ZARA CaseQuest - Assignment Example

?Zara Case Quest College Lecturer ZARA Case Quest Introduction The Zara Company operates globally in the apparel industryand is identified as a market leader. This comes as a result of various business strategies adopted by the company in undertaking globalization of operations. The company constitutes of a single manufacturing plant located in Spain, where all products are manufactured (McAfee, Dessain, & Sjoman, 2007). Using centralized manufacturing, the company has maintained standards within the global arena as products available anywhere exhibit no discrepancies in quality. This has contributed significantly to the high levels of customer satisfaction, leading to customer loyalty. The company continues to maintain customers through ensuring similar levels in product quality, hence assuring customers of quality in Zara products. High quality products have in turn brought high sales placing the company in a global market leadership position. Combinations of other business strategies aimed at strengthening the company position have also had influence in maintaining the company’s position, globally. Business Model (GAP) Gap Company has taken the approach of outsourcing manufacturing in different Asian countries. Outsourcing in these countries aims at utilizing the cheap labor available in Asian countries. The company hopes to reduce production costs through utilization of cheap labor, and achieve significant profit margins (George & Bock, 2012). The outsourcing model of manufacturing presents several risks to the business in standardization of numerous business elements. Standardization of products and service delivery becomes extremely difficult for the company to control. This could be attributed to the different manufacturing technologies and management styles available in different countries. In some countries with limited technological advancement, required product standards might be difficult to reach. This method also presents the risk of fake products being introduced into different international markets using the Gap trading name. Gap invests heavily on advertising because of the approach taken in manufacturing. The outsourcing approach could lead into product quality compromise that necessitates intensive advertising, aimed at convincing doubting customers. The intensive advertising conducted by Gap aims at creating product awareness in the different countries where the products are available. The availability of the product shall be notified to the customers through advertising. The company shall be able to conduct market analysis aimed at improving distribution channels utilized and creating policies regarding product improvements. The advertising process can also enable the company to effectively undertake competitor analysis, and created a competitive advantage over them. Gap company does not have specific times when new products can be introduced however, most introductions occur during the month of August. The company takes as a trend setter approach, therefore, decisions regarding new products result from market analysis to identify existing gaps. Introduction of new products follows the need to create a unique design, resulting from market research indicating need for such design. The company receives its income through the sales achieved from the subsidiaries. The subsidiary businesses have to undertake internal financial analysis and establish the profits experienced during a trading period. The profits from different subsidiaries become the company’s income. The subsidiaries must make deductions of all subsidiary expenses incurred before arriving at profit remitted to the parent company as income. The core competency of Gap remains the capability to coordinate diverse manufacturing plants in delivering globally standardized products (Galunic & Rodan, 1998). Diversification in manufacturing locations remains a fundamental core competency for the company. The competitive advantage for Gap remains the utilization of cheap labor in Asian counties, enabling the company to achieve low production costs, hence high profit margins (Clulow, Gerstman, & Barry, 2003). Business Model (ZARA) Zara Company undertakes all manufacturing processes from a central location and distributes products into the different countries. This approach mainly enables the company to maintain high standards in products, and ensure global product standardization. This production method ensures global product uniformity in all countries. The company takes a trend chaser approach where it manufactures products based on customer requirements. Business approach immensely considers customer desires when introducing new products into the market (George & Bock, 2012). The company analyses the common trends, among customers, and capitalizes on creating uniqueness within the existing trends. Through analysis of the company’s customer behaviors, the company can establish products suiting the customer demands. This approach has continued to ensure the company takes a leadership role within the global apparel industry arena. The customers remain the fundamental consideration when making critical business decisions. The company continues to use DOS despite desires by numerous store managers for upgrading of the system. The company deems the upgrading unnecessary expenses, since the currently utilized system ensures customer satisfaction and no relevant customer complaints has been received regarding the application used. The company entirely focuses on customer satisfaction as a method or retention through creating customer loyalty. Customer satisfaction continues to enable the company receive relatively high sales volumes despite limited advertising being undertaken (Farris et al., 2010). The company, heavily, relies on repeat clients from satisfaction with products offered. Utilising this method as a marketing tool has enabled the company to cut expenses incurred through advertising and other marketing programs. Delivery of quality products eliminates the posibility of having fake products within the market. The company has continued to deliver quality products globally, through centralised manufacturing and utilisation of similar programmes within all stores globally. This also ensures that the services delivered by employees, to customers, worldwide remain standardised and customers might not experience disatisfaction. The core competency of Zara remains manufacturing from a central location and distributing the products globally. The efficiency of the distribution channel is also another competency the company utilizes in eliminating competition. Managers are equipped with technologically advanced tools for making requisitions when stock volumes reduce. These systems ensure utilization of the JIT strategy through reduced inventory processing costs, significantly improving inventory delivery. The competitive advantage