Porter’s Five Forces

1. Threats of New Entrants 

The threat of new entrants in the fashion retail industry is weak because it is heavily
populated with numerous brands offering similar products, making it difficult for a new
entrant to differentiate themselves and catch consumers' eyes. To survive, they must
market themselves through a unique strategy that will allow them to have a powerful
platform. Brand identification and product differentiation play a significant role in the
industry as it creates a barrier to entry. Other barriers include investments in infrastructure,
marketing, supply chain, and human resources. Although it may not be difficult to imitate
existing styles and fashion trends, brands must also consider the economies of scale in
production when entering. Being a high risk, high- reward industry for entrants, they will
have to manage production at a large scale or a cost disadvantage.
High barriers of entry: A bit of history, Some basic information, Results and
ownership structure of Inditex, High fix costs, High selling, general and administrative
costs, Long sales cycle, Brand equity valuated by consumers.

For media and entertainment industries, there is a high expense of entrance. On the other hand, the
entrances that are existing like Zara have been working on their target sectors; therefore, the cost is quite
low. All these threats are adjusted by market rivals and Porter’s five forces of Zara. There is always
the threat of new entrants but then the risk is not so much as Zara already has a
huge presence in most parts of the world. The barriers for entry for distribution are
quite low in Spain ( where the bulk of their clothes come from.) New entrants will
have it easy as the cost of distribution is quite low as they only need to rent a shop
and need a bit of capital to start out. However when it comes to manufacturing then
the barriers of entry are really high mainly due to the fact that it requires a huge
investment to get started within the market.
It is in the favor of the companies that exist in the market to create barriers for the new
entrants to prevent them from entering into the industry. The organizations could be
the new companies or the companies that are planning to diversify itself in the market.
The barriers can be both industrial and legal. Apart from this the size and the reputation
of the companies that are already operating in the market also play an important.
Furthermore the cost related to the entry, access to raw materials, barriers related to
culture and technical standards also play a major role and can affect the decision of the
new entrants in the market.

Threat of new entrants reflects how new market players impose threats to the
existing market players. If the industry will be profitable and barriers to enter the
industry will be low, it will attract more players and hence, the threat of new entrants
will be high. 
Here are some factors that reduce the threat of new entrants for Zara:

 Entry in the industry requires substantial capital and resource investment.

This force also loses the strength if product differentiation is high and
customers place high importance to the unique experience. 
 Zara will face the low threat of new entrants if existing regulatory framework
imposes certain challenges to the new firms interested to enter in the market.
In this case, new players will be required to fulfil strict, time consuming
regulatory requirements, which may discourage some players from entering
the market.
 The threat will be low if psychological switching cost for consumers is high
and existing brands have established a loyal customer base.
 New entrants will be discouraged if access to the distribution channels is
restricted.

Zara will be facing high new entrants threat if

 Existing regulations support the entry of new players.

 Consumers can easily switch the brands due to weak/no brand loyalty.
 Initial capital investment is high.
 Building a distribution network is easy for new players.
 Retaliation from the existing market players is not a discouraging factor.

How Zara can tackle the Threat of New Entrants?

 Zara can develop brand loyalty by working on customer relationship

management. It will raise psychological switching costs.
 It can develop long-term contractual relationships with distributors to widen
access to the target market.
 Zara can also an investment in research and development activities, get
valuable customer data and introduce innovative products/services to set
strong differentiation basis. 
Threat of New Entrants

 The economies of scale is fairly difficult to achieve in the industry in which

Zara operates. This makes it easier for those producing large capacitates to
have a cost advantage. It also makes production costlier for new entrants.
This makes the threats of new entrants a weaker force.
 The product differentiation is strong within the industry, where firms in the
industry sell differentiated products rather a standardised product. Customers
also look for differentiated products. There is a strong emphasis on
advertising and customer services as well. All of these factors make the
threat of new entrants a weak force within this industry.
 The capital requirements within the industry are high, therefore, making it
difficult for new entrants to set up businesses as high expenditures need to
be incurred. Capital expenditure is also high because of high Research and
Development costs. All of these factors make the threat of new entrants a
weaker force within this industry.
 The access to distribution networks is easy for new entrants, which can easily
set up their distribution channels and come into the business. With only a few
retail outlets selling the product type, it is easy for any new entrant to get its
product on the shelves. All of these factors make the threat of new entrants a
strong force within this industry.
 The government policies within the industry require strict licensing and legal
requirements to be fulfilled before a company can start selling. This makes it
difficult for new entrants to join the industry, therefore, making the threat of
new entrants a weak force.

How Zara can tackle the Threat of New Entrants?

 Zara can take advantage of the economies of scale it has within the industry,
fighting off new entrants through its cost advantage.
 Zara can focus on innovation to differentiate its products from that of new
entrants. It can spend on marketing to build strong brand identification. This
will help it retain its customers rather than losing them to new entrants.
2. Bargaining Power of Buyer 
Customers in the fashion retail industry do not have much direct bargaining power
when lowering prices. Nonetheless, the buyer power is a strong force as customers
have indirect bargaining power. Retailers must not only satisfy consumer needs but
differentiate themselves to attract and retain buyers. The steep competition and
access to multiple different brands give buyers flexibility and many options to find
what they are looking for—having alternatives and various points of supply allows
consumers to switch easily between brands at zero cost.
Bargaining power of customers

 very fierce competition (local, european, international)

 Satisfy the consumer needs

 Differentiate products

 Economic crisis

 Zara competition

 GAP less affordable prices

 H&M less quality

 MANGO organizational strategy is based on

a franchising system, and in marketing strategy, 

relying heavily on advertising campaigns.

