Fashion and Apparel - Essay Example

?Case Study: Zara (Fashion and Apparel) Summary Zara is in the apparel and fashion business. Its growth in this sector is unprecedented, and is attributed to the kind of business strategy that it has applied all through the years. It produces most of its products and outsources only a small percentage of the products. Its closest rival, Hennes and Mauritz, has a different strategy, quite opposite to the strategies of Zara. Zara is more liquid than H&M. Because of this, Zara’s lead in the sector is quite unmatched. Among its strategic innovations, Zara has used technology in its processes. The company website is a 24/7 interactive method wherein customers can make suggestions and also air their complaints. Zara is also affected by the growing tide of globalization. It is a knowledge-based organization and its workforce is composed of a pool of talented and expert individuals. Zara has invested on its employees. The company also aims for customer satisfaction and loyalty; that is why, its products and services are quality-oriented. Inditex, Zara’s mother company, sees to it that the company adheres to quality management and best practice. The company’s financial standing is as healthy as ever. Zara’s supply chain is effective. They ensure product quality and deliver it with speed and accuracy, making the customer asks for more. It’s what Zara has been doing all through the years. The main body Zara is owned by Inditex and is into the international apparel market and fashion, which are customer-driven markets. It is continuously growing and is a leading competitor in this kind of industry. Its closest rival is Hennes and Mauritz (H&M) which outsources most of its products to lower cost. On the other hand, Zara is a company that is quality-oriented. It produces 60% of its products and is into quality management. Unlike H&M, Zara ensures that its customers are satisfied and hopes to come back to buy more of its products. With the application of computers, the Internet and Information Technology, Zara provides speed of information to its customers. The Internet provides customer interaction; thus Zara’s website provides 24/7 service to update customers of its latest products and services. In the age of globalization, knowledge is both a product and resource. Organizations are now focused on knowledge-based economies, and are more concerned with the knowledge people possess; this is termed ‘people-embodied knowhow’. Firms take care of their workforce because of the knowledge they possess. They have invested much on their workforce. Zara aims for talents and customer’s focus and loyalty. This is the job of the marketing manager. It also sees the importance of focusing on their employees because they see the relation between contented employees and contented customers. Satisfied employees result in satisfied customers. Meeting the customer’s needs and wants is a business trend in the age of globalization. Zara aims for customer loyalty while keeping cost of production low. This is shooting two birds in one shot but difficult to achieve; difficult because meeting the customer’s needs and wants at the same time minimizing cost of production do not ensure quality product or service. But Zara focuses on quality in its many products. With respect to its closest competitor H&M, the two rivals have closely similar characteristics, for example their financial status, their operating revenues, etc. What is remarkable however is that Zara is a bit more liquid than H&M; Zara has a manufacturing plant that manufactures most of its products, while H&M only stores its products in a warehouse. These products come from outsourcing companies, mostly Chinese companies that manufacture products for a very low price. Inditex, Zara’s mother company, is an effective company which adheres to best practice and quality management. It has an operating profit much higher than H&M, and also adheres for expansion by building more stores according to company surveys and studies using scientific projects and anticipated future value. Zara’s financial statement is considered stable and very much improving, and has a competitive advantage over its many rivals, particularly its closest rival H&M. There are other companies in other industries (not particularly the apparel and fashion industry) which adhere to quality and looks for continual improvement, quality service and customer satisfaction, that Zara has looked up to and, perhaps, based its style of management. These companies, like Zara, do not outsource its products. They do meticulously take care of the manufacturing of their products, seeing to it that quality and durability are ensured, coupled with an effective supply chain. Most of the companies nowadays, particular the global ones, prefer standardized products which can be manufactured by outsourcing companies from China, in order to minimize production costs and the flow of supply chain. Moreover, the apparel industry is labor-intensive; its process of manufacturing requires the services of more people, which is unlike other manufacturing processes where they use machines and robots to manufacture the products. Like the car manufacturer Toyota, Zara has its own in-house manufacturing; it produces products that suit to the needs and delicate tastes of its customers. With this, product quality is ensured and customer satisfaction is not far behind. Another remarkable process in Zara is that “85% of production is done through the season”, allowing a supply chain that provides updated products (Ghemawat 9 quoted in Craig, Jones and Nieto 2004). Vertical integration is Zara’s corporate strategy amidst globalization. This allows Zara to be ahead of its competitors. As stated, 60% of its products are manufactured in-house. Its trained personnel analyzes product quality, including its cycle and trend in stores up to the designers. Because of this, local designers in Spain are able to design products that meet customer specifications (Ghemawat quoted in Craig, Jones and Nieto 2004). Likewise, amidst vertical integration, Zara’s workforce also works horizontally because of the open