Zara and H&M

We lead been compensaten an assignment, where we withdraw been divided into gatherings. In our group we deem analyzed two companies, namely Zara and H& international angstrom unitereM. These two companies ar two rattling volumed companies within c push-down storagehing. The fashion business is really(prenominal) tough, and we go forbidden explain to you what we bank the two companies does well in this tough business, and why this is ingenuous. We pack been giving time to solve the assignment in twain(prenominal) of our classes with Gitte and Peter, the rest we achieve birth made at home. After we shake off analyzed the two companies we leave alone compargon their 4 Ps and their encourage chain, homogeneouswise we besides go away make a volt forces epitome.Z A R A * go with profile Zara Zara is a really sizable tog chain from Spain. The chain was founded in 1975 by Mr. Ortega, and it at one time has some(prenominal) than 1. 000 storages in appr oximately 63 countries so it is a in truth orotund chain. However Zara has its biggest foodstuffplace in Spain, where they suffer 364 stores in total. They take fashion dress of a fairly hot eccentric to credible equipment casualtys this as well means that they know a big tar hire group, which we deliberate to be from kids to adults younger than 50, two men and women.Over the years Zara has expanded their merchandise line heavily, so now they too snitch accessories, cosmetics, furniture and perfumes. They confuse made a whole bracing store hollered Zara Home where they ar selling furnitures we will however management on their clo occasion. The founder of Zara is of black market rattling wealthy, in fact he is the richest reality in Spain, and the second richest within the business of fashion. overly Zaras stores atomic number 18 very big, most of them argon between 800 and 1. 000 squ ar meters which makes room for a lot of fashion clothing.Inditex, t he mother companionship of Zara has umpteen stores under them, nevertheless it is worth mentioning that Zara stands for 77 % of Inditex boilersuit sales, which is very impressive, and their plan for the future is to hold out expanding and growing bigger and bigger. Zara clothing is sold worldwide, and not long ago the bushel-go store opened on Stroget in Copenhagen. * generic wine strategies Generic strategies is a marketing tool invented by Michael Porter. It is very popular and legion(predicate) companies engross it. The generic system tells intimately the intersection(s) and its tail end group(s). Beneath you will escort the generic strategies model. Low cost Unique crop / towering cost Broad rear end group Overall cost leading Differentiation Narrow target group Niche Cost decoct Niche Differentiation focus As seen above we confide that Zara uses the general cost leadership system. Zaras target group is very broad but their prices atomic number 18 in a ddition fairly low, this is why they use the overall cost leadership strategy. To a certain ex tilt you could too prescribe that Zara uses the incompatibleiation strategy. This is because they project very beautiful fruits which atomic number 18 a crisp to a owing(p)er extent expensive than their closest competitors. plainly in like manner because they have so some different products they have everything from dress to furnitures. still mainly we are certain that they use the overall cost leadership strategy. * Growth strategies Ansoffs fruit strategy is a well distinguishn toll within marketing. The strategy is used by venders who have objectives for maturement, and Ansoffs matrix offers different strategic choices to deliver the experts the goals. The model is shown below this text Old product newborn product Old target group Market penetration harvest-festival victimization unused target group Market development diversificationWe believe that Zara uses two growth strategies, and we will know explain why. The two strategies that Zara in our opinion uses is, market penetration and product development. If we have focus on their clothing line we believe that they have penetrated the market very a great deal, naturally because they use the same products, clothing, and as well because they aim for their live target group. If your growth strategy is market penetration it would be obvious choice to shape up your products, but that is not what Zara is doing.They are electrical relaying on near(a) store locations and stickycore customers who will talk in nice words about Zara to their friends and family. As mentioned we also believe that Zara uses another strategy, namely product development. We base this on the fact that they have expanded their product line. Now they acceptt just sell clothing, now customers also have the opportunity to acquire accessories, cosmetics and furniture in Zara stores. Even though Zara is introducing new products, they still relay on their existing target group. Inditex has expanded very heavily, and to put this in perspective we have some facts that show this.In 1995 they had 500 stores worldwide, and in 2004, club years later they had 2. 250 stores. * PEST compend The PEST analysis is a marketing tool in the macro environment who tells about the political, environmental, socio- hea thuslyish and technological forces that may have an check on your familiarity. These are contumacious forces which we do not have any regulate on. Also, it is lively that a partnership considers its built in bed before beginning the marketing wreak. Political factors Zara has stores in a lot of countries at that placefore it is hard to get a steady-going view over the political factors.But if we focus on some countries we know it is easier. In Denmark we dont see any political obstacles for Zara we have a stable political environment, and the only thing we see as a threat for Zara is n ew tax-laws, that could influence our bargaining possibilities, but on the other hand it could also go the other way around. one definitive global thing that could affect Zara could be new laws regarding the specious work place in the east. New laws regarding this area could end up raising their costs. stinting factors We are right now in the essence of a global financial crisis, and galore(postnominal) an(prenominal) fear that we will have a recession.This will of course influence Zara. If the recession comes, customers of Zara will have less currency to spend on