...The case of Zara – The Postponement strategy I) Introduction In order to compete in the world of rising globalization and shortening of product life cycle nowadays, firms have to deal with the demand for increasing product variety to meet the diverse needs of customers. Mass customization has become a requirement for many businesses especially in the dynamic, fast-changing industries. However, the more product varieties, the more difficult it is to forecast demand, control inventory and manufacture. Therefore, some innovative companies have integrated “postponement” strategies with their supply chain operations to gain control of product variety proliferation. Zara is one of the most successful fast-fashion chains in the world, which is famous for its ability to keep itself up to date with fashion trends and the incredibly short time to introduce new products. In order to react quickly to fashion changes and consumer demand, Zara maintains extremely efficient supply chain operations. By properly designing the product structure and the manufacturing and supply chain process, Zara can delay the point in which the final products assume their specific characteristics, thus raising the flexibility to handle the changing demand for the multiple products. This is known as the “postponement” approach. In this paper, we will analyze how Zara achieves mass customization through “postponement”, with a particular focus on the supply chain structure, relationship and enabling activities...
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...ZARA - zara owned by inditex; posted net income eur340m on revs eur3.250m in 2001 - inditex ipo may 2001; oversubscribed; stock increased by over 50% - 76% of equity value implied stock price was based on future growth expectations (higher than an estimated 69% for WMT) - global apparel chain; buyer driven global chain - branded marketers and manufacturers served as brokers in linking overseas factories with markets - production; very fragmented (individual apparel firms on avg employed a few dozen ppl) - about 30% of apparel production was exported (developing countries had very large share, nearly 50% of all exports)...cheaper labor + inputs - proximity also important bc it reduced shipping costs - china was export powerhouse but greater regionalization in 90s led turkey, north africa, eastern euro countries to be major suppliers to US - MFA (multi fiber arrangement) regulated apparel and textile industry (restricted imports of US, canada, west europe since 1974); agreement to phase out quota system by 2005 and further reduce tariffs (avg 7-9% in major markets) - cross border intermediation; trading co's played primary role in orchestrating physical flows of apparel btwn exporters and importers - retail; large retail played leading role in promoting QR (quick response); targeted at improving coordination between retailing and manufacturing (increase speed and flexibility of responses to market shifts) - QR led to significant compression of cycle times enabled by...
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...Ready to wear market: Ready-to-wear or prêt-à-porter often abbreviated RTW; "off-the-rack" or "off-the-peg" in casual use) is the term for factory-made clothing, sold in finished condition, in standardized sizes, as distinct from made to measure or bespoke clothing tailored to a particular person's frame. Off the peg is sometimes used for items other than clothing such as handbags. Ready-to-wear has rather different connotations in the spheres of fashion and classic clothing. In the fashion industry, designers produce ready-to-wear clothing, intended to be worn without significant alteration because clothing made to standard sizes fits most people. They use standard patterns, factory equipment, and faster construction techniques to keep costs low, compared to a custom-sewn version of the same item. Some fashion houses and fashion designers produce mass-produced and industrially manufactured ready-to-wear lines but others offer garments that are not unique but are produced in limited numbers. The textile and apparel industry constitutes the largest global manufacturing employer with approximately 200 nations involved in production resulting in $313.5 billion in trade during 1996. Of this amount, $163.3 billion was derived from apparel, the tenth largest trade category in the world. The apparel industry comprises many small but interrelated firms. Making garments to sell as ready-to-wear is labor intensive but to initiate production requires less capital investment and less advanced...
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...inventory control, quality control, storage and logistics. A great deal of focus in operations is on efficiency and effectiveness of such a process. An example of successful operations strategy in the retail industry is the strategy employed by Zara which is discussed in this critique. Zara started as a single shop in La Coruna and then rapidly spread its wings to 68 countries; opening a store each day - one of the fastest global expansions the world has ever seen. Throughout the entire system of Zara’s business; designing, sourcing, manufacturing, distribution process and retailing come out a number of success factors: short cycle time, small batches per product, extensive variety of product every season and heavy investment in information and technology. This elements feature in every aspect of the business. 2. Introduction. Zara is the flagship brand of the Spanish fashion retail giant, Inditex, (Industrias de Deseno Texti S. A.) Founded in 1975 ; this super- heated performers in soft retail fashion market in recent years; is engaged in textile design, manufacturing and distribution .The group operates approximately 1500 stores .The company primarily operates in Europe, where about 80% of its sales are made with La Coruna , the city that saw its earlier operations, home of its central offices. Zara contributes about 2/3 of the company’s sales making it undoubtedly the firm’s growth engine. As other retailers like Marks and Spenser and Gap join...
