Zara’s Competitive Advantage Over H&M

Subject: Case Studies
Pages: 1
Words: 398
Reading time:
3 min
Study level: Master

This essay examines Zara’s three distinct capabilities that brought the competitive advantage over H&M.

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Zara’s business model is based on trendy clothes at low-price. The first distinctive capability is Zara’s focus on opening new stores rather than on marketing. Compared with H&M, it does not spend much of its budget on marketing (Xuejie et al., 2019; Wang, 2018).

Such attitude made Zara popular and the most innovative retailer in the world. Focusing on operational deals rather than promotion may lead the business structure to increase its valuation (Johnson et al.,2020; Camillus, 2008). The second distinction is its quick response to recent fashion trends. Compared to H&M, Zara is more fashionable as they are responsive to fashion trends and produce clothes every season (Xuejie et al., 2019; Segran, 2019). Indeed, the company is based on the principle of “medium quality fashion clothing at affordable prices,” allowing people to be trendy without spending too much (Women’s clothes, n.d.). This increases brand loyalty, as customers are ensured that they may rely on the brand.

The third distinction is the great use of information and communication technology. Zara tracks customer preferences year-round, ensuring that they know what customers look for (Koivulehto, 2017; Seo & Suh, 2019). The company recruits designers from fashion schools to produce seasonal clothes. It also hires IT specialists to use applications that help monitor trends better (Mayrhofer & Roederer, 2016). A fresh look and careful monitoring of customer needs contribute to the company’s success.

Three distinct capabilities of Zara enhance its brand image and brand loyalty, thus increasing its position in the market. They allow Zara to gain a competitive advantage over other brands in the segment, including H&M. For example, the benefits of H&M are long-term and short-term planning strategy, which allows the company to prepare 80% of the new collection in advance and adjust 20% according to the latest trends (Manrique, 2015).

In addition, the resource-based view demonstrates that both companies have features that bring them a long-term sustainable competitive advantage. Zara has a strong fashion brand and high-quality service that attracts customers and technology to track trends and needs. H&M loses in these areas, but the company has the technology and reliable relationships with suppliers and distributors, which gives it a lower cost of production (Manrique, 2015). Thus, both companies are strong competitors, although brand and trendiness may be a more significant advantage of Zara.

Reference List

Camillus, J.C. (2008) ‘Strategy as a wicked problem’, Harvard Business Review, pp. 99-106.

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Johnson, G. et al. (2020) Fundamentals of Strategy. 5th edn. Harlow: Pearson

Koivulehto, E. I. (2017) Do social media marketing activities enhance customer equity? A case study of fast-fashion brand Zara. Bachelor’s Thesis. Aalto University. Web.

Manrique, C. (2015) ‘H&M: how fast fashion translates into low prices and success’, Harvard Business School. Web.

Mayrhofer, U. & Roederer, C. (2016). Zara: The international success of fast-moving fashion. HAL.

Segran, E. (2019). H & M, Zara, and other fashion brands are tricking shoppers with vague sustainability claims. Fast Company, 8.

Seo, K., and Suh, S. (2019) ‘A study on the characteristics and social values of vegan fashion in H&M and Zara’, Journal of Fashion Business, 23(6), pp. 86-100.

Wang, Y. (2018). An exploratory study of brand strategy in fast fashion brand– using Zara as an example. Proceedings of 3rd International Conference on Contemporary Education, Social Sciences and Humanities , pp. 648-651.

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Xuejie, C., Chang, Q., and GuangHao, Z. (2019). Research on innovation supply chain management in fast fashion industry—A comparative analysis of ZARA and H&M. Proceedings of the 3rd International Conference on Education, Culture and Social Development, pp. 29-30.

Women’s clothes. (n.d.). Zara. Web.