communication environment within the company. This is enhanced by the effective Information Technology that the company has applied. Zara should introduce various changes in its marketing strategies, product orientation, employee management, and other organizational strategies. It has to adapt some strategies and marketing strategies in order to gain an edge in the competition. The demand for localized products is also growing. Adaptation is one innovation that Zara has to apply in its marketing strategies to adjust to cultural differences. Customer satisfaction must be an important strategic part of marketing. Products and services must be geared towards customer focus, and customer satisfaction is a goal in a value added supply chain. Supply chain management excellence is crucial to customer satisfaction; consequently, customer satisfaction is critical to customer loyalty, and loyalty critical to profitability. In order to address the problem of customer loyalty, firms apply product and service innovations. Supply chain learning should be a part of the firms’ strategies to address customer satisfaction and loyalty. This is also the main objective of market orientation – customer satisfaction through superior performance of products and services. Companies attain competitive edge through constant innovation. Organizations keep constant contact with customers, looking for ways to satisfy their needs and wants. Good customer relation is an important aspect of business. Identifying and working out to strengthen customer satisfaction, supply chains can help in having a good relationship with customers, but supply chains have two attributes which are cost and service. Service is itself responsiveness to the customer’s demand, but demand can also increase cost. Putting on a lot of innovations on the products means adding cost on production. The application of Information Technology to Zara Customer interaction is now enhanced by technology and the internet or the World Wide Web. Customers can ask questions or complain through company websites which have many features. Modern information technology used in supply chain includes Electronic Data Interchange (EDI) which is the information transmission backbone of manufacturing companies and supply interfaces. The popularity of the Internet has led to the introduction of Internet-based EDI. Supply chain management is traditionally focused on least-cost transaction, but the new trend in business-to-business transaction is long-term relationship. It is almost similar with customers and consumers. The question that is always in the mind of the marketing manager is: “will the customer come back?” One significant strategy in meeting the needs and wants of customers is introducing an approach to supply chain that aims back at the customer. Satisfying their needs and wants is always a challenge to marketers. Knowing the customers’ needs have become a foundation for which a company is founded. Zara’s strategy should be marketing orientated which requires that a number of changes take place in the organization, in practices and in attitudes. Implementing the marketing concept requires more than paying lip service to the ideas inherent in the concept. Behavioral sciences can lead to an understanding of buyer behavior; another example is the development of quantitative and qualitative techniques of marketing research for analyzing and appraising markets. From analyzing the customers’ information, companies can shift focus to analyzing what the future holds for the customer and the company. This may include determining if the customer may still want to deal with the company, or buy products from the company or shift to other competitors. The information on the customer satisfaction is vital in the improvement and enhancement of the product. This information and data can be linked back to the manufacturer for further quality enhancement. Customer focus is vital to supply chain. The customer wants to be understood, and the marketer can interpret this by answering what he/she wants of the product. The information can be inputted back to the customer for enhancement of the product. If it is service-oriented, the company has to modify the service. Supply chain has to be continually improved in order to attain customer satisfaction and loyalty, while customer focus can reflect satisfaction and loyalty. An excellent supply chain management can attain customer satisfaction; at the same time, customer satisfaction may lead to loyalty, although satisfaction does not necessarily lead to loyalty. Before loyalty can be attained, customer closeness is crucial; meaning some activities have to be geared towards contacting the customer in order to acquire more data and information about the product, and how the customer reacts to the product, including suggestions for improvement. Acquiring more profits, which is one of the major goals of companies, seems to be not a sure goal. It is also one of the difficult objectives to achieve. There are more and more products being manufactured but there are fewer customers who buy these products. Companies, or global business and organizations, have to find their segments and customers because they have more products to sell. There is a surplus of products and less customers. In other words, organizations around the world compete to gain more customers, and one way of gaining more customers is to win their trust, answer and meet their needs and wants, and make sure that they come back. It is not enough that they buy the company’s products; it is important that they come back. Customer satisfaction should be able to gain customer loyalty. A lifelong partnership between the company and the customer can make the company last a lifetime. Supply chain is an important factor to consider in attaining customer satisfaction. When a product is being bought by a customer, it must be delivered quickly, with ease and comfort of delivery, and must have the desired quality that the customer asks for. This is what Zara has been doing in its marketing strategies. Gulati and Oldroyd’s article explains the significance of supply chain management on customer