Question 1 – Zara’s Business Model and Competitive Analysis Zara, the most profitable brand of Inditex SA, the Spanish clothing retail group, opened its first store in 1975 in La Coruña, Spain; a city which eventually became the central headquarters for Zara’s global operations. Since then they have expanded operations into 45 countries with 531 stores located in the most important shopping districts of more than 400 cities in Europe, the Americas, Asia and Africa. Throughout this expansion Zara has remained focused on its core fashion philosophy that creativity and quality design together with a rapid response to market demands will yield profitable results. In order to realized these results Zara developed a business model that incorporated the following three goals for operations: develop a system the requires short lead times, decrease quantities produced to decrease inventory risk, and increase the number of available styles and/or choice. These goals helped to formulate a unique value proposition: to combine moderate prices with the ability to offer new clothing styles faster than its competitors. These three goals helped to shape Zara’s current business model. Zara’s Business Model 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. Capabilities of Zara, or the required resources needed to exploit the opportunities and execute this conceptual strategy, are numerous for Zara. Zara maintains tight control over their production processes keeping design and manufacturing in-house or with some strategic partnerships located nearby Headquarters. Currently, Zara maintains 80% of its production processes in Europe, 50% in Spain which is very close to La Coruña headquarters. They have strategic agreements with local manufacturers that ensure timely delivery and service. Through these strategic partnerships and the benefits brought by this proximity of manufacturing and operational processes, Zara maintains the flexibility necessary to design and produce over 12000 new items annually. This capability allows Zara to achieve their strategy of expedited response to consumer demand.
Zappos is an online shoe and clothing store. The idea of an online shoe store originally came from Nick Swinmurn in the year 1999. He then pitched the idea to Alfred Lin and Zappos’ current CEO Tony Hsieh. Zappos quick rise to success is mostly attributed to their ten core values. These values vary from creating fun and weirdness to being humble. However, the root of this company’s success lies only on one important thing: their regard for customer service. They value the quality time spent with customers over the phone rather than the quantity of customers.
Competitive factors in fashion brands include quality, design, service, and price. In this case, there are a lot of apparel is competing with Stussy such as American Apparel, Superdry, Cyerdog and so on. Due to the intense competition of apparel industry, no one can guarantee the demand of products will be high all the time. Moreover, the development of new products needs cash flow for design, manufacturing and marketing. It is possible those costs are not covered due to the failure of products. So Stussy have to anticipate the possibility and make
Zappos currently offers a diverse product line. This product line has allowed them to develop a prestigious brand. Zappos can take advantage of their brand name by adding a new product, as brand extensions have become in increasingly popular strategy (Greifeneder, Bless, & Kuschmann, 2007). However, with this branding comes pressure when considering a new product. Pressure to deliver the new product to market that stands up to the consumers’ brand expectations.
4.6.1 New Products and Ranges Product innovation is a core component of Lovisa’s competitive advantage. Its customers expect a broad range of fashionable products that are in line with the latest global fashion trends. In order to meet this expectation, Lovisa employs a product team of more than 20 people who are responsible for Lovisa’s forward range planning, designs, product development, production, visual merchandising and merchandise planning, ensuring Lovisa is continually meeting market demand. While the product team is based in Melbourne, its team members travel the world to identify global trends. In addition, its product teams meet with suppliers in China, India, Thailand and other parts of Asia frequently.
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.
1a: Zara’s ability to manage some of the manufacturing in-house and distribute only what is absolutely necessary to outside manufacturers gives them a unique amount of flexibility and control over cost and quality. Their competitors are primarily outsourcing the production, so that control over price is lost.
