This week we once again look at the apparel industry, this time the Zara case (see Course Notes). Please answer the question below. Also, please check out the other posts and comment on one of them. If you’re first, please come back later!
In your view, what is the key reason for Zara’s success? (Please explain why. If you use technical terms from the case, please ‘translate’ them into plain language)
In my opinion the key reason for Zara's success is their focus on a particular area of the value chain and company wide support for this focus.
ReplyDeleteThrough focusing all of their efforts on making the manufacturing and logistics area of the value chain the best that it could possibly be Zara has created a sustainable competitive advantage over other firms in the industry.
Zara has full buy in from its staff and higher levels of management to the strategy which means that business processes and practices needed to be done in order to make this strategy a success are carried out.
The result is just in time manufacturing for Zara's limited run production lines and fine tune logisitcs and communication throughout the organisaiton for efficient and effective decision making. All of this makes Zara a well oiled and high functioning machine that will continue to be successful.
• Zara’s ability to constantly refine its operations throughout the firm’s value chain has helped it prevent a previous trend of costs rising further than sales. Zara included their technology investment at the points in its value chain where it would have the most significant impact, making sure that every dollar spend on technology had a payoff. The comapny has found no need to invest as much in advertising, allowing it to save even more costs. The constant refinement to Zara’s value chain has also meant competitors have found it hard to replicate it.
ReplyDelete• The use of technology has been important in helping Zara identify and manufacture the clothes customers want, get their products to market quickly, and eliminate costs related to advertising, inventory missteps and mark downs. By being highly vertically integrated, Zara is able to keep most of its production processes in-house (based in Spain). This means products will be produced and put on store shelves quicker, and more regularly. They also cut costs because they do not have to do any outsourcing (which can be risky), and also avoiding conflicts with different channel suppliers.
• The employees of Zara do not bother handling inventory during busy periods, they simply move them from the shipping boxes straight to the store racks. This allows them to spend more time on value-added activities, such as helping customers find exactly what they want.
• How did Zara improve their relationship with customers even more by providing value-added activities?
- Zara was able to provide accurate information regarding its customers using personal digital assistants (PDAs) that gathered customer input. This would allow Zara to gain feedback and insights of what customers would like to see more of. Therefore, better predicting customer demand and reduces any ‘guesswork’ when designing and planning inventory.
- Zara’s manufacturing and logistics process is very fine-tuned. It has a large team of designers, up to 300 which limits the amount of failed product lines being created. This allows for efficiency when getting designs that customers want, quickly into stores.
- Most products manufactured have a limited production run, customers never end up looking the same as someone else after they shop. This encourages customers to visit more often and purchase right away at a high price.
I think that the key reason for Zara's success is having most of Zara's products manufactured for a limited production run.
ReplyDeleteThis allows Zara to cultivate the exclusivity of its offerings which will make customers buy straight away and at full price and if they don't the product will be sold or moved for newer products within 3 weeks.
Having new limited run items will encourage customers to visit more often as Zara has twice-weekly inventory delivery with the latest designs.
In your view, what is the key reason for Zara’s success?
ReplyDeleteThe key reason that I believe are driving Zara’s success is the firm’s ability to efficiently refine their value chain to stand out from the pack in the apparel industry.
The first parts of the value chain have been address by keeping a majority of its production in-house. This means that they are not affected by the “sweatshop labour” issue that other apparel companies have a huge problem with. This also means that their non-advertising strategy is not affected by bad media.
Another way in which the value chain has been adjusting is by linking their Service segment of the value chain to the Operations segment. This is done by having sales staff in the retails stores equipped with PDAs which they use to survey customers and quickly make the results of this survey avlivable to the “The Cube”(Zara’s central command centre). This information is then used to alter design to what customers want, and also to replenish store inventories to accommodate increases and decreases in customers demand.
By linking the above mentioned factors to alter this value chain and constantly amended any outdated steps, Zara has put themselves in a very competitive and strong position in the apparel industry.
In your view, what is the key reason for Zara’s success? (Please explain why. If you use technical terms from the case, please ‘translate’ them into plain language)
ReplyDeleteIn my view the key reason for Zara;s success is they have a competitive advantage in their value chain (manufacturing and Logistics) against other organisations. Their value chain allows more efficient
Manufacturing and logistics allowed Zara to quickly attain locally targeted designs and get them on to the shelves faster then others in the industry. This is due to customers expectations when they come into its stores and ask for a certain designs. Adding to this is the vertical integration of technology where it finely tuned its logistics and leveraged certain areas. Overall this saved Zara money as selling times were shortened greatly meaning a faster turnover.
Technology helped Zara manage its inventory systems in order to speed up order processes, which meant lower cycle times and the reduction errors. This allowed them to determine their stock levels and ensuring stores ordered only what they needed. The process of creating its products were reduced hugely with the use of technology, which allowed them to get the products straight from the manufacturer to the stores racks and letting staff add value by helping customer with what they want to create a quick selling time.