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...SUPPLY CHAIN STRATEGY FOR ZARA FASHION Which is Zara's main competitive advantage? The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. That the company doesn’t outsources manufacturing to low-cost countries, it keeps huge swaths of its production in-house, enabling Zara to move faster to the style and fashion designs that the consumers are looking for, than its competitors. thethe main difference between the supply chain management and logistics from Zara and from it nearly competitors. Zara’s supply chain is high vertically integrated and keeps most of its operations, including production at the same country (Spain), probably facing more expensive manufacturing costs, but eliminating transportation costs and the time, energy and resources it involves. Some examples between Zara and its competitors are: ASPECT ZARA COMPETITORS The average time from idea to appearance in store * 15 days * 12 times faster than Gap Most of the products you see in stores didn't exist three weeks earlier, not even as sketches Once or twice a season H&M takes three to five months to go from creation to delivery Other retailers need an average of six months to design a new collection and then another three months to manufacture it Inventory Number of Designs 12 Inventory turnover / Year 12,000 Designs Others between 3-4 times Others Averages :4000-6000 An effective supply chain mainly consists in making information flow and...
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...Case 1: Zara, H&M, Benetton Supply Chain Strategies | Executive Summary The performance of many organizations is highly dependent on utilizing the correct supply chain model. This report focuses on the analysis of the supply chains of three clothing companies: Zara, Hennes & Mauritz (H&M), and Benetton. The analysis was focused on three aspects. First, the supply chain models of the three retailers were compared and contrasted and there was an evaluation whether each of the retailers has the right supply chains for the type of products they offer. Second, the analysis highlighted how the supply chain architecture of the three companies impacts the management of inventory, information, and capacity. Finally, the analysis also included some research on how the supply chain strategies of these retailers have changed in recent times and its impacts on their relative competitive advantage. Based on the analysis, several recommendations around strategic and process improvement were provided for Zara, H&M, and Benetton. The recommendations are further supported by an implementation plan as well as an overall assessment of the risks that the retailers face. Sources of analysis include the two Harvard Business Review Articles “What is the Right Supply Chain for Your Product” and “Rapid-Fire Fulfillment”. The analysis also utilized several research reports from DataMonitor. Analysis Zara, H&M, and Benetton are all clothing retailers that focus on fashion...
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...Identify the corporate strategy of the clothing retailer ZARA and discuss how the five operations performance objectives support Zara’s corporate strategy. In addition explain the external benefits of these five objectives. Zara is the clothing retailer the best known as a brand of Spanish holding group Inditex (Industrias de Diseno Textil). First Zara store was opened in 1975,in Spain by Inditex father and founder Amancio Ortegas Gaona. It was first step and strong foundation to his success. Zara became most successful brand in fashion industry and it keeps growing and expanding constantly. There are 1721 Zara stores in 87 countries all over the world. All offer great catwalk fashion clothes for reasonable prices. The triumph of this brand has his root in the business corporate strategy which Inditex group applied and based all operation within a company. ‘Corporate strategy concerns all units of the business, covers its business philosophy and ideology, including a basic set of guidelines regarding its business. This guidelines my take into consideration industries and technologies, product and services, raw materials and employee’s skills , countries and geographical locations, market and customers, quality and prices , margins and value –added profits and cash flow, volume and sizes , governmental regulations and export opportunities, or any operationalization of the corporate vision. (Eli Segev, p4 ) Zara’s strategy represent blend of Old Economy and NewTone...
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...2 Discussion 3 Products and Services 3 SWOT Analysis 3 Competitive Analysis 4 Competitive Advantages 5 Sustainability 5 Recommendations 5 New Product/Service 5 Marketing Strategy 6 Conclusion 7 References 8 Introduction This report is mainly focusing on studies of marketing strategy. By analyzing and discussing the case of Zara, we will be able to have a more in depth analysis of companies and their marketing strategies. In the background section, basic knowledge of marketing strategy will be introduced. In the discussion section, an analysis of Zara’s existing product and service will be listed and an S.W.O.T. analysis is done to figure out the company’s current situation and position in the marketplace. In the recommendation section, a new product/service will be recommended to augment Zara’s brand. Also a marketing strategy will be suggested to improve Zara’s business. Background Firstly, some commonly used terms and their definitions will be introduced in this report in order to provide some basic knowledge and understandings of the principles and studies about marketing strategy planning. SWOT Analysis: This is a strategic planning method which used to evaluate the strength, weakness, opportunities and threats of an organization involved in a certain business. (Friend, Graham. 2009) Competitive Analysis: This is an analysis of the...