Bargaining power of buyers indicates the pressure that customers exert on the
business organisations to get high quality products at affordable prices with
excellent customer service. This force directly influences the Zara’s ability to
accomplish the business objectives. Strong bargaining power lowers profitability and
makes the industry more competitive. Whereas, when buyer power is weak, it makes
the industry less competitive and increase the profitability and growth opportunities
for Zara

There are some factors that increase the bargaining power of buyers:

 A more concentrated customer base increases their bargaining power against

Zara
 Buyer power will also be high if there are few in number whereas a number of
sellers (business organisations) are too many.
 Low switching costs (economic and psychological) also increase the buyers’
bargaining power. 
 In case of corporate customers, their ability to do backward integration
strengthen their position in the market. Backward integration shows the
buyers' ability to produce the products themselves instead of purchasing
them from Zara
 Consumers’ price sensitivity, high market knowledge and purchasing
standardised products in large volumes also increase the buyers' bargaining
power.

Some factors that decrease the bargaining power of buyers include lower customer
concentration (means the customer base is geographically dispersed), customers’
inability to integrate backwards, low price sensitivity, lower market knowledge, high
switching costs and purchasing customised products in small volumes.

How Zara can tackle the Bargaining Power of Buyers?

Zara can manage the bargaining power of buyers by increasing and diversifying their
customer base. It can be done by introducing new products, targeting new market
segments and adopting the product diversification strategies. Marketing and
promotional strategies can also be helpful in this regard. Building loyalty by
embedding innovation and offering excellent customer experience can raise the
switching costs, which will ultimately reduce their bargaining power. Zara can adopt
these strategies to strengthen its competitive positioning in the market.

The dynamics of the media and advertising industry allows the client to have high bargaining power. And,
the low cost somehow allows the clients to look for other companies which further cancels the porter’s five
forces of Zara and increases the business hazard. 
Customers have varying levels of bargaining power as they can decide what they
want. Customers are quite fickle when it comes to buying clothes. However the good
thing is that each customer has a love purchase volume and that means that even if
some tend to change their brand there will still be some who will buy Zara. It is not
an item like a burger or a snack which is available easily anywhere for a low price. The
good thing about the clothing business is that there is no risk nonpayment because
customers pay for clothes during purchase.

How Zara can tackle the Bargaining Power of Buyers?

 Zara can focus on innovation and differentiation to attract more buyers.

Product differentiation and quality of products are important to buyers within
the industry, and Zara can attract a large number of customers by focusing on
these.
 Zara needs to build a large customer base, as the bargaining power of buyers
is weak. It can do this through marketing efforts aimed at building brand
loyalty.
 Zara can take advantage of its economies of scale to develop a cost
advantage and sell at low prices to the low-income buyers of the industry.
This way it will be able to attract a large number of buyers.

The buyers having strong bargaining power can highly influence the profitability of the
suppliers operating in the market by imposing condition that are not much favorable for the
suppliers in terms of price, quality or service. Therefore choosing clients often become
crucial for the organizations as to avoid the situation of being highly depended on the
buyers. The level of interest and concentration of buyers toward the product gives them
more or less power.
Powerful buyers could flip the side of the powerful supplies by forcing the prices to move
downwards and by demanding high quality and services by creating a competition between
the participants in the industry on the basis of price and quantity. Zara Customer are
deemed strong if they contain negotiating leverage specifically if the industry is sensitive to
price, the buyers can pressure suppliers for further price reductions.
The customer are assumed to have strong buying power in case:
 If the number of buyer are limited or each of the buyer purchases large quantity
relative to the size of the suppliers.
 The products in the industry are standardized or are undifferentiated.
 The cost of switching is comparatively low.
3. Intensity of Rivalry 
The global apparel market is rapidly growing as the demand for clothing and other
accessories are rising worldwide. Within the numerous apparel retailers worldwide,
Zara, H&M, and UNIQLO are the top international competitors. The competition in
the apparel industry is high due to its fragmentation, the large presence of big to
small businesses, and the extensive number of brands offering similar products.
Brands like Zara can compete, and drive customer loyalty based on quality and
features. However, retailers with a strong brand image, such as luxury brands, can
charge much higher prices. The industry is mature and has low entry barriers; thus,
the market is quickly becoming saturated.

 The Rivalry among existing firms shows the number of competitors that give
tough competition to the Zara High rivalry shows Zara can face strong
pressure from the rival firms, which can limit each other’s growth potential.
Profitability in such industries is low as firms adopt aggressive targeting and
pricing strategies against each other.
 • The industry is growing at a fast rate
 • The products are highly differentiated, and each market player targets
different sub-segments
 • The economic/psychological switching costs for consumers are high.

Similarly, there are some factors that increase the Rivalry among existing firms for
Zara For example, the company will face intense Rivalry among existing firms if
market players are strategically diverse and target the same market. The rivalry will
also be intense if customers are not loyal with existing brands and it is easier to
attract others’ customers due to low switching costs. Competitors with equal size
and offering undifferentiated products with slow industry growth tend to adopt
aggressive strategies against each other. These all factors make the Rivalry among
existing firms a major strategic concern for Zara

How Zara can tackle the Rivalry among existing firms?

Zara should focus on the implicit needs and expectations of its customers to
strengthen the differentiation basis. It should raise switching costs by developing
long-term customer relationships. The organisation should also invest in research
and development activities to identify new customer segments. In some cases,
collaborating with competitors can be mutually beneficial. The organisation can look
for this option as well. 

Generally, due to the segmentation, the apparel industry has an allowance for smaller firms globally. Even
though Zara has multiple direct rivals like H&M, GAP, it still has loyal consumers. The chances of buyers’
cost of switching from Zara to the other brand is relatively high due to the price settings. 

Zara faces a lot of competition in the market. There are a large number of
competitors in the market such as H&M, Benetton, Gap, etc. Fortunately The high
level of competition makes it tough for everyone as they are all struggling to get a
piece of the pie . The biggest problem is that due to the large number of competitors
the growth rate is low due to the number of manufacturers around. The clothing
industry has peaked and it is very difficult for people to stay in the industry as the
competition is cut throat. Customers are spoiled for choice due to the number of
brands within the market. They are also very fickle minded and base their buying
habits on the basis of new trends. They will only buy based on price and brand
recognition and this is why the manufacturers have to keep changing what they do
and come up with new ways of gaining customers. The costs of manufacturing new
goods are quite high plus it is not easy to procure raw material so that’s why the
ones who have the resources and the ability to do so are able to survive within the
market.

