Fashion industry is closely related to the retail business that has specific rules that should be followed to ensure stable operation of the entire network. In this respect, ZARA is a chain of retail stores that sell clothes all over the world. The importance of information is very high for such chain of retail stores because they are supposed to operate on a similar basis. In addition, the POS terminals are of paramount importance for such stores as they contain the information about the goods and enable the stores to operate effectively.
Scope of the research
Business models. The definition of business model can be related to the process of maintenance of the company or to the receiving of revenue. However, all the business models reflect the general idea of how the company should operate and what should be the main strategies to reach the goals set by the board.
In this respect, it is possible to review the e-commerce business models aimed at providing the companies with the opportunities for effective online trade techniques. The application of a business model should be evaluated to the type of business the company is involved in in order to ensure that it selects the most appropriate business model and would benefit greatly from it.
The companies operate to get revenue and each of them has specific methods of doing this. The study by Casadesus-Masanell and Ricart (2007) contains elements that are claimed to be components of a business model; as such, choices (policies, assets, and governance) and consequences (flexible and rigid) are integral parts of every business model (p. 3). At the same time, Zott and Amit (2009) insists that the key to understanding the business mode of the company is the analysis of its activity system (p. 2).
As suggested by Magretta (2010), “every viable organization is built on a sound business model, but a business model is not a strategy, even though many people use the terms interchangeably” (p. 2). The importance of realizing how the company should operate and the major issues related to its strategies and policies makes the business model an issue of patent processes as many companies such as Amazon patent their inventions such as ‘one-click purchasing’ an integral part of their business model.
Information needed for operation. The importance of information for operation of a company is high due to the number of companies that may potentially operate in the same market and the competition that increase due to the changes in the market that are related to the suppliers, consumers, brand awareness, new entries into the market, and other aspects that should be taken into account.
So, if the company wants to stay in the market and operate effectively, it should be aware of the main tendencies in information technologies and other areas that may help it to be in advance of all other competitors.
Evaluation of global operation
Upgrading of ZARA’s POS systems. The process of upgrading the POS systems of ZARA can be time and cost consuming if it is planned to be performed once a century. The changes should be appropriate in terms of time. If the managers feel that the system should be upgraded, they should upgrade it because the changes made in a timely manner can increase the revenue of the company and bring it forward with regard to the level of competition in the sector of business.
The application of PDAs was initially considered to be inappropriate and cost consuming whereas the operation of the stores is facilitated with the help of these devices because the ZARA does not have centralised units that would make decisions, collect information on the needs of every store, and other actions.
In this respect, the implementation of PDAs can be considered one of the most effective innovations integrated into the ZARA system operation. Salgado should proceed on the issue of upgrading ZARA’s POS systems through making agreements with manufacturers and distributors of more advanced software necessary for normal operation of POS.
The company should upgrade the POS terminals to a modern operating system because it would enable it to operate in accordance with the modern requirements and avoid the necessity of changing the entire network in several years when the company would implement other processes into operation. The changes should be made in the moment when the company is ready for them because the next period can appear to be less effective for the company and it would not be able to sustain its competitive advantage.
The in-store networks should be built in to ensure that all members of the teams in every store are capable of making decisions to facilitate the process of decision-making and make decisions when they are required and not when they come to the very top. The employees should get the ability to look up inventory balances for items in their own stores though it is not necessary for employees to be able to look up inventory balances for items in other stores because this may lead to unfair competition between the stores.
ZARA’s business model. ZARA’s business model includes operation of retail stores via online connections that enable the employees to make orders and have appropriate selection of items of clothes, leadership skills are necessary for employees of the stores to make decisions at once. As suggested by Watson (2005), the business model should include not only strategies of the company but also all the components that “result in costs for itself and value for the customer” (p. 2).
Pahl and Mohring (2009) analysed ZARA’s business model and define it as the following: “ZARA organised its supply chain to transfer both hard data and personal perceptions of costumer behaviour quickly and easily from the shops to designers and the production department, thus clothing the information loop between consumers and its own upstream operations” (p. 11). In other words, the connection between the customers and designers is direct to ensure adequate responses.
