- 1 zara case
- 1.1 You May Also Find These Documents Helpful
- 1.2 Overall about vertical integration
- 1.3 LOGISTICS MANAGEMENT OF ZARA – A CASE STUDY
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. listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Ans. The four companies shown given in the case have very different business models. Inditex owned much of the production and most of its stores. Inditex is thus a vertically integrated company. This gave Inditex a competitive advantage, which is quick response to the market requirements. On the other hand, The Gap and H&M have a different business model. They owned most of the stores, but outsourced all the production. And Benetton had a third business model. It invested heavily in the production, but licensees ran its stores. To prove Zara has the prospect of sustainable growth in the international apparel market, it is important to understand and compare the financial differences of Inditex, its parent company, and its major competitor. The most interesting of Zara’s competitors for comparison is Hennes and Mauritz (H&M), who as the case study states, “was considered Inditex’s closest competitor, [with] a number of key differences”. H&M differs from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented. The key similarities for comparison between Zara and H&M are that they are European based companies, are fashion forward at lower price retailers, and have a strong.
. ZARA Case Assignment 1. With which international competitor listed in the case is it most useful to compare Inditex’s financial performance? What do comparisons indicate about Inditex’s operating economics? Why? There are 3 key international competitors mentioned in the case: The Gap, H&M and Benetton. The Gap‘s production was internationalized with more than 90% of it outsourced outside of the United States. Its stores, however, were US centric. Therefore, The Gap’s strategy was to own most of its stores, while outsourcing all production. The same was the case with H&M. Benetton on the other hand had a completely different business model; it had invested relatively heavily in production, but licensed its stores to third-party operators. Of these competitors, probably the one which is most useful to compare Inditex’s financial performance to is H&M, which was considered at the time of the case Inditex’s closest competitor. Inditex and H&M are both based in Europe and have a strong focus on international expansion. They are both placed in the 4th quadrant of the Product Market Positioning Map, which means they are both fashion forward but at lower prices. When we look at the financial status of both companies in the Exhibit 6, they seem to be very comparable. However, a closer analysis reveals that Inditex has enjoyed a competitive advantage in operating metrics over.
Zara Fast Fashion Case Study Solution Essay
. 1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency? Even though H&M follows a strategy which differs significantly from Inditex’s approach it is the closest competitor from the financial point of view. H&M differs from Zara because it outsources all of the production, it is more price oriented and spends more money on advertising. But both companies are based in Europe, are fashion forward at lower price retailers, and have a strong international expansion strategy. Exhibit 6 indicates that the financial results of Inditex and H&M seem to be very comparable. However, a closer analysis reveals that Inditex has enjoyed a competitive advantage in operating metrics over H&M. Some comparisons of financial and commercial parameters will help to understand the relative operating economics of Inditex (all numbers in € Millions). 1. ROIC = Return on Sales x capital turnover. Inditex: 27.24% H&M: 24.16% Inditex was the most profitable firm, measured by ROIC. Return on Invested Capital is a key measure of a company’s profitability that focuses on the true operating performance of the company. 2. Operating Margin Inditex: 21.7% H&M: 13.1% The operating margin can be used as a measure of each firm’s capital efficiency. It shows.
. technological, human, and organizational dimensions". (Davenport, 1993) ZARA ZARA is founded in the year 1975 and owned by Amancio Ortega, in La Courna. Inditex is probably the world's fastest growing clothing retailer with over 3,100 stores around the world in over 70 countries and the Zara format taking around 1,000 of those stores. In March 2006, the group overtook Sweden's Hennes & Mauritz (H&M) to become Europe's largest fashion retailer. Inditex owns stores present in Europe, North and South America, Asia, and Oceania and engaged in the design and the manufacturing of its products and the main activity is retail. It holds under it firms sorted in sub-categories like footwear, men, women, children clothing, fashion, etc,. It caters to the fashionable family clothing, which consists of the design and the retail of trendy clothes for young men and women. Some of the direct competitors of Inditex for example are Benetton, Mango, Gap Inc., H&M, and Abercrombie. Three principles of Amancio Ortega, the founder He has devised three principles for ZARA and they are a. Close the communication circle b. Keep a rhythm c. Invest in your own assets. These three principles facilitate flexibility and reactivity in the Zara organisation culture. Why ZARA pitched into Business process Reengineering? Basically, every company faces tough competition in the.
