How Zara Uses BCG Matrix to Manage Its Product Portfolio
Zara is one of the most successful fashion brands in the world, with more than 7,000 outlets in 86 countries. Zara is known for its fast fashion, offering trendy and affordable clothing and accessories that cater to different customer segments. But how does Zara manage its product portfolio and decide which products to invest in, maintain, or divest? One of the tools that Zara uses is the BCG matrix.
The BCG matrix is a strategic management tool that was created by the Boston Consulting Group, which helps in analysing the position of a strategic business unit (SBU) and the potential it has to offer. The matrix consists of four quadrants that are based on two dimensions: market growth and relative market share. The four quadrants are:
Stars: SBUs with high market growth and high relative market share. These are the products that generate high revenues and profits, but also require high investments to maintain their position. Stars have the potential to become cash cows in the future.
Cash cows: SBUs with low market growth but high relative market share. These are the products that generate steady cash flows with low investments. Cash cows are the main source of income for the company and should be protected from competitors.
Question marks: SBUs with high market growth but low relative market share. These are the products that have uncertain prospects and require careful analysis. Question marks may become stars or dogs depending on their performance and the market conditions.
Dogs: SBUs with low market growth and low relative market share. These are the products that have low revenues and profits, and may even incur losses. Dogs should be divested or discontinued as they consume resources without generating returns.
By using the BCG matrix, Zara can evaluate its product portfolio and allocate resources accordingly. Here is an example of how Zara's products can be classified into the four quadrants:
Stars: Fashion denim, Fashion jersey, Unique collection of bags and accessories, Zara TRF, Zara Man
Zara's stars are the products that have high demand and popularity among customers, as well as high market share compared to competitors. Zara should invest in these products to maintain their leadership position and increase their profitability. Zara can use strategies such as product development, market penetration, market development, and horizontal integration to grow its stars.
Zara's cash cows are the products that have loyal customers and strong brand recognition, as well as low competition. Zara should invest in these products to sustain their market share and cash flow. Zara can use strategies such as vertical integration, differentiation, cost leadership, and customer loyalty programs to protect its cash cows.
Zara's question marks are the products that have potential for growth but also face high competition and uncertainty. Zara should analyse these products carefully and decide whether to invest in them or divest them. Zara can use strategies such as niche marketing, innovation, diversification, and strategic alliances to improve its question marks.
Zara's dogs are the products that have low performance and low prospects. Zara does not have any dogs in its product portfolio currently, but it should monitor its products regularly and eliminate any dogs that may emerge. Zara can use strategies such as harvesting, divestment, liquidation, or turnaround to deal with its dogs.
The BCG matrix is a useful tool for Zara to manage its product portfolio and achieve its strategic objectives. By using the BCG matrix, Zara can identify its strengths and weaknesses, opportunities and threats, and competitive advantages and disadvantages. The BCG matrix can also help Zara to align its products with its target markets and customer segments. 061ffe29dd