Limitations and recommendations
The recommendations concerning ZARA’s business model and its relation to the IT innovations are pertaining to the importance of updating of POS when it is required. However, it does not seem necessary to change something which operates effectively and does not need costs for additional maintenance or repairing.
Conclusion
ZARA is one of the retail chains that effectively operate all over the world due to the leadership skills and adequate responses of the designers to the customers’ expectations expressed through the network. As such, every customer is sure to receive what he/she wants due to the system of information.
Reference List
Casadesus-Masanell, R., & Ricart, J. E., 2007. Competing through business models. Working Paper 713.
Magretta, Joan, 2010. Why business models matter. In: Harvard Business School Press, ed. 2010. Harvard business review on business model innovation. Boston, MA: Harvard Business Press, pp. 1-19.
Pahl, N., & Mohring, W., 2009. Successful business models in the fashion retail industry: strategic audit of H&M compared to ZARA. München: GRIN Verlag.
Watson, David., 2005. Business models. Hampshire: Harriman House Limited.
Zott, C., & Amit, R., 2009. Business model design: an activity system perspective. Long Range Planning doi:10.1016/j.lrp.2009.07.004.
A company’s management has the role of managing operations and Supplies to ensure adequate supply of materials in the company at the right time at an appropriate competitive cost. Supplies takes the form of having the raw material required for production at the right time to make the process effective and in the case of outsourced manufacturing services, the timely supply of the finished products (Cousins, Lamming, Lawson and Squire,2008).
As many Europeans companies are shifting their operation (manufacturing) base to China, African Nations and Asia, to enjoy the cheaper labor markets there; however, some companies like Zara International Fashions have opted to procure their products in Europe. The main question is why has Zara International ignored the perceived benefit from outsourced manufacturing? This paper seeks to answer the above question; it will discuss the answer from a supply-chain management angle.
What is Supply Chain Management?
A business process is a well-coordinated sequential task, undertaken to fulfill certain set objectives. Every stage is managed as it contributes to attainment of the set goals and objectives. Generally, three sets of business processes they are, managerial processes, operational processes and supporting processes.
Supply chain management aims at providing goods necessary for production in a business. It starts from identifying the materials required for various processes in the company and ends with the supply of those goods. It has a period; an efficient process must be completed within a set period. A supply chain management is an internal operation whose results the internal and final consumer feels. It has the following objectives:
To ensure that there are quality and quantity supply of goods and services
To ensure that there is a Just in time delivery of goods and services
Control the supply system and attain highest efficiency possible
Reduction of transportation cost, lead time and warehouse costs
Enhance customer service through provision of high quality goods.
When a company has an adequate supply of materials, it is able to produce goods in the right time at an affordable and competitive price.
When sourcing products from another country, the approach of supply chain management moves a notch higher, companies in Europe has to contend with other logistics though in the supply chain network that companies like Zara procuring locally are not entitle to, they include:
International logistic issues
To have adequate supply, the prevailing conditions must be optimal and no external influence; when a company is procuring from abroad, it is affected by economic, political and social changes in the procuring country; this makes the business miss the confidence that they can supply when wanted. This reason makes Zara opt for local produced goods.
Complication of international procurements
When getting goods abroad, companies are seen to operate two stage complicated supply chain, they must ensure that either the foreign country gets the materials, those sent from the buying country or it has procured in the local market; to manage such a process is complicated and time consuming. Zara has opted to have a simple local manufacturing that it can manage effectively (Zara International, 2011).
The make-buy decision
When in business, the management must make the decisions whether they will use their own manufactured goods or they will buy already made goods; the decision is rather personal to a business and considers many options. When a company decides to make products, it ensures that it has the right expertise materials are available as well labor. The main factor of consideration is whether making ones products will lead to a reduced cost of production or alternatively it will lead to higher quality that will lead to increased sales.
