers get a job done or solve a problem
-Women/ Men - Zara satisfies the needs of its customers by providing them with large choices
of style and fashionable products at affordable prices as well as reasonable quality.
-Designers- Zara satisfies the designers by making their creation popular in the eyes of the
customers.
• The key pains and gains that Zara addresses for the customers
-Women/ Men Pains- Expensive and costly designers clothes as well as problem in finding
centralised stores.
-Women/ Men Gains- Enabling the customers to feel fashionable at affordable prices and
facilitating them with centralised store location.
-Designers Pains- Heavy cost of setting up their own fashion store and to reach customer.
-Designers Gains- Providing them with a platform where they can present their collection to
large number of customers without incurring heavy cost

CUST
•People for whom Zara is creating value
-Customers both Men and Women (between the age group of early twenties and thirties, ranging
from college students to professionals), Designers
• The job to be done of the customers
-Women/Men - To search for brands providing latest fashion items of standard quality at cheap
prices
-Designers- To create fashionable and trendy clothes that are eye catchy for the customers to get
maximum exposure
• Problems that Zara tries to solve
-Women/ Men - These customers are trying to solve the problem of getting stylish clothes at
affordable prices
-Designers- They are trying to solve the problem of reaching large number of customers to make
them aware about their creation and to lower the cost of setting up a store
• Grouping of customers on the basis of their jobs and problems
-The Freemium or Premium user segment
-The Designers segment
• Type of platform
-Zara is a multi sided platforms that connects various customers and designers to get the maximum
benefit out of the business
CUSTOMER SEGMENT

• Type of relationship that Zara’s customer want- personal, emotional or automated
Women/ Men - Personal, emotional and Trust relationship
Designers- Personal, Cross- sided network
•Zara’s strategies to attract customers
Zara has the most competitive business strategy for attracting customers which is divided into two
points:-
First, they update their collections in the store in every two weeks which creates a feeling in the
customers that they should buy the product at the time its made available in the store otherwise it
will sell out in the coming week. It also gives customers a sense of differentiation from other
brands. This mentality leads to the purchasing of products hence, increasing the sales of Zara.
Second, the factories are located in Europe which is an advantage for Zara as the new and latest
designs take little time to reach the store. This facilitates customers in getting new designer clothes
in a short time span.
It also creates a sense of loyalty in the customers towards the brand hence, increasing the revenues.
• Zara’s Strategy to retain its customer’s participation
Its the toughest task to retain the interest of customers in the brand for a long time but Zara
manages this by updating its collection and getting trendy, fashionable clothes within two weeks
which is a less time period for any other brand to get their stock updated. So, this generates a
mentality in the customers of scarcity of fashion that is- to buy the product at the time they have
seen it otherwise they will loose it as the inventory is updated in every two weeks.
• Zara’s strategy to increase their interaction
By being creative, flexible, getting new and latest fashion trends at reasonable prices to attract the
customers will increase their interaction to a great extent
CUSTOMER RELATIONSHIP

•Zara’s way of communication with customers
Zara communicates with its customers with the help of its online shopping website, in- store
interaction, social media platforms- Facebook blog posts, Twitter, Pinterest, Instagram as
well as some fashion shows where it present its collections
• Distribution of Zara’s product and services
The Zara stores are highly centralised that can be reached easily by the customers and they
have a self service option where customers buy their products and straight away take them
home. On the other hand, the products are delivered at customer’s place who buy products
online from the website and the time span of delivery is about two days. It also coordinates
in the best manner with logistics which is an important aspect to be considered. So, it can
be said that because of the huge number of retail outlets it becomes easy for Zara to
distribute its products and services to the customers and give them the best shopping
experience.
• Differentiating Direct and Indirect channels
Website comes under the category of direct channels that is delivered by Zara and In- store
services (from the point of view of customers) and field sales (from the point of view of
store staff) can be referred to as both direct as well as indirect channel as there are certain
designers working for Zara to get the best collection in the store. Zara has its own factories
where clothes are prepared and they are straight away sent to the stores for final sales.
DISTRIBUTION CHANNEL

REVENUE STREAM
•Zara’s Pricing Strategy
-The pricing strategy is market- oriented so, the prices are set keeping in mind the markets like-
prices are high in international markets because of longer distribution channels whereas, they
are low in domestic markets.
- It has set an affordable price for its fashionable and quality clothes which gives high
increments in sales.
- It focuses on Just in Time policy for getting better results.
- It follows different price lines which also indicates the level of quality of its clothes like- Higher
the price, better will be its quality
- It has a low level of inventory
• Sources of Revenue
In-store sales- $7,670,000,000
Online Sales- $3,875,000,000
Total Revenue- $11,545,000,000
• Zara’s Revenue at glance
In the end of the year 2014 (ended January 31, 2015), Zara experienced heavy sales of $19.7
billions which was comparatively high from other extremely popular retailers like H & M. In the
past year Inditex has marked great success by increasing its sales by 8% which was far more than
the competitors in the market on the other hand, in India, the average sales per store of Zara is
about Rs.45 Crore a year It has 1,923 stores in 88 countries generating fast fashion for its
customers both Men, Women and the reason behind its high revenues is its ability of getting
quick merchandising in its stores.