Rivalry Among Existing Firms

 The very few competitors have a large market share. This means that these
will engage in competitive actions to gain position and become market
leaders. This makes the rivalry among existing firms a stronger force within
the industry.
 The industry in which Zara is growing every year and is expected to continue
to do this for a few years ahead. A positive Industry growth means that
competitors are less likely to engage in completive actions because they do
not need to capture market share from each other. This makes the rivalry
among existing firms a weaker force within the industry.
 The fixed costs are high within the industry in which Zara operates. This
makes the companies within the industry to push to full capacity. This also
means these companies to reduce their prices when demand slackens. This
makes the rivalry among existing firms a stronger force within the industry.
 The products produced within the industry in which Zara operates are highly
differentiated. As a result, it is difficult for competing firms to win the
customers of each other because of each of their products in unique. This
makes the rivalry among existing firms a weaker force within the industry.
 The production of products within the industry requires an increase in
capacity by large increments. This makes the industry prone to disruptions in
the supply-demand balance, often leading to overproduction. Overproduction
means that companies have to cut down prices to ensure that its products
sell. This makes the rivalry among existing firms a stronger force within the
industry.
 The exit barriers within the industry are particularly high due to high
investment required in capital and assets to operate. The exit barriers are also
high due to government regulations and restrictions. This makes firms within
the industry reluctant to leave the business, and these continue to produce
even at low profits. This makes the rivalry among existing firms a stronger
force within the industry.
 The strategies of the firms within the industry are diverse, which means they
are unique to each other in terms of strategy. This results in them running
head-on into each other regarding strategy. This makes the rivalry among
existing firms a strong force within the industry.

How Zara can tackle the Rivalry Among Existing Firms?

 Zara needs to focus on differentiating its products so that the actions of

competitors will have less effect on its customers that seek its unique
products.
 As the industry is growing, Zara can focus on new customers rather than
winning the ones from existing companies.
 Zara can conduct market research to understand the supply-demand situation
within the industry and prevent overproduction.

The competition among the firms help in identifying the lucrativeness of an industry
where companies are competing hard in order to maintain their power within the
industry. The Zara competition is moreover on basis of diversity, the development within
the sector and the barriers related to entrance in the market. The competitive rivalry is
the analysis of the brands and the product, its strengths and weakness along with the
strategies, competitors and the share in the market.

4. Supplier Power 
Supplier's bargaining power in the fashion retail industry has a minimal and
insignificant force. Due to the saturated market, most clothing brands outsource
their raw materials, production, and manufacturing in developing countries such as
China, Bangladesh, Vietnam, and India. The purchasing power lies in the brand's
hands as they can switch and substitute for other suppliers at a low cost or adopt
forward integration. Therefore, clothing suppliers' customers are not fragmented
and must abide by the apparel companies' rules. Textile suppliers do not have
control to raise prices and have low input prices as they receive only small portions
of the profit.
There are too many suppliers in the market which is one reason why the suppliers
don’t have much negotiating power. The fact that Zara procures or makes most of
the stuff itself is also another factor which doesn’t work in the suppliers favor. If the
supplier decides to cut down the supplies the manufacturer can easily go to another
manufacturer.

Powerful suppliers possess more power to capture significant value for themselves by
demanding high prices while limiting the quality and the quantity of the product or services
or by transferring the cost on the participant of the industry. Many condition imposed by
the suppliers generally include the increase in price while compromising the quality and
quantity.
A bargaining power of a supplier in the market is strong if:
 It is more concentrated than the industry it is selling to.
 It is not heavily relying on the industry for its profits
 If the participants in the industry have to incur high cost for switching suppliers or
the firms are located adjacent to the suppliers manufacturing facilities.
 The product being offered by the suppliers are highly differentiated.
 And when there is no close substitute available for the products being supplied by
the suppliers.

Due to the continued liberalization of global trade, the power of the supplier is quite less. That is why Zara
organizes multiple licenses and offer it to all suppliers. So, with the existing licensing contract, the supplier
power becomes weak as they need to stick to particular provisions; therefore, minimize the variation or
manipulation of the designs. 
Bargaining power of suppliers

 Low power of suppliers

 Zara strategy

 Establish quality partnerships

 only 10% of stock is unsold

 fashion market changes frequently

 excellent and integrated supply and value chain

Bargaining power of suppliers in the Porter 5 force model reflects the pressure
exerted by suppliers on business organisations by adopting different tactics like
reducing the product availability, reducing the quality or increasing the prices. When
suppliers have strong bargaining power, it costs the buyers- (business
organisations). Moreover, high supplier bargaining power can increase the
competition in the industry and lower the profit and growth potential for Zara
Similarly, weak supplier power can make the industry more attractive due to high
profitability and growth potential.

Bargaining power of suppliers will be high for Zara if:

 Suppliers have concentrated into a specific region, and their concentration is

higher than their buyers.
 This force is particularly strong when the cost to switch from one supplier to
other is high for buyers (for example, due to contractual relationships).
 When suppliers are few and demand for their offered product is high, it
strengthens the suppliers’ position against Zara
 Suppliers’ forward integration weakens the Zara’s position as they also
become the competitors in that area.
 If Zara is not well educated, does not have adequate market knowledge and
lacks the price sensitivity, it automatically strengthens the suppliers' position
against the organisation.
 Other factors that increase the suppliers’ bargaining power include-high
product differentiation offered by suppliers, Zara making only a small
proportion of suppliers’ overall sales and unavailability of the substitute
products. 

