A five forces analysis, based on michael porter s model, points out that competition, customers and substitutes are the most important external forces in nikes industry environment. Porter s five forces analyses are an approach to determining just how competitive a given market is, and consequently, how profitable it may be for a business. This makes it easier for those producing large capacitates to have a. He has identified five forces that determine the state of competitiveness in a market.
Michael e porter has outlined three generic strategies that can be used by a business brand to acquire a source of competitive advantage. Today zara is a fastest growing retail merchandise throughout the world. The purpose this pest and porter s five forces analysis is to identify various external factors which serves as guide to make better strategic decisions. Porter s five forces analysis threat of competitors. Michael porter teaches at the harvard business school. The economies of scale is fairly difficult to achieve in the industry in which zara operates. Zara has been the major pioneer of disposable fashion. Porters five force analysis america is filled with all sorts of fast fashion chains, some of which have major market shares.
It draws upon industrial organization io economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. The methodology used to analyse the brand includes models such as a pestle and swot analysis and michael porter s five forces 1980 as well as both secondary and primary re search, such as comparative shopping and observational research. Zara is the biggest retailing clothing brand which originated from spain in 1975 when amancio ortega started zara as a part of inditex group of companies. Fortunately the high level of competition makes it tough for everyone as they are all struggling to get a piece of the pie. Porter s five forces model is often used as a tool for analyzing industries and competitive structures within them. Zara, one of the leading brands within the fashion industry. Zara strategic management retail corporate social responsibility. Uta boehm yamaha ybr125 ybr125ed 2008satellite communication system engineering wilbur l. Developed by michael porter 1979 1, five forces analysis remains as one of the most important strategic analytical tools for competitive analysis for more. Cocacola can reexamine and rebuild its strategy by distinguishing external threats and weakness which is essential to cementing a business strategy to grow and move the organization forward. Porter s five forces model is regarded as a credible and practical alternative to the widely used swot analysis. Porter five forces analysis porter five forces analysis is a framework for industry analysis and business strategy development formed by michael e.
One of the leading brands is zara which has the helping hand of inditex, one of the largest. Zara has been able to use the five competitive force analyses by porter in making its business thrive. I have used porter s five forces model porter, 1995 to analyse the industry and zara. This framework draws on five factors, known as the five forces, to achieve this. The forces aim at determining the competition intensity to be able to gauge the attractiveness and profitability of the company. The use of strategic forces to understand competitive.
Developing competitive strategies based on swot analysis in porter s five forces model by danp. Zara porter s five forces analysis a model was put forward by michael. This ebook describes porter s five forces framework, a technique that provides a model for industry analysis and business strategy development. Five forces analysis of the fashion retail industry. Porter five forces analysis is a strategic management tool to analyze industry and understand underlying levers of profitability in a given industry. This force analyzes how much power and control a companys supplier also known as the market of inputs has over the potential to raise its prices or to reduce the quality of purchased goods or services, which in turn would lower an industrys profitability potential. This uniqueness allows zara to profit from the public without having to spending large sums on advertisement in order to gain market share.
In the case of the implementation of zara and mango, it can know with precision what. Competitive forces and strategic issues shaping zara s. A case study of fashion giant zara using porters five forces model. Zara s distinctive competencies abovetheline just print advertising belowtheline they use internet, events, pr and brand communications along with media cooperation communication goals of zara are to inform the consumer about new products 11. Power is in the hands of the customers in this era and therefore the focus of the brands is also on crafting a better consumer experience. Zara may find it difficult to get required information if its business information system is not structured accordingly. 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. This is a five forces analysis of the fashion retail industry based on the porter s five forces model.
Pdf developing competitive strategies based on swot. It is important how many direct competitors we have, but it is also important if. This is a discussion of the generic and intensive growth strategies zara followed to grow its brand and market share and generate sustainable competitive advantage. Bruijl and others published the relevance of porter s five forces in todays innovative and changing business environment find, read and cite all the research. Zara outperforms its rivals in profitability, brand identity, and its successful business model. Porter s 5 forces examines the five forces that make a company competitive while helping identify its strengths and weaknesses.
This makes it easier for those producing large capacitates to have a cost advantage. Overview of the determinants of industry profitability porter s five forces analysis zara s competitive position can be quickly summarized using the chart below, where it is seen that zara has a dual advantage over its competitors. Pdf the relevance of porters five forces in todays. In this backdrop, this analysis will describe how the porters five forces and the. The five competitive forces that shape strategy by michael e. Executive summary ebusiness background zara, part of spanish giant.
Porters five forces free ebook in pdf, kindle and epub. Porter s value chain model is highly popular in the business world. Strategic analysis michael porter s 5 forces analysis is a useful tool in analysing an industry and the business strategy of a company and also helps in evaluating the overall attractiveness of the market. Thus, there are several forces affecting the market position of the fashion brands. Threat of new entry time and cost of entry specialist knowledge economies of scale cost advantages technology protection barriers to entry supplier. The third section will provide an industry analysis in relation the organisations business environment which will include a pest analysis and porters five forces. The five forces model teaches us that competition has multiple dimensions. One of these forces is the competitive rivalry intensity fonta, 2010. In this case, tesco will be taken as an example and a 5 forces. Analysis of the main groups of textile distribution in. It helps to analyze how the business itself is positioned relative to. However, zara must not take it as a rigid, standalone framework by assigning the equal importance to all activities.
Porter s five forces framework is a method for analyzing competition of a business. I have used porter s five forces model porter, 1995 to analyse the industry and zara s strategic position. It draws from industrial organization io economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness or lack of it of an industry in terms of its profitability. Table of contents introduction 4 zara and michael porter s model 5 generic competitive strategies analysis for zara 5 five forces analysis for zara 6 suppliers bargaining power 6 buyer bargaining power 7 threat of new entrants 7 threat of substitute 8 industrial competitors 9 the value chain of zara 10 enterprise resource planning erp 11. As of today, there are not many fast fashion shops like zara around. Porters five forces model applied to zara by karim. This will be tough for penneys starting off but not impossible. Another approach to identifying the external factors which are relevant to the development of zara is. In where he developed a framework of the strategic management models that named porter s five forces model of competition. Methodologically the paper uses porters five forces and a swot analysis.
Porters 5 forces model of inditex group term paper. Porter s five forces model is a simple and yet effective tool used for analyzing the level of competition in an industry. 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. Threat of new substitutes threat of new entrants barriers of entry what is zara. Fashion is the imitation of a given example and satisfies. Porter s five forces framework rivalry existing competitors, threat of new entrants, power of suppliers and buyers, substitut products and services is based on the. Download as docx, pdf, txt or read online from scribd. The idea in brief the core idea the idea in practice putting the idea to work 24 article summary 25 the five competitive forces that shape strategy a list of related materials, with annotations to guide further. This section analyses zara using each of the five forces of porter s model. Porter s five forces analysis includes a critical analysis of five separate forces that shape the overall extent of competition in fashion, apparel and accessories industry. Managers can use to analyze competitive forces in the industrys environment. The models central tenet is that an industrys profit potential is determined to a large extent by either one or a combination of five competitive forces within that industry. The forces also influence the profitability of firms already in the industry.