for Zara remains delivery of high quality products globally. This has seen the company continue to experience increased sales from created customer loyalty. The customers believe in the capability for the company in delivering products that meet customer requirements, and satisfy customer desires (Clulow, Gerstman, & Barry, 2003). The customer satisfaction received from delivering quality products continues to ensure the customers return to the company seeking other products. These products also have efficient delivery channels through the company’s organization where ordering occurs globally. Trend chaser vs. trend setter The companies utilize different business model with Gap using trend setting and Zara being trend chaser. The trend setting approach includes businesses making products based on the forecasting of customer desires. In trend setting approach the company conducts market analysis aimed at establishing new products which a market might desire. Though products might not be available in the market, introducing these products cannot guarantee sales in the apparel industry. This method could only work if the customers desire a product which does not exist. In the apparel industry, however, designs are created and customers might like or dislike them. The trend chaser approach taken by Zara involves analyzing the dressing trends in different societies, then developing designs from the existing trends. Within the apparel industry context, trend chasers might achieve better customer satisfaction. This approach remains the main reason why Zara receives higher sales volume than Gap, with limited advertising. In other industries, like automobile industry, trend setters could become the industry’s market leaders. Through utilization of centralized manufacturing and immense standardization, the company has also ensured managers deliver similar services, hence efficacy of the entire management element. Risk Management Risk management involves analysis of the expected risks and implementation of policies aimed at completely eliminating the risks. One risk faced by Zara remains the possibility by other firms overtaking it internationally, within the apparel industry. The company remains adamant to implementing changes, and intends to continue operating using similar systems. These systems can be defined as the tools which have brought the company into the position of global, apparel industry market leader (SCDigest, 2011). The company aims to maintain the same processes that have kept the company in that position in dealing with this risk. The DOS system utilized presents a potential risk should the system encounter problems (McAfee, Dessain, & Sjoman, 2007). While the systems remains outdated the company appears adamant to implement necessary changes into the system. The company needs to quickly upgrade the system to ensure capability to handle problems when they arise. Though the system remains stable, changes in technology might make the system incompatible with modern software utilized in computer applications. Through this system, the company cannot utilize online selling since that system might not be compatible with modern systems. Android technology, for example, continues to be highly utilized in mobile devices and tablet computers and might not be compatible with the Zara system (Kralevich, 2010). Adapting technological changes could be a positive way of ensuring future leadership, and keeping update of current technological changes. Distributive Business Model This approach significantly influences the global availability of Zara and its products. The distribution channels utilized include establishment of warehouses where products can be stored. When stores require stock, orders are received at the warehouses located near them. This enables quick delivery of invent troy, hence increased efficiency of the distribution channels utilized by the company. The company maintains these distribution channels because manufacturing occurs from central location and delivering inventory would be costly and time consuming if performed from the manufacturing plant. The manufacturing plant delivers inventory to the warehouses which are centrally located based on store location. This enables a single warehouse to serve several retailing stores efficiently. Through utilization of these distribution channels, the company significantly cuts costs related to logistics. The cost cutting and time saving factors created by the distribution channels improve the application of the just-in-time business strategy. This strategy enables timely delivery of products at relatively low costs. This significantly improves the efficiency of the distribution channels utilized by the company, hence overall improvement in service delivery to customers. These distribution channels present significant importance to the business when delivering products as they provide quality. Conclusion Zara can be identified as an international market leader within the apparel industry. The business model utilized by the company contributes significantly to the global reputation of the company. The company has adopted a trend chaser model as opposed to its competitors who utilize the trend setting model. As a trend chaser the company has achieved a comparative advantage through delivery of products suiting customer desires and requirements. This follows the company’s capability to effectively analyze fashion trends before venturing into introducing new products (Galunic & Rodan, 1998). The trend analysis continues to provide the company with critical information regarding popular trends within the apparel industry. As an industry governed by fashions, consideration of the prevailing trends remains critical in introducing new products and designs, suiting the current trends. References Clulow, V., Gerstman, J. & Barry, C. (2003). The resource-based view and sustainable competitive advantage: the case of a financial services firm. Journal of European Industrial Training, 27 (5): 220–232. Farris, P., Bendle, T., Pfeifer, T. & Reibstein, J. (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. Galunic, D. & Rodan, S. (1998). Resource recombinations in the firm: knowledge structures and the potential for Schumpeterian innovation. Strategic Management Journal, 19 (12): 1193–1201. George, G. & Bock, A. (2012). Models of opportunity: How entrepreneurs design firms to achieve the unexpected. Cambridge : Cambridge University Press. Kralevich, N. (2010). It's not "rooting", it's openness. Retrieved from Android Developers Blog: http://android-developers.blogspot.com/2010/12/its-not-rooting-its-openness.html. McAfee, A., Dessain, V., & Sjoman, A. (2007). Zara: IT for Fast Fashion. Boston: Harvard Business School. SCDigest. (2011). Supply Chain News: Understanding the "Operations Rules". Retrieved from Supply Chain Digest: http://www.scdigest.com/ontarget/11-02-16-1.php?cid=4211. Read More