Contrarily, the bargaining power of suppliers will be low for Zara if:

 Suppliers are not concentrated

 Switching costs are low
 Product lacks differentiation
 Substitute products are available
 Zara is highly price sensitive and has adequate market knowledge
 There is no threat of forward integration by suppliers.

How Zara can tackle the Bargaining Power of Suppliers?

Zara can strengthen its position against suppliers by decreasing the dependency on
one or a few suppliers. It will increase its price sensitivity. Developing the long-term
contractual relationships with suppliers from different regions not only lowers their
bargaining power but also allows Zara to improve its supply chain efficiency. Finally,
Zara can find the alternate ways of producing the product if product demand is high
enough and the firm has required competencies and expertise. However, it requires
detailed cost-benefit analysis to determine its feasibility. Product redesign and
diversification of the product lines can also help the organisation reduce the
suppliers’ power in the market.

Bargaining Power of Suppliers

 The number of suppliers in the industry in which Zara operates is a lot

compared to the buyers. This means that the suppliers have less control over
prices and this makes the bargaining power of suppliers a weak force.
 The product that these suppliers provide are fairly standardised, less
differentiated and have low switching costs. This makes it easier for buyers
like Zara to switch suppliers. This makes the bargaining power of suppliers a
weaker force.
 The suppliers do not contend with other products within this industry. This
means that there are no other substitutes for the product other than the ones
that the suppliers provide. This makes the bargaining power of suppliers a
stronger force within the industry.
 The suppliers do not provide a credible threat for forward integration into the
industry in which Zara operates. This makes the bargaining power of suppliers
a weaker force within the industry.
 The industry in which Zara operates is an important customer for its
suppliers. This means that the industry’s profits are closely tied to that of the
suppliers. These suppliers, therefore, have to provide reasonable pricing. This
makes the bargaining power of suppliers a weaker force within the industry.

How Zara can tackle the Bargaining Power of Suppliers?

 Zara can purchase raw materials from its suppliers at a low cost. If the costs
or products are not suitable for Zara, it can then switch its suppliers because
switching costs are low.
 It can have multiple suppliers within its supply chain. For example, Zara can
have different suppliers for its different geographic locations. This way it can
ensure efficiency within its supply chain.
 As the industry is an important customer for its suppliers, Zara can benefit
from developing close relationships with its suppliers where both of them
benefit.

 The number of suppliers in the industry in which Zara operates is a lot more
than the number of firms producing the products. This means that the buyers
have a few firms to choose from, and therefore, do not have much control
over prices. This makes the bargaining power of buyers a weaker force within
the industry.
 The product differentiation within the industry is high, which means that the
buyers are not able to find alternative firms producing a particular product.
This difficulty in switching makes the bargaining power of buyers a weaker
force within the industry.
 The income of the buyers within the industry is low. This means that there is
pressure to purchase at low prices, making the buyers more price sensitive.
This makes the buying power of buyers a weaker force within the industry.
 The quality of the products is important to the buyers, and these buyers make
frequent purchases. This means that the buyers in the industry are less price
sensitive. This makes the bargaining power of buyers a weaker force within
the industry.
 There is no significant threat to the buyers to integrate backwards. This
makes the bargaining threat of buyers a weaker force within the industry.

5. Threat of Substitute 
Clothing is a basic need as it protects the human body and provides warmth. There is
no substitution for clothes; therefore, the threat of substitutes does not affect the
apparel industry's profitability. Without the retailers, people either have to make
clothes themselves or tailor-made, not popular and time-efficient options. However,
there is the presence of subgroups in the retail industry, differing from price points,
quality, and product offerings. Consumers can move from group to group; for
example, a buyer interested in high-end fashion but does not meet the financial
means may opt to shop at stores that offer similar styles at an affordable price, e.g.,
Zara. Nonetheless, this is not seen as a substitution.
The Zara substitute products are an alternatives that are available in the market at
comparatively better prices. Such products prevail due to the technological and innovative
advancement. Due to which the products being produced by the companies that are already
existing in the market and is using the same technology are than replaced by the other
company’s products that are comparatively better in terms of price and quality and are
being produced from sectors with significant profits. The substitute products are dangerous
as the companies are under constant threat of being replaced.
High threat of substitute leads to low profitability as it limits the industry profits by placing a
price ceiling due to the fear of being substituted by other product. Apart from this it also
affect the growth potentials of the industry as a whole but reducing the profitability
margins. 

Clothing is not just about wearing attractive clothes. It is a symbol to represent class and personal
identity. That is why buyers' propensity to substitute is high in this case. Duplicate fashion is a
considerable threat within the same region, like India and China. This is where people prefer
buying Zara clothing as it is made of exceptional high-quality natural materials. But still, a substitute is
possible in this case. 
The availability of substitute products or services makes the competitive
environment challenging for Zara and other existing players. High substitute threat
shows that customers can use alternative products/services from other industries to
meet their needs. Various factors determine the intensity of this threat for Zara

The Threat of Substitute Products or services increases when;

 A cheaper substitute product/service is available from another industry

 The psychological switching costs of moving from industry to substitute
products are low.
 Substitute product offers the same or even superior quality and performance
as offered by Zara’s product. 

However, this threat is substantially low for Zara when;

 The switching cost of using the substitute product is high (due to high
psychological costs or higher economic costs)
 Customers cannot derive the same utility (in terms of quality and
performance) from substitute product as they derive from the Zara’s product.

How Zara can tackle the Threat of Substitute Products or services?

 Zara can reduce the Threat of Substitute Products or services by clearly

emphasising how its offered product/service is better than the available
substitutes.
 It should provide convincing reasons to the customers by offering a better
experience and high value for money.
 It can raise switching costs by working on loyalty.
 Lastly, it can improve the quality, maximise value for money and set strong
differentiation basis to discourage customers from using the substitute
product.

