Zara - Unique Business Model

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Q 1.: What is unique about Zara's business model? Zara has proved to be a maverick of its time – it came at a time that the apparel industry was fragmented there was no integration, the costs incurred were enormous it was highly labor-intensive leading to outsourcing to save on costs and the business model prevalent was not proving to be highly successful as compared to the models of other industries. In came Zara and showed that strategic imperatives depended on how a retailer sought to create and sustain competitive advantage through its cross border activities and seamless operations, the power of integration and the importance of sticking to your positioning without adding too many frills. Zara's factories were heavily automated,…show more content…
The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behavior and responding quickly to shifts in consumer demand. It also decreases costs of holding inventory. Zara gives store managers significant autonomy in both determining the products to display in their stores and which to place on sale, and relaying market research and store trends back to their headquarters in La Coruña. Zara designers continuously track customer preferences and then placed orders. Designers talk daily to store managers, to discover which items are most in demand. At headquarters there are teams of commercials who take this information into account to design and effectively plan and produce all of Zara's products. Zara produces approximately 11,000 new styles per year. Zara's short cycle time reduces working capital intensity and facilitates continuous manufacture of new merchandise – Zara undertakes 35% of design and purchase of raw materials, 40-50% of the purchases of finished products from external suppliers and 85% of the in-house production after the season had started compared with only 0-20% in the case of traditional retailers. Inventory costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until periodic

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