Porters Analysis of Zara Essay
. Forces for the organisation’s strategic position. You should support your arguments with evidence from the company and/or the relevant literature. Zara has been the major pioneer of ‘disposable’ fashion; which makes up over 12% of the UK clothing industry. Zara outperforms its rivals in profitability, brand identity, and its successful business model. I have used Porter’s five forces model (Porter, 1995) to analyse the industry and Zara’s strategic position. I have applied the theory of this model and its determinants to my research of Zara; providing evidence to form strong conclusions. Zara faces competition from other market leaders such as Topshop and H&M which all provide customers similar products of ‘disposable’ fashion. The concentration of the market also influences rivalry amongst competitors. I believe the ‘fast-fashion’ industry is an oligopolistic market; concentrated by a few main competitors. Through its ‘unique business model’ Zara has revolutionised the modern clothing industry and bought about industrial growth. Zara shows higher levels of profits than its competitors during 2009. The Arcadia Group (Topshop) experienced a 2.1% increase in their operating profit. (Arcadia Group, 2010). H&M increased operating profit by 7.4% (comparing figures from 2008 and 2009). (H&M Corporate, 2010). Inditex (Zara) showed increased annual operating.
. ZARA INTERNAL ANALYSIS. Zara's core competence is recognizing and assimilating the continuous changes in fashion. They're very good at this because there's a very good communication within the company. Store managers send information about the customer demands and new fashion trends to the headquarters on a daily basis. So if there's a new trend, Zara is able to adapt their products or design new articles immediately. If a design doesn't sell within a week, it's withdrawn from the shops, further orders are cancelled and a new design is developed. This is only possible because of a good communication between stores and headquarters. All stores receive goods twice a week and each shipment contains new articles, in this way they avoid having large inventories so less stock costs. Another core competence is their flexible business model. They're able to adapt to changes during a season, reacting to them by bringing new products to the stores in a very short time. It only takes Zara 2 weeks to develop a new product and distribute in which is enormously fast in comparison to other clothing companies. Their key to global competitiveness is their ability to adapt the offer quickly and precisely to the customers desires. Zara first wanted to grow in their own market by opening stores in each city in Spain with more than 100,000 inhabitants. After this they expanded to Portugal. After their expansion to Portugal.
. Zara Case Write-Up Zara was founded in 1963, by Amancio Ortega Goana. He started the company because he wanted to improve the manufacturing and retail aspects of fashion and to reduce the cost of the apparel chain. He opened the first stores in Spain, and slowly over the decades started to expand to different countries. Zara headquarters is in Arteixo, Spain, with their distribution center close by. Inditex, the holding company that owns Zara, has a business model, which states, “Global specialty retailer that designed, manufactured, and sold apparel, footwear, and accessories for women, men, and children”, and Zara’s business model is to be, “medium quality clothing at affordable prices”. Zara has five hundred and seven stores that account for seventy two percent of Inditex total capital. Zara’s biggest competitors are the US company, Gap, the Sweden company, Hennes and Mauritz, and the Italian company, Benetton. Out of all the completion Gap is the largest company but had a negative net income in 2001, Hennes and Mauritz had the highest net income, Benetton has stores in the most countries, and Inditex had the biggest change in market value. Zara owns a few different manufactures that produce their higher quality, popular products; they only outsource cheaper, standard clothing. Zara markets their products to infants all the way up to forty five.
It might not be in the retailer’s best interest to perform such upgrade, as the new system will replace three of the existing legacy systems in terms of ordering and fulfillment. The IS department will perceive such upgrade as a radical move and is expected to show high resistance in response to it. Even though Zara has a decentralized decision making process, the retailer’s IS department exercises absolute autonomy on the IT infrastructure and design. The fact that “only one person had left the department” in the past 10 years further confirms that the retailer is suffering from cognitive and action inertia, and thus creating a huge barrier for such …show more content…
-Running critical services on out-dated O/S will also limit the compatibility and extensibility with the improving software and hardware. This will prevent Zara from sustaining business growth by further improving scalability of services using enhanced hardware architecture or enhanced networking capabilities with other IT software/inventory systems.