focus. The recommended the four stages of customer focus, which are: Communal coordination. Create a centralised repository of customer information, which records the business interaction of customer and the company. Organisations have to manage and collate their interactions with different kinds of customers. Gathering the information for the company requires a lot of job to include networking with different organisations within the industry. Serial coordination. This involves coordination to manage ‘a continued collation of data’ by different units so that these information and data can be analysed and shared within and throughout the company. Symbiotic coordination. From analysing the customers’ information, companies can shift focus to analysing what the future holds for the customer and the company. This may include determining if the customer may still want to deal with the company, or buy products from the company or shift to other competitors. Integral coordination. Companies can shift focus on a ‘sophisticated understanding’ of the customer, and incorporating this understanding into their daily operations. (Gulati and Oldroyd 2005, 99) The authors concluded that supply chain is an important factor to consider in attaining customer satisfaction. When a product is being bought by a customer, it must be delivered quickly, with ease and comfort of delivery, and must have the desired quality that the customer asks for. That is supply chain. Customers sometimes look for the price of the product and do not care about the sales pitch the salesman is conducting. The salesman should help the customer understand the superb value of his product (Anderson et al. 91). But in a survey, consumers are concerned of the value they are receiving of the money they are spending. This is true with utilities companies. Edward A. Morash and Daniel F. Lynch’s article focused on supply chain, strategy and customer closeness. Their aim is to correlate supply chain to global firms and consumers. Their research involved surveys on global capabilities and performance measurement practices, they found that customer closeness is important in demand-oriented capabilities and performance. Customer closeness is supported by responsiveness to customers and customization. The research also found that some supply chains are also experimenting with mass customization, which is a strategy that combines operational excellence with customer closeness. The innovative strategies and their relationships to supporting capabilities showed the types of capabilities firms are most likely to rely on to achieve this. Another article which focuses on customer loyalty is from Govindarajulu and Daily who said that companies have to be flexible in dealing with customers, and should have the ability to change and react. They defined flexibility is defined as “the ability to change or react with little penalty in time, effort, cost or performance” (Upton 1994 quoted in Govindarajulu and Daily, 83). A flexible organization should respond to rapid changes in product mix, delivery, or volumes demanded by the customer (Fisher, Hammond, Obermeyer, and Raman 1997 quoted in Govindarajulu and Daily, 83). In some studies flexibility refers to operations and financial performance. Barsky and Ellinger (2001, 32) said that one significant strategy in meeting the needs and wants of customers is introducing a “customer-driven approach to supply chain management”. Their article emphasized that satisfying the needs and wants of customers is always a challenge to businesses. Knowing the customers’ needs have become a foundation for which a company is founded. The practice of customer-oriented approach can be understood as the organisation’s openness to the customer, or the organisation being accountable to the customer. Taylor’s study focused on the application of value stream management techniques to improve supply chain and logistics. He applied this on a case study which was the Texon International plc, the world’s largest supplier of materials in shoe manufacturing. In the study, Taylor introduced the value stream analysis (VSA) which was used in mapping internal manufacturing processes, and also in domestic supply chains. Taylor analyzed a project case study of a global supply chain. He concluded that it was necessary to adapt some of the approaches of the supply chain because of the global scope of the project. Value stream management, it was concluded, was an effective framework in analyzing and improving the international supply chain. References Anderson, John, Jim Narus, and Weyn Van Rossum. 2006. “Customer Value Propositions in Business Markets.” http://0-web.ebscohost.com.wam.city.ac.uk/ehost/search/advanced?sid=6354a166-6b3e-4b62-b493-828d5c925f5e%40sessionmgr115&vid=3&hid=108 Barsky, N. and A. Ellinger, A., 2001. “Unleashing the Value in the Supply Chain.” Strategic Finance, Jan2001, Vol. 82 Issue 7, p32-37, [e-journal], Available through: City University London [Accessed 24 Mar 2011]. Approaches to b2b electronic commerce. International Journal of Commerce, Vol. 7, Number 1 Craig, Amanda, Charlese Jones and Martha Nieto. 2004. “Zara: Fashion Follower, Industry Leader.” Business of Fashion Case Study Competition, Philadelphia University. Govindarajulu, Nalini and Bonnie F. Daily. 2009. “Exploring the Antecedents of Externally-Driven Flexibilities.” Journal of Management Research, Vol. 9, No. 2, August 2009 Morash, Edward A. and Daniel F. Lynch. 2002. “Public Policy and Global Supply Chain Capabilities and Performance: A Resourced-Based View.” Journal of International Marketing http://0-web.ebscohost.com.wam.city.ac.uk/ehost/search/advanced?sid=6354a166-6b3e-4b62-b493-828d5c925f5e%40sessionmgr115&vid=3&hid=108 Richard Gulati and James Oldroyd. 2005. “The Quest for Customer Focus.” Harvard Business Review [e-journal], Available through: City University London [Accessed 11 May 2011]. Taylor, David H. 2008. “An Application of Value Stream Management to the Improvement of a Global Supply Chain: A Case Study in the Footwear Industry.” International Journal of Logistics: Research and Applications Vol. 12, No. 1, February 2009, 45–62 Read More