zara case study analysis
1. Introduction 3
2. Strategic Issues Underpinning the Buying Decisions at Zara 3
3. Zara’s Product Mix Strategy: Advantages and Disadvantages 6
Zara is a successful retail clothing company that expanded over the years due to its elaborate supply chain and excellent product mix strategy. The company established in 1963 opened its first store in 1975, in La Coruna. By 1989, the company had ninety-eight retail shops and production facilitates distributed around Spain. This followed international expansion where the company opened several other stores around the world. The company has a huge expansion around the world, making it the largest and most lucrative Unit of Inditex SA, manufacturer and distributor of Spanish clothes with over one thousand three hundred stores located around Europe, Asia, America, the Middle East and Pacific region. This brief overview highlights the strategic issues underpinning Zara’s buying decisions and the company’s product mix strategy. 2. Strategic Issues Underpinning the Buying Decisions at Zara Buying decisions are the series of options a consumer makes before purchasing a product (Stahlberg 2012, p.3). The customer chooses where to buy the product, the model, the brand, when to buy, amount to spend and what payment method to use. The company or marketers try to influence consumers’ buying decisions through supply of sufficient information (Stahlberg 2012, p.3). Zara develops a production cycle that is distinct from fashion sectors principles. The company’s design team operate throughout the season studying every current trend in the market. The design team do so through assessing how clubbers dress, and clothes worn in major television series. These strategies help the company in producing stream of new products that keeps customers flocking in the company to see and purchase the new products. The company also offers its quality clothes at moderate prices. The high-velocity operation employed by the company keeps customers queuing up in long lines at Zara’s stores, particularly on delivery days. The popularity of the company and its quality, current and affordable designs generates bottom-line and tangible results besides admiration of the company by the fashion world. The company buying decisions are strengthened by the nature of the company’s product. Zara provides fashionable products that meet the present fashion trends and consumer taste and preferences. The company is keen in offering tastes that varies by region, country and from one store to another. The company offers products with brief product life cycle. It produces products that remain fashionable for a brief period. The company introduces ten thousand new designs into its various stores annually. The steady store refreshment attracts new buyers besides guaranteeing the return of old buyers. The company changes the manner in which people do their shopping in the sense that when customers notice a product that they like in the store, they understand that the product will only be available for four weeks. This motivates customers to buy the products instantaneously thereby creating a considerable shopping velocity. The company also offers products with uncertain demand. The mixture of fashionable, regional deviation of feel and trend, and short product life cycle implies that the product is indecisive. Moreover, the company influences customers buying decisions through provision of products with comparatively high margins. The company provides consumers with products, although, not luxurious, but have an advanced margin end of fashion industry. Another aspect that strengthens buying decisions at Zara is the disposition of the company’s markets. Evidently, the company has a considerable number of loyal customers. It also holds the potential to attract more customers through its.
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Data collection: The survey questionnaire has been distributed to 50 managers to collect the data Data analysis: By using a statistical package the results were analysed Report and interpret findings: The study purposes to interpret the analysis as findings in the coming section to validate the factors influencing the global sourcing in apparel industry. Zara is a famous apparel branded company from Inditex group operating from its headquarters in Spain. This group includes other brands like Massimo Dutti, Pull & Bear, Stradivarius, Oysho and Bershka
Zara’s outstanding success was achieved by making a shift from the conventional sourcing to the customized sourcing strategy. Zara unlike other garment producers, instead of outsourcing its production from the low cost bidding countries, Zara makes its profits by building up its brand image through marketing and advertisement. Zara retains its control on design, production and distribution and beats the high labor costs. Zara integrated its supply chain in line with the demand driven market in a vertical integrated pattern.