-Moreover, as IT hardware is improving in a rapid pace, legacy hardware components might not be available in the market for Zara's purchase. Zara might face difficulties in purchasing commercial license for O/S that vendor has dropped support.
-Unconnected terminals between headquarters and POSs might implied out-sync or inconsistent information sharing in time-critical information such as inventory. Bottleneck in information sharing or slow responsiveness from customers' query are fatal to real time sales, especially Zara is focusing on Fast Fashion Business and place Inventory Management as their competitive advantage. IT strategy
-Zara fails to identify how IT can further improve and achieve the company's competitive advantage. For example, while Zara's success based heavily on competitive Inventory Management, the company fails to further improve it by enhancing
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Essay on ch 3 notes incl zara case
Zara Case Notes(chapter 3) 2/2 Introduction Technology enabled strategy was their key to dominating the fashion industry Shuns advertising and rarely runs sales Highly vertically integrated Keeps huge swaths of its production in house Most other fashion companies outsource to low-cost countries Why study Zara? Zara is currently undergoing one of the fastest global expansions that the fashion world has ever seen Has one of the highest profitability’s in the industry Clothing looks high fashion…
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Zara keeps her total control strategy of the business
Strong human resource team
Offers the Latest Fashion
How could this small firm become internationally present?
The big step up arrived in the 90’s, when Zara started an important foreign expansion in Europe, America and Asia
Zara is the largest division of Inditex with 76% of total retail sales with 507 stores worldwide: 31 of them were franchised and 12 were joint ventures
Flexibility and reactivity
All products passed through Zara’s major distribution centre in La Coruna
Stores order and receive shipments twice per week
In 2001 Zara was opening new stores at an average rate of one per week.
Total control of the supply chain
Flexibility in the decisions
Increase the overall profitability of the business
Interactions with governmental policy for intervention in the economy and legal aspects in decision making processes
Different duties and levels of tariffs in different countries and this can cause the prices of products to vary in different countries
Regarding the social media trend development it’s a must for Zara to establish a social media relationship to satisfy customer’s demands due to change in generation choices.
Zara has invested in technology and it has to keep improvising because if they don’t then their competitors will get a head start on them
ZARA follows a strategy like Benetton
Strategy that involves less risk
due to the stock and to the things that not sell
so the risk of this belongs to the franchisers,
Atraction of new consumers due the effective response of their needs
Loss of interest in the store due the lack of turnover
Doesn't pressure the buyer on his buying decision
Comparing Zara and Benetton
Create the capacity to respond to a high flow of demand (4)
Benetton is the most global of all high street fashion brand (4)
High technological capacity (3)
Excellent quality (5)
Market oriented strategy (4)
Total control of the supply chain (5)
Environmental and animal welfare policies (2)
Alternative 1 is the most indicated one
Week stock turnover (5)
The client waits too much time for the promotional campaigns (3)
Decline in sales (5)
Loss of costumers to competitors (5)
Limited stocks (3)
Inditex overdependence on Zara (3)
More cutting edge design, more risk (4)
Benetton following some international regulations like “ Regulation for Markets Organised and Managed by Borsa Italiana SpA” and is also listed on the Frankfurt Stock Exchange where obeys a general regulation.
With the actual economic recession the consumers have less capacity to purchase Benetton products and so prefer the products of their competitors.
This is one of the most important force, the communication of Benetton is very controversial and many times some marketing campaigns are controversial and in some countries Benetton is required to remove these campaigns
Benetton renewed all the systems and equipments every five years to stay ever in the top of the innovation.
Catarina Chloé Hortense João Ricardo
Continuous and consistent representation of company
ZaraвЂ™s marketing strategy focuses on product variety, speed-to-market, and store location. It is also notable for what it excludes. If you want to find out whatвЂ™s currently available at the Zara stores you have two options: go to the web site or go to the store. Zara puts 10,000 different items on the store shelves in a single year. It can take a new style from concept to store shelf in 10-14 days in an industry where nine months is the norm. In its primary European markets, Zara locates its stores close together.
ZaraвЂ™s success is as much a result of its history and location, as of its counter-intuitive business strategies. While it may not be possible for another company to exactly duplicate the conditions under which Zara flourished, one can certainly learn from its experiences, and itвЂ™s business structures.
Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega, who also owns brands such as Massimo Dutti, Pull and Bear, Oysho, UterqГјe, Stradivarius and Bershka. The group is headquartered in A CoruГ±a, Spain, where the first Zara store opened in 1975. It is claimed that Zara needs just two weeks to develop a new product and get it to stores, compared with a six-month industry average, and launches around 10,000 new designs each year. Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries. Perhaps its most unusual strategy was its policy of zero advertising; the company preferred to invest a percentage of revenues in opening new stores instead. 1
Data accessed on http://en.wikipedia.org/wiki/Zara_(clothing), March 12, 2009.
The elements supporting ZaraвЂ™s business structure and strategy are also greatly interlinked and interdependent. The following three factors stand out:
1. Extensive market research providing a constant stream of inputs into the product development process, rather than in batches or discrete seasons.
2. Locating various business function in close proximity of the headquarters, and tight control, allows the various functions to coordinate and take joint-decision very quickly. Control also refers to early investment in raw material, and direct or indirect вЂњownershipвЂќ of processing and production capacities. These provide the capability to respond very quickly to the market research-influenced decions.
3. Communication and information Technology are absolutely vital to managing the constant interface of various and management of the huge variety of product information.
вЂњHow Zara manage the strategy of distribution and vertical integration?вЂќ
- On which way can vertical integration of zara be an advantage for the company?
- On which way can the fact that zara has a single distribution centre be an advantage?
What to do before: 2
ZaraвЂ™s target market is people from teens to adults, men and women.
Zara is broadly and deeply assorted.
2 Taken from Kotler and Keller, Marketing Management 13th edition, Prentice Hall
Establishing merchandise sources, policies and practices.
Zara product price is affordable
Prepurchase service, postpurchase service, ancilary service.
Zara storeвЂ™s athmosphere is high end but classy, high lighting, no pictures on the wall.
Store activities and experiences
Stay update through the website.
No advertising, but free press is good advertising.
Zara locates themselves in central business districts with as many outlets as possible.
Overall about vertical integration
Zara defies most of the current conventional wisdom about how supply chains should be run. In fact, some of Zara's practices may seem questionable, if not downright crazy, when taken individually. Unlike so many of its peers in retail clothing that rush to outsource, Zara keeps almost half of its production in-house. Far from pushing its factories to maximize their output, the company intentionally leaves extra capacity. Rather than chase economies of scale, Zara manufactures and distributes products in small batches. Instead of relying on outside partners, the company manages all design, warehousing, distribution, and logistics functions itself. Even many of its day-to-day operational procedures differ from the norm. It holds its retail stores to a rigid timetable for placing orders and receiving stock. It puts price tags on items before they're shipped, rather than at each store. It leaves large areas empty in its expensive retail shops. And it tolerates, even encourages, occasional stock-outs. 3
3 Data accessed on http://www.twistedesign.com/master_logistica/05-12 06/Zara%20rapid%20fulfillment.pdf, March 11, 2009.
Under computerized system, the company reduced its design to distribution process to just 10 to 15 days. Rather than placing the design burden on a single designer, the company developed its own in-house team of designersвЂ”more than 200 by the turn of the 21st centuryвЂ”who began developing clothes based on popular fashions, while at the same time producing the company's own designs. In this way, the team was able to respond almost immediately to emerging consumer trends as well as to the demands of the company's own customersвЂ”for instance, by adding new colors or patterns to existing designs. State-of-the-art production and warehousing procedures, as well as the installation of computerized inventory systems linking stores to the company's growing number of factories, enabled the company to avoid taking on the risk and capital outlay of developing and maintaining a large back inventory.
Zara has been able to achieve excellent financial status due to its core competencies that provide the chain with a competitive advantage over traditional retailers in the industry. Zara is an apparel chain that works differently from traditional retailers. Generally, a traditional retailer outsources all of its production while focusing on distributing and retailing those goods. This is due to the fact that the global apparel industry is вЂњhighly-labor intensiveвЂќ rather than capital intensive. Fashion retailers and apparel manufactures are always seeking to lower costs by outsourcing production to developing countries where the lowest labor rates are found. In contrast, Zara is a chain that has developed a successful diverse method of doing business in the fashion industry. Zara by working through the whole value chain is very vertically integrated and highly capital intensive.