Threat of Substitute Products or Services

 There are very few substitutes available for the products that are produced in
the industry in which Zara operates. The very few substitutes that are
available are also produced by low profit earning industries. This means that
there is no ceiling on the maximum profit that firms can earn in the industry in
which Zara operates. All of these factors make the threat of substitute
products a weaker force within the industry.
 The very few substitutes available are of high quality but are way more
expensive. Comparatively, firms producing within the industry in which Zara
operates sell at a lower price than substitutes, with adequate quality. This
means that buyers are less likely to switch to substitute products. This means
that the threat of substitute products is weak within the industry.

How Zara can tackle the Threat of Substitute Products?

 Zara can focus on providing greater quality in its products. As a result, buyers
would choose its products, which provide greater quality at a lower price as
compared to substitute products that provide greater quality but at a higher
price.
 Zara can focus on differentiating its products. This will ensure that buyers see
its products as unique and do not shift easily to substitute products that do
not provide these unique benefits. It can provide such unique benefits to its
customers by better understanding their needs through market research, and
providing what the customer wants.

Another approach to identifying the external factors which are relevant to the development
of Zara is that of Porter’s Five Forces, which argues that there are five forces all acting
together to create a particular environment within a particular industry or market. The
fashion industry in its entirety is highly competitive, with extensive sales, on an international
basis, thus making Porter’s Five Forces particularly relevant to the analysis, when identifying
how companies such as Zara can set themselves apart and what types of forces the
company can use to achieve a differentiation (Porter, 1979).

Firstly, when looking at the threat of entry, it can be seen that there are relatively no entry
barriers for those looking to enter the industry. However, although it is not necessary, at a
low level, to invest large amounts of capital, the issue of economies of scale is playing an
increasingly important role, with consumers constantly demanding cheaper prices. This
makes it hard for the smaller new entrant to compete, from a price point of view, but still
allows them to offer unique designs, which may then give them access to a market that
which would otherwise be closed. Substitution across the whole industry is extremely high,
as individual consumers can choose alternative providers for their fashion needs. When
looking at taking the mass-market competitive approach, substitution may simply be down
to price issues, whereas designer boutiques may be able to offer a different type of product,
which again will offer a competitive substitution for the consumer (Moran and Riesenberger
1994).

Linked to this point of substitution is the large power that buyers have within this industry.
Customers now have wide access to a broad range of retailers, with internet purchases
extending this even further. The recent price war has also increased availability of fashion
items to the general public and this allows buyers to have a huge influence on the market,
by selecting new products, on a regular basis. Buyers demand continuous change,
particularly within the fashion industry; therefore, it is necessary to continuously provide
new and innovative fashions, on an on-going basis. Failure to do so is likely to result in
customers turning away from a particular brand, until they renew their product ranges.

At the other end of the scale is the fact that the power of the suppliers within the fashion
industry is low, with many organisations outsourcing their production to developing
countries, in order to keep costs at a critically low level. Organisations such as Zara have a
substantial opportunity, when it comes to changing suppliers, and this enables the company
to drive down costs. Although this offers opportunities for reducing costs, it can also
potentially create difficulties where there are concerns over the ethical behaviours of these
third party providers.

Drawing on the four forces above, it can be argued that, finally, there is a large amount of
competitive rivalry within the industry (the fifth and final force). This suggests that the
competitive rivalry is increasing rapidly within an organisation such as Zara need to look
towards establishing themselves with a competitive advantage during these difficult times,
with particular reference to the fact that the buyers have a large amount of power, yet costs
are critical to the situation, as there are economic pressures on the industry, as a whole, in
the wake of the global international crisis.

CONCLUSION
 more quality trendy products at more affordable prices.

 pioneer in the concept of fast-fashion

 Zara competitors are H&M and Gap

Michael Porter's five forces model

 competitive leadership in fast fashions

Porter Five (5) Forces Model

Porter Five (5) Forces Model was proposed by Michael E. Porter in 1979. The
purpose was to assess and evaluate the competitive positioning and strengths of
business organisations. The model has three horizontal competitive forces (Threat
of Substitute Products or services, the threat of new entrants and rivalry among
existing firms) and two vertical forces (Bargaining power of buyers and bargaining
power of suppliers). 

These forces shape the competition within any industry. The overall industry
competitiveness declines when these forces reduce profitability. Porter found SWOT
analysis lacking in rigour. Many new companies use the Porter Five (5) Forces Model
to decide whether it is profitable to enter in a particular industry.

Application of this model can help Zara to determine the industry attractiveness and
understand its competitive positioning in the market. The analysis can also be used
to make some strategically wise decisions that could improve the performance of
Zara and ensure long-term survival.

The application of Porter five (5) forces model in real-world context allows
organisations to .make wise strategic decisions. Impact and importance of each of
the five forces is context dependent. By using Five Force analysis, Zara can
determine the industry attractiveness, make effective entry/exit decisions and
assess the influence of these forces on their own business and competitors.
Moreover, the dynamic analysis of this model can reveal important information. For
example, Zara can combine the Porter 5 force model with PESTEL framework to
determine the industry’s potential future attractiveness. In some cases, companies
do not have the required information to analyse five forces. In such a scenario, the
analysis can be conducted with the help of assumptions. Mostly, consultants
consider this model as a starting point, and other frameworks (like PESTEL and
Value Chain) are used in conjunction for a better understanding of the external
environment.

The Porter Five Forces has been developed in 1979 to analyse industry’s affective and profitability. It is a
famous tool for gaining insight into the overall fashion apparel industry and more importantly the role of
Creación with a variety of key factors affecting the company itself. The Porters Five Force model comprises
competitive rivalry within an industry, threat of new entrants, threat of substitutes, bargaining power of
suppliers and bargaining power of buyers.