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...PAPER ZARA Created By: Anggita Sulisetiasih 1006718706 Kenji Wibawa Junardy 1006718990 Patricia M. A. Adam 1006805694 International Undergraduate Program Faculty of Economics University of Indonesia Depok 2013 TABLE OF CONTENTS Chapter 1 4 INTRODUCTION 4 1.1. Company Background 4 1.2. Vision and Mission 4 1.3. Long-term Objectives 5 Chapter 2 6 VISION – MISSION ANALYSIS 6 2.1. Importance (Benefits) of Vision and Mission Statements 6 2.2. Characteristic of a Mission Statement 7 2.3. Mission Statement Components 8 2.4. Vision and Mission Relation: Is It Achievable? 10 Chapter 3 11 EXTERNAL ASSESSMENT 11 3.1 Michael Porter’s Five-Forces Model 11 3.2 External Factor Evaluation (EFE) Matrix 13 3.3 Competitive Profile Matrix 15 Chapter 4 19 INTERNAL ASSESSMENT 19 4.1 Resource-Based View Analysis 19 4.2 The Internal Factor Evaluation (IFE) Matrix 22 4.3 Financial Analysis 27 Chapter 5 33 STRATEGIES IN ACTION 33 5.1 The Strategies 33 5.2 Michael Porter’s Five Generic Strategies 34 Chapter 6 36 STRATEGY ANALYSIS AND CHOICE 36 6.1 The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix 36 6.2 The Strategic Position and Action Evaluation (SPACE) Matrix 37 6.3 The Boston Consulting Group (BCG) Matrix 39 6.4 The Internal-External (IE) Matrix 40 6.5 The Grand Strategy Matrix 41 6.6 The Quantitative Strategic Planning Matrix (QSPM) 44 Chapter 7 46 IMPLEMENTING STRATEGIES: MARKETING...
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...PAPER ZARA Created By: Anggita Sulisetiasih 1006718706 Kenji Wibawa Junardy 1006718990 Patricia M. A. Adam 1006805694 International Undergraduate Program Faculty of Economics University of Indonesia Depok 2013 TABLE OF CONTENTS Chapter 1 4 INTRODUCTION 4 1.1. Company Background 4 1.2. Vision and Mission 4 1.3. Long-term Objectives 5 Chapter 2 6 VISION – MISSION ANALYSIS 6 2.1. Importance (Benefits) of Vision and Mission Statements 6 2.2. Characteristic of a Mission Statement 7 2.3. Mission Statement Components 8 2.4. Vision and Mission Relation: Is It Achievable? 10 Chapter 3 11 EXTERNAL ASSESSMENT 11 3.1 Michael Porter’s Five-Forces Model 11 3.2 External Factor Evaluation (EFE) Matrix 13 3.3 Competitive Profile Matrix 15 Chapter 4 19 INTERNAL ASSESSMENT 19 4.1 Resource-Based View Analysis 19 4.2 The Internal Factor Evaluation (IFE) Matrix 22 4.3 Financial Analysis 27 Chapter 5 33 STRATEGIES IN ACTION 33 5.1 The Strategies 33 5.2 Michael Porter’s Five Generic Strategies 34 Chapter 6 36 STRATEGY ANALYSIS AND CHOICE 36 6.1 The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix 36 6.2 The Strategic Position and Action Evaluation (SPACE) Matrix 37 6.3 The Boston Consulting Group (BCG) Matrix 39 6.4 The Internal-External (IE) Matrix 40 6.5 The Grand Strategy Matrix 41 6.6 The Quantitative Strategic Planning Matrix (QSPM) 44 Chapter 7 46 IMPLEMENTING STRATEGIES: MARKETING...
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...Porter’s Generic Strategies According to Porter, there are basically three strategies that provide opportunities to organizations to have a competitive advantage over others, namely Cost leadership, focus and differentiation. These strategies are termed as Porter’s Generic Strategies. The diagram outlines the framework of Porter’s Five Generic Strategies and Zara’s position in this classification. SIZE OF MARKET | | GENERIC STRATEGIES | | | Cost Leadership | Differentiation | Focus | | Large | | | | | Small | | | | Zara adopts differentiation strategy to have a competitive advantage over the other major players in the industry. The differentiation strategy involves production of product or services, which is unique throughout the industry and because of its uniqueness the customers are willing to pay more for it. The uniqueness may be in terms of design, brand image, technology or customer service. In case of Zara, it is the fast fashion philosophy adopted by the company. Zara’s unique selling point is to design and produce the latest fashion trends within a short span of two weeks. And these new styles are only available for sale on the floors only for a period of 4 weeks. The inventory of the products that are left out and do not sell, are immediately pulled from the floor and are discontinued. For Zara, the size of the market is large as it is targeted to the industry-wide. Zara is leader in the retail industry because of its strong differentiations...