Through this vertical integration, the design to delivery lead time has came down from 4-6 months to a few days. Twice the week every shop under the brand receives new stock and 80% of the collection is
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Only half part of its components are sewn outside. Zara owns 400 workshops and co-operatives around the Galicia area and in Portugal. Zara is a famous apparel branded company from the group of Inditex operating from its headquarters in Spain. This group includes other brands like Massimo Dutti, Pull & Bear, Stradivarius, Oysho and Bershka Zara sources 80% of its products from Europe. Zara is less likely to outsource its production to the low cost countries. This makes a quick delivery of the products to the point of sale. Read also about Zara corporate social responsibility issues
The sales feed back to the production sites keeps its inventory at optimum levels. The control over fabric, pattern and garment quality avoids freight cost, long lead times and delay in deliveries. The sales feed back through the integrated technology allows the designers to respond to cope with the smallest demand fluctuations and trend in the fashion market. Zara’s market research cut downs the non productive trends and lines and keeps the stores up to date for the customer choice. Read about Zara sourcing strategy
Zara’ when confronted by stockouts, the sourcing model adopts the store execution policies and customer behavioral perception activities. Also Zara’s sourcing model involves careful selection of inventory size particular to the store, readily available to the customers, making the shopping an enjoyable experience to the recurring customer. Maintaining the right size of inventory lot is the key area here. This makes the entire supply chain alert to the economic order quantity with a vision of quick delivery.
This followed international expansion where the company opened several other stores around the world. The company has a huge expansion around the world, making It the largest and most lucrative unit of Indexed AS, manufacturer and distributor of Spanish clothes with over one thousand three hundred stores located around Europe, Asia, America, the Middle East and Pacific region. This brief overview highlights the strategic issues underpinning Sara’s buying decisions and the company’s product mix strategy. 2.
Strategic Issues Underpinning the Buying Decisions at Ezra Buying decisions are the series of options a consumer makes before purchasing a product Sternberg 2012, p. 3). The customer chooses where to buy the product, the model, the brand, when to buy, amount to spend and what payment method to use. The company or marketers try to Influence consumers’ buying decisions through supply of sufficient information (Sternberg 2012, p. 3). Ezra develops a production cycle that is distinct from fashion sectors principles. The company’s design team operate throughout the season studying every current trend in the market.
The design team do so through assessing how clubbers dress, and clothes worn in major television series. These strategies help the company In producing stream of new products that keeps customers flocking In the company to see and purchase the new products. The company also offers its quality clothes at moderate prices. The high-velocity operation employed by the company keeps customers queuing up in long lines at Sara’s stores, particularly on delivery days. The popularity of the company and its quality, current and affordable designs generates bottom-line and tangible results besides admiration of the company by the fashion world.
The company buying decisions are strengthened by the nature of the company’s product. Ezra provides Desalinate products Tanat meet ten present Tattoos trends Ana consumer taste Ana preferences. The company is keen in offering tastes that varies by region, country and from one store to another. The company offers products with brief product life cycle. It produces products that remain fashionable for a brief period. The company introduces ten thousand new designs into its various stores annually. The steady store refreshment attracts new buyers besides guaranteeing the return of old buyers.
The company changes the manner in which people do their shopping in the sense that when customers notice a product that they like in the store, they understand that the product will only be available for four weeks. This motivates customers to buy the products instantaneously thereby creating a considerable shopping velocity. The company also offers products with uncertain demand. The mixture of fashionable, regional deviation of feel and trend, and short product life cycle implies that the product is indecisive.
Moreover, the company influences customers buying decisions through provision of products with comparatively high margins. The company provides consumers with products, although, not luxurious, but have an advanced margin end of fashion industry. Another aspect that trenches buying decisions at Ezra is the disposition of the company’s markets. Evidently, the company has a considerable number of loyal customers. It also holds the potential to attract more customers through its design specification. The specifications include design centers on fabric, color, style and product finish.
Ezra sells fashionable clothes designed to achieve fashion trends and local customers’ taste. The issue of fashion durability is not a crucial aspect for the company because the company’s aim is to provide clothes that remain fashionable for comparatively restrained period after which new fashion replaces the old ones. Ezra provides products with design exclusivity. Consumers require products with brief life cycle because a few people only wear such products. The delivery speed of the company’s products also enhances its buying decisions.
