Zara as One of the Largest Retailers - Case Study Example

?Zara Case Study Introduction Zara is one of the largest retailers of fashion industry, owning stores in high streets and shopping mall in the world.Zara produces the most unique fashion designs in the industry. The success of Zara has been accredited to the use of distinctive business models in the fashion and retailing industry. Zara’s success has also been attributed to the production of new designs and strong marketing strategies that encourage customers to visit their stores again (Pahl & Mohring, 2009). The use of these strategies has played a huge role in acquiring a larger market; hence, the bigger profit margins. Zara has also acquired some approaches that enhance growth in sales. Unlike most firms in the fashion industry, Zara has been applying the strategy of outsourcing by contracting external manufacturing firms. The outsourcing strategy is an advantage because it avoids the manufacturing costs such as labor. Other firms in the fashion industry include H&M and GAP. The disruptive business The disruptive business model has been used Zara to determine how different the business operates from other businesses in the same industry such as GAP. This determines whether the business achieves its long term efforts to increase their revenue and existence in a competitive market. The disruptive business model mostly involves producing, redesigning and renovating products of services that are provided by the business so as to have unique products and services from firms in the same industry. In order for Zara to provide the latest clothes and fashions designs, they produce new brands with different designs according to the needs of the customers. Integration of the disruptive model in the management approach of the company has helped Zara achieve a distinctive view in the market thus acquiring a larger market share as compared to other companies on the fashions and design industry (Jones, 2006). The disruptive business model also plays a role in ensuring the business survives in a highly competitive industry. Zara has been able to exist and dominate the industry over GAP because of its distinctive approach of management. Disruptive management approach however has its challenges because most companies are mostly used to companies are used to the same way of doing things, therefore, embracing change in the management approach becomes difficult. Most of the company management teams avoid embracing change because they fear that the new approach may never work, or they may affect the overall performance of the company (Osterwalder & Pigneur, 2010). This factor causes most of the companies not to implement the disruptive approach of management whereas; disruptive approach of management has become the cause of the success of various companies. Modern companies that need to thrive in the market should focus on renovating their products and investing in newer innovative brands as well as their services. Unlike GAP Zara has been able to produce the latest fashion designs because of their consideration to customer specifications while producing new designs and renovating the existing ones. Failure to invest in new and renovated brands leads the company to risk management efforts. Some of the factors to consider while incorporating the disruptive business models include; when new products were last produced, last changes made in the company operations, the last time to enter a new market and whether the company renovated their products among other factors. For a company to grow in revenue and profit margin, it should invest in change and renovations (Jones, 2006). Over the recent past, the apparel industry has been affected by economic pressures due to low costs of manufacturing. This has caused most companies in western countries to seek for new strategies to develop new products and renovate the existing brands. These companies seek for new plans of operation for survival in the highly competitive market and grow in terms of sales and profit margins. This method however, is challenging because the manufacturers are bound to strict dates of delivery, mass production thus making the utilization of the resources difficult. The customers depend on the company to deliver products of the right standards at the right time. The markets for the apparel industry are mostly mixed up therefore it’s hard for retailers to increase their market size. To counter these challenges the companies in the apparel industry can implement various business models to develop the company as well as distinguish their products in the larger market (Collins, 2009). Some of the factors to consider in case the company needs to adopt a new business model are outsourcing production, planning strategically, reducing the products life cycle, offering fast fashion and organizing the distribution channels. The implementation of new business models in the apparel industry ensures the companies is relatively advantageous as compared the other companies in the industry as well as survive in the competitive market for longer. Therefore, it’s suggested that the companies within the apparel industry often evaluate and revise their business models and technology use. The customers and end users of products from the apparel industry are responsible for determining its growth and success. Most of the customers buy the clothes based of their ethnic and cultural environment, their age and social economic backgrounds. Consumers from different cultural and social economic back grounds differ in their choices of clothes and fashion designs. Some of the other factors that determine the preferences of the apparel shoppers are lifestyles, culture and shopping orientation (Osterwalder & Pigneur, 2010). Most consumers determine their shopping outlet depending on their shopping orientation thus it’s the responsibility of the manufacturing company to determine where to deliver their products to the right target markets. Another characteristic of consumers in the apparel industry is that most of them do not formally gather information about the product before buying it. The consumers make the decision whether to buy or whether not to buy the product while in the store (Collins, 2009). The consumers mostly gather formal information about the shopping store rather than the product they purchase. To enhance easier shopping orientation, shopping stores are classified according to interests, fashion, finances, and time and brand consciousness. The demographic factor also determines the consumers’ preference of the apparel industry products. Some of the demographic factors that determine the consumers’ choice of products are the different levels of education and income levels. These factors determine the lifestyles and consumer behaviors (Jenkyn, 2005). Business strategies Fast and effective decision making; One management strategy that Zara has acquired is through practicing proper and effective making of decisions as well as quickly responding to the requirement specifications of their customers. Providing products and services according customers demands are some of the major challenges facing the fashion industry. Unlike GAP where decisions are made by the senior management, decisions at Zara are mostly left to the stores managers since they have a wider knowledge of the client’s needs (Osterwalder & Pigneur, 2010). Marketing; Zara has invested in properly laid out marketing strategies through marketing their products, merchandising & advertising the products. These factors encourage visiting Zara’s stores often and buying more designs. Zara has invested production of high quality products and has also put in place proper networks for the distribution of their products targeting potential markets such as the Italian and European markets. Information systems; Unlike Gap, Zara has embraced use of information technology through use infrared of dial up modems for order management where the store management is responsible for overseeing the process. Due to the complicated process, it’s divided into segments and steps where the concerned parties play their part in design and manufacturing of the order that has been made by a client. The company has set the time limit from the placement of the order to the delivery of the product to a maximum limit of three weeks. This ensures that all the customer orders are delivered to the customer as required and within the shortest time. Zara has also invested in advanced information systems where orders are prepared and relayed over the internet. The factories were facilitated with applications that offer information about the order as well as their due dates. Distribution; to ensure that the products reach their target markets, Zara has established a large number of stores especially in the area with higher market potential. Zara has retail stores in the United Kingdom, Portugal, Spain, Greece, France and the Middle East among others. Effective communication between the distribution channels, stores and the factory plays a huge role in ensuring high response to orders from the customers (Pahl & Mohring, 2009). Outsourcing production; Unlike GAP where manufacturing of the designs is the responsibility of the firm, Zara practices the outsourcing strategy by contracting external firms to manufacture then designs according to specifications. Outsourcing production is important in ensuring high response because the chain of supply and distribution is clearly defined. The clearly defined distribution network easily links the customer demand to manufacturing and links manufacturing to the distribution channels (Pahl & Mohring, 2009). Zara business process Stage Value drivers List of references Collins, J. (2009). Threads: Gender, Labor, and Power in the Global Apparel Industry. Chicago: University of Chicago Press. Jenkyn, S. (2005). Fashion Design. London, UK: Laurence King Publishing. Jones, R. (2006). The Apparel Industry. New Jersey: John Wiley & Sons. Osterwalder, A., Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. New Jersey: John Wiley & Sons. Pahl, N., Mohring, W. (2009). Successful Business Models in the Fashion Retail Industry: Strategic Audit of H&M Compared to ZARA. Georg Steinbach: GRIN Verlag. Read More