their products thusly they used to. This burn down be very crucial for Zara, because we skill fear that their customers will tend to buy products from their greatest competitor, namely H& adenineM. Hennes & angstrom Mauritz products are a arcminute cheaper then Zaras, and therefore we fear for Zara that they would lose customers during a recession. Socio- cultural factors Some the great unwashed are against t he fact that big companies use cheap takings in foreign countries, but in this situation Zara has an advantage over its competitors.They produce 80 % of their change state in europium which is a lot more(prenominal) than their closest competitors. This subject we will also talk about in the SWOT analysis. Teenagers are also using up a lot of property on raiment, and they often do this without influence from their parents. This acquires a golden group for Zara who are willing to buy a lot of fashion clothes, so they seat look nice. Technological factors When we are in the clothing business technological factors does not have a very big influence compared to other businesses.But there are things that are relevant for Zara. Because of all the technology we have today, Zara also has new opportunities to get in touch with their customers. The internet is in this case a lustrous ex international amperele. Zara brush off promote on the internet, and they also have a homepage wh ere you can learn more about them, and check their products. * The protect chain A value chain is a chain of different activities which aims at creating value for the end user, and leaving the company with a positive margin. The activities culminate in the total value delivered by an organization.The value chain is divided into base and support activities. UpstreamDownstream Research & development Inbound logistics Production (outsourcing) outgoing logistics Sales and marketing Service (After market) Its very grave for Zara to create as much value in the value chain as possible, because there is a tough competition within the market for comparatively cheap, but still good fictitious character clothes. Zara creates value in payoff. Their issue takes place in some of the countries with a low salary, which minimizes the production cost.But they also produce their products in Spain and Portugal, which we believe many customers will like. In outward-bound logistics we also be lieve that Zara creates a lot of value. This is the place where the products are send to the stores and at this point Zara creates very good and vital value. We know that Zara are very ready at getting their products sent out to the stores, likewise they also can grouse them back very easily compared to their competitors, and this of course creates value for Zara. In the sales and marketing Zara does not gain much value.They dont advertise for their products, and we believe that this would be a good idea, especially in the countries where Zara still needs to get its big defect trough, instead Zara depends on good store location. We believe that they should give advertising a chance. * SWOT analysis A SWOT analysis is another strategic method within marketing. It is used to evaluate a companys, strengths, weaknesses, opportunities and threats. Strength and weaknesses are internal factors, go opportunities and threats are international factors. We will start out with the stren gths. One of their great strengths is their fast production.When their clothes are designed for the first time, it can be bought in their stores around the world only 2-5 weeks later. This means that they have a very fast production and if something goes wrong or doesnt sell they can easily call the product back. At the same time they will also have new clothes with a great variety in the stores every second week. The fast production also gives a good control of your stock, which means that they only have 15-20 % unsold inventory from severally one(prenominal) year and a good profit margin. In H&M, Zaras worst competitor, it takes 6-8 months before their designs are in the shops therefore it is a great strength.Location of Zara stores is also one of their strengths. They are placed where a lot of multitude walk by, and therefore a lot of people see the store, and they will go in, and flattually end up acquire something. Because of their production, they also have a good re putation among their customers. Most of Zaras production takes plane in Spain and Portugal. This is a good thing because many people dont like the thought of underpaid workers. When you buy products from Zara you have a lot of different things to choose of, which is also a strength and the products you buy are of a high feel and a reasonable price.A weakness for Zara we definitely mean to be their homepage. It is very confusing, and it is not easy to trim around. When we looked at it, we were actually very disappointed, and we even got a little bit frustrated because it is so confusing. We also destine that despite their good quality and prices they are a bit unknown among the young generation in Scandinavia. Before this assignment we didnt know too much about Zara. We believe that H&M is more known then Zara in Scandinavia, and this is due to Zaras lack of advertising.Right now we have a global financial crisis, which influences the customers buying possibilities. This also affects Zaras customers, and they will think more carefully over the things they choose to buy. If the financial situation became more positive and we were facing a boom, Zaras customers would have more money to spend on their products therefore a boom is a fortuity for Zara. Of course Zara has their competitors as a threat, especially H&M and Gap. The business which they operate in is very free-enterprise(a) therefore it is vital to be on the marks at all times. Zara also has some production in Asia. whence new political laws about salaries and workings hours is a threat for Zara, which could end up making their production more expensive. * Price / quality grid The price/quality grid is a tool you can use to analyze a product and the companys strategy with the given product. First it is worth mentioning that a product is anything that can be offered to a market for purchase or use, which might satisfy a want or need. A product consists of trio levels, namely the core ben efit, the tangible product and the augmented product. Beneath we have shown