Question

How did Zara apply five forces of competitive strategy (Porters) that the organization must master?

Answer 1

Porter five force model or analysis can help make the plans or strategies strong for the industry. The application varies from one industry to another. However a few things remain the same.

Zara applies it in the following ways:

1. New entrants:

Zara can benefit from the scalability of the economy in the industry. Using cost advantage, fighting the new entrants is very easy. Focus should be on innovation. This will make the products different from other entrants. Brand identification can also be made strong. This also helps in retaining clients and customers and building long term relations with them.

2. Bargaining power of suppliers:

Raw materials for Zara are bought from the long term suppliers at minimum cost. Suppliers can be changed if the product cost is too high. Multiple suppliers can be engaged in the supply chain. From different locations across the globe different suppliers can be selected. It will make the supply chain efficient. This also helps in building long term strong relations with suppliers.

3. Bargaining power of buyers:

By focusing on differentiation and innovation, more buyers can be attracted. Quality and differentiation of products is very important. A huge database of customers can be built by doing so. If the buyer's bargaining power is not strong, marketing efforts should be aimed at brand building. Products can be sold at low prices to build a customer base. Low-income clients or buyers will always be interested in that.

4. Substitute services or products:

Substitution also means quality of product should be intact. Buyers always choose a substitute that has good quality at low price. Buyers should see the product differently and find it unique. Customers' needs should also be kept in mind while building a product base of different services and products.

5. Rivalry among firms:

Zara can take advantage in the competition by making its products different and improving their quality at low price. Instead of focusing on old customers, it is also good to focus on new customers and their needs. It can be done by market research and understanding the situation of supply-demand. It can help in prevention of overproduction.