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BSBMKG507 Interpret Market Trends and Development

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Details of Subject

Qualification

BSB52415 Diploma of Marketing and Communication

Subject Name

Marketing Trends

Details of Unit(s) of competency

Unit Code

BSBMKG501 Identify and evaluate marketing opportunities

BSBMKG507 Interpret market trends and development

BACKGROUND INFORMATION

Zara is a Spanish clothing and accessories retailer based in Arteixo, Galicia. The company was founded in 1975 by Amancio Ortega and Rosalia Mera. It is the main brand of the Inditex group, the world’s largest apparel retailer. The formula for Zara is simple: latest catwalk trends reproduced, plus new stock delivered to stores in fewer than 15 days, plus giggle-inducing prices.

INSTRUCTION TO LEARNERS

Learners must read the Zara Case Study available in eLearning to understand the business model and company’s marketing strategies.

Learners are to complete this workbook which is composed of 4 activities. To answer the activities, learners must apply to Zara the marketing concepts and principles that were discussed in class lectures. This is an individual assessment.

Workbook Activity 1 (10 marks)

Instructions: Write answers to the 2 questions of Activity 1. This activity is to be completed in class and is due Week 3.

1. Provide and explain the possible growth strategies for Zara using the Ansoff Product Matrix. Rank these marketing opportunities from 1 to 4, 1 being the most viable and most likely to contribute to the business and 4 being the least viable and least likely to contribute to the business. (8 marks)

1. Market development.

Expand the market by opening stores in several countries, as they are already doing. Develop different customer segments and increase the number of consumers.

2. Market penetration.

Zara could be more aggressive in marketing and promotion techniques to penetrate products in existing markets.

3. Product development.

Zara could develop the brand by designing new products for its public to increase sales and attract a new group of consumers

4. Diversification.

This is a risk strategy and would mean expanding the Zara brand by creating new products in new markets.


2. What does Zara take into consideration when researching for a potential new market or opening up a new store? List 2 and explain. (2 marks)

  1. Market Size: This involves population size and market density
  2. Consumer Profile: If the Zara product attracts the consumer to this new market and if it is affordable for their purchasing power.

Workbook Activity 2 (10 marks)

Instructions: Write answers to the 4 questions of Activity 2. This activity is to be completed in class and is due Week 4.

3. Evaluate each of the growth strategies you answered on Question 1 and determine the impact of each of these opportunities to Zara’s customers. (4 marks)

Market development.

This will benefit customers as it will make products more accessible on the world market.

Market penetration.

This will make the brand more known by potential customers in the world market. In addition, if promotion techniques are successful, the desire for Zara products will be enhanced by the ease of adherence.

Product development.

This will allow the brand to penetrate even more into the aspects of customers' lives, at all times (daily fashion, gymnastics, pajamas, home, etc).

Diversification.

This will make Zara an innovative and creative brand, taking the zara apart from fashionable clothing. This is very risky, but if successful, you can gradually

4. Identify and explain 2 external factors that may affect Zara’s growth strategies. (2 marks)

Economy: The economic situation of the country is extremely significant, since a country with a weak (or decreasing) economy makes purchasing power smaller, with inactive consumers.

Labor laws: The new labor rules make the worker more expensive, increasing the value of the product, or decreasing the profit margin of the company.

5. Identify and explain 2 operating costs of Zara. (2 marks)

  1. All work - from factory workers to managers to employees in stores. All of them need to receive a salary and receive at least minimum wage or above.
  2. Rental of shops around the world - Zara is always in prime locations and best known shopping centers in the world and has to pay rent for its prime location, which has a cost.

6. Identify and explain 2 business risks of Zara. (2 marks)

In economically unstable countries, Zara runs the risk of having insufficient sales, causing profits to diminish or, in the worst case, to generate losses.

Another risk is the issue of legislative compliance. If the new legislation is implemented, Zara risks not meeting the requirements. For example, if labor costs increase, Zara may need to raise the price of products, thus making them less accessible to the end consumer.