7.1.1 Competitive rivalry within an industry

There are segmented clothing and retail industries around the world. Therefore, there are provisions for a
smaller number of firms in the industry. Although Creación has direct competitors like Jovian and…show
more content…
The basic strategy for fighting competition is to attract buyers at lower prices, more unique designs, high-
quality design, efficient customer service and solid image brand. Thus bargaining power of buyer for apparel
industry is high as the products falls under the basic needs in human lives. There is no much difference in
terms of products offered by the apparel company, so if buyer is unhappy with the product or service they can
easily switch to another brand. Thus, Zara are trying to strengthen its position in the market by using their
unique strategy by giving priority to buyer to meet their special needs.
7.2 Relative Strength of Porter’s Five Forces
In apparel industry the level of competition is very high, as there are big players competing in industries such
as Jovian and Medeena. New entry threat are higher as they require less investment to enter the industry,
whereas bargaining power buyers are also higher because of the wide alternative available to them. Suppliers'
power is lower due to the existence of a large number of sellers and ultimately, treats of substitution is lower,
as clothing is a basic needs whereas consumers have no alternative to clothing.
7.3 Minimum efficient scale of

Apart from this, our experts can also help you with "Porter's Five Forces of Zara" that majority of the
professors ask students to include while writing a case study of Zara.  

Using Porter’s five forces model, you can get a better insight into the brand and easily determine the
likelihood of success and other factors that can help you write better Zara case study solutions. 

Zara, being the fastest growing retail brand, has built a successful business model to survive in the
upcoming world. Hope, you have already realized the same by reading the aforementioned Porter's five
force analysis. Similarly, you can do the Zara case study analysis and talk about the same in your case
study. If still, there is something that is bothering you and stopping you from writing a perfect case study
of Zara, then do not think twice and consult our online Zara case study help experts.  

A model was put forward by Michael. E. Porter in an article in the Harvard Business
Review in 1979. This model, known as Porter's Five Forces Model is a strategic
management tool that helps determine the competitive landscape of an industry.
Each of the five forces mentioned in the model and their strengths help strategic
planners understand the inherent profit potential within an industry. The strengths of
these forces vary across the industry to industry, which means that every industry is
different regarding the profitability and attractiveness. The structure of an industry,
even though it is stable, can change over time.
The Porter’s Five Forces model can be used to analyse the industry in which Zara
operates, in terms of attractiveness through inherent profit potential. The information
analysed using the model can be used by strategic planners for Zara to make
strategic decisions.

Zara Porter five forces reflects the competitive environment of an industry. It is a strategic
tool that is used to avoid or minimize the risk of losing the competitive edge that the
organization has and to ensure the profitability of the products in the long run. The
company holds its vision closely as it allows them to orientate its innovation in terms of
choices regarding the investment and strategies. Within the industry the businesses
profitability is dependent upon the following forces:

Limitations of Zara Porter’s five forces

Though the model from a strategic point of view is an important tool but there are certain
limitation associated with the application of the porter five forces model. The framework
use a classic perfect market and relatively a static structure of market i.e. it only
incorporates the aspects of the present day and only incorporate the events that took place
within the short term period. Zara Apart from the model only provide the overview of the
environment and does not define the industry clearly.  As it can be difficult to group the
companies having similar business lines and to call it an industry. Therefore Porter
framework due to its limitation is too inert to be depending upon outside the short term to
medium, term objectives.  It emphasizes more on external factors and ignore the specific
factors that are more specially related with the firm. The model doesn’t incorporate new
business model and the changing dynamics of the market and the impact of globalization.
Moreover it does not consider non-market forces.

Всегда существует угроза появления новых участников, но тогда риск не так велик,
поскольку Zara уже имеет огромное присутствие в большинстве стран мира. Барьеры
для входа действительно высоки, в основном из-за того, что для начала работы на
рынке требуются огромные инвестиции, высокие фиксированные затраты, высокие
коммерческие, общие и административные расходы, длительный цикл продаж,
капитал бренда, узнаваемость бренда, создание огромной международной сети.
• Zara также может инвестировать в исследования и разработки, получать ценные
данные о клиентах и внедрять инновационные продукты / услуги, чтобы создать
прочную основу для дифференциации.

• Zara может развивать лояльность к бренду, работая над управлением

взаимоотношениями с клиентами. Это повысит психологическую стоимость
переключения.
• В отрасли, в которой работает Zara, довольно сложно добиться эффекта масштаба.
Это позволяет тем, кто производит большие емкости, получить преимущество в
стоимости. Это также делает производство более дорогостоящим для новых
участников. Это делает угрозы новых участников более слабой силой.
• Zara может воспользоваться эффектом масштаба, достигнутым в отрасли, отбиваясь
от новых участников за счет своего ценового преимущества.
• Zara может сосредоточиться на инновациях, чтобы отличать свою продукцию от
продукции новых участников. Это поможет компании сохранить своих клиентов, а не
потерять их из-за новых участников.

Покупатели в сфере розничной торговли модной одеждой не имеют возможности

напрямую договориться о снижении цен. Розничные торговцы должны не только
удовлетворять потребности потребителей, но и дифференцироваться, чтобы
привлекать и удерживать покупателей.

• очень жесткая конкуренция (местная, европейская, международная)

• дифференцировать продукты

Эта сила напрямую влияет на способность Zara достигать бизнес-целей. Сильная

позиция на переговорах снижает прибыльность и делает отрасль более
конкурентоспособной. Принимая во внимание, что слабая покупательская способность
делает отрасль менее конкурентоспособной и увеличивает прибыльность и
возможности роста Zara.

Есть несколько факторов, увеличивающих переговорную способность покупателей:

• Более концентрированная клиентская база увеличивает их позиции на переговорах с
Zara.
• Покупательская способность также будет высокой, если их немного, тогда как
количество продавцов (коммерческих организаций) слишком много.
• Низкие затраты на переключение (экономические и психологические) также
увеличивают переговорные позиции покупателей.

