Using Planning and Leading to Ensure Innovative Organizational Values and Practices - Case Study Example

 Using Planning and Leading to Ensure Innovative Organizational Values and Practices Table of Contents Executive Summary 1. Introduction............................................................................................................... 2. Planning at Zara........................................................................................................ 2.1 Looking backwards..................................................................................... 3. Leading at Zara......................................................................................................... 4. Conclusion.................................................................................................................. 5. Recommendations...................................................................................................... References Executive Summary Zara, a multi-national retail store catering to youth demographics with a line of stylish and trendy clothing, currently experiences business success and is often benchmarked for its efficient processes and business activities. This business operates in a very volatile and unpredictable marketplace where buying behaviours of consumers change frequently, thus there is always a change-focused philosophy at Zara. At the managerial level, planning and leading are the two most important management functions as they provide opportunities for locating process inefficiency and also work to develop a more stable, loyal organizational team. Zara managers use planning to enhance the operational aspects of the business while using leading concepts to improve employee motivation and innovation in multiple business divisions. This report identifies Zara’s current planning and leading functions within the management hierarchy, offering suggestions on how Zara managers can best use these functions to create better innovative practices and values. Using Planning and Leading to Ensure Innovative Organizational Values and Practices 1. Introduction Zara is a rapidly expanding clothing store catering to the 18-30 year old demographics, offering fast-fashion, quality clothing at an affordable price. Zara’s focus in its clothing line is to satisfy the growing consumer trend toward modernism, essentially giving couture quality clothing at a fraction of the price while keeping in touch with current social trends. This fast-fashion mentality has created significant improvements to areas of supply chain, the in-store sales promotion environment, and has created many operational benchmarks in overall business model which are being used by other retailers in this marketplace. However, in order to be the efficient business leader in a difficult consumer retail environment, Zara must rely on its management to facilitate a positive organizational culture and also to drive compliance to internal practices and policies in order to reach business goals effectively. In this environment, planning and leading are two of the most important management functions as they tend to bring better sales results for Zara as well as satisfied consumers receiving a product which appeals to their social needs for exclusivity, modernism, and overall fashion value. In today’s organisations, to become a business success, management must instil innovative values and practices in order to achieve competitive advantage and to build a more successful and contributing employee staff. As dynamic business environments change both externally and internally, innovation and change should be embraced to bring a variety of process and policy improvements. This report identifies how the functions of management planning and leadership best contribute to the development of innovative values and practices at Zara. The report will focus on Zara’s strength and weaknesses in relation to process and human resources and identify how planning and leadership contribute to a better and more efficient business retail model. 2. Planning at Zara The basic long-term strategic objective at Zara is to continuously drive improvements in areas of the supply chain and production in order to keep a brand promise to customers about fast fashions with an edgy and trendy appeal. This strategy also involves using modern management theory regarding how best to motivate employees to drive innovation and higher business contribution. The business currently has only a 15 day lead time from raw materials to finished delivery, which is something unparalleled in the retail sales marketplaces both domestically and globally. One retail management expert offers, “Zara has revolutionised the fashion industry by following a fast fashion model and has been able to navigate the volatility of this world” (Sull and Turconi, 2008, p.4). At the planning stage, the managers at Zara need to recognize areas of operations and marketing to determine whether changes can be implemented to improve business process, usually conducted through an internal audit of capacity. Currently, Zara experiences a very high competitive strength over all of their competitors with having such short cycle times from manufacture to distribution, other retailers can have six month lead times. Keeping this competitive edge requires innovation in order to improve cycle times further or enhance aspects of the supply chain for areas of cost savings or better supplier relationships. Zara managers use planning tools of many varieties to analyse sales forecasts, transfer costs, merchandizing, and product ordering (Ferdows, Lewis and Machuca, 2003). Essentially, in order to improve operational efficiency both upstream and downstream, the planning manager must develop a long-term strategy, measure internal capabilities to reach that goal, and then determine whether the plan is reachable using both process and human capital. Planning at Zara is vital, especially