Zar Business Model And Marketing Tactics

Zara is a high-end street store offering the latest tastes in fashion for women, men, and children alike. Amancio Ortego, Zara’s founder, has made the store grow with rapid success in both its home country, Spain, and internationally. One of the distinct reasons why Zara is such a unique company compared to its competitors is its foundation of the quick response system. Today, Zara’s cycle time is six weeks, in which it responds to its customers’ demand very quickly, unlike most stores that take half a year. Overall, Zara is distinct from most apparel stores in its ability to travel globally and from its international strategy.

Zara International was a retail shop originated in La Coruna, Spain in 1975. It was clothing and accessories shop and imitated the latest fashion trends and sold them at a lower cost. It became Zara International after entering Portugal in 1988 and then the United States and France in the 1990s. The distributor for this brand is Inditex and is considered the most successful retail chain in the world. Zara has a business strategy that is very different from the retailers nowadays. If a customer orders a product Zara’s distribution centers can have the items in the store within 24 to 48 hours of receiving the order, depending upon the country. The business plan that Zara’s executives made was very innovative and played a great part in the

An additional method Zara utilizes to ensure the right product is produced is to constantly monitoring the sells at every store in real time through the use of computers. Sells managers are the individuals that play out this strategy. When the clothing sells well or does not sell well, they can quickly let the designers know to swiftly create new designs (“Case 3-4. Continued Growth for Zara and Inditex”, 2013). However, the competition is changing their strategies in an attempt to successfully compete with Zara. The methods that Zara has implemented to ensure fast fashion is truly fast has pressured the competition into reducing their lead times on stocking their stores (Hayes & Jones, 2006).

This case discusses the unique supply chain management practices of Spanish garments retailer Zara, which enabled it to gain competitive advantage over other fashion retailers in the world. Zara's vertically integrated supply chain system enabled the company to place the latest designs in any store across the world within a period of two to three weeks. The company produced garments as per the latest trends in a limited quantity. Zara introduced 12,000 designs every year, with new designs appearing in the stores globally, twice a week. The case explains in detail the design, production and distribution processes of Zara's supply chain.

Zara, a Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry. By owning its in-house production, Zara is able to be flexible in the variety, amount, and frequency of the new styles they produce. With their unique strategy, Zara has the competitive advantage to be sustainable. In order to maintain that advantage and growth they must confront certain challenges that face traditional retailers in the apparel industry such as Hennes and Mauritz (H&M) and The Gap, who differ from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented.

The Spanish retail chain Zara has unique supply chain management practices that enable it to gain a competitive advantage over other fashion retailers in the industry. Zara’s rapid response time enables the firm to quickly respond to changing fashions while deliberately under producing products. This strategy, which is supported by competencies in logistic management, design and information systems, allows the company to maintain less inventory and higher profit margins and is a key factor to Zara’s success. The firm should continue to add value by seeking new opportunities to expand in the retail market and maintain their sustainable growth.

Zara ' employees seem to have a very good ability predicting the next big trend in fashion. The product market specialist and store manager spend a great deal of time communicating this tacit knowledge of what the next big seller item is going to be. Even some of the store employees are wearing Zara products indicating that too are aware of what will be the next fashion trend. It is through this tacit knowledge that Zara is capable to getting a jump on their competitors. This feeling or sense of what products will be in demand, and results from sales at a test store, Zara store managers and market specialist are able to spread the word to other stores.

In comparison to competitors, Zara’s business strategy, in regards to strategic partnerships and cost of production, provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton, and H&M, does not use Asian outsourcing. Eighty percent of Zara’s materials are manufactured in Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters. Most of Zara’s competitors have 100% outsourcing to cheap Asian countries. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. The local strategic partnerships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution. To make this happen, the company designs and cuts its fabric in-house and it acquires fabrics in only four colours to keep costs low. The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behaviour. It also decreases costs of holding inventory. Zara’s competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labour and production costs.