Zara может управлять рыночной властью покупателей, увеличивая и диверсифицируя

их клиентскую базу. Это может быть сделано путем внедрения новых продуктов,
ориентации на новые сегменты рынка и принятия стратегий диверсификации
продуктов. В этом отношении также могут быть полезны маркетинговые и рекламные
стратегии. Повышение лояльности за счет внедрения инноваций и предложения
отличного обслуживания клиентов может повысить затраты на переход.
Динамика медиа и рекламной индустрии позволяет клиенту иметь высокую
переговорную позицию. А низкая стоимость каким-то образом позволяет клиентам
искать другие компании.
Покупатели довольно непостоянны, когда дело касается покупки одежды.
• Zara может сосредоточиться на инновациях и дифференциации, чтобы привлечь
больше покупателей. Дифференциация и качество продукции важны для покупателей
в отрасли, и Zara может привлечь большое количество клиентов, сосредоточив
внимание на них.
• Zara необходимо создать большую клиентскую базу, так как покупатели имеют
слабые позиции на переговорах. Это можно сделать с помощью маркетинговых
усилий, направленных на повышение лояльности к бренду.

• Zara может воспользоваться своей экономией на масштабе, чтобы получить

преимущество в цене и продавать по низким ценам малообеспеченным покупателям в
отрасли. Таким образом, он сможет привлечь большое количество покупателей.

Мировой рынок одежды быстро растет, так как во всем мире растет спрос на одежду и
другие аксессуары. Среди многочисленных розничных торговцев одеждой по всему
миру главными международными конкурентами являются Zara, H&M и UNIQLO.
Конкуренция в швейной отрасли высока из-за ее фрагментации, большого присутствия
крупных и малых предприятий и большого количества брендов, предлагающих
аналогичные товары. Такие бренды, как Zara, могут конкурировать и повышать
лояльность клиентов за счет качества и характеристик. Однако розничные торговцы с
сильным имиджем бренда, такие как люксовые бренды, могут взимать гораздо более
высокие цены. Отрасль зрелая и имеет низкие входные барьеры; таким образом,
рынок быстро насыщается.
• Соперничество между существующими фирмами показывает, что количество
конкурентов, которые создают жесткую конкуренцию Zara High, показывает, что Zara
может столкнуться с сильным давлением со стороны конкурирующих фирм, которое
может ограничить потенциал роста друг друга. Прибыльность в таких отраслях
невысока, поскольку фирмы применяют агрессивные стратегии ценообразования и
ценообразования друг против друга.
• • Продукты сильно дифференцированы, и каждый участник рынка нацелен на
разные подсегменты.
Организация должна также инвестировать в исследования и разработки для
выявления новых сегментов потребителей.
Несмотря на то, что у Zara есть несколько прямых конкурентов, таких как H&M, GAP, у
нее все еще есть лояльные потребители.
Zara сталкивается с большой конкуренцией на рынке. На рынке присутствует большое
количество конкурентов, таких как H&M, Benetton, Gap и т. Д. К счастью, высокий
уровень конкуренции усложняет задачу для всех, поскольку все они изо всех сил
пытаются получить кусок пирога. Самая большая проблема в том, что из-за большого
количества конкурентов темпы роста низкие из-за количества производителей вокруг.
Покупатели избалованы выбором из-за количества брендов на рынке. Они также
очень непостоянны и строят свои покупательские привычки на основе новых
тенденций. Они будут покупать только исходя из цены и узнаваемости бренда, и
поэтому производители должны постоянно менять то, что они делают, и придумывать
новые способы привлечения клиентов. Затраты на производство новых товаров
довольно высоки, к тому же нелегко закупить сырье, поэтому те, у кого есть ресурсы и
возможности, могут выжить на рынке.
• Очень немногие конкуренты имеют большую долю рынка. Это означает, что они
будут участвовать в конкурентных действиях, чтобы занять позицию и стать лидерами
рынка. Это делает соперничество между существующими фирмами более сильной
силой в отрасли.
• Постоянные затраты высоки в отрасли, в которой работает Zara. Это заставляет
компании отрасли работать на полную мощность. Это также означает, что эти
компании снижают цены, когда спрос падает. Это делает соперничество между
существующими фирмами более сильной силой в отрасли.
конкуренция Zara основана на разнообразии, развитии внутри сектора и барьерах,
связанных с входом на рынок. Конкурентное соперничество - это анализ брендов и
продукта, его сильных и слабых сторон, а также стратегий, конкурентов и доли на
рынке.

Торговая сила поставщика в индустрии розничной торговли модной одеждой

минимальна и незначительна. Из-за перенасыщенности рынка большинство брендов
одежды передают свое сырье, производство и производство на аутсорсинг в
развивающихся странах, таких как Китай, Бангладеш, Вьетнам и Индия. Покупательная
способность находится в руках бренда, поскольку они могут переключаться и заменять
других поставщиков по низкой цене или внедрять прямую интеграцию. Таким
образом, клиенты поставщиков одежды не фрагментированы и должны соблюдать
правила компаний, производящих одежду. Поставщики текстиля не контролируют
повышение цен и имеют низкие производственные цены, поскольку получают лишь
небольшую часть прибыли.
На рынке слишком много поставщиков, что является одной из причин, по которой у
поставщиков нет достаточных возможностей для ведения переговоров. Тот факт, что
Zara закупает или производит большую часть товаров сама, также является еще одним
фактором, который не работает в пользу поставщиков. Если поставщик решит
сократить поставки, производитель легко может обратиться к другому производителю.
Мощные поставщики обладают большей властью для извлечения значительной
выгоды для себя, требуя высоких цен при ограничении качества и количества продукта
или услуг или перекладывая затраты на участника отрасли. Многие условия,
налагаемые поставщиками, обычно включают повышение цены при сохранении
качества и количества.

• Поставщики сконцентрированы в определенном регионе, и их концентрация выше,

чем их покупателей.
• Эта сила особенно сильна, когда переход от одного поставщика к другому высок для
покупателей (например, из-за договорных отношений).
• Когда поставщиков мало, а спрос на предлагаемую ими продукцию высок, это
усиливает позиции поставщиков по отношению к Zara.
• Дальнейшая интеграция поставщиков ослабляет позиции Zara, поскольку они также
становятся конкурентами в этой области.

