· Differential strategy consists in offer exclusives products.
· Cost Leadership Strategy achieved having the lowest prices in target market segment. This strategy is only viable for large firms with huge production of volumes and a big market share.
A good example could be Lefties, from Inditex’s brand, which was created in order to fight with low cost brands. Lefties consists in a clothing brand which offers products to customers from Zara’s previous season. However, they also have their own exclusive pieces.
At the present time the economic crisis has caused not only a 5% decrease on Inditex sales but also a fast growing in low cost brands as Primark or H&M. Whilst Zara’s shops are fading, the openings of Lefties’ shops are frequently. Nowadays, there are 86 shops in Spain and 16 in Portugal.
Besides this, on the last months the locations of these shops have been redesigned. Fortunately, they are not untidy and gloomy shops as many years ago. These days, it comes as enticing shops situated in malls. This is also an important factor because sales in these centers have suffered a drastic descent since 2007. The opening of low cost stores like Lefties causes an increment of affluence on these shopping centers.
Therefore Inditex is willing to expand this brand in order to achieve their objectives and to be a fashion leader in the market. For that reason it is necessary to adapt it supply at the demand and to reduce their prices for beating brands like Primark (their main competitor). As a result, they increase their sales, in order to keep their quality but with lower prices.
To conclude, a cost leadership strategy has the disadvantage in losing customers because of the reputation from poor quality, but if they accomplish that people associated their low cost brand to the current one, as a substitute, is available. Indeed, it suppose the success for Inditex in the current market.
At the present time the economic crisis has caused not only a 5% decrease on Inditex sales but also a fast growing in low cost brands as Primark or H&M. Whilst Zara’s shops are fading, the openings of Lefties’ shops are frequently. Nowadays, there are 86 shops in Spain and 16 in Portugal.
Besides this, on the last months the locations of these shops have been redesigned. Fortunately, they are not untidy and gloomy shops as many years ago. These days, it comes as enticing shops situated in malls. This is also an important factor because sales in these centers have suffered a drastic descent since 2007. The opening of low cost stores like Lefties causes an increment of affluence on these shopping centers.
Therefore Inditex is willing to expand this brand in order to achieve their objectives and to be a fashion leader in the market. For that reason it is necessary to adapt it supply at the demand and to reduce their prices for beating brands like Primark (their main competitor). As a result, they increase their sales, in order to keep their quality but with lower prices.
To conclude, a cost leadership strategy has the disadvantage in losing customers because of the reputation from poor quality, but if they accomplish that people associated their low cost brand to the current one, as a substitute, is available. Indeed, it suppose the success for Inditex in the current market.
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