Zara case study

2/Identify the marketing and logistics constraints of Zara?

In order to better understand Zara’s constraints we have to identify its business model.
First take a look at the operating expenditures. Where Zara’s competitors spend lots of money in marketing and a few amount in production, Zara take into consideration the production rather than the marketing. In terms of facts, Zara do not produce garments in Asia, and instead of spending 3,5% of sales in advertising, they spend only 0,3% and consider more the location of its stores. They are also more involved in creating new fashion styles (12 000 style per year). Moreover, they produce new style in a few quantities where competitors produce a huge amount of stock.
According to those facts, Zara only has a margin of 30% where competitor’s margin is about 60%.
So, how could Zara be efficient and survive?

As strange as it could be it is due to its business model: Zara do not forecast the future fashion styles but identifies them early when people already wear them. And when they identify the upcoming fashion styles, they produce them quickly and in few quantities. And those are Zara’s keys success factors: lots of styles for a short period, in a few quantity within only a month.
Depending on this business model we can now identify and make assumption concerning their marketing and logistics constraints. Basically, the business model of such a company requires constraints.
Let’s start with the marketing ones. Zara has decided to put only 0,3% of the sale in the advertising. If you want to be efficient without advertise, you have to put your store in the right place that is to say in the place where there are the most potential clients you have targeted considering your products. This is the first marketing constraint.
The second one, also according to their business plan is the creation of new fashion styles. Zara wants to produce lots of fashionable garments. That implies hiring lots