Zara может укрепить свои позиции по отношению к поставщикам, уменьшив

зависимость от одного или нескольких поставщиков. Это повысит его чувствительность
к цене. Развитие долгосрочных договорных отношений с поставщиками из разных
регионов не только снижает их позиции на переговорах, но и позволяет Zara повысить
эффективность своей цепочки поставок. Наконец, Zara может найти альтернативные
способы производства продукта, если спрос на продукт достаточно высок, а фирма
обладает необходимыми компетенциями и опытом. Однако для определения его
осуществимости требуется подробный анализ затрат и выгод.
• Zara может закупать сырье у своих поставщиков по низкой цене. Если затраты или
продукты не подходят для Zara, она может сменить поставщика, поскольку затраты на
переключение невысоки.
• Для покупателей нет значительной угрозы обратной интеграции. Это делает
торговую угрозу покупателей более слабой силой в отрасли.

Продукты-заменители Zara - это альтернативы, которые доступны на рынке по

сравнительно более выгодным ценам. Такие продукты преобладают благодаря
технологическому и инновационному прогрессу. В связи с чем продукты,
производимые компаниями, которые уже существуют на рынке и используют ту же
технологию, заменяются продуктами других компаний, которые сравнительно лучше
по цене и качеству и производятся в секторах со значительной прибылью.
Высокая угроза замены ведет к низкой рентабельности, поскольку ограничивает
прибыль отрасли, устанавливая потолок цен из-за опасения быть замененной другим
продуктом. Помимо этого, это также влияет на потенциал роста отрасли в целом, но
снижает рентабельность.

Угроза заменяющих продуктов или услуг возрастает, когда:

• Доступен более дешевый заменяющий продукт / услуга из другой отрасли.
• Продукт-заменитель предлагает такое же или даже лучшее качество и
характеристики, как и продукт Zara.
• Zara может уменьшить угрозу замены товаров или услуг, четко подчеркнув,
насколько предлагаемый ею продукт / услуга лучше имеющихся заменителей.
• Он должен предоставлять клиентам убедительные доводы, предлагая лучший опыт и
высокое соотношение цены и качества.
• Это может повысить затраты на переключение, работая над лояльностью.
• Наконец, он может улучшить качество, максимизировать соотношение цены и
качества и создать прочную основу для дифференциации, чтобы отговорить клиентов
от использования продукта-заменителя.

• Zara может сосредоточиться на повышении качества своей продукции. В результате

покупатели будут выбирать ее продукты, которые обеспечивают более высокое
качество по более низкой цене по сравнению с продуктами-заменителями, которые
обеспечивают более высокое качество, но по более высокой цене.
• Zara может сосредоточиться на дифференциации своей продукции. Это гарантирует,
что покупатели увидят ее продукцию как уникальную и не перейдут на замену
товарам, не обеспечивающим этих уникальных преимуществ. Он может предоставить
такие уникальные преимущества своим клиентам, лучше понимая их потребности
посредством исследования рынка и предоставляя то, что хочет клиент.

Во-первых, если посмотреть на угрозу входа, можно увидеть, что входных барьеров
для тех, кто хочет войти в отрасль, относительно нет. Однако, хотя на низком уровне
нет необходимости инвестировать большие суммы капитала, вопрос экономии за счет
масштаба играет все более важную роль, поскольку потребители постоянно требуют
более низких цен. Это затрудняет конкуренцию для более мелких новичков с точки
зрения цены, но все же позволяет им предлагать уникальные дизайны, которые затем
могут дать им доступ к рынку, который в противном случае был бы закрыт. Замещение
во всей отрасли чрезвычайно велико, поскольку отдельные потребители могут
выбирать альтернативных поставщиков для своих потребностей в моде. При
рассмотрении конкурентного подхода на массовом рынке замещение может быть
просто связано с проблемами цены, тогда как дизайнерские бутики могут предложить
другой тип продукта, который снова предложит конкурентоспособную замену для
потребителя (Moran and Riesenberger 1994). .
С этой точкой замещения связана большая власть покупателей в этой отрасли. Теперь у
клиентов есть широкий доступ к широкому кругу розничных продавцов, и покупки в
Интернете расширяют это еще больше. Недавняя ценовая война также увеличила
доступность модных товаров для широкой публики, и это позволяет покупателям
оказывать огромное влияние на рынок, регулярно выбирая новые товары. Покупатели
требуют постоянных изменений, особенно в индустрии моды; следовательно,
необходимо постоянно предлагать новую и инновационную моду на постоянной
основе. Невыполнение этого требования может привести к тому, что покупатели
откажутся от определенного бренда, пока они не обновят ассортимент своей
продукции.
На другом конце шкалы находится тот факт, что влияние поставщиков в модной
индустрии невелико, и многие организации передают свое производство в
развивающиеся страны, чтобы удерживать затраты на критически низком уровне.
Такие организации, как Zara, имеют значительные возможности, когда дело доходит
до смены поставщиков, и это позволяет компании снизить затраты. Хотя это дает
возможности для снижения затрат, это также потенциально может создать трудности,
когда есть опасения по поводу этического поведения этих сторонних поставщиков.
Опираясь на четыре вышеуказанные силы, можно утверждать, что, наконец, в отрасли
существует большое количество конкурентных соперников (пятая и последняя сила).
Это говорит о том, что конкурентное соперничество быстро нарастает внутри такой
организации, как Zara, и ей необходимо стремиться к созданию конкурентных
преимуществ в эти трудные времена, с особым упором на тот факт, что покупатели
обладают большой властью, но затраты имеют решающее значение к ситуации,
поскольку существует экономическое давление на отрасль в целом после глобального
международного кризиса.

комбинировать силовую модель Porter 5 со структурой PESTEL, чтобы определить

потенциальную будущую привлекательность отрасли.