KEY ACTIVITIES
•The core activities of the Zara’s business
-Product Development
- Sales & Marketing
-Search for latest fashion trends
-Control of value chain
• The type of business ii is- value added, problem solving or networking?
As per the key activities of the business, it can be inferred that Zara’s business is more of value
added and networking. Product Development, Search for latest trends are value added on the
other hand, Sales & Marketing and Control of value chain fall under both the categories- value
added and networking.
• Key activities to be done in the business
All the four activities mentioned above- Product Development, Sales & Marketing, Search for
latest trends and Control of value chain are of utmost importance for Zara and will be done in
the business.

KEY RESOURCES
•The key resources of Zara are also the key value drivers of its business and they are
categorised into two:-
- TANGIBLE RESOURCES
Tangible driver is basically the financial segment of Zara that is very strong and competitive
in nature and the financial performance of Zara explains its heavy amount of earnings and
profit margins in the market.
- INTANGIBLE RESOURCES
Intangible drivers are the customer loyalty, brand awareness of Zara which provide
significant amount of value to it. This is due to the Zara’s flexible and innovative nature
which always provides the customers with wide range of clothes in terms of designs, fashion,
latest styles, trends, etc.
These are the two key elements that drive value for Zara and hold utmost importance in
differentiating its business from that of others.

KEY PARTNERS
• Suppliers of resources that Zara needs for the business
The designers, wholesalers, distributors, fashion magazines, and the customers both Men
and Women who shop at Zara.
• People integrated in Zara’s activities
All the people who are some way or the other connected to Zara like- its store employees,
Sales and marketing staff, distributors (distribution channels), customer segments,
designers, website handlers, suppliers, etc. These people are the backbone of Zara in
implementing all the operations in the best possible manner.
• Supporters to Zara’s key activities
Zara gets support from both its In- store staff as well as outside sources.

COST STRUCTURE
• The most important cost incurring segments in the business
- Material Cost ( Variable Cost) $ 500,000,000
-Marketing Cost (Variable Cost) $ 500,000,000
-Design Cost (Variable Cost) $ 700,000,000
-Logistics Cost (Variable Cost) $ 500,000,000
Zara incurs heavy amount of cost for obtaining material for creating quality clothes for its
customers so, in relation to this cost Zara has to pay for the designs as well as the logistics
because these hold great importance in the business. Zara updates its inventory within a time
frame of 2 weeks so it pays a lot more attention on these three costs. Lastly, it incurs little and
manageable cost on advertising the brand this is because Zara is a well- established brand in
the market and most popular as well so, it focuses on the other three costs to a great extent.
So, the total amount of cost incurred by Zara is $ 2,200,000,000 and the total Profit earned
after all the expenses is $ 9,345,000,000.
• Key activities that are more expensive
From the figures mentioned above it can be derived that Design Cost is the most costlier affair
for Zara as it puts lots of emphasise in researching for the latest fashion trends and designs for
updating its collection.

FUTURE STRATEGIES
K
STRENGTHS
-Well known and established brand
-High quality products at low price
-Becoming highly innovative with
technology
-Centralised distribution system
-Standardized product delivering
services
WEAKNESSES
-Online customer service is
somewhere lacking behind
-Online pricing is not consistent
with in- store pricing
- Weak Online presence
-Don’t incur much cost on
advertising
OPPORTUNITIES
-Development of products and
improving them for giving best
shopping experience
-Further global expansion
-Product collaboration with outside
sources
-Demand for high fashion at
affordable prices
SO STRATEGIES
-Use the high quality at low price
feature to fetch quality customers
-Enter into the developed and
emerging markets
WO STRATEGIES
-Get consistency and equality
between the online and the in-store
prices
-Development in the production
process which may get maximum
output of products to satisfy the
demands of high fashion customers
THREATS
-High Shipping Cost
-Market Demand is often based on
the current economic state
-High level of competition in the
fashion market
-Emergence of newcomers with
new ideas and creations
ST STRATEGIES
-Use centralised distribution system
for gaining competitive advantage
-Update the collection of clothes as
usual for facing competition and
defeating the competitors
WT STRATEGIES
-Improve the online presence for
getting best results
-Collaborate with the new entrants
and it can flourish in the market

REFERENCES
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 Zara: worldwide pricing strategy revealed by study - News : Retail (#544318). 2015. Zara:
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 Sample Project Of Business Model on Linked In (By Tove Perlhede)

Spanish fashion brand Zara crosses Rs 500-crore sales mark in India - timesofindia-
economictimes. 2015. Spanish fashion brand Zara crosses Rs 500-crore sales mark in India -
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g&dpr=0.9#tbm=isch&q=zara+business+model+canvas+2015&imgdii=SNz2HJNCuD-UvM%3
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