The reason why other European countries have decided to get their products made from Asian and Chinese countries is the labor costs, this makes the goods cheap in the end; however managing the process for quality is complicated; again it is a shaky deal where a company has to worry about any change in the country of procurements stability. Zara International has opted to buy more form the market because of a variety of factors; they include:
When buying locally, it will not be given the margin to buy to be sold at an appropriate cost; this is different than when manufacturing, the manufacturer has to make some products to break even which may lead to over production.
When buying locally, the company will have the option of comparing the many varieties in the market and procure form those companies that have the products in demand. This makes the company have the best products at an affordable cost (Zara International, 2011).
Sourcing strategies and supply chain configurations
When manufacturing goods from a country different form the country of sales, the European companies depending on other companies have to undertake some suppliers/abroad manufactures. Configuration of supply chain is a procedural way that ensures that goods are delivered their place of need when they are needed to be.
Logistic management involves processes undertaken by a company to ensure that it has goods and services it requires for its day-to-day activities when they are needed. Some governmental procedures or companies processes may shape it. In an international procurement, there are customs logistics that must be adhered to ensure that commodity is delivered at the right time. It involves procuring, handling, warehousing, verifying and control of goods imported. Customs laws must be adhered.
It is a lengthy process and thus an importing company must ensure that it has enough time for a just in time delivery. Logistics management team is given the mandate to ensure that delivery is done at the right time, right cost and the right place (Harrison and Hoek, 2008)
When Zara procures locally, then it avoids all the above logistics and it can be sure that it will get what the market is offering; in the case the above logistics are hampered by something may be special to a procuring country or applying across the board, the procuring company will have to suffer the loss of business.
However, the case is different when a company is procuring from the local scenes. Zara always has the option of selling what is available in the market thus at any one point is it on toes with the market, a move that offers it competitive advantage.
Strategic supplier selection
A company should develop a good business relationship with its suppliers, as this will assist in making sure that there is reliability in the supply of materials. When in the international arena, a company should ensure that it has good relations will all the people in the line of business all the way from the sourcing of materials to the last person who will bring the goods into the company; this is not an easy task.
When there is a good relation, it is easier to get goods at a better price and market data from suppliers whom the company has established good business relations. Maintaining the good relation with people of different personalities and companies with varying philosophies is not an easy job, sometimes it fails the manufacturing companies (Mangan, Lalwani and Butcher, 2008).
The decision of Zara International to procure locally can be attributed to avoidance of the above hassle the management is better concentrate on looking for the best commodities in the local market and ensuring that the internal businesses processes are up to date and competitive. As other businesses are looking for relationship building approaches, the company is busy developing business processes and enacting them for a competitive business.
Aligning supply with corporate strategy
Companies are guided by corporate strategies; they should align their processes, including supply management processes to the company’s corporate strategy. A Company’s procurement and supplies department ensures that production materials and equipments required for an effective production are available, in the right quality and at an appropriate price, this will meet the company’s main goal of being profitable.
With globalization, companies can procure goods and services that meet their requirements from different countries; the wide availability of materials and their markets has facilitated industrialization; however the policies and the ideologies in the international business has sometimes contradicted the procuring company corporate structure (Lysons and Gillingham, 2003).
For example, many European companies have sustainable development agendas as one of their corporate strategies; however, they may procure from countries that have relaxed environmental laws, thus the procurement ends up violating the company’s corporate goal. Another area is in labor and its costs, different countries have different labor cost, Europeans companies have corporate goal of ensuring they have the best cared for human capital, but when they procure abroad, the standards set in those countries may be different thus the company ends up violating its own corporate goal indirectly (Christopher, 2005).
Zara International is keen on maintaining and respecting its corporate goals and objectives; when the company buys from local scenes, it is able to make sure that all areas have been looked into before making a move. For example, it will be able to make sure that it buys from companies that respect their employee’s rights and those that protect the environment. With such moves, it will be satisfying its corporate goals and objectives (Zara International, 2011)
Conclusion
Having an effective supply chain management offers a competitive advantage to an organization; supply chain management has the main objective to ensuring that at any one time there are adequate supplies to a business, at an appropriate cost and place.