Zara also had limited production runs, which offered many benefits. Zara stores are designed to stock up special items of its local clients, this encourage them to buy products straight away. Customers realise the difference between the new and old products by determining what hanger they are on. This also allowed more customers to visit its stores, which meant lit spent less on advertising its organisation.
The value in manufacturing and logistics of Zara allowed them to be competitive in the market as they added more value to it by using technology to keep its system up-to-date.
In my view, the key reason for Zara's success is their ability to turn their concept ideas into actual finished products in a short period of time.
ReplyDeleteBy having a high productivity rate, Zara is able to adjust production to cater for current fashion trends and have them distributed to stores within days. This means that each Zara store would have high turnover of inventory and carry different products to each other, as stock changes frequently to cater for consumer preferences and keep up with current trends.
Also frequent inventory turnover would encourage customers to purchase now at full price, rather than wait, as the product may be replaced with something else in a few days. This will mean high profits for Zara as greater quantities of products are sold and more frequently, at higher margins.
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ReplyDeleteFrom my point of view, I believe the key reason for Zara’s success is the fact that they fulfilled the needs of its customers by gathering data, with the use of personal digital assistants (PDAs), and the point-of sales (POS) system.
ReplyDeleteZara’s store managers gathered intelligence, and with this information it was determined what would end up on each store’s rack. The managers used PDAs to gather customer input, staff regularly talked to customers to get there opinion on what they wanted more of.
The PDA’s were also linked to the store’s POS system, this system showed how garments ranked by sales. It only took less than an hour for managers to send updates which were a combination of hard data captured by the cash register, as well as the information they got by talking to customers.
The information combined using the PDA’s and POS system allowed the firm too plan styles and issue re-buy orders based on feedback rather than hunches and guesswork. The goal was to improve the frequency and quality of ‘sense making’ for design and planning teams.
With all this data the Zara’s store gathered they were able to use the information in their favour to make decisions which would meet fulfil their customers’ requirements, and also because of this information release products much quicker than its competitors.
Zara has succeeded as a company due to their focus on the operations and the outbound logistics and service parts of the value chain. With their great emphasis on these parts of the value chain they have been able to focus on what matters which is getting adding value to the brand of Zara and deliver merchandising that is competitive and current in the style market, while beating competitors on price and service delivery.
ReplyDeleteZara’s ability to deliver what the consumer wants through questioning the customers and using PDA’s to gather information and research on customer preferences and ideas and in conjunction with them been able to deliver in such short periods of time, has given them the unique ability to sustain a brand reputation of giving the customer what they want at a great price.
The consumer knows that with an item they see of Zara’s, if they don’t buy it then and there, it will most probably be gone by the next time they come into the store due to Zara’s constant roll out of new products and ability to ship new stock to there stores twice a week.
With this knowledge and the feedback the consumer provides the company they get the best products in the shortest period of time. The consumer provides their loyalty to the company and Zara gets to maintain a competitive advantage over there competitors.
The reason behind Zara’s success is that Zara utilised the data gathered from the PDA’s and POS system. With the data gathered from these systems managers were able to account customer input and order accordingly.
ReplyDeleteThe systems also displayed how the products sales ranked by sales such as garments. With the use of the data customer requirements and customer satisfaction have been achieved. It also improves the re order systems as the managers can order products based on customer needs.
In my view the key reason for Zara’s success is their ability to gather data and use this information to improve their product line. During store hours customers are informally surveyed about the garments they are trying on. These informal surveys undertaken by employees give Zara concise data about what their customers want. After store hours Zara’s employees then survey their store and look for trends in what clothes are tried on, what garments are looked at the most and what a customer’s preference is. The information gained during and after store hours gives a large amount of customer data that can be used in changing their clothing designs.
ReplyDeleteZara’s ability to gather data allows the organisation to better plan styles and issue re-buy orders. The chance of incorrectly planning a style is eliminated when it is the customer setting the trend and not Zara. With information on what is popular and what isn’t; Zara can order in only what the customer wants. The information advantage for Zara means the customer will only be seeing what they want to buy when shopping at their store.
Finally with their information, Zara can quickly respond to trends. New styles can be pushed out from inception to store delivery within 15 days. If a trend for a different style is identified, Zaras designers are able to analyse the data and make changes as necessary. This gives a competitive advantage to Zara of being able to sell a new style before any other competitor. Customers can rely on Zara to have the latest trends which means more visits than their competitors.
Zara's key reason for success came from its strategic approach using vertical integration and information technology to gain a competitive edge from its competitors. Vertical integration means that Zara imports raw materials and processes their own products - charged with their own manufacturing and logistics. Unlike other retailers, Zara moved at an amazing pace for the industry (i.e. 15 days from idea to shelves) and also boasts 11,000 new designs a year, whereas competitors typically offered only 2,000 - 4,000. Also, Zara stores hold fewer inventories so that customers buy products on the spot because if they decide to come back later, it will most likely be gone the next time they visit the store.
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