Vertical integration, a distinctive feature of ZaraвЂ™s business model, has allowed the company to successfully develop a strong merchandising strategy. This strategy has led Zara to create a climate of scarcity and opportunity as well as a fast-fashion system. Zara manufactures 60% of its own products. By owning its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new styles they produce. Also, 85% of this production is done through the season, which allows the chain to constantly provide its costumer with very updated products. Traditional retailers lack this flexibility. Traditional retailers are obligated to place production orders to manufacturers overseas at least 6 months in advance of the season.
ZaraвЂ™s in-house production purposely creates a rapid product turnover since its вЂњruns are limited and inventories are strictly controlledвЂќ. This rapid product turnover creates a climate of scarcity and opportunity in ZaraвЂ™s retail stores. The climate also increases the frequency and rapidity with which consumers visit the stores and buy the products. Regular customers know that new products are introduced every two weeks and most likely would not be available tomorrow. Therefore, ZaraвЂ™s scarcity climate allows the company to sell more items at full price. This strategy minimizes ZaraвЂ™s total cost because it reduces 15-20% of markdown merchandise compare to a traditional retailer.
In the retail environment, ZaraвЂ™s managers and sales associates are in charge of transmitting the sales analysis, the Product life cycles, and the store trends to the designers. This allows the designers in Spain to develop the right products within the season to meet consumer demand. The transfer of this communication is also accelerated by IT software that is specifically designed for ZaraвЂ™s diverse business. ZaraвЂ™s quick response communication strategy is effective due to its management and corporate culture. Amancio Ortega, the founder of Inditex, still owns 60% of ZaraвЂ™s shares. Mr. Ortega has effectively transmitted the values of the company, which are: freedom, perfectionism, responsibility, rapidness, flexibility and respect to others, to his management team. This has created a very autonomous and flexible corporate culture for Zara. Also, this has allowed the company to work horizontally with an open communication environment rather than a hierarchal one. Due to this, ZaraвЂ™s managers work in teams in the countries where the chain is located. These divisional headquarter teams are composed of a head country manager who is constantly communicating with local managers and reporting to top management. The constant flow of information between managers allows the company to keep its customers happy, which results in increased sales.
Moreover, ZaraвЂ™s centralized distribution facility gives the chain a competitive advantage by minimizing the lead-time of their goods. ZaraвЂ™s internally or externally produced merchandise goes to the distribution center. This is cost-effective due to the close proximities of the distribution center in Arteixo and their factories in CoruГ±a. In the distribution center, products are inspected and immediately shipped, since ZaraвЂ™s distribution center is a place where merchandise is moved rather than stored (12). Then, to increase delivery speed, the shipments are scheduled by zones and shipped by way of air, and land. The typical delivery time within and outside Europe is between 24 to 48 hours.
Zara also has an advantage over its competitors due to its low advertising costs. ZaraвЂ™s advertising investment is 0-.3% as compared to traditional retailers who expends 3 вЂ“ 4% (13). ZaraвЂ™s cuts in advertising investments reduce total expenses, which make the international expansion more economical. This also signifies that Zara relies mainly on its stores to project their image. For that reason, Zara has a department, which exclusively works in acquiring global prime real estate locations. In addition, this department is responsible for the frequent refurbishing of store layouts, as well as the creation of a common window display for ZaraвЂ™s global stores. The display positions Zara in the industry with a prestigious and elegant image.
By targeting a broad market Zara has an international advantage over its competitors. ZaraвЂ™s target market is very broad because they do not define their target by segmenting ages and lifestyles as traditional retailers do. ZaraвЂ™s target market is a young, educated one that likes fashion and is sensitive to fashion. Today, people around the world through various communication devices have more access to information about fashion. Therefore, fashion has become more globally standardized and Zara uses this to their advantage by offering the latest in apparel. For that reason, 80- 85% of the products that Zara offers globally are relative standardized fashionable products. This is due to the fact that ZaraвЂ™s marketing teams believe that a product that sells well in a fashion capital such as New York will most likely sell well in another such as Milan, Sao Paulo or Madrid since fashion has become more globally accessible.