Workbook Activity 3 (10 marks)

Instructions: Write answers to the 4 questions of Activity 3. This activity is to be completed in class and is due Week 5.

7. Research two current and/or potential competitors of Zara in the Australian market. Briefly describe these companies. (2 marks)

H & M

This is your main competitor in terms of prices. However, the products do not maintain a unique quality standard.

Forever 21

The brand is new in the Australian market, but very famous worldwide for the low price. They do not work with unique clothing and sizes are not standardized for each market.

8. In 2017, Zara’s fixed costs in Westfield Sydney Central Plaza amount to $80,000* and variable costs per unit sold is $10*. Selling price per unit is $50*. How many units must be sold for Zara to break even? (1 mark)

*Figures are fictitious and for assessment purposes only.

Break even = 80000 / (50 – 10)

= 2000 units must be sold for Zara to break even.

9. Below is a table of Zara’s yearly sales. Use 2 period and 3 period moving average forecasting technique to forecast 2017 sales. Also, compute for mean absolute difference. Show your solution. (4 marks)

Year

Sales (in Millions)

2 Period

Error

3 Period

Error

2011*

214

2012*

222

2013*

217

2014*

221

2015

222

2016

256

2017

*Figures are fictitious and for assessment purposes only. 2015 and 2016 are actual figures.

Period 2 error: 2015 + 2016 / 2 = 2017 … 222 + 256 / 2 = 239

period 3 error: 2014+2015 + 2016 / 3 = 2017 … 221 + 222 + 256 = 233

mean absolute difference:

Mean of the data set: 225.3

mean of absolute difference = 0,03

10. Using the table of Zara’s yearly sales on Question 9, identify the following measures of central tendency:

  1. the mean 3 (1 mark)
  2. the median 5 (1 mark)
  3. the mode 222 (1 mark)

Workbook Activity 4 (10 marks)

Instructions: Write answers to the 3 questions of Activity 4. This activity has a remote observation requirement that has to be done outside class time. This activity is due Week 6.

11. Visit your favourite clothing retail shop and visit Zara’s retail store in Westfield Sydney Central Plaza, Pitt St. Perform a qualitative analysis on the business aspects provided on table below. Describe each aspect and identify which retail shop did better. (6 marks)

Business Aspect

Zara

H&M

Latest Products

Modern products and according to the latest trends.

The quality of the clothes have a unique pattern for all products.

Modern products and according to the latest trends.

The quality of products are different between products. (some better and others with poor quality)

Location

Located in the shopping center, in one of the main entrances (visibility of the street). Large store with 2 floors.

Located in the shopping center, inside the establishment. (without window in the street). Large store, also with 2 floors.

Retail Layout

The store is well laid out, highlighting a few items right at the entrance.

The departments are well divided by sectors (jeans, clothing, intimate, accessories, etc.)

Very clean and well organized shop, with routine maintenance, preventing products from being scattered in the wrong sector.

The store is also well laid out, highlighting a few items right at the entrance. departments are also divided by sectors.

Lacking organization, many items were placed randomly in the store's shelves. The products were difficult to locate in terms of colors and sizes.

12. From your qualitative analysis on Question 11, identify and explain 2 potential opportunities for Zara. (2 marks)

The location is a good opportunity for Zara as it is very visible to all who enter and even outside the shopping center. This is strategic and common for the brand stores around the world.

The quality of the products stand out and hold the price, which is a little high amis. Consumers like this and this is an opportunity for Zara to maintain and grow its customer base.

13. From your qualitative analysis on Question 11, identify and explain 2 threats for Zara. (2 marks)

A threat to Zara is that there are stores that offer cheaper prices for very similar products. New consumers tend to opt for the cheapest.

Another threat includes consumers who do not price as a purchase decision. These conumidores look for brand and quality. There are also shops that are not as competitive in terms of prices but have a lot of shops with the quality of clothing differentiated in this locality.

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