To buy locally available goods or manufacture goods for sale is a decision that management has to make; Zara has opted to purchase over 80% of its goods locally, instead of having international manufacturing joints that have cheaper labor. The main reason for the decision is to offer management a chance to concentrate on other business processes that will offer a competitive advantage to the company; it is also a risk management approach.
References
Christopher, M. ,2005. Logistics and Supply Chain Management; creating value-adding networks. Harlow: Prentice Hall
Cousins, P., Lamming, R., Lawson, B. and Squire, B. ,2008. Strategic Supply Management: principles, theories and practice. Harlow: Prentice Hall.
Harrison, A. and Hoek, R. ,2008. Logistics Management and Strategy. Harlow: Prentice Hall
Lysons, K. and Gillingham, M. ,2003. Purchasing and Supply Chain Management. Harlow: Prentice Hall/ Financial Times.
Mangan, J., Lalwani, C. and Butcher, T. ,2008. Global Logistics and Supply Chain Management. Chichester: John Wiley & Sons Ltd.
Would you send a half empty truck from Dubai to Oman? Why?
Sending a half empty truck from a certain place to the destination can possibly be reasonable once the final venue of destination is located close to the initial place. In the supposed case, the use of the transport and the gas can be justified by certain motivations of the company. However, when speaking of such distanced places as Dubai and Oman, one must admit that sending half of the possible freight is a completely groundless waste of time and money.
Would you pay airfreight thrice a week to India?
According to the video in question1, there is no use in paying for the transportation of goods to India twice a week, since paying once for the entire transportation should be a much more sensible approach. Therefore, paying airfreight to India thrice a week cannot be considered a wise decision and cannot be made by any company manager. It would be much less complicated to pay for the entire transportation beforehand, thus, allowing the company to cut on certain expenditures.
Would you move your unsold items after 2 weeks out of the store?
Even though certain goods do not sell well enough, moving the latter from the store triggers another costs that will not be compensated unless the store increases the price of each goods offered. Since the latter will trigger the customers’ dissatisfaction, it is desirable not to move the goods from the store, but sell them with considerable discounts, in case the goods are not food. Hence, the company will be able to make for the losses at least partially.
Would you outsource for cheaper suppliers? Explain?
Outsourcing cheaper suppliers does seem rather efficient way for a company that would like to develop a rewarding tactics in the market and obtain considerable revenues. Therefore, it is recommendable to choose cheaper suppliers. However, it is worth keeping in mind that the company’s reputation often depends on the suppliers, which means that neglecting the quality for the sake of the cheap supplies is not a way out. Therefore, a golden mean is to be found.
Sinosteel Co. Strengthening
What do you understand by Enterprise Resource Planning?
According to OracleVideo, Enterprise Resource Planning is a strategy that allows the company to coordinate the work of the managerial more efficiently, thus, increasing the revenues and the levels of the company’s efficiency and the product quality2. As the president of the company says, the given strategy helps to “optimize the resources3,” thus, helping the company to increase the rates of the revenues and making the human resource management strategy more effective.
How does the ERP system help the management of Sinosteel?
Creating an “integrated business management platform4,” the company, together with the Oracle’s People Soft Enterprise and a number of other groups managed to update the working process of the company, creating the links between various departments. Thus, the integration of every department of the company was achieved.
What are the benefits of adopting ERP in various departments?
One of the first and the foremost benefit of using the ERP method is the fact that there can be no possible information risks within the company5. United in a single online entity, the company does not have to share its secrets with anyone, which is of utter importance. It is obvious that the company “standardized managerial relations” (OracleVideo).
In the past Sinosteel used a de-centralized system. What was the major problem that Sinosteel experienced when using a de-centralized system?
