Zara business model in comparison with others in apparel industry - Assignment Example

?Zara business model in comparison with others in apparel industry Inserts His/her Inserts Grade Inserts s Name Date Zara Business Model Introduction The apparel industry deal with clothing and is one of the most dominant industries today. To be more specific, it deals with fashion and also design and has proved to be a very competitive industry. A lot of companies in the industry face the challenge of being able to predict and even respond to the fast changing trends in a manner that is swift that will be able to meet the consumer demands. In this paper I will focus on Zara business model that continually changes with the changing customer demands. I will compare the model with other business models in the industry by using Gap.inc Company as the proxy company that will be responsible in representing all other firms in the industry. It will be used in making comparisons with the Zara business model. Gap inc. specializes in clothing, personal care products and accessories. This company was the former industry leader before Zara came to the limelight. Zara’s model Zara runs a fast fashion model that has come to be known as the business model innovation. Zara’s model has three basic components which include concept, capabilities and value drivers. It has the concept of maintaining design. This is achieved through its production and processes in distribution that will enable it to respond fast to shifts in demands f consumers. It emphasizes on giving consumers what they want by putting their focus on demand and not on the supply. It maintains control over its production through in-house manufacturing and also with strategy partnerships located near its headquarters. 80% of its materials are made in Europe and 50% made in the Zara controlled facilities in Spain. Herman (2008) indicates that Zara has a unique approach to marketing and advertising. This is because it spends 0.3% of its revenues on advertising and marketing. It uses the location, layout of the store and life cycles of their products as marketing tool i.e. it locates all stores in the prime retail district in order to do visibility marketing. It also does its marketing by doing a lot of investment in the layout of its stores by making them look trendy. This model encourages the customers get to the store very often and also encourages them to buy on the spot because of the fear that if they don’t buy at that time, the product will sell out. Zara has a core philosophy that quality and creativity with fast response to market demands yields results that are profitable. In terms of the use of information and technology, Zara has a different approach as compared to other companies in the industry that are represented by Gap inc. Communication protocols are different from others because it spends 0.5%of the total revenue on information technology and 0.5% on the employees of technology. It uses human intelligence and information technology to create hybrid in information flow from the stores to the headquarters. Using of the human intelligence on information technology made it successful since it resulted to inventories that are well managed, reduced cost from merchandise that was obsolete and also a link between the demand and supply. This strategy is advantageous in terms of cost to the operations of Zara and responds fast to the changing demands. According to Badil, (2009), Zara is able to change its designs in a fast way and quickly due to the proximity it has to the stores. It has departmental stores that modify designs of other people and send them to Asian factories that are low cost. This model supports the notion of stocking little while ensuring that it updates the collections more often. Zara does restocking of new designs twice a week as compared to other competitors in the market. Consumers in the market have characteristics of quickly losing interest in a fashion that stays for a while in the market and that is why Zara is involved in observing the trends and often changing fashion. This has led to another characteristic in the consumer in that they have become choosy. Other business model Other businesses in the fashion industry have a different approach and models as compared to the Zara. Gap Inc. can be a better representation because it was a leader in the industry before Zara came in. The gap model uses the forecasting method in coming up with its designs and also the fashions. They predict a fashion according to the seasons and send their orders to a contractual company that makes the designs for them. The contractual companies are normally far placed but they claim to do this because of lower costs not taking into consideration the distance between them which makes them not to be able to easily adopt the new designs that come into the market. Advertising and marketing Gap, representing other businesses invests a lot in marketing and advertising using up to 3-4% of its total revenues. It draws customers due to large budget of television promotion and advertising. This makes it to incur a lot of costs as compared to Zara that only uses 0.3% and gets a lot of customers due to establishment of its stores and other areas. Sourcing It also outsources it production by using contractual manufacturers as compared to Zara that uses in-house manufacturers. These contractual companies have unacceptable working conditions. An example was in the year 2007 where gap clothes were made with children as young as 10years in New-Delhi which was considered as slave-labor conditions. Why is it a disruptive business? It is considered as a disruptive business because it carries out its operations differently from the way other business in the market do. One reason is that it shuns or uses little advertising while other businesses invest a lot in advertising in order to get more customers. It also uses in-house resources as compared to others in the industry that outsource at lower costs. To Zara, the strategy is proximity and also gaining of control. It also blends technology in the fashion industry with human intelligence which is not commo0n in the industry. This is a strategy that is used to make it keep up to date with changing trends hence making it trendy. It rarely runs sales which I a common strategy in the industry that is meant to increase the sales. Competitive advantage Zara has a competitive advantage over other businesses due to its product development, strategic partnerships and lower costs of production. For product development, it gives autonomy to store managers to determine the products that they need to display and those they need to sale. They communicate the changing trends to the headquarters that will come up with the designs that suit the market. Its in-house strategy and proximity also offer it a competitive advantage. This is because 50% of its materials are made in Spain near the headquarters. Its strategic partnership in Europe allows for its throughput time of 3-4 weeks that is from the conception to the distribution time. Low investment in advertising and technology also leads it to set lower prices compared to others which make a lot of customers go for it. From a risk management perspective, its business is different from others since it only uses 0.5% of information technology. To be specific, it uses DOS in operating the system. It is at risk since it may not be able to sustain its competitive edge due to lack of investment in the information technology. Segreto (2012) notes that other companies could find automated solutions which could outdo Zara’s speed to market i.e. they could have an enterprise-wide software that allows a designer in following sales of test garments a bit closely than relying on manual orders from the managers of the stores. Conclusion In conclusion, the Zara model of innovation is proving to be effective in the industry because it has outdone other businesses and even others have started to copy the model. Since fashion changes overnight, I too feel that the innovativeness model is the appropriate one that needs to be applied by all the makers of the fashion market. However, since the world is changing too, it is of necessity that more money be invested in technology and also in advertising in order to make the model to remain competitive in the long run and also able to withstand changes in the long run. References BadiI, E. (2009). Zara and her sisters the story of the world's largest clothing retailer. Basingstoke: Palgrave Macmillan. Hermann, P. (2008). Zara's secret for fast fashion: modeling the business model. SaarbruI?cken: VDM Verl. MuI?ller. Segreto, L., & Bonin, H. (2012). European Business and Brand Building. Brassel: P.I.E.-Peter Lang S.A. Appendix Read More