On which way can vertical integration of zara be an advantage for the company?
- Cutting cost because they do not outsource any channel.
- Cutting time, faster, effective, and efficient.
- Avoid conflicts emerge from different channels.
On which way can the fact that zara has a single distribution centre be an advantage?
- Centralized control, avoid misunderstanding or conflicts.
- Manageable time scheduling, focused on one rather than managing several different time schedules.
On which way can this be an disadvantage?
- Diseconomic of scale вЂ“ in long term, the costs is getting higher and higher.
- Because of managing distributions on their own, designing and production process might not be in its optimum level.
Cooperate with vary range of designers so Zara can maintain its competitive advantage to be вЂњthe fast fashionвЂќ but remain more and more creative.
Cooperate with any channel of production all over the world so new improvements in operation technology can be applied into Zara instead of keep using the old ones.
Making more distribution centres so they will enable Zara to be more faster, effective, and efficient in distributing their products to the retailers.
Advertising might be important in the future when competitors are becoming more competitive and demands are declining.
Typical Zara Store, at Almere, Netherlands.
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LOGISTICS MANAGEMENT OF ZARA – A CASE STUDY
This report aims to study the supply chain management and logistics of fashion retailer, Zara, to boost customer value. The concept of sustainability and competitive advantage is considered with other business models and compared with successful and unsuccessful company. The study is compared with the supply chain management and business strategies of Zara with Dell and Zara with Myers.
Zara was founded and established 1975 by Spanish born Amancio Ortega Gaona. The actual store dealt with the products of the manufacturing company Zara, was an outlet for cancelled orders of women’s night wears and lingerie. These have made a strong foundation for realizing the association between producer and retail trade (Ferdows et al, 2003). Major priority of Zara and its parent group Inditex, is customer and a demand centric supply management (O’Marah & Hofman, 2010). Though Zara is a global multi-national company, but it is a subsidiary of Inditex which is world’s biggest apparel retailer. The Inditex group owns more than 100 textile companies. Zara is the flagship brand of Inditex, captivating maximum sales (Gallaugher, 2008).
PESTEL analysis and Five Forces Model analysis made to determine internal and external environment and its competitive advantage. Detailed analysis has revealed tough competition with Zara and its main contenders are Gap, Benetton, and H&M battling for market stake. In 2008, Inditex paved its way to reach the top of success and became world’s biggest fashion retailer (Hall, 2008). But the global economic condition has changed. Nowadays products have shorter life span, with markets more unstable demanding so that no company rests on its glories (Christopher, 2005)
Zara’s speed of delivery, vertical integration, its deployment of Just-in-Time operations and use of technologically advanced logistics processes is the key to its success. Collaboration of chief tasks, strategic use of organizational resources and core competencies contribute to Zara’s competitive advantage.
This report entails a deep analysis of Zara’s strategic method to Logistics Management, customer value and competitive advantage, comprehending the influence of supply chain in this. Theoretical frameworks related to study are, Porter’s generic strategies (1980), Just-in-Time manufacturing and supply chain patterns are studied and other related factors are organizational culture, modernization, education and knowledge management and disposition of core competence. Zara’s business strategy has been compared with Dell and Myers.
Comparison between Dell and Zara’s Logistics Management
Dell and Zara, both are prosperous corporations. One manufactures computers while the other one apparels.
It is very simple indeed consists of three main players: consumer, Dell and the supplier. The customer places the order, Dell procurer the supplier and parts, immediate assembly and supply to the customer.
Its supply chain is completely dissimilar from the other one. Designing, sourcing, manufacturing, distribution to outlets, are the main functions of supply chain.
Type of supply chain of Dell
Dell follows horizontally integrated supply chain whereas Zara a vertically integrated supply chain. Dell is isolated from the production process, hires third party suppliers for the finished goods and delivery.
In contrast, Zara has full control over different phases of production of garments. The company is successful due its full control over the trade, from crafting, to manufacturing, and to delivery. Total control on the company enables them respond quickly to the changing fashion and customer preferences. This control permits Zara to issue new designs in a short duration of time. Another benefit of horizontal supply chain is that it is controlled easily since minimum responsibilities are there in the assembly line. On the other side, Dell have to coordinate a number of small procedures, control the whole thing and make necessary changes which is much easier. Both are correct for respective companies.