Zara is a global fashion designing and manufacturing company that is the most productive market that has a great responding for customer demand in UK’s fashion industry. Amancio Ortega Gaona, the CEO of Inditex company of Spain, he began his work as an errand boy for a La Coruña shirtmaker in 1949. He has worked really hard in his way for the company, and later on Amancio Ortega Gaona was founded his own retail store with developing decisions and competitive advantage against many other competitors. In1963, he founded Confeccioneds Goa to manufacture p...
o establish whether there were differences in purchase intention for Zara factors between the respondents of different backgrounds, tests of variance were carried out using Student’s T-Test and Analysis of Variance (ANOVA). The results of comparison are presented in tables 4.9 – 4.20.
Problem Recognition is the first step in the consumer decision making purchase. When customer passes through this step, it moves to the second step which is known as information search. Zara focuses on this step. When customers starts collecting information to know about a particular brand or various alternatives available in the market. As per the customers of Zara, various factors can influence their decision to choose Zara. Some of the factors that can influence the decision of its customers are products, brand image and brand identity, coming up with new products every two to three weeks and ambience of Zara stores and outlets. The decision factors differs from a person to person are unique for every person. Zara has to focus on factors like brand image, brand identity, products, ambience of its stores, so that it can influence the consumer’s decision and attract more customers to choose Zara. (Vaxjo, K. 2011)
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.
In the modern world we live in, international business plays a key role in the functionality of countries resources and economy. The ease at which people can purchase goods from another country and the outsourcing of brands has now meant international barriers has been squashed and large corporations are more accessible than ever. In recent times, the huge and unbridled up rise of Multinational Corporation is the Famous Japanese clothing brand UNIQLO. UNIQLO's full name is UNIQUE CLOTHING WAREHOUSE, it is defined by the inner meaning of unnecessary decoration decorative abandoned warehouse type store, supermarket shopping using the self-service model, in order to provide a reasonable and credible customers want commodity prices. It is arguably Japan's most successful local fast fashion brand, began in the 1980s, developed in the 1990s. 1980s, Uniqlo focuses on the basic design of unisex casual wear, such as shirts, jeans, sweaters, etc., although these fashionable clothing, but do keep up with changes in fashion. Secondly, the introduction of Japan's first hypermarket style clothing sales, in the form of warehouse stores, with " reasonable and credible prices and large continuous supply, allows consumers one-stop shopping. The most important thing is moving the factory to cheaper places, lowering production cost, allowing prices for consumers to stay extremely low in comparison to other fashion outlets but at the same time staying at a high rate of quality. Through the unique product planning, development and sales system to store operations to achieve cost reduction, the shape of the Japanese consumer 's favorite leisure brand.
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.
283). Zappos has without a doubt developed long-term customer relationships that provide a competitive advantage in the purchase of shoes and other products. The company’s customer focused business model believes that developing long-term customer relationships is what is most important for its business (p. 452). Its customer focused approach has proven to be very successful for the company (p. 451). The way that Zappos serves customers and handles their issues is different from any other company in the industry (p. 453). Zappos’ business model and operating philosophy is described through its ten core values: Deliver WOW through service, embrace and drive change, create fund and a little weirdness, be adventurous, creative, and open-minded, pursue growth and learning, build open and honest relationships with communication, build a positive team and family spirit, do more with less, be passionate and determined, and be humble (Ferrell and Hartline, 2014, p. 452). These values create a framework that guide the company’s actions (p. 452). Zappos’ untraditional core values are demonstrated in the company’s commitment to the well-being and satisfaction of its customers (p. 452). The company puts its efforts into developing relationships with each of
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.
Zappos.com is a website that started off just selling shoes but now sells items such as handbags, clothing, and housewares in addition to shoes. Their company logo includes their catchy name with an explanation point as the end in the shape of shoe print which leads consumers to believe Zappos has strong feelings about the service they provide to their consumers. Zappos believe that customer service is the number one priority and is focused on cultivating repeat customers which is why they have always provided free shipping on both orders and returns; occasionally provides upgraded shipping so customers can receive their shoes the same day that they are ordered even though this is very expensive to the company; and they only show products on their website that they actually have in stock albeit they lose 25 percent of their potential business by doing so (Walker, 2009). For a compa...