when auditing supply chain. Zara owns most aspects of its supply chain from distribution to raw textile and raw materials ordering (Sull and Turconi). This allows the planning manager to view the supply chain, recognize areas where costs are continuously rising or where efficiency is lacking, and redevelop the logistics network by changing suppliers or helping suppliers to improve their response times to Zara’s production needs. Planning is the driving force of innovation at Zara because managers are constantly focused on process and supplier relationships as steps toward reaching an overall strategic objective. At Zara, this objective is constant process improvements using planning as a tool to achieve better industry benchmarks and improve sales volumes by meeting brand promises for fast fashion and new styles. Also in relation to planning, Zara managers must routinely determine whether they are producing marketing promotional materials which meet with changing consumer beliefs and values. Zara’s fast fashion model and their stylish clothing lines have raised consumer sales volumes so much that Zara is able to sell 85 percent of its merchandise at the regular retail price while other competitors are left with 50 percent surplus and must reduce the merchandise through sales promotions (Hardman, Harper and Notaney, 2007). This means that Zara is effectively using promotion to bring in desired 18-30 target markets and is meeting their brand promise for top quality fashions. Unlike many retailers, Zara uses little print or on-air promotion but relies on in-store promotions and window displays to create a brand image. Planning, in areas of promotion, provide tools to recognize opportunities for better satisfying customers especially when buying behaviours change or sales begin to decline. Planning creates innovation at Zara because it offers a strong vision of achieving marketing innovation by looking for opportunities to expand or alter current promotional focus before consumer buying trends change. A successful organization “has a strong vision of what they want to do and where they want to go” (De Vries, 1996, p.491). Another author offers, “You don’t need expensive promotions to get corporate publicity” (Bluestein, Buchanan, Chafkin, Del Rey and Joyner, 2009, p.75). Planning provided Zara with contingencies in areas of marketing and promotion by understanding what their objective actually was for areas of advertising and finding new media outlets to build a better corporate image in the process. Through planning, Zara finds a better promotional package able to respond to volatile or unexpected changes in consumer buying behaviour. 2.1 Looking backwards A successful innovator must maintain a backward-looking management philosophy (Alsever, 2009). In planning, the goal of management is to look toward how to reach future objectives, however understanding previous failures is part of the planning process and can bring high success to companies like Zara. When entering new markets nearly a decade ago, Zara did not have the understanding of foreign buyer demands and behaviours and attempted to launch a similar business model internationally. Sales of Zara clothing products were not what was expected during this period for failing to meet local buyer needs. Planning in today’s Zara gives managers the ability to look at the long-term objective of building better sales in foreign market environments and reflect on where previous international strategies have failed, thus removing these process deficiencies from the management system. Reinstein (2007) offers that when planning business activities, it is important to select the right people who are not interested in protecting the past but can use it to create a better future. 3. Leading at Zara Managers in competing businesses must “build a fortress and defend it or nurture and leverage unique resources to find success” (Eisenhardt and Sull, 2001, p.109). The idea of building a fortress highlights a more authoritarian manager devoted to the centralized business hierarchy and the top-down flow of information from leader to subordinate employee. This type of manager would not be effective at Zara in a rapid change, fast-fashion environment. Because this is a change-focused organization adaptable when constant improvements are necessary, a leveraged manager using human capital as a tool for success is a key strength at Zara. When implementing a change policy, there are usually 25 percent of employees or managers who will resist the change as part of inherent motivations (Reinstein). An environment where continuous change and improvement is required demands that managers decentralize the work environment and allow employees to become more involved in innovation and problem solving within the organization. “If the organization is still using vertical hierarchies instead of self-directed work teams, it is not ready for change” (Reis and Pena, 2001, p.674). Zara devotes considerable training to their managers to be more positive communicators and to facilitate coaching and employee development, demanding leaders rather than rigid, centralized managers within the business. One expert in business research offers “members of the operating core seek to minimize the influence of the administrators – managers – over their work” (Mintzberg, 1980, p.2). Workers, as a generic whole, prefer to work in autonomous environments where managers have less control over their activities. At Zara, the organizational culture is multi-cultural and very diverse, with diversity training at the forefront of lower-level employee knowledge. Leaders at this organization are equipped with knowledge of cultural dimensions, behavioural outcomes of manager and subordinate relationships, and motivational theory to drive a better performing and team-focused environment. A business environment which maintains many different demographics and cultures has the human capital necessary to bring any number of process or policy changes which improve business productivity and efficiency in its marketplace. Zara uses qualified leadership to build a more unified organizational culture and can drive innovation by having a business model built on diversity where multiple talents can coordinate and communicate effectively to achieve project successes. 