the model and we will explain which strategy we believe Zara uses. High price Low price High quality Premium strategy rock-steady value strategy Low quality Overcharging strategy Economy strategy In our opinion Zara uses the good value strategy. This is of course because they have a high quality, but also a fairly low price. When buying clothes from Zara the customer at least get the same quality as if buying from Armani, but buying clothes from Zara also gives you a low price. This tells us that the customer gets more then he pays for, when public lecture about the actual product. Others would recite that the brand and status other products give them is more important.But when using a good value strategy, the company will get a lot of satisfied customers. It is worth mentioning that Hennes & Mauritz in our opinion uses the same strategy, namely the good value strategy. Hennes & Mauritz * Company pr ofile Hennes and Mauritz is a very big company, it was founded in Sweden, 1947. They started selling clothes to women and at that time their stores was called Hennes. Later, in 1968, they founded a store that started selling clothes to men, and this store was called Mauritz, and Mauritz also started selling accessories.Later they changed the name to Hennes & Mauritz (H&M), which is the store we know today, who sells their products to two men and women. Since H&M was founded they have expanded heavily, and today you can find them in 24 different countries, with more than 1. 345 retailers worldwide. Hennes & Mauritz has their biggest market in Scandinavia likewise their target group is very broad. They sell clothes to small children but also to adults, both men and woman. * Generic strategies Porters generic strategies were made in the 1980s, and since then it has been a very popular marketing tool.Today it is still very used among companies worldwide. Low cost Unique pr oduct Broad target group Overall cost leadership Differentiation Narrow target group Niche Cost focus Niche Differentiation focus The generic strategy is used to find the companys competitive advantage, so they will know what to focus on while they are maintaining their core competitive advantages. H&M has a very broad target group, and their products are also at a relatively low price. Therefore they use the strategy which is called overall cost leadership.They can sell their products at a low price because they produce them in countries such as China and other Asian countries. H&M has used this strategy with great success. * Growth strategies Ansoffs growth strategies were first published in 1957. Today it is still used by many marketers who have objectives for growth. This model offers different choices of how to achieve your goals. Old product New product Old target group Market penetration Product development New target group Market development Diversification H&M o perates uses the market penetration strategy, obviously.They have their existing products, mainly their clothes, which they sell to their existing target groups. They have a good brand within clothing which they are trying to make stronger and stronger. You could say that they over the years also have used market development. Because in the beginning they only sold clothes to women, but know they also sell clothes to men. This is why their strategy for many years has been market penetration. * PEST analysis Before a company begins its marketing process it would be wise to consider its environment. This can be done with a PEST analysis.Political forces In Denmark we dont believe that the political forces free rein any role, but in their production countries it can affect them. New laws about salary and working hours can make production more expensive, which wont be good for H&M. Economic forces Not long ago we had a boom plosive consonant in Denmark, therefore people had more mo ney to spend on clothing for example. But now we are slightly heading towards a recession. But actually we dont mean this has any negative influence on Hennes & Mauritz. People will still have the money to buy their products because they are cheap compared to others.So maybe they will even implement to get more customers, if the population does not detect that they so much money to spend on clothes. Socio- cultural forces The trends are very important for H&M. We believe that many girls like having clothing from H&M. This we believe to be their biggest target group also. They have slews of different products which can be bought at a good price, and they feel comfortable wearing clothes from H&M. Therefore it is important that H&M keeps them self updated on new trends. A more negative factor could be the fact that some people are against cheap production in foreign countries.This will digest their image among some people, because they have so much production in the east. Technological forces On the technological forces H&M is up to date in our opinion. They have cheap production, partly because of good technology. Also they have a very good homepage where you can see their collection, and also shop online. Furthermore you have the opportunity to read about the company and get the newsletter via their homepage. * The value chain UpstreamDownstream Research & Development Inbound logistics Production (outsourcing) Outbound logistics Sales and marketing Service (After market) higher up we have shown the value chain. Earlier we have mentioned the purpose therefore we will now start with the analysis. When we look at their production we know that many of their products are produced in China. This makes production cheap and therefore also the products that are sold to the end users. This creates value for H&M. Also they have 700 independent suppliers, primarily in Asia and Europe. Hennes & Mauritz only produce 30 percent of their own clo thes, the other clothing they get from firms such as L. O. G. G. , which they have a permanent contract with.This way they dont spend too much money at their own production, while having lots of independent suppliers. And due to all the suppliers they will naturally get a good price, because they order a huge amount each time, but also because the suppliers would like to have their products in H&M stores. H&M has a top of read/write head status when we think of cheap and fashionable clothing. And this is very valuable. Not many companys has achieved to make the same brand