Fashion is an integral part of the culture in Spain. This is the home to famous designers, prestigious international fashion labels and some of the most famous models. Zara is one the most famous clothing brand in Spain; when people think and talk about Spanish fashion, Zara always comes to mind. They are a clothing line that belongs to Inditex, one of the largest distributions groups. They are known for delivering fast fashion at affordable prices to low cost countries; always trying to meet the needs of the customers but at the same time trying to share the passion for fashion across the world and help people express their taste and sense of style. But first, before emerging into the Zara Fashion world, lets talk a little about the place it all started: Spain.
Spain officially known, as the Kingdom of Spain is a democracy organized in the form of a parliamentary government under a constitutional monarchy. That is, “a social, representative, democratic, constitutional monarchy in which the monarch is the head of the state and the prime minister is the head of the government”. The King, who serves as the monarch, is in charge of ratifying laws, dissolving the legislature and proposing candidates for the office of prime minister. The monarch is also known as the head of the state and the head of the armed forces, but it has not executive role, his power is more symbolic that actual. He is more in charge of representing Spain in international relations. This is a hereditary position; both male and female can be heirs, but only if the monarch has no sons. The King Juan Carlos I has held the position since November 22, 1975 and the apparent heir is Prince Felipe, Prince of Asturias.
The prime minister, know as “the president”, serve...
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Contrary to must companies, Zara delivers new products twice a week to all their companies around the world. The made this possible because they control manufacturing closer than must companies, they act as both the supplier and the retailer. Instead of outsourcing to Asia or countries that production is cheaper, they have 14 highly automated Spain factories that create the foundation of their products. Then, these unfinished products are sent to their more than 300 small network partners in Portugal and Galicia to handle the rest of the process. By, not outsourcing the have the benefit of making any changes to their products depending on customer’s preferences; they have the ability to react quickly, designing new styles and getting them to the stores while the trend is still peaking. So it can be said, that supply chain management is the key to Zara success.
Monarchy is a method where a single person oversees the government. This head of state reigns within bounds of a constitution but still creates a single entity with extreme power. Personal beliefs often override best practices.
La Movida began when Dictator Francisco Franco died in Madrid on November 19th, 1975. Franco’s 36-year reign had been one in which rigid public and church laws preserved the traditional role of family, enforced formal relations between the sexes, and controlled expression in the press and media. Eager to distance themselves from Franco’s repression and censorship, Spain quickly began the move to democracy called the “Transition”. King Juan Carlos I helped the transition by quickly naming Adolfo Suárez Prime Minister. Spain’s first democratic vote in over 40 years took place in 1977, and a new constitution was signed in 1978. That constitution is still in place now. In 1979, Enrique Tierno Galván became the mayor of Madrid, the capital of Spain. In this position he had a lot of power to help or hinder La Movida. His choices helped Spain to move past its repressive past. Then, in 1982 the Socialist PSOE party, headed by Felipe González, was voted in by a landslide and became Spain’s first leftist government since the 1930s.
Zara sources fabric, other inputs, and finished products from external suppliers. It has purchasing offices in Barcelona and Hong Kong. This gives Zara a competitive advantage towards the costs of goods sold, as it can purchase from both Europe and Asia according to prices. Buying more from China in the future might reduce even more the costs of goods sold.
Analysis & Recommendation: Zara’s main strategy is the ability to respond very quickly to the demands of target customers which called for identifying trends of the customer in advance. The company has been able to identify the trends and meet the demand with the help of its autonomously organized structure and its effective value chain systems. The present system followed by Zara has been very effective and very easy to maintain, which as a result has persuaded the company to continue without any change in the present system so far. The problem that Zara faces right now is that the system that they use, P-O-S (Point of Sale terminals), runs on DOS which Microsoft does not support anymore and any hardware change in the POS terminal will not be compatible with the current POS software. Although the sense of urgency for the change may not be that high, investing in IT infrastructure is a must as MS Dos is an obsolete technology and there is no contract or guarantee from their POS terminal vendor that they will continue supplying the same terminal with out much changes in the hardware for any specific period of time, therefore change is unavoidable. The other main issue that Zara faces is that the stores don’t share inventory information electronically and hence inventory management becomes highly difficult and manual. The decision making process is based on the judgment of employees throughout the company instead of relying on a small set of decision makers; the majority of the decisions were made by store managers and as a result they placed orders for the items rather than simply accepting and displaying what headquarters decided to send them.
