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Executive Summary

Attaining a competitive advantage is a concept that continues to attract the attention of researchers in the field of strategic management. One of the principal elements that contribute to the accomplishment of a competitive advantage is the selection of an effective business model. This paper focuses on the business model employed by Zara and Primark, which are retail companies in the apparel industry. While Zara employs a standard fast-fashion business model, Primark uses the fast-fashion discounter model. Zara’s model enables the company to continue leading the market ahead of its rivals such as Primark. This model ensures that the company has a quick supply chain and is adaptable to changing market situation. The paper suggests that Primark adopts a standard fast-fashion model of business in line with the strategic management principle for it to maintain its competitive position the market. Primark’s current business model does not ensure quick supply chain performance and adaptability to market dynamics. 

Business Models of Zara and Primark

This paper critically analyzes a case situation of Primark and Zara in terms of strategic management issues and makes justified recommendations for the strategic direction that Primark should follow. According to Prommarat et al., (2015), enhancing the performance of organizations relative to their competitors and attaining a competitive advantage position are the principal goals that companies should strive to accomplish. In strategic management, competitive advantage is a concept that continues to attract the attention of scholars and researchers. One of the principal elements that contribute to the enhancement of an organization’s competitive advantage is the selection of an effective business model. Bhattacharyya et al., (2015) define a business model as a plan that a company implements to generate revenues and gains from its operations. As such, a business model takes into consideration the functions and components of the business, and the revenues it generates along with the costs it incurs. This paper accomplishes its objectives by comparing and analyzing the business models of Zara and Primark followed by offering a recommendation for the strategic direction that Primark should follow. The paper also highlights the internal threats/challenges that Primark faces.   

Overview of Zara and Primark

Zara is a Spanish accessories and clothing retailer based in Galicia. Rosalia Mera and Amancio Ortega established this company in 1975 (Competition & Change, 2014). Zara is Inditex group’s flagship chain store, which considered the largest retailer in the world. Zara’s stores have women’s clothing, men’s clothing, and children’s clothing. The company’s products are often supplied in relation to the trends of consumers. Zara’s highly responsive/flexible supply chain ships novel products/commodities/items to stores two times every week. According to Dolbec et al., (2015), Zara produces approximately 450 million items every year. Primark is an Irish clothing retailer that operates in nations such as the U.S, UK, Belgium, Austria, Spain, France, Portugal, and Netherlands among others (Dolbec et al. 2015). The company is headquartered in Ireland. Primark provides a range of items, including kids and newborn clothing, menswear, women clothing, home ware, foot ware, accessories, and beauty products. Primark focuses on the fast-fashion trend, and sells its items on the market’s low-cost end.

Comparison and Contrast of Primark’s and Zara’s Business Models

Over the last 30 years, the global textile industry has witnessed a significant disruption from two forms of business models (Thompson & Martin (2010) & Chaola et al. (2015)). The fast-fashion model of business emerged in 1980s followed by the emergence of the fast-fashion discounters five to ten years later (Charles et al. 2008; Szymaniec-Mlicka (2014) & Taneja et al. (2014)). The fast-fashion discounters were aggressively prices, and began inspiring a change of step in consumer expectations with their potential to undercut conventional clothing retailers by approximately 50% or even more (Albert et al. 2015). Zara is an established fast-fashion retailer, while Primark is a discount fast-fashion retailer. However, the common future associated with the two companies’ business models is that they focus on fast-tracked items/products.