Zara follows vertically integrated supply chain so it exercises control over suppliers. Demand is easily met and manufacturing is easily achieved. Dells manage supply chain very well since 15 suppliers’ delivers 85% of their services. Although they have number of suppliers but speed and accuracy is the primary concern for Dell to their services of clients. Risks are involved like uncertainty, insecurity, shortage of goods and delay in delivery. But instead of lessening their stocks, Dell stresses on high speed delivery of products. This is possible since 95% of suppliers are located close to the manufacturing unit.
Dell follows make-to-order strategy. Such a strategy is custom – made in a very short span of time for respective customer that is orders are made as per the requirement of the customer at reasonable prices. Sometimes the core competencies of partner firms or suppliers and information technology are leveraged, such as the Internet, to incorporate a value chain. Dell provides range of customized products on its website. They also design products which are easily customized.
Zara is keen in introducing new designs and launching new products very quickly. They believe more styles are equal to more choices. They launch products in a limited showroom in which stores receives few pieces of the new product. This strategy of making the product exclusive sold out the stock quickly also generates curiosity in customer about their next launch, making the next product exclusive and demanding. The strategy of lower quantity is equal to limited supply is equal to compulsion purchase. Zara does not advertise their products because they do want a brand image. Their target is product and customer’s expectation of their products. Since products are limited, customers frequently store to check new arrivals. Some clothes are highly demanding in some region while the other clothes in other region. For an instance, in India demand for summer clothes is very high for their tropical climate, whereas in Europe demand for woolen clothes is very high due to their cold climate all through the year. Europe being the fashion capital of the world can market their products in other region such as Asia. Such a production philosophy serves the customer’s tastes. Dell puts forward their philosophy of make-in-order products.
Dell has low inventory costs with no extra cost on warehouses. They have 7 hours of inventory instead of 10 days. Other costs like warehouse, direct delivery, supplier storage with transporter or retail storage with direct customer pickup helps them cut cost. Dell has no inventory policy. On the contrary Zara has number of warehouses to store their garments and circulate them efficiently.
Indirect Distribution Channel of Dell includes: retailers, suppliers, assimilator, distributors and the end customer. The B2B model followed by Dell allows 90 percent of suppliers to order online. Dell sells its laptops, PCs directly online as per the direct model. This way the in-between stages are removed that add more time and cost, and Dell is directly connected to its clienteles. This upshots transport costs of Dell.
Products of Zara are shipped from the manufacturing site in Spain through Corunna depot or Zara Logistica. The inventories are not stocked and are distributed to the Zara stores twice in a week. For overseas distributions, the inventories are carried to the Spain border, and the logistics carrier of the country takes it down to the stores. Stores order more stocks from offers, commercial manager takes the orders and passes on to the logistics who handles the stock. Stores are graded according to their sales and accuracy of orders, this rank governs their priority level for supplies of order. If any product is not selling in the market their production is immediately stopped. This means that no stocks will be piled up. If a product is not selling in certain stores, the company stops production of that product. This eliminates unnecessary stocking of unsold goods. This process adapts to consumer’s preferences quickly.
New collections and designs are updated weekly and released. Zara shop managers places order via La Corunna on sold and unsold products. This reports a product is to be kept or changed, and new designs are to be created or not. The designers depend on apparel sales, criticisms and remarks from customers. This communication system is cost efficient speed up their process. This is Dell’s weakness since they lack foresight about international styles. The customer orders are their only feedback.
Comparison of Myer with Zara
Myer has made no effort to segment their markets along demographic lines and psychographic lines of customers and their use of products, whereas Zara has segmented the market along demographic lines and lifestyle lines. Zara brands itself as the leader of fashion industry offering money value. Myer’s “My Store” concept is ambiguous. It has a general target of market. Zara’s target group is between 20 – 35 year old young fashion markets. Whereas, Myer positions itself as a departmental store with extensive collection of products, but unsatisfactory customer service. It uses discounting sales strategies to invite more customers. Instead, Zara is motivated on launching seasonal fashion products with tempting promotional demonstrations and adequate customer services.