For fashionable products with a brief life cycle and uncertain demand, delivery speed is paramount. The delivery entails quick placement of products into the company’s stores as well as replenishing the inventory when needed. The delivery of the company is also reliable. Ezra designs, produces and distributes its products quickly and through reliable delivery channels. The company’s deliveries get into their respective stores on time. For instance, when the company tested the new Khaki skirt in Corona store and realized that it was a hit, 7, 800 skirts were sent within 12 hours to over 1300 stores across the globe.
The brief product life cycle and the fashionable nature of the company’s products imply that consumers cannot remit higher prices for the company’s product. In this regard, the company’s price is comparatively sensitive, and therefore, Sara’s offers products with moderate prices. Moreover, the company places big and colorful price tags, splayed with flags of different nations each convoyed by a local currency price. The company also meets design specification through quality conformance. The company is able to translate the current fashion trends into finished products in no more than fifteen days.
Delivery of such products twice a week makes the company catch fashionable trends when they are hot in the market. More importantly, the Ezra brand name is crucial in influencing consumers’ buying decisions. While clients get concern of fashionable products as opposed to where to buy, Ezra brand name helps In getting consumers In I s various stores across ten world. However, ten Dulling decisions are influenced by design specification, design exclusivity, delivery speed, delivery reliability and pricing. 3.
Sara’s Product Mix Strategy: Advantages and Disadvantages A product is the fundamental competing tool in the hands of marketers (Farrell 2008, p. 188). The intention of other components of marketing mix is to strengthen the position of the product in the market. A product holds combination of physical attributes and bundle of satisfactions that consumers hopes to achieve from it. A group of products performing similar functions and practically lose in appearance refers to a product line, while all products marketed by a company constitute of its product mix.
A product mix strategy entails decisions concerning to the product mix, and breadth and depth of the product line (Farrell 2008, p. 188). A productive mix strategy entails assessing existing product for market share and market growth. Ezra employs a practical product mix strategy that directs its resources towards profit mastication. Through its product systems, the company designs new styles founded on client’s input from store managers and research on modern fashion trends. Ezra sources its fabrics from global suppliers, and these fabrics are cut into different styles through in-house, capital-intensive and by electronic machines.
The fabrics are dyed through small in-house units with the local workshops performing the ultimate sewing and assembly. The centre of distribution located in Spain distributes the products to the company’s stores twice a week. The UN-dyed and uncut fabric is held in inventory, and it remains undedicated with colors and styles. The company’s distribution system comprises of store managers who selects the form and quantity of products through computers. The company capitalists on in-house production and distribution systems. Ezra makes its own fabrics and produces over 60 percent of its fashionable designs.
All the production process apart from sewing is done by the company. The production system functions without finished products inventory. Fabric is held in the inventory and products inventory are held in stores. The company integrates its production, marketing information systems and distribution. Each of its stores remains electronically connected to the head office. This allows the head office to evaluate sales and errant quick adoption to customer’s desires and needs. The company assesses its value chain and ensures control of its many sections.
It focuses on lowering time between design and sale. The design team assess the current fashion trend to ensure constant production of new products within a short period of time, and at moderate prices, Supply Chain Management is a critical aspect in the fashion industry. It entails the procedure from collection of raw materials, production, distribution and consumption (Hugo 2011, p. 17). SCM requires physical product, time, form, space and product functions. Ezra employs an Agile Supply Chain that helps it identify and confine business prospects faster compared to its competitors.
The companies supply chain is flexible and demand driven. Information system promotes the company’s supply chain through enhancing information visibility. The company ensures fabrics, which it considers as it raw materials is always available prior to start of the season. The fabric are unclouded, an aspect that makes color changes more flexible. The company outsource heavy labor activities while in- house team does designing and computer-enhanced cuts. The company produces ore tan anal AT Its own products as opposed to appending on slow-moving suppliers.