Fast-fashion retailers’ products are characterized by three principal features/elements that include evergreens, traffic generators, and headline grabbers (Barrick et al. 2015). Evergreen items are not fashion-driven. As such, they do not encourage the payment for a flexible and fast supply chain. Headline grabbers and traffic generators always have concept-to-shelf times that fall below 20 weeks. Since these products are fast-tracked, their production is done quickly followed by their transportation to their designated places using air transport.  Moreover, production capacities are always reserved in pre-colored and advanced fabrics developed up front to ensure the reliability of the manufacturing process. The ultimate stages validate the product and fine-tune the fit. According to Competition & Change (2014), Fast-Fashion models of business, which Zara embraces, are underpinned or reinforced by a segmented chain of value that cautiously juggles flexibility, cost efficiency, and speed across the item types. Dolbec et al., (2015) assert that the most sophisticated for of fast-fashion business model often incorporates a fourth process that captures missed trends. Once the supply chain is in motion, it can deliver a product from concept-to-product in a period of less than 10 weeks (Dolbec et al. 2015), as seen in the case of Zara whose items are often taken to store two times every week. Zara’s supply chain is strictly managed by mechanisms (i.e. read and react) of direct feedback from the floor of the shop. As such, the company exercises a high degree of flexibility by tracking a collection’s slow movers and hot sellers. Such an undertaking ensures that Zara can adapt, thereby ensuring precise make-to-demand manufacture/production, which optimizes and outclasses the conventional make-to-forecast frameworks/models.

Some of the key features that form the basis for comparing and contrasting the business models adopted by Zara and Primark are pricing strategy, corporate strategy, fashion, location, clients perception and positioning, number of stores, lines, and coverage. In relation to the aspect of pricing strategy, the fast-fashion discounter model enables Primark to offer more affordable or cheaper products/items than Zara. For example, Dolbec et al., (2015) point out that Zara’s prices are often tow-folds Primark’s prices in many regions/places. In relation to corporate strategy, while Zara belongs to the Inditex group, Primark is not affiliated to any group. Zara seems to provide more fashionable items than Primark since its shelves are often renewed after every two weeks (Dolbec et al. 2015). On the other hand, Primark often stock the same item for months. While Primark is often situated in the cities’ outskirts, Zara is often located in the cities’ best street. For example, while Zara can have many of its stores located in the same city, a Primark store can be located in a shopping mall within the same city. Considering the aspects of clients perception and positioning Zara often strives to democratize fashion, while Primark is viewed as the clothing supermarket (i.e. a place where a customer goes and grabs a product and leaves).   Zara sells perfumes, accessories, and clothing (i.e. including shoes). Zara also has a sub-brand known as Zara Home that sells house items such as sheets and pillows among others. On the other hand, Primark offers the same range of products, but within one place. According to Competition & Change (2014), Zara has approximately 1,671 stores, whereas Primark has an a proximate of 242 stores. While the two companies (i.e. Primark and Zara have) long lines, Primark’s product lines are longer than those of Zara. In terms of coverage, Primark majorly focuses on European markets, whereas Zara extends to other regions/continents and countries such as China (Dolbec et al. 2015).

Strategic Direction that Primark Should Follow

Rothaermel (2012), Ferreira et al., (2015) & Chatterjee et al., (2015) inform that organizations have missions or reasons for existing. As such, organizations can establish strategic direction be making their strategic visions explicit for their future. In relation to this, Primark’s current management needs to ensure that it develops an idea of where the company is going as well as the goals that the company needs to accomplish to be at the top of the market. This objective can be met by assessing company’s external/environmental and internal assessments. According to Morrison (2006), White (2004), Zatzick et al., (2012) &Giannakis & Harker (2014), the component of strategic direction ensures that the goals and vision of the company are in line with or achieve four principal issues. First, strategic direction ensures that the company’s goals and visions are in line with its competencies/potentials and complements its culture. Second, it ensures that organization’s goals and visions foster cooperation and commitment among key constituents. Third, strategic direction ensures that a firm’s goals and visions maximize the gains/benefits inherent within environmental opportunities and limit the liabilities inherent within environmental threats. Fourth, strategic direction ensures that a company’s visions and objectives enhance its position in terms of critical success factors (i.e. organizational aspects that distinguish success/excellence from failure), as well as its potential to accomplish stated objectives.