Supply Chain Management Strategy
The companies are more focused on strategic supply chain management (SCM) of occupational improvement and achievement (O’Marah and Hofman, 2010). Strategic logistics management is a major source of customer satisfaction and competitive advantage.
As a new model (Skjott-Larsen et al, 2007) SCM is focused on handling physical product and information which involves both upstream suppliers and downstream customers to create value.
SCM is the organization of relationship with suppliers and customers to deliver best customer service at low cost. He further elucidates the definition that managing relationships is the key to supply chain management. It also highlights that suppliers and buyers are separate entities key point of distinction between supply chain management and logistics.
Logistics meets the demand of end-customer by supplying what and when is needed and at low cost. Maintaining logistics of physical goods and information and providing end customer value is the fundamental aspect of SCM.
The SCM strategy and competitive advantage has gained popularity recently (Romano, 2009). An explicitly defined, activity-oriented, well-reserved, well-organized, quantifiable strategic plan provides valued benchmark in the global financial setting. Strategy binds the organization to the peripheral world.
The SCM strategy is linked to the hierarchy of the organization. As Christopher (2005) supports that effective organizations operate with one-plan. Overall the strategy of SCM and logistics should concentrate on functions, processes and actions of supply chain management objectives.
Just-in-Time (JiT) is a pioneer of Japanese technology, monitors inventory (Hill, 2009:p480). Ohno (1988) observed car manufacturer, Toyota, JiT eliminates wastes through minimizing inventory holding costs, production time and by reducing defects (Christopher and Towill, 2000). Nowadays JiT is utilized in almost all the manufacturing units (Hill, 2009) and lean thinking across supply chain and business operations (Harrison and Van Hoek, 2005).
Zara has reached its zenith to adapt with technology and principles of customer value and modernization. Market winners and qualifiers are main determinants of different approaches of lean and agile and services.
Zara’s competitive advantage
The World Retail Congress newly named Inditex as “International Retailer of the Year‟ for its best practice in global retailing. It also received maximum score in stock market index for social responsible investment, FTSE4Good, 2011. These accolades indicates Zara’s tendency for constant expansion. Its quest for invention is another cause of competitive advantage in today’s consumer -driven market. Zara’s new product development and innovation is accredited worldwide and its leadership in service. Modern-day business knows partnership, alliance and clarity in their supply chain which is Zara’s strength with suppliers (Romano, 2009).Persistent improvement, innovation and collaboration all contribute to the concept of learning organization. Learning organization is holistic, insolence and related to conviction. Zara’s customer- oriented approach, is subjective to establishing Zara and distinguishing the association between manufacturer and retailer, represents an exposed, receptive attitude.
Pedler et al (1997) provides a learning organization which provides assistance in collective and individual learning, participative learning, partnership, alliance and ecological scanning in conjunction to Top 25 supply chains. The training, sense of sympathy and cooperative ethos are the characteristic of Zara.
Dalton (2010) recognizes that learning and core competence are the sources of competitive advantage. Value chain analysis envisioned the core competence of Zara.
Finally, brand credit and fidelity holds less authority in today’s international market. Brand value is a source of competitive advantage. Value chain analysis illustrates the brand value Zara has accrued. One online source places Zara as number219 in the top global 500 brands. H&M is ranked highest at number 89, Gap at number 425 and Benetton fails to make any rating. Zara is positioned at par with Dove and M&S and moves in advance of Sanyo, Colgate and Hyundai. There are various methods of calculating brand value but the used one is a discounted cash flow (DCF) technique.
It can be concluded that a supply chain that works in favor of someone may be detrimental to others. Zara’s supply chain management analysis provides deeper understanding of internal value chain. Its customer-centric services, leading speed, customized technology, logistics, vertical integration and economies of scale grasped from its parent company, Inditex, its are the key to its success. The inputs of its supply chain, collaboration and inventive capacity, information and knowledge management and a educative organization have also arose as significant cause of success. Zara’s mindset and strategy is customer-centric services. SCM believes that value addition to customer service is important to gain competitive advantage (Harrison and Van Hoek, 2005).
For Ortega material wealth is ignorant though he is the richest man of Spain (Hall, 2008).He is the major motivator of creation of value or wealth. Succeeding his challengers and customers made Amancio Ortega a billionaire and Zara is vital for success.
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