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...➢ Major Facts: Zara is a fashion company based in Europe, the case goes over a lot of different areas of the business. Everything from how they operate differently than their competitors, their outdated IT systems, and where they plan to go in the future. The case shows many strategies Zara has taken in order to become successful in Fashion industry, having a customer’s driven process, agility, retail power, and a successful supply chain. As in the case, managing a supply chain in the fashion industry is extremely difficult. Customers’ wants and trends are constantly changing, and suppliers have to be ready for those changes at anytime in order to work with Zara. Zara, one of the brands of Inditex and most profitable, was established in 1975. It has become well known for their fashion designing and manufacturing efficiencies. The company has developed into the leader of highest profit margins comparing to its competitors, also being one of the most famous fashion companies know by consumers. It’s a Spanish based company, manufacturing all of their products in Europe, later distributing them all across the world to their retail stores. Inditex group has set up strategies for Zara to follow when first creating the company, and now with the operations. Stating that “Through Zara’s business model, we aim to contribute to the sustainable development of society and that of the environment with which we interacts”. For each of their retail store the approach has been focused, “at...
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...Zara – Rapid Fire Fulfillment Peggy Martin February 16, 2014 BUS/3022 Professor Matt Fok The first Zara store opened in La Coruna, Spain in 1975. Today, Zara has grown from one small shop to a major apparel company, having 4,700 stores in 76 countries globally. Zara’s great success can be attributed to its very unique supply chain strategy. (Chopra & Meindl, 2013) Zara’s very successful supply chain strategy is based on the five fingers touching the factory and five fingers touching the customer philosophy. Basically, this means to have full control over all the merchandise until it has been purchased by the customer. Instead of outsourcing or contracting with third-party logistics companies, Zara handles the designing, manufacturing, warehousing, and distribution of all its merchandise. In addition, all logistics functions is handled by Zara, and even put all the price tags on its products before they are shipped out to the stores. (Ferdows, Lewis, & Machuca, 2004) Zara has managed to achieve an excellent strategic fit for the company. All areas of the company, from design to distribution work together smoothly, having the same ultimate goal. Zara’s strategy has allowed them to cut the design to sale cycle time considerably. Generally, in the clothing industry, the design to sale cycle time is anywhere from four to six months. Zara is able to maintain a cycle time of four to six weeks. In addition, the information technology that...
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...Critically evaluate the comparative transnational effectiveness of Benetton and Zara Zara and Benetton are two of the most acknowledged clothing companies in the fast fashion industry. The different international business strategies they adopt result in different transnational effectiveness. To begin with, this essay will give a brief overview of the motivation, means and mentality of these two companies, and then compare how they sustain their competitive advantages through integration, responsiveness and flexibility. Next, it will highlight their evolving strategies and demonstrate the structures, worldwide learning and innovation models they adopt to support the strategies. Finally, the evolving global roles will be analyzed. Motivation, Means and Mentality As well-known leading clothing corporates, Zara and Benetton both choose to expand aboard. Although their motivations to internationalize are quite similar, their means and mentalities are different in many ways. Basically, there are two kinds of motivations: traditional motivations and emerging motivations. The biggest traditional factor that drives Zara and Benetton to expand aboard is market-seeking. The former CEO of Inditex, Jose Maria Castellano, pointed out that the limited market growth potential in domestic market was the main driver for Zara to go aboard (Martinez, 1997). In 1988, Zara opened its first overseas store in Oporto, Portugal as the first step to occupy global market (Lopez and Fan, 2009)....
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...THE CASE OF ZARA: PLANNING AND STRATEGIC CONTROL Alexandra Iacob University of Huelva HUELVA, SPAIN 2015 Abstract Zara is a retail company belonging to the Spanish company Inditex Group. Currently, Zara has 1,808 stores in 86 countries. This paper will analyse Zara’s business model, based on innovation and flexibility, as well as logistics chain and the various tools used to recognize the continuous changes in fashion trends and turn them into a product marketable within a few weeks. Compared with the competition, Zara has three distinctions: vertical integration to achieve a faster turnaround time; rapid expansion; and use of the store as the main tool for promotion, with low spend on advertising. This company offered a product design and quality, low price. In addition, resources and competences have allowed develop a different business model, where all processes from product design, to manufacturing, distribution and sales are carried out within the same organization. Key words: Strategic Management, Strategy, External Environment, Michael Porter’s Generic Strategies, Vertical Integration, Balanced Scorecard, Globalization Culture Introduction Company Background Four letters that make up a fashion brand known around the world. Zara is a Spanish brand of clothing and accessories and the foundation of Inditex’s success as well as their first retail format. Inditex S.A. is a Spanish multinational group of textile manufacturing and distribution established in 1975 in...
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