Zara: Brand of Inditex Group - Essay Example

? Zara Table of Contents Question 3 Question 2 4 Question 3 5 Question 4 8 References 10 Question Zara is one of the leading and most popular Spanish clothing and the accessories retailers. It is the flagship brand of Inditex group. Inditex group is one of the world’s largest fashion retailers. The Inditex group owns several brands. Among all of the owned brands, Zara is considered as one of the most popular and accepted brand among the people around the globe. Several leading organizations are trying to implement business expansion strategy in order to develop a potential global client base and achieve significant market share growth. Zara has a strong global presence. The brand implemented a unique operation management strategy in the business processes which is totally different than other retailers selling similar types of apparels. Zara is known as a vertically integrated retailer. The organization has high control on each and every step in supply chain, manufacturing, designing and distribution of the products. The company has set up its own production factory in major areas around the globe (Jones and Robinson, 2012, p.29). It helped the organization to control each and every business operation process individually. Effective integration and close look at each and every business process help the organization to maintain a strong control on production and distributions. It is discussed earlier that the organization adopted different operation strategy in business process unlike to the similar retailers or organizations. Zara adopted just-in-time approach in the business model in order to enhance the supply chain, inventory management, and logistics management and distribution management process. The manufacturing units are located in several parts in the world. It is true that the warehouses of Zara are located in Spain. 50 % of products are manufactured in Spain. The rest of the products are manufactured throughout the world. It is a significant example of effective operation process (Slack, Chambers and Johnston, 2010, p.97). It is true that, several leading organizations used to outsource products and services from the parent country. It increases the outsourcing cost and supply chain cost. Glocal manufacturing and distribution process helped Zara to cut down the outsourcing cost. Now-a-days, Zara is significantly trying to expand its business practices due to favourable external environmental factors. In addition to this, strong global brand name is influencing Zara to implement global expansion strategy. Manufacturing factories in different places and strong vertical integration in business model are helping Zara to adopt and implement global expansion strategy quite successfully. Question 2 Zara, being one of the leading global apparel retain chain is facing several operation management issues in its global expansion strategy. It is discussed earlier that the organization adopted vertical integration strategy in the business model. In addition to this, the organization implemented just-in-time approach in the supply chain and distribution management process. Zara believes in lowest inventor management. Zara never goes for mass production and huge inventory. According to the management of Inditex group, large inventory can affect the product quality and brand image of the organization (Johnston, Clark and Shulver, 2012, p.76). The percentage of annual sales of Zara is lower that other potential competitors due to this reason. In addition to this, Zara used to avoid developing inventories in its supply chain part from the resources and raw materials to the end users. The brand designs and manufactures almost 10,000 new models in every year and distributes it to all the retailers twice per week. This system actually increases the inventory management cost. The organization believes that large inventory and limited logistics activity can reduce the exclusivity of the products as the organization tries to provide quality and exclusive products to the target customers. The organization faced operation challenges in its global expansion strategy due to this inventory management process as the organization has to bare huge logistics and supply chain cost. Other potential competitors of Zara believe in larger inventory in order to cut down the extra logistics cost in global market places. Zara has a strong presence in global market place. It is important for an organization to increase the number of warehouses in several international markets to bring efficiency in the supply chain and distribution process (Lopez and Fan, 2009). Limited number of warehouse can affect the organization in its inventory management system. In addition to this, centralized logistics and distribution model affects the distribution management process. Low inventory, lack of warehouses around the globe and centralized logistics are creating major operation issues in Zara’s global expansion strategy. Question 3 Zara is one of the leading and popular fast fashion and apparel retail chains around the globe. It is discussed earlier that the organization is increasing its manufacturing stores in order to reduce the outsourcing cost and time. Earlier the brand used to manufacture, store and process the products from Europe. The organization always ensures sustainable business practices in order to avoid several legal and environmental issues. Chinese fashion industry is achieving sustainable growth rate due to favourable social needs. Zara generally provides exclusive apparels and accessories for the target customer groups. Recently, the demand for western style fashion is significantly increasing among the Chinese customers (Christopher and Lowson, 2004, p.32). Earlier Zara had limited number of manufacturing units outside of the European country. Manufacturing products in a single production unit increase the supply chain cost and time. However, slowly and gradually the management of the organization decided to increase the number of manufacturing units outside Spain (Walters, 2006, p.7). Zara is considered as a successful brand extension of Inditex group. It is one of the leading fashion retailers around the globe. Inditex always tries to ensure sustainable business practices in global market due to maintain its high brand image and effective corporate governance. Demand for the apparels and accessories of Zara are highly increasing among the Chinese people. If