4. Conclusion Zara takes full advantage of planning and leading in order to build a more effective business model, satisfy the consumer, and remain an industry leader in areas of logistics. This company is benchmarked by other retailers for their quality and efficiency, with much of this being attributed to successful strategic planning and management philosophy of internal managers. Using Zara as the example, managers can use planning to identify areas for improvement in process as a means for reaching long-term strategic goals. In areas of promotion, Zara uses effective planning to create a proactive advertising model which has contingencies in the event of changing consumer values. Innovations, generated from talent within the organisation, is a key focus of leadership at Zara due to the business’ investment in talent management and human resources at the fundamental, motivational level. Autonomous working environments and development/coaching of human capital brings Zara unparalleled business success in its highly competitive marketplace. The high volatility of this retail market environment demands innovative activities and practices at Zara which is best achieved through planning and leadership over other business functions. 5. Recommendations Teams admire leaders who “have solid values and clearly communicate those values” (Froschheiser, 2008, p.9). When implementing change policies, another 50 percent of employees are typically on the proverbial fence as to whether to accept or reject the change (Reinstein). Zara management is constantly looking for process-related improvements or opportunities to change internal operations. Zara should develop a more charismatic leadership training programme for managers which highlights coping with change resistors and the art of persuasion. This would broaden the leading capabilities of existing managers and improve team-focused outcomes. It is also recommended that Zara managers devote even more investment into building a more autonomous organizational culture. When employees are empowered to offer their opinion or solutions to internal or external problems, it is likely their performance is going to increase substantially. The end result could be innovative practices which further streamline the competitive business model and can be attributed to human capital development. “Doing what was done yesterday is no longer a formula for success” (Kotter, 1990, p.104). Zara must continue to devote management investment into further motivating workers by appealing to their social needs related to belonging within the organization. Zara learns from its past mistakes, such as the aforementioned marketing problems with international clients. However, greater international competition dictates new innovations in order to sustain that competitive edge. Zara should periodically survey their employees to offer suggestions on how to improve internal processes to create sensations of autonomy and belonging and also drive innovative business solutions. Zara managers should also use better planning tools, such as the Gantt chart, to further streamline process innovations. By looking at time issues, Zara can identify whether certain areas are not meeting efficiency improvements or even create a radical redesign of staff or production which is much more efficient. Time aspects as a planning tool can bring more benchmarking awards at the operational level. Finally, it is recommended that Zara encourage a better dialogue between senior leaders and the lower-level employees in order to encourage a better sense of teamwork. People genuinely want to be proud of their role in the organization and are not very accepting of rigid, centralized hierarchies. Building a stronger inter-divisional communications medium, perhaps by outsourcing information technology support, could be an aspect of planning to improve organizational culture and business effectiveness. References Alsever, Jennifer. (2009). How to Innovate: A step-by-step guide to fostering business creativity. Fortune Small Business, 19*2), p.68. Sull, D. and Turconi, S. (2008). Fast fashion lessons. Business Strategy Review, Oxford. 19(2), p.4. Bluestein, A., Buchanan, L., Chafkin, M., Del Rey, J. and Joyner, A. (2009). The ultimate business tune-up for times like these. De Vries, Manfred. (1996). Leaders who make a difference. European Management Journal, 14(5), pp.486-493. Eisenhardt, K. and Sull, D. (2001). Strategy as simple rules. Harvard Business Review, January 2001. Ferdows, K., Lewis, M. and Machuca, J. (2003). Case Study: Zara. Supply Chain Forum, 4(2), p.63. Retrieved 10 Oct 2009 from www.supplychain-forum.com Froscheiser, Lee. (2008). Communication, communication, communication the most important key to success in business leadership. SuperVision, Burlington. 69(1), pp.9-12. Hardman, D., Harper, S. and Notaney, A. (2007). Keeping inventory – and profits – off the discount rack: Merchandise strategies to improve apparel margins. Retrieved 11 Oct 2009 from http://www.boozallen.com/media/file/off_the_discount_rack.pdf. Kotter, John P. (1990). What leaders really do. Harvard Business Review, June 1990. Mintzberg, Henry. (1980). Structure in 5’s: A Synthesis of the Research on Organization Design. Management Science, 26(3). Reinstein, Doug. (2007). Results matter: Unlocking value through Avaya’s business transformation. Organization Development Journal, Chesterland. 25(4), pp.P55-P63. Reis, D. and Pena, L. (2001). Focus on management history: Reengineering the motivation to work. Management Decision, 39(8), pp.666-675. Read More