Sample Essay

Zara follows a market-based pricing strategy which determines the target prices that the buyer is willing to pay. The budget for the cost of the material, production and suppliers is fixed according to the target price and the profit margin that the management department wants to achieve with that item (Caso Zara: el tejido internacional, 1996)(Mazaira, 2003).Over the past 30 years, Inditex has built a brand portfolio through brand acquisition and developed its brands using a multi-brand and an extension strategy. In line with the multi-brand strategy `Zara´ was created in 1975, and an extension strategy was applied to `Zara Home´. Inditex used the name of the existing brand `Zara´ to take advantage of the transfer of associations between the flagship product and the extended one, `Zara Home´. This allowed Inditex to target at different segments more effectively. However, the cost of maintaining several brands and the hazard of cannibalization are the major drawbacks of this strategy. Inditex has tackled cannibalization by differentiating the brands mainly through the product, target market, presentation and retail image (Zara. El modelo de negocio de Inditex, Claves de gestion, 2004).

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