Zara Business Analysis Fundamental business philosophy of Zara The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly. Thus, the main business tactics of the company in context of this business philosophy is ; [ Short lead time ] More fashionable clothes and embracing quick changing customer's tastes [Decentralized Management] Taking advantage of the intelligence and trust the judgment of employees [Lower quantities] Inventory will be formidable burden in perishable products [More styles] Providing more choices for customers and more chances of hitting it right. < Zara's Business Concept > Fashion at Low Cost Low Cost Fashion Reduce Creative Design ( Copy of leading styles ) Define a fast response process Optimize the process ( lean organization) Advertising only for new arrivals No discounted sales Specialized network for production Interdependent between design and product team Low product complexity : 3 types, size and colors More choices ( approximately 11,000 new items in a year) No classics ( Design for clothes to be worn 10 times ) The principles for Zara's business operation Based on the business strategy and tactics, Zara has been trying to optimize its business operation largely in three cyclical processes ordering, fulfillment, and design and manufacturing. Much of the process are standardized and simplified under the excellent control and employee's intuitive decision making latitude. In short, the principle of Zara's business operation is optimization of all business process and get rids of all redundancies and unnecessary things. More extended or peripherals of the principles can be summarized as follow; Keeping up with fashion ; short lead time and quick response to the market Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales Ownership and control of production ; vertically integrated manufacturing operation to enable its constant introducing of new items and also ensure short lead time
More proficient item and logistics by needing to put a decent arrangement of time and exertion into reducing so as to make the production and logistics more effective the quantity of creation stages, expanding efficiency, diminishing stock levels and expanding conveyance
Organizational changes that reduce cost. The M&S reduced its management levels to reduce the cost.
2) How specifically do the distinctive features of Zara’s business model affect its operating economics? Specifically, compare Zara with an average retailer with similar posted prices. In convenient to assume that on average, retail selling prices are about twice as high as manufacturers’ selling prices.
Zara is a famous Spanish apparel retailer based in Arteixo Galicia that provides product lines for women, men, and children. They are a high fashion retail that has a fast changing product lines. Zara is now represented in over 30 markets worldwide and operates over 500 stores. Zara has been operating under Inditex that was founded by Amancio Ortega in 1975. Inditex has been a global specialty retailer and has six apparel retailing chains including Zara. The six different chains include Zara, Massimo, Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho. In 2001, Inditex has generated a net income of 340 million Euros. Currently, Zara is the largest and most international retailer in Inditex’s chains. Zara mission was to always to provide fast and affordable fashion apparel for customers. Since the fashion industry is rapidly changing over the seasons, Zara wanted to provide customers with attracting design.
In the textbook, “International Retailing” by Brenda Sternquist, the company focus on the company Zara, shows the company overview from the beginning when the brand started in Spain. The study describes the company’s international expansion, business systems, production, and distribution within the U.S. markets. Zara is part of a parent company called, Inditex Group which is centralized in Spain. At first, Zara started as a lingerie company and quickly expanded into three sectors of fashion as a women’s, men’s and children’s fashion brand. Zara takes pride in their private label, which keeps their brand image high and keeps advertisement costs low, which also drive their company profit margin. They also depend on the fast turn around in the products to keep their stores efficient and exclusive. Zara’s turn around time, a total of three weeks, keeps their customers motivated to shop in their stores often to get the trendiest and newest fashions. They have limited new items on their shelves and sell out within two days, which create exclusivity to customers and low amounts of markdowns or discounts on their items. Zara keeps a centralized distribution system and make about 10,000 items per year. Zara’s international expansion began in 1988 when they first opened a store in Portugal and used a strategy of expanding one store per country each year. During expansion, Zara really focused on opening flagship stores in major cities before expanding into nearby and smaller cities. All Zara stores in Spain are wholly owned stores, but the company has also incorporated joint ventures and franchises in specific countries such as Russia and China for parts of their expansion to enter markets. Currently, Zara is in 60 countries with ...
b) Zara can focus on expanding and increasing the number of outlets in Asian countries such as China and India. The scope of development is very high and the demand for fashionable clothes is increasing at a very fast rate. But it will have to focus on other local competitors who provides the latest fashion at a cheaper rate. As Zara is a known brand, so it would be easy to increase awareness among the consumers through advertisement, promotions and celeb endorsements.
Crafting a sound competitive strategy is fundamental to running a business. This statement is simple to write but a complex undertaking in practice. Competitive strategy is the mechanism used by organizations to create value for customers and gain an advantage over competitors. The organization gains a competitive advantage through activities that encompass designing, producing, marketing and supporting products2etc. The business strategies organize these activities to create a synergistic effect that maximize value for customers.
2.4 Segmentation: Some of the important bases for segmenting consumer markets are Demographic, Geographic, benefits, Psychographic and Usage rate segmentation. Geographic segmentation is the priority of Zara. It is a global brand and its supply chain management is very much perfect. It helps Zara in getting the latest trends into stores in three weeks’ time, based on consumer preferences. It’s a Spanish brand, so it would be a better option for Zara to open more stores in European countries.
In order for a retail company, like Zara to produce good sales results it is dependent on the level of stock on hand. If Zara has too much inventory in a given store it can slow the stores cash flow as well as reduce profit due to markdowns. Therefore, excellent inventory control is of high importance to Zara in order to realize sales targets. Studying the open-to-buy has allowed me to realize it’s tremendous importance as well as usefulness for a buyer. As one of the two major tools of merchandise planning, the open-to-buy plan is used by many retailers today as an inventory management tool, in order to determine the quantity of inventory that needs to be bought. This is generally done on a monthly basis in order to reach revenue projections.
In the case, Marks & Spencer and Zara, it discusses two business process designs that each company took. You first had Marks & Spencer, who had a more traditional approach. Their chain started of with the buying team, design, developers, merchandisers, technologist, suppliers, logistics, and lastly the store. Zara, however, comes up with a new innovative design. With this new design in effect the delivery of new collections only has a lead-time of 5 days. They were able to cut down this time due to the fact that products where mainly produced on Galicia.
Zara’s business model can be broken down into three basic components: concept, capabilities, and value drivers. Zara’s fundamental concept is to maintain design, production, and distribution processes that will enable Zara to respond quickly to shifts in consumer demands. José María Castellano, CEO of Inditex stated that "the fashion world is in constant flux and is driven not by supply but by customer demand. We need to give consumers what they want, and if I go to South America or Asia to make clothes, I simply can't move fast enough." This highlights the importance of this quick response time to Zara’s operations.
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
Fashion is a word that can mean many different things. To some it means what models wear on the runway. To others, fashion means the clothing styles that people wear on a daily basis. A good place to start this discussion would be to define what Fast Fashion is; it is the rapid conversion of design trends into multi-channel volume.
Some of them are, rapid response, it is concerned with a firm’s ability to satisfy customer service requirements. The objective is to reduce inventory deployment to the lowest level consistent with customer service goal. Lastly, transport also plays a very important role to achieve the objectives, it is related to the type of product, size of shipment and distance. Moreover, all these objectives plays a very important role to manage the business of franchising and to achieve its producers goal also customers satisfaction. (Refer figure 1.9)
In this report we want to know how process in manufacturing is done, what they consider in this manufacturing process and different organizations in production process.