and position as H&M, therefore they gain great value in sales and marketing.Many big designers has designed clothes for H&M such as Stella McCarthy and now also bloody shame wants to design clothes for them. She wants to make a series of clothes for women called M by Madonna, which we believe could be a huge success. If Madonna designs clothe for H&M it will be good promotion and great value. * SWOT analysis Strengths Weaknesses Good repetition Loyal customers Good quality Reasonable prices Slow production Some think of H&M as discount label Recall of products Opportunities ThreatsEconomy (recession, to a certain extant) Growth in the Asian retail sector arise salaries for the workersNew political laws regarding productionCompetitors intense competition The purpose of a SWOT analysis we have already mentioned. We believe that their strongest strength is their quality and brand compared to their prices. In H&M you get something in return of your money. But as we see it they also have one very big weakness, especially compared to their strongest competitor, Zara. H&M has a very bleak production compared to Zara and it takes up to 8 months before the new designs are for sale in the stores.If something goes wrong it wont be easy for them to call the products back, so at this point they have to improve. Regarding the economy we believe that they are well prepared for b oth a boom and a recession. If we have it off a boom people will buy even more clothes then they usually do, and if we experience a recession they will maybe get some new customers. The biggest threat we believe to be new laws regarding their production, this would give them extra costs. Comparison * The 4 Ps The marketing liquefy, also known as the 4 Ps, is probably the most famous marketing term.The marketing mix is very simple, and it tells us something about the product, place, price and promotion. We can also say that the marketing mix is the companys offer to its potential customers. We will start out with the most important P the product. Product As we know both Zara and H&M primarily sells clothing. Their products are very correspondent they both sell fashionable clothes, so at this point we dont see any big differences. But Zara has expanded their product line. They have made new stores where it is possible for their customers to buy furnitures, so at this point we see a difference.Also Zara offers cosmetics to their customers. Price At the price there is a little difference, but again these two companies are very similar. H&M is a little bit cheaper then Zara and this is a result of their cheap production. Zara is also fairly cheap, but H&M, their closest competitor is a bit cheaper. Place We believe that we roughly can divide their markets into two in Europe. Zara has their biggest market in the Southern Europe, while we believe that H&M has their biggest market in Northern Europe and Scandinavia.This is also naturally because of the firms birthplaces. Furthermore they both operate worldwide in hard competition with each other. They sell their products worldwide, and they both have good locations especially Zara. Promotion Zara is against promotion, so they do not advertise for themselves, instead they rely on good store locations and a good repetition among their customers. The case is different for H&M, they advertise for thei r products, so that they can create attention upon their products. The 4 Ps have been a very good way at comparing these two companies.Overall we can conclude that they look alike each other a lot, and they are in a very hard competition against each other. They both have strong sides which they will use, both they also have weak sides which they can improve. But one thing is certain the competition is very tough. * Porters 5 forces Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or dress of products.Five forces analysis looks at five key areas namely the threat of entry, the power of buyers, the power of suppliers, the threat of substitutes, and competitive rivalry. Analysis for Zara and H&M There will ever be a thread of new comers on the market . In many cases these companies will not become a big threat, because there on the clothing market is such big competition, that they will be ousted within a relatively short period of time. The Power of buyers is if big buyers like Magasin choose how much they want from a certain company like e. . Bruuns Bazar. Then Magasin sets the standard, they can do this because of their good reputation, and because many costumers do their shopping in this mall every day. Therefore they got a big buying power. The threat of Substitute Products will forever be there, for example the walkman was substituted be the MP3 player, and the horse-wagon was substituted by the car. There will always be a development, and companies must be sure to be updated at all times.Therefore its extremely important to use a big sum of money in the Research and Development Department because thats the companies future. The suppliers also have a certain power. They are the ones providing the company with the raw-mate rials, so that they can produce the products. * The value chain In the value chain we believe that Zara and H&M gains value at different places. Zara creates value in their production because some of it takes place in good production countries, while some of it also takes lace in Spain and Portugal which also creates value. But at this point they are similar, because also H&M creates value in the production chain. Most of their production takes place in foreign countries, and this makes their products cheap which will give them more customers. The place where there is a big difference is in the inbound logistics where Zara creates a lot of value, and H&M does not. As we have mentioned earlier Zara can send their new designs quickly to their stores, and also call them back again.H&M can also do this, naturally, but for them it takes much longer time. But then Hennes & Mauritz are good at creating value in Sales & Marketing, where Zara is not so good in our opinion. H&M has huge stars like Madonna who wants to design clothes for them, this is very good promotion and it also creates a lot of attention. Zara, on the other hand doesnt even promote their products they are depending on good store locations as mentioned. 1 . http//www. marketingteacher. com/Lessons/lesson_fivefoces. htm