According to what OracleVideo says, the threats of a de-centralized system obviously concerned the risks for the company to face the fraud. As OracleVideo explains, “a delinquent customer could own money to one subsidiary only to be invoiced and paid by another6,” which would trigger the most deplorable consequences for the company and its revenues.
Sinosteel has now adopted a Centralized System. What are the advantages of having a Centralized System?
Since with the help of the Centralized System, the company can efficiently share the customers’ information and at the same time make the latter feel completely safe and anonymous as for any third party’s concern. Hence, any attempts to swindle are doomed to failure from this time on, as the client’s data are transmitted via the corporate information database to all departments. Hence, the benefits of the Centralized System are obvious.
Therefore, it cannot be doubted that with the help of efficient strategy concerning the coordination of work between various departments, one can achieve great success and make the company prosper. Employing a professional approach and being able to foresee the consequences of the undertaken decision, one is bound to make the company efficient. Judging from the videos in question, producing original ideas and being able to see the alternative option for a certain situation is extremely important for successful company running.
Bibliography
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
Zealfulcoder1, Zara supply chain management, video recording, YouTube, 2008.
Footnotes
Zealfulcoder1, Zara supply chain management, video recording, YouTube, 2008.
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
OracleVideo, Sinosteel strengthens business management with Oracle apps, video recording, YouTube, 2008.
Zara is a Spanish-based retailer of clothing/accessories (part of the Inditex group), which during recent years was able to gain a global fame, due to its truly innovative retailing strategy. Unlike what it is the case with other clothing-retailers that operate in the same segment of the market, the actual time between the point when a particular Zara-branded product gets to be conceived on a sketch pad and the point when it becomes available for purchasing at the Company’s stores, accounts for only two weeks.
This allows Zara to promptly react to the demand-fluctuations in the global market of fashion (as of 2014, there were 1895 of the Company’s stores operating across the world), which in turn substantially increases the rate of Zara’s competitiveness, and consequently makes it possible for the Company to pursue the policy of aggressive expansion on a global scale.
The main reasons as to why Zara was able to get ahead of the competition, in this respect, are as follows:
The designing/manufacturing processes within the Company are vertically integrated.
Zara refrains from adopting the policy of outsourcing, as it is the case with most of the fashion-industry companies: “Zara produces half of its merchandise in factories in Spain and Portugal, keeping the manufacturing of the most fashionable items in-house” (Capell 066).
Zara experiments with the innovative ways of marketing, such as adopting the ‘clicks-and-bricks’ operational mode.
Hence, the essence of Zara’s business strategy – creating the artificial scarcity of fashionable and yet affordable clothes, the design of which is being updated/changed on a biweekly basis – something that encourages consumers to pay more visits to the Company’s stores.
The Eight Key Elements of Zara’s business model are:
Short lead time – by being able to come up with the new lines of clothing every two weeks, the Company can ensure that its products are fully consistent with the most recent fashion-trends.
Reduced risks – the earlier mentioned element presupposes that there are spatial limitations to just about every line of Zara’s clothing, which in turn reduces the negative impact of the situations when some of the Company’s products are being disfavored by consumers, on the extent of Zara’s overall competitiveness.
The placement of emphasis on producing styles, rather than on producing the actual clothes – this puts Zara in the position of defining the ways of the market – the strategy that is being thoroughly consistent with the concept of post-industrial marketing.
The vertical control of production – the Company’s manufacturing facilities are located in Europe, which enables the speedy adjustment of the production-processes.
Innovativeness – instead of investing in the conventional advertisement of its products, Zara invests in finding more and more ways for these products to be accessed by as many potential buyers, as possible.
Reactivity – Zara’s business strategy is concerned with reacting to the market-demands, as they come into being, rather than with anticipating what these demands may be ahead of time.
Affordability – along with being fashionable, Zara’s clothes feature affordable prices.
Interactivity – Zara makes a deliberate point in paying close attention to what account for the fashion-related anxieties in consumers – hence, the Company’s close affiliation with social media, such as Facebook and Twitter.