The company makes 40 percent of its products and produces 60 percent of its merchandise in house, an aspect that makes maintain a competitive edge. Advantages * Cost effectiveness and profit mastication * Minimizes inventory * Keeping UN-dyed fabric helps in keeping lead-times briefs besides guaranteeing fabric use in line with demand * Efficient production and a balance between outsourcing and in-house task instigates minimum lead times and expands the company’s market share * Excess stock holding and forecasting risks are put at minimal * The company’s supply chains help in upholding a competitive edge in the fashion industry. Integration of information system, distribution and production enable production and design teams to react swift to shifting needs of customers. * The supply chain helps the company in designing right products besides introduction of new products * The supply chain facilitates management of uncertainty and swift production of new products * The product mix strategy replenishes the present inventory quickly * The product mix helps in keeping fabric inventory low, and minimizing markdowns Disadvantages The product mix strategy employed by Kaka requires heavy time and resources in investment.
The strategy also needs considerable research. 4. Conclusion The swift expansion implies that Ezra is the fastest developing retail business across the world besides its capacity to export effectively its formula internationally. Moreover, the company offers market shopping with contemporary designs that reflects present fashion trends. The success of the company is based on effective customer satisfaction through feasible buying decisions and excellent product mix strategy. The company supports its supply chain management through performing over 40 percent of its production.
SIMCON- SIMSREE Consulting Club
The Secret Behind Zara’s Retail Success
At Zara, speed and responsiveness are more important than cost. Other brands churn out fast fashion; Zara, which is based in Spain and is owned by the distribution group Inditex, attempts the mind-spinningly supersonic.
The founder, Amancio Ortega, founded Zara in 1975 in order to better understand world markets for his fashion merchandise. A decade later, he formed Inditex as a parent company for Zara, as well as several other retail concepts and suppliers that he had built.
While Zara originated in Spain, it has stores in 86 countries today – in Europe, the Americas, the Middle East, and Asia. In 2012, Inditex reported total sales of US$20.7 billion, with Zara representing 66 percent of total sales (US$13.6 billion).
The brand is renowned for it’s ability to deliver new clothes to stores quickly and in small batches. Twice a week, at precise times, store managers order clothes, and twice a week, on schedule, new garments arrive. The company produces about 450 million items a year for its 1,770 stores in 86 countries.
To achieve this, Zara controls more of its manufacturing and supply chain than do most retailers. For Zara, its supply chain is its competitive advantage.
Synergy between business and operations strategy
Zara’s overarching strategy is achieving growth through diversification with and vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within 2 weeks of the original design first appearing on catwalks.
The company owns its supply chain and competes on its speed to market, literally embodying the idea of “fast fashion”.
The retail giant delivers fashionable and trendy numbers catered for different tastes through a controlled and integrated process – just in time.
Zara keeps a significant amount of its production in-house and makes sure that its own factories reserve 85 percent of their capacity for in-season adjustments. In-house production allows the organization to be flexible in the amount, frequency, and variety of new products to be launched.
The company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities nearer to its design headquarters in Spain.
The wages of these European workers are higher than those of their developing-world counterparts, but the turnaround time is miraculous.
Zara also commits six months in advance to only 15 to 25 percent of a season’s line. And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the season.
If a certain style or design suddenly become the rage, Zara reacts quickly, designs new styles, and gets them into stores while the trend is still peaking.
Store managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. That data is instantly funneled back to Zara’s designers who begin sketching on the spot.
Zara also has extra capacity on hand to respond to demand as it develops and changes. For example, it operates typically 4.5 days per week around the clock on full capacity, leaving some flexibility for extra shifts and temporary labor to be added when needed.
This then translates to frequent shipments and higher numbers of customer visits to the stores, creating an environment of shortage and opportunity.
This strategy allows Zara to sell more items at full price because of the sense of scarcity and exclusiveness the company exudes. Zara’s total cost is minimized because merchandise that is marked down is reduced dramatically as compared to competitors.