Zara decides to set up a new manufacturing unit in China, then it will help the organization to maintain effective business sustainability (Kim, 2006, p.9). There are four types of sustainability, such as human, economic, social and environmental. It is important for the organization to develop a manufacturing unit in China. It will help the organization to maintain effective relationship with the stakeholders and government in China. Introduction of manufacturing plant in China will help Zara to gain significant support from the government of China as it will help the country to overcome several economic challenges. Recent financial crisis and economic slowdown affected the social life and economic position of common people. Increasing unemployment rate is the major consequence of economic downturn (Zara and Paul, 2002, p.7). This strategy will help Zara to maintain economic sustainability in China. The decisions of introduction of manufacturing in china will help the government to overcome the problems like high unemployment rate. Environmental sustainability is required as this involves natural resources that are used by organizations that are required for human beings. Zara is environmentally sustainable organization. Inditex group always tries to focus on recycling of water, maintaining zero solid waste and reducing carbon emission level. These processes will help Zara to increase its brand value in China. Social capital is a key aspect of sustainability. Effective leadership style and employee centric developed policies will help the organization to achieve effective support from public and several public bodies. Stakeholders’ interest is important for an organization to attain significant business growth in the global market place. The organization needs to recruit local or Chinese employees. Corporate Social Responsibility of an organization is considered as contributing something to society or community against the market return or business profit. Zara should try to develop effective employee policies to meet social sustainability. If Zara decides to manufacture in China it has to bide by the rules and regulations of that country. The foreign businesses face external pressures from parts of the society. It is not a hidden secret that manufacturing in China will involve some environmental costs. It would be the responsibility of Zara to reduce those costs by following effective CSR policies like “zero solid waste”. It would have some positive impacts upon the CSR activities of Zara. Zara is one of popular flagship organizations of Inditex group. Inditex always tries to organize community engage programs for the purpose of social welfare. China is one of the growing markets for fast fashion and exclusive clothes. Zara can gain effective competitive advantages form Chinese market. But it is important for the organization to contribute something for the Chinese society or community. The organization can use significant human resources. The organization can develop several community engagement programs in China to ensure human sustainability. Therefore, it will be effective if Zara decides to develop a manufacturing unit in China. It will help them to maintain sustainability and effective corporate social responsibility. Question 4 The number of warehouses of Zara is quite limited. Earlier the organization used to manufacture its products in Spain. In addition to this, the organization developed centralized warehouse to have a direct control on the manufacturing and distributing process. However, the organization agreed to increase the number of manufacturing units outside Spain and the European countries. It helped the organization to use the resources of various countries and deliver the products in different international places as it is highly difficult for an organization to maintain a huge global market place through limited manufacturing units and warehouses. Zara uses centralized distribution model. The diagram below will provide a detailed picture of centralised distribution model. If the organization continues to use centralized model then it has to bare high investment. In addition to this, it can create serious conflicts among several departments. It is important for the organization to localize and decentralize the manufacture and distribution model. For example, the demand for exclusive products is significantly increasing among the Chinese people. It is very much difficult for an organization to outsource products from Spain to China as it takes huge logistics costs and time. Therefore, it can be recommended for the management of the organization to increase the number of warehouses outside country (Slack, 2012, p.62). Significant number of warehouses and manufacturing units can help an organization to bring efficiency in the supply chain and distribution process. Decentralization will help the organization to clear the inventory and stock goods within significant time period. Zara should focus on increase in inventory. Low inventory can affect the organizations’ business performance as it can cause high demand and less supply. Large inventory and warehouses outside Spain will help the organization to strengthen its supply chain network and bring speed or efficiency in the distribution process. These things will be ensured if the organization follows decentralization in supply chain and distribution. References Christopher, M., and Lowson, R., 2004. Creating agile supply chains in the fashion industry. International journal of Operation Management, 9(1), p.32. Johnston, R., Clark, G., and Shulver, M., 2012. Service Operations Management- Improving Service Delivery. London: Prentice Hall. Jones, P., and Robinson, P., 2012. Operations management. 1st ed. London: Oxford University Press. Kim, D., 2006. Process Chain: A new paradigm of collaborative commerce and synchronized supply chain. Business Horizons, 41(2), p.9. Lopez, C., and Fan, Y., 2009. Internationalisation of the Spanish brand Zara. Journal of Fashion Marketing, 39(4), p.13. Slack, N., 2012. Operations and Process management. London: Prentice Hall. Slack, N., Chambers, s., and Johnston, R., 2010. Operations Management. 6th ed. London: Prentice hall. Walters, D., 2006. Effectiveness and efficiency: the role of demand chain management. International Journal of Logistics Management, 23(1), p.7. Zara, K., and Paul, V., 2002. Zara fast fashion. International Journal of Operation management, 21(3), p.7. Read More