The organization has had to ensure that it has retail stores in many countries globally and website options in more than 100 countries. The company further enhances access of online stores in more than 37 countries which is accessible all the time and people are able to access the services regardless of their location. Globalization further affects the organization in the sense of international market management which requires it to engage in strictly global decision making. The organization’s production networks have been geared to enhancing global competition (Lüsted, 2012) .The Company is further good when it comes to seizing the opportunities available in global market. For the organization to find efficient as well as cheap means of production, it has to bargain hard so as to allow its contractors to have low profits. This mostly is consequential to the suppliers cutting corners with the use of cheap
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.
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.
The Spaniard civilization can date all the way back to the Stone Age. Because of its agricultural wealth, Spain was acknowledged to have
H&M is the world’s second largest retailer, only behind its main rival Zara of Inditex (Petro, 2012). The company currently has 3006 stores in 53 countries. The company does not own any factories. H&M outsources production to network of 800 independent suppliers; 75% in Asia and 25% in Europe. In order to increase the efficiency and productivity of its supply chain, the company strategically locates its network of 20 to 30 production offices close to its suppliers. According to Stockholm Newsroom, the pretax profit of the company for the month of June to August of 2013 is $907 million, which indicates an 11 rise in turnover (Pollard, 2013). The company continuous development plan facilitates its goal for both brick and mortar, and online stores expansion worldwide. The target segments for H&M, a category specialist store, are trendsetters and fashion/money conscious males and females ranging from 16 to 40 years old with income ranging $15,000 to $60,000 annually.
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.
The business model that sets Zara apart from other clothing retailers is how rapidly the company changes stocks and releases new product lineups. The company averages 12-16 collections annually which equates to more than one lineup a month. Due to stock being limited and the rapid production Zara brings forth, their items are viewed as exclusive promoting further business. Their customers are happy knowing that their specific article of clothing is more “rare” due to only having an average of a two-week window to purchase the clothing. The company specifically targets current trends and has them in the store within 30 days. This maintains the brand’s uniqueness and relativity in fashion.
This paper describes the various aspects of the Zappos case. The objective is to evaluate the depth analysis of the Zappos strategy. It enables to determine the Zappos strategy, business model & marketing strategy, and smartness of the Zappos acquisition.
store managers and frontline personnel, play a critical role in the context of Zara’s business model. Using customised PDAs, store managers constantly communicate customer feedback, either hard data such as orders and sales trends or soft data like customer reactions to a new style or the “buzz” around a new design, to Zara’s HQ where the feedback is used by designers to quickly develop new garments based on customers’ wishes (Ferdows et al., 2004). Frontline employees assist their superiors in collecting the feedback. Zara’s store managers and shop assistants thus close the communication loop between shoppers and Zara’s HQ (Ferdows et al., 2004) and therefore contribute hugely to Zara being able to first understand what customers like and then design and produce it (Buck, 2014). Accounting for their key role, Zara pays store managers an above-average salary and up to 100% of their salary in bonuses if they hit sales targets (Ruddick,
The supply chain constitutes the processes, which goods or services go through to reach the end user, including the design, manufacture, and delivery stages (Buxmann et al. 2004). Therefore, it encompasses suppliers, manufacturers, transporters, warehouses, wholesalers, retailers, and customers. According to Datta et al. (2008), all businesses and companies are part of one or more supply chains and depend on them to thrive. Nowadays, most companies want to understand the supply chain concept and the specific roles they should play in it (Ertek & Eryılmaz 2008). Their main objective is to participate in profitable chains to gain a competitive advantage over their competitors.