Zara gets 85 percent of the full price on its clothes, while the industry average is 60 to70 percent. Unsold items account for less than 10 percent of its stock, compared with an industry average of 17 to 20 percent.
“Most companies are riddled with penny-wise, pound-foolish decisions to reduce cost,” says KasraFerdows, a professor at Georgetown University’s McDonough School of Business. “Zara understands that if they don’t have to discount as much, they can spend money on other things. They can see the benefit of this certainty and rhythm in the supply chain.”
This is also the reason why Zara can afford the extra labor and shipping costs needed to accommodate and satisfy changes in seasonality and customer demand.
Zara is fully aware of the saying, “inventory = death”. It avoids piling up inventory in any part of its supply chain from raw materials to finished products.
Inventory optimization models are put in place to help the company to determine the quantity that should be delivered to every single one of its retail stores via shipments that go out twice every week. The stock delivered is strictly limited, ensuring that each store only receives just want they need. This goes towards the brand image of being exclusive while avoiding the build up of unpopular stock.
This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters in Spain, allows Zara to ship more often and in smaller batches. If the design Zara hastily creates in an attempt to chase the latest trend does not in fact sell well, little harm is done.
The batch is small, so there’s not a ton of unsold inventory to get rid of. And because the failed experiment is over in a jiffy, there’s still time to try a different style, and then a different one after that
“The secret to their success has been centralization,” says Felipe Caro, an associate professor at the University of California at Los Angeles’s Anderson School of Management and a business adviser to the company. “They can make decisions in a very coordinated manner.”
Zara sticks to a deep, predictable and fast rhythm, based around order fulfillment to stores.
Each Zara outlet sends in two orders per week on specific days and timing. Trucks leave at specific times and shipments arrive in stores at specific times. Garments are already labeled and priced upon destination.
As a result of this clearly defined rhythm, every staff involved (from design to procurement, production, distribution, and retail) knows the timeline and how their activities pan out with respect to other functions. That certainly also extends to Zara customers, who know when to visit stores for fresh new garments.
Zara’s strong distribution network enables the company to deliver goods to its European stores within 24 hours, and to its American and Asian outlets in less than 40 hours.
According to Nelson Fraiman, a Columbia Business School professor who wrote a 2010 case study about Zara, the retail giant can get a product out from concept to store in just 15 days, while the industry standard is 6 months.
At Zara, change doesn’t disrupt the system; it’s part of the system.
This brand’s success story shows the strength of its operations. Its cross-functional operations strategy, coupled with its vertically integrated supply chain, enables mass production under push control, leading to well-managed inventories, lower markdowns, higher profitability, and value creation for shareholders in the short and long term.
Analysis of Zara - Case Study Example
Analysis of Zara
The success of Zara, from operations management point of view, can be attributed to many factors as discussed in the subsequent paragraphs. In relation to design and manufacturing, Zara comes up with innovative design collections at the beginning of each season. Moreover, it continuously brings in new items with short lead times all through the year. By providing more fashionable clothes which are not readily available, the customer have limited option, and they have to move quickly in purchasing the little available stock and hence a high turnout for Zara. On the other hand, Zara strategy to embark on the vertically incorporated industrialized undertakings and well-organized production system has also enabled them increase sales. Moreover, there was extensive and equal distribution of production resources across the network of facilities all over the supply chains where errands were well segregated. As a result of this segregation, new clothing design were innovated and were afterward displayed it in its stores for vending in a month’s period span. This is a short period span and therefore, manufactured quantities can be solely based on the approximation and any alteration in the production can be made without difficulty and quickly.
Secondly, Zara spent modest on advertising for its fashion. As an alternative, it has played attention on opening its stores in major city locations. Across the world, store layouts and pricing of the outfits are also homogeneous so as to reflect the main branch, the H Q in La Coruna (Zara, 9). Despite the fact . Show more