17.03.2023

How to gain a competitive advantage on the example of Zara

 

Key information:

  • In the 1970s, Armancio Ortega opened the first Zara store. By reducing the product delivery time for the customer to 2 weeks, he was able to respond to current customer needs and trends.
  • Competitive advantage is based on giving the customer a unique value that no other company will give them. It is divided into price, quality and information.
  • In building a company strategy, Porter's 5 forces analysis is particularly helpful in identifying the forces that are most important in your industry.
  • If the threat from competitors is too high, you can focus on building brand recognition and customer loyalty to gain dominance.
  • Why is market advantage so important? It increases profitability, market share and brand recognition.
  • Zara has gained its edge by combining good quality products with affordable prices.
  • With its strong brand, customer loyalty and reputation, Zara is able to stay on the podium, but in the long term it will be necessary for it to innovate and follow trends to maintain its dominance.

Details below!

Zara's beginnings

In 1975, Armancio Ortega opened the first Zara store in La Courni, Spain. The founder chose creating fashion accessible to all as the company's main mission. But what made the difference in gaining a competitive edge was a new distribution model. Zara gave customers what the competition could not provide at the time. Although it initially took several months from designing a garment to delivering it to the customer, Ortega reduced that time to just 2 weeks. Delivering finished goods in such a short time, allowed the company to create more collections - constantly responding to customers' current needs and their desire to follow the latest trends.

What is competitive advantage and what are its types?

Competitive advantage is mainly about giving consumers something that is of unique value to them. It refers to the unique qualities that a company possesses. It results from offering better quality products to the customer compared to other similar companies in the same market. xxx For example, Zara has more expensive products in its product line compared to its competitors, but in return they are of better quality.

We can achieve an advantage in one of three areas:

  • pricing advantage

The most difficult to implement from the perspective of small businesses. It requires pricing at a lower level than the competition and marketing activities at a higher level. Unfortunately, there may be a risk of lowering margins and to a permanent decline in profits. It is important to continuously monitor the activities of the competition and skillfully develop more attractive actions.

  • quality advantage

It encompasses activities that give the greatest possible value by creating above-average quality products, packaging or distribution channel. This means that products can be innovative or made from exceptional raw materials. At the same time, the company, can afford to sell products at slightly higher prices without losing customer confidence. A company can also achieve a quality advantage by introducing innovative product packaging. For example, ones that were not previously recyclable in 100%. For example, quality advantage strategies are used by Zara. The store has introduced a new distribution channel. It gives its customers the option to purchase a product online with the option to pick it up at a stationary store, just 30 minutes after placing an order. Few chain stores offer such options to their customers.

  • information advantage

Its key element is to get buyers interested in the offer, using branding, advertising or sales promotions. Most often, these are marketing campaigns to promote the latest products or to introduce buyers to production processes. It can support a price or quality advantage. A company can use information to notify the widest possible range of consumers about the above-average quality offered or the more attractive price level compared to competitors.

Porter's 5 forces in building a successful corporate strategy

Porter's 5 forces analysis is a method of assessing the attractiveness of a particular sector.To build a competitive advantage, it is worth using Porter's 5 Forces analysis, the company should first identify the forces that are most important in its industry and environment and develop strategies that respond to them. Only by performing the analysis, will it be possible to create an appropriate strategy and create competitive advantages. It is based on the following factors:

  • bargaining power of buyers
  • bargaining power of customers
  • Threat of new competitors entering
  • the threat of substitutes
  • impact of existing competition

For example, if the threat from the emergence of new competitors is high, the company can focus on building strong brand recognition and customer loyalty by creating unique products or introducing loyalty cards. This will make it more difficult for competitors to gain dominance.

If the bargaining power of suppliers is high, a company can invest in developing its own supply chain or look for alternative suppliers to reduce its dependence on a single supplier.

Gain leadership position by achieving competitive advantage

Standing out among the competition gives you a chance to dominate, which allows you to attract more customers and ultimately achieve greater success, which can manifest itself in one of the following:

  • Increased profitability - thanks to competitive advantage, companies can set higher prices , which can lead to higher profits.
  • Market share - companies with competitive advantages can gain a greater share of the market because customers are attracted to their unique features and offerings.
  • Brand recognition - having a competitive advantage can help companies build brand awareness, leading to greater customer loyalty and repeat business.
  • Barriers to entry - competitive advantage can create barriers to entry for new competitors, as it can be difficult for them to replicate the unique characteristics that the company possesses.
  • Innovations (e.g., product) - competitive advantage can drive innovations. It provides motivation and access to create new products or services. Companies are constantly striving to improve their offerings to maintain a competitive edge.

How long can ZARA hold onto the podium?

ZARA has forged its position and reputation through an effective strategy of competitive advantage in quality and price. It quickly adapts to changing trends and offers good quality products modeled after the most popular fashion houses at an affordable price for everyone.

The fashion industry is constantly and rapidly changing and evolving. Nevertheless, over the years, ZARA has shown a great ability to adapt and maintain its position in , which has contributed to its continued success. In addition, the store has a strong brand, a loyal customer base and a reputation for offering quality products at affordable prices. The company has also made strategic investments in technology and supply chain management, which has helped it remain efficient and responsive to changing market conditions.

With this in mind, the fashion industry is highly competitive and there is always the potential for new entrants or established competitors to gain an edge. In order to continue to maintain its leadership position, ZARA must innovate and surprise customers with its pace of keeping up with trends.

 

Get back to us and we'll help you do a competitive analysis for your company. Don't get left behind!















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    Ewa Jakubowska

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