Zara is a clothing and accessories retailer selling stylish apparel at affordable prices, and it is also the most profitable brand of the Spanish clothing retail group Inditex SA. Ortega planned for this new Zara outlet, located near his factory in La Coruna in northern Spain, to sell this overstock merchandise himself. Since then, Zara has expanded into 500 stores in 68 countries as of January 2007 and has become a leader in customized fashion retailing. This assignment presents core competencies to help Zara achieve competitive advantages in fashion industry. Besides, we also offer five competitive objectives about quality, speed, flexibility, dependability and cost to evaluate

Zara’s strategy is to offer cutting edge fashion at affordable prices by following fashion and identifying which styles are “hot”, and quickly getting the latest styles into stores. They can move from identifying a trend to having clothes ready for sale within 30 days (whereas most retailers take 4-12 months). This is made possible by controlling almost the whole garment supply chain from design to retail.

Second, in fulfillment, we can also see speed in responding to demand. For example, the replenishment, as well as production will be optimized according to supply and demand as quickly as possible. Besides, the fulfillment will commonly completed in one or two days, clothes flowed quickly, and without stopping, from factories to DCs to stores, where they were immediately put on the sales floor. Third, in design and manufacturing, we can find how Zara respond quickly to demand. Zara brought out new items continuously throughout the year, including both changes to existing garments and entirely new creations. The network of production had made design from conception through production and into the DC in as little as three weeks. Besides, Zara did not have to predict what would be selling six months, or even one month, in the future; it could continuously sense what customers wanted to buy and respond “on the fly.” All these operations reflect the speed-chasing and target-oriented nature of Zara business.

Moreover, Zara move/shipped over 2 million items per week, nothing remains warehouse within 72 hours. The clothes are pre-ironed and hang in hangers with security and price tag to save stores prime selling time. Every clothing stores nowadays sell clothes on a seasonal basis which mass produce clothes for the season. But Zara produces and sells new design every 2 weeks, which forces people to visit their stores more frequently because they could find new designs every time they visit and to buy their favorite designs as soon as possible. This strategy eliminates the idea of putting discounts and sales in the stores toward the end of the season because of its limited production and Zara’s customers soon learned to buy them quickly before it gets sold out. Moreover, Zara does not spend money on advertisements because of they usually their flagship stores on most expensive real estate location. This is another strategy that the company is using effectively because this most expensive real estate where most people who love to shops lives. Thus, eliminating advertisement to be spent on their revenue. Zara recently beats its competitor H&M in profits, sales and also in the stock market by 8% in 2016 and it still going strong as the margins go up to 11.5% right now. As Zara focus on quick fashion and more online presences to drive up their sales rather than mass producing clothes and then heavily discount them later on the

The basic strategy for fighting competition is to attract buyers at lower prices, more unique designs, high-quality design, efficient customer service and solid image brand. Thus bargaining power of buyer for apparel industry is high as the products falls under the basic needs in human lives. There is no much difference in terms of products offered by the apparel company, so if buyer is unhappy with the product or service they can easily switch to another brand. Thus, Zara are trying to strengthen its position in the market by using their unique strategy by giving priority to buyer to meet their special needs.

Enforcement of such system “fast fashion” is too good in decreasing the time of production. This is clear in the case of Zara as recognizing the required fashion and applying or producing it in a short period of time less than two weeks. This is too good for forming rapid answer for all clients’ requirements, and so keeping clients satisfied. This system of fast fashion also helped Zara to produce more effective styles. This included the production of 11,000 items, while in case of rivals we find that Gap produced only 4,000 items, and H&M produced only 2000 items. Moreover, the adopting of such system helped the company reduce level of supply “scant quantities”, and this is too effective for satisfying clients as they wear a unique model. All those issues helped Zara to support its name in the market, and so despite of the different disadvantages, we find that Zara will

Zara is an apparel company and the leader brand of the Spanish retail mogul, Inditex. zara was established in 1975 in Spain by Amancio Ortega who is currently the 3rd richest man in the world, the first store was opened as an outlet but by 1979 the establishment already had six stores at different locations in Spain and by 1985 the company branched out to Portugal new york city and Paris. Today Zara has over 1900 stores worldwide which are located in 22 different countries; these stores render employment to over 125,000 employees. Zara depends on information they gather from customer and organizational feedback from all their stores on a daily basis this information is then forwarded to the supply chain, which works in synergy with the stores to keep the level of storage in stores down to a minimum. Zara owns the production, supply chain and in-house production, which lead to greater speed in output (M.A.Cano)