While being perfectly aware of Zara’s recent successes in becoming one of the major players in the world’s fashion-industry, many manufacturers of smartphones/mobile software were quick enough to strike partnership with the Company.
To exemplify the validity of this suggestion, we can refer to the fact that ever since 2012, Samsung smartphones are being sold with the preinstalled Zara mobile application: “Samsung Electronics announced the launch of the Zara fashion App, which will see the global fashion chain’s latest collections brought to Android smartphones for the first time… the App will give fashion-lovers the ability to flick through the new season must-haves, purchase immediately” (“Samsung Announces Zara” par. 1).
The same can be said about the Apple Corporation – the company that recognized Zara’s business potential as early, as in 2010: “At Apple’s iTunes store, Zara is the only one of the big three with an app showing its latest designs. The app, which will also sell garments come September, has been downloaded more than 3.5 million times for the iPhone and iPod Touch since it was introduced at the beginning of the year” (Bjork par. 17).
It is understood, of course, that this did contribute towards helping Zara to increase its sales rather substantially. Because of having Zara mobile applications installed on their smartphones, people can purchase the Company’s products online, without having to use computers for this purpose.
Essentially the same can be said about the effects of the Company’s well-established presence in social media – it allows Zara to advertise its products, without being required to spend large amounts of money for doing it in the conventional manner (Matherly and Richards 85). Moreover, this particular approach to marketing, on the part of Zara, allows the Company to reach out specifically those consumers, who due to the specifics of their lifestyle would be naturally inclined to consider buying Zara-clothes.
The Company’s main strengths, weaknesses, opportunities and threats (SWOTs) can be outlined as follows:
Strengths
Zara is the brand name that is well known throughout the world, which makes it much easier for the Company to market its products.
Zara is a vertically integrated company – something that allows it to promptly react to the continually fluctuating dynamics in the market, on one hand, and to keep the low cost of operations, on the other.
Weaknesses
The Company’s current approach to marketing (no conventional advertisement-campaigns) is rather experimental and may not continue being effective in the future.
Most of the consumers, targeted by Zara, are price-sensitive. What it meansis that these people’s loyalty to the brand in question is weak.
Opportunities
The realities of today’s living presuppose that, as time goes on, the Internet-based methodology of shopping will continue becoming increasingly popular with more and more people, which in turn should provide Zara with a competitive advantage
The currently deployed approach to targeting consumers, on the part of Zara, makes possible the substantial expansion of the Company’s niche in the market.
Threats
Fashion-industry has traditionally been associated with the heightened rate of ‘new entrants’ trying to establish themselves in the market, which means that Zara is in no position to afford coming up with wrong marketing-decisions.
There are a number of indications that the current economic recession is only beginning to gain a momentum – something will have a strongly negative effect on the Company’s continual ability to proceed with the policy of global expansion.
In light of what has been said earlier, the rise of Zara to its current prominence, as one of the world’s most successful fashion-retailers, appears to have been objectively predetermined. That is, it came about as a result of the Company’s top-managers having applied an extensive effort in researching what should be considered the most effective strategy for producing and marketing clothing in the 21st century (Mo 220).
After all, there can be only a few doubts that the Company’s manufacturing/marketing ways are indeed nothing short of being deemed revolutionary. This, of course, provides Zara with the sharpened competitive edge – especially given the Company’s domain of specialization, as such, in which the very notion of ‘innovation’ is considered synonymous with the notion of ‘value’.
At the same time, however, there are a number of reasons to believe that it is much too early for Zara’s owners/managers to assume that the currently deployed business model, on the Company’s part, will continue to remain just as effective into the future, as it is the case nowadays.
The main rationale behind this suggestion is that, as time goes on, the world’s economy is going to grow ever more volatile (Warner and Zheng 95). In times like these, it is very unlikely for people to continue paying close attention to the matters of fashion – especially if they happened to be price-sensitive, such as the majority of Zara’s loyal customers.