One of the mechanisms that Primark’s management should consider during the establishment of a strategic direction that the company should follow is focusing on the measures/strategies employed by companies that lead the market such as Zara. Zara’s business model appears to be successful since its revenues have been increasing year after year. In 2015, Inditex, Zara’s parent company had a 20% increase in net gains/profits, and this figure is expected to grow by double digits in the next five years (Schlossberg, 2015). The success of Zara’s business model is attributed to the elements of flexibility and agility, which seem to lack in the business model that Primark embraces.

Zara’s business model ensures quick picking up of novel/new trends, quick stock turn down that keeps consumers coming back for novel items, margin maximization, and appropriate responsiveness for external elements/factors such as the weather. This model of business also enables Zara to forecast the requirements of stock in an accurate manner, thereby reducing cases of markdowns (Competition & Change, 2014). Zara employs a push-based framework that ensures that factories push out items to stores. These products are then sold to consumers in a quick. This model also eliminates the issue of product customization or making of products to order.

Dolbec et al., (2015) point out that while Zara’s business model appears similar on the surface, this model is highly integrated. The aspect of Integration implies that there is an extremely tight chain of supply, from the original/initial design through to the production’s final stage. According to Gibbons et al. (2015), Henry (2011) & (Hopkins, (2013), the push-based model shortens the lead times, thereby ensuring that companies do not need to commit to their stock in advance every season. It also ensures that companies continue to manufacture or products through seasons.  As such, companies adopting this model can perform activities such as responding to changes in fashion, reducing or increasing production, as required. They can also introduce novel lines of product when they desire.

It is evident that the failures to rapidly adapt have led to companies such as Primark depending on sales to dispose their inventory.   On the other hand, companies that have quicker chains of supply cannot witness this problem (Mahoney & Qian, 2013; Ning & Yong, 2014). Zara happens to be among the businesses that possess this competitive advantage. In the current global market that is characterized by rapid changes in trends and fluctuations in weather, the ability to adapt has remained to be Zara’s source/point of competitive advantage.  As such, Zara continues to be the leading innovator within the fashion industry.  Dolbec et al., (2015) inform that Zara company often introduces an approximate of 18,000 designs every year, and manages this production in an average of 3 weeks.

Primark’s model of business also grants the company certain benefits. The model enables the company to present irresistible offers in terms of astonishingly low prices. As such, the business can able to accomplish a new and faster fast-fashion, which enables buyers to purchase a bulk of clothes and discard them after a given period (i.e. short period) then come for new ones.  Primark’s model business is associated with three primary elements that include rock-bottom prices, attractive stores, and cool clothes.  The strategy employed by fast-fashion discounters has been beneficial. This strategy enables companies such  as Primark to set unbeatable product prices, including fashionable/trendy T-shirts that often sell for as low as  €3 (Competition & Change, 2014). In this manner, the discounters have managed to concoct a level of price that established fast-fashion companies such as Zara and conventional multi—brand firms cannot afford or match. According to Competition & Change (2014), Primark accomplishes its rock-bottom prices because its sleek logistics, scale, and meager marketing budget that enable the company to win bargains from its suppliers. Primark has a higher ability/potential of withstanding tiny margins, thereby generating its income on volume.   However, despite providing these benefits, Primark’s model of business still does not match to the level of benefits offered by Zara’s business model. As such, Primark’s management should focus on adopting the fast-fashion model of business employed by Zara to ensure that the company remains competitive in the environment.

The Internal Challenge Required in Primark to Accomplish its Objective

One of the key internal challenges that Primark can face, as it attempts to implement the standard fast-fashion business model, is effective management or leadership.  Lack of effective leadership can substantially hinder successful implementation of the standard fast-fashion business model.  As such, the company needs to embrace strategic management . Strategic management does not substitute traditional/conventional management operations such as monitoring, budgeting, reporting, marketing, controlling, and planning (Lynch, 2015; Lynch, 2011). Instead, strategic management integrates these elements into a wider context, taking into consideration the internal organizational potentials/capabilities, external environment, and the company’s overall direction and purpose (Najmaei, 2014; Prommarat et al. 2015; Ronda-Pupo, 2015).

While Primark’s business model (i.e. fast-fashion discounter) has enabled the company to present irresistible offers in terms of price, this model has failed to ensure that that the company possess a quicker chain of supply. The model has also limited the flexibility and adaptability of the company to changing trends.  In addition, the company’s prices happens to be too low to validate the shipping expenses of e-commerce. As such, the company cannot manage to conduct a successful online business.  Such a weakness can adversely affect the business when it comes to revenue generation. For example, when its consumers in the U.S or any region shift in large numbers to purchasing clothes/product through messaging services and social networks, the company’s revenue generation can significantly decline, threating its existence.   Primark should do two things to enhance its competitive position in the market.

First, Primark needs to integrate a fast-track approach into the novel collection. This strategy will enable Primark to its range of items are often up-to-date. As a result, the company will manage to increase its sales velocity. Besides, the company’s higher stock turn will enable it to price items at prices that are significantly lower relative to its competitors. In this manner, Zara will continue to attract many consumers, thereby generating more revenues.

Second, Primark should also adopt a step-by-step approach to implementing the standard fast-fashion business model. Dolbec et al., (2015) inform that the business employed by discounters like Forever 21 and Primark is an advancement of the fast-fashion formula employed by Zara. However, compared to the standard fast-fashion framework/model, the fast-fashion discounters possess a significantly lower gross margin (i.e. lower than 4%), higher standardization levels in product development and material purchasing, and a supply chain that depends heavily on efficiency (Dolbec et al. 2015). Considering the aspects of marketing cost structures and lean personnel, these factors (i.e. the three factors associated with fast-fashion discounters), fashion discounters can only cover or address their fixed costs/expenses with high sales volumes. As such, embracing the standard fast-fashion business model will ensure that Primark maintains a competitive position within the market by frequently replenishing its stock and adapts to the changing conditions of the market. The company will also manage to gain more and create superior value perception.

Key Issues that I have learnt due to taking the Groups Assignment

Involvement in teamwork contributes significantly to the student’s comprehension of the learning materials and activities. I discovered three principal things from my participation in the teamwork (Hamann et al. 2012). First teamwork creates a relaxed and comfortable environment where a student can ask his or her pears questions while responding to theirs (Dietz-Uhler & Lanter, 2012). While in the group discussions, I could freely ask and respond to questions from my colleagues without fear. Second, teamwork acts as a sense of motivation to students (Hamann et al. 2012). Many members of the team including myself, were greatly motivated by the contributions and efforts made by other group members, and decided to work hard to accomplish the same. Third, teamwork builds on the understanding of students (Dietz-Uhler & Lanter, 2012). Group members who had adequate knowledge on certain areas of the assigned topic provided an in-depth and simple explanation, making it easy for everyone to understand. As such, the group excelled in terms of cooperation, motivation, and building on each other’s knowledge. However, the group was not effective when it comes to assigning tasks to various group members. For example, certain members could be given broader areas of research, while others only research on a few areas. As a result, complaints were occasionally received from members who felt overtasked.        

How My Individual Contributions Impacted the Group Work

My individual findings on the assigned topic had a significant impact on the group’s understanding of the topic area. My findings were comprehensive in the sense that they focused on many critical areas of the assigned topic (i.e. strategic management). my findings enabled the group members to have a deep understanding of the companies being investigated in terms of their modes of operations, locations, and product ranges that they offer. My findings equipped the group members with knowledge on key concepts and models on the two business models employed by the companies under investigation (i.e. Primark and Zara with fast-fashion discounter and standard fast-fashion business models respectively). My findings also equipped the group members with knowledge on the significance of having a strategic direction in an organization. Besides, my findings enabled group members to gain knowledge on the various benefits and disadvantages associated with the two models of business employed by Zara and Primark. I also managed to research on the critical measures that Primark should adopt in relation to strategic management. Moreover, my findings also offered a clear illustration on the path that companies should follow to accomplish a competitive position in the market, particularly by focusing on Primark.