It appears that the main key to ensuring that Zara remains fully competitive through the coming years, would be the Company’s persistence with making its marketing activities ever more technologically advanced, on one hand, and Zara’s willingness to switch to the conventional methods of promoting clothing (if the circumstances call for it), on the other.
Works Cited
Bjork, Christopher. “Zippy Zara Wakes Up to the Web; the Big Fast-Fashion Retailer Next Week Will Start Selling Online, Years Behind its Rivals.” Wall Street Journal (Online). Aug 25, 2010. ProQuest. Web.
Capell, Kerry. “Zara Thrives By Breaking All The Rules.” Businessweek 4104 (2008): 066. Print.
Matherly, Laura, and Claire Richards. “ZARA: Chic and Fast Fashion.” Journal of Strategic Management Education 9.2 (2013): 81-98. Print.
Mo, Ziying. “Internationalization Process of Fast Fashion Retailers: Evidence of H&M and Zara.” International Journal of Business and Management 10.3 (2015): 217-36. Print.
Samsung Announces Zara Mobile Fashion App 2012. Web.
Warner, Mildred, and Lingwen Zheng. “Business Incentive Adoption in the Recession.” Economic Development Quarterly 27.2 (2013): 90-101. Print.
The analysis of the implementation of the new technologies on the background of Zara will be provided.
Implementation of FIT can be useful for Zara in several cases. First, Zara can initiate the development of statistical software for the evaluation of employees’ performance, retention rates, the level of burnouts, etc. In the case study provided, only basic demographic data about employees are gathered (average age and gender). The statistical software may be useful for deep investigation of employees’ performance and demographic data. Also, FIT can be useful for designers. Zara may develop software that will make the process of making digital presentations of collections easy. Also, it is written that designers used to track the preferences of customers. Again, statistical software may make this process comfortable.
The creation of NIT is necessary for the successful operation of teams of designers and representatives from stores. When preparing a new collection, teams of designers need to work and collaborate actively. Consequently, the system of instant messaging may be required for sharing experiences and points of view. Stores of Zara were located taking into account shopping rates and intensity of traffic. Stores are located in various regions, and it can be helpful to create a system of communication between stores that are located within one region (to check the availability of clothes, for example). In addition, blogs from regional stores may attract more clients.
Initially, chains of Zara did not coordinate, but the situation changed with the development of the brand. Old and advanced chains accelerated the expansion and creation of new chains. Consequently, EIT would be useful to implement the system of electronic data interchange to enhance the process of expansion. Also, the system of electronic data interchange is the must for top managers (who work in Spain mostly) for the coordination of other chains’ activities and control of performance.
Besides, cogitating around Zaras case study, it is possible to apply the why statement to the process of the implementation of NIT technology. There are four dimensions of any good why statement which means that it is vital to identify the problem, locate it, outline the terms and magnitude. Only the strict adherence to all these points could guarantee the success of a certain issue.
Speaking about NIT, EIT and FIT for Zara, it is possible to say that there is the problem of the creation of the appropriate network that will be able to satisfy existing demands and implementation of some new technologies and practices. That is why, all members of a team should be asked questions connected with the nature of the needed network in order to determine the needed model. Moreover, the terms of the application should also be outlined for the staff to know the date and be ready to use the final product. All these actions could lead to the creation of an efficient corporate network that could promote the further development of the company.
With this in mind, it is possible to conclude, that the creation of the efficient why statement could help to improve the functioning of a company and guarantee its prosperity.
NIT Why statement.
Identity
Implementation of NIT faces some difficulties as the staff is not able to work with it
Location
Departments of Zara
Timing
Problems began at the first stages of the implementation of NIT
Magnitude
The problem might result in a significant decrease in the efficiency of the general performance of Zara and lead to the failure of the implementation of new technologies
FIT Why statement.
Identity
The new software is taken as rather complicated and some workers are not able to use it.
Location
Client Services Division fails to work with the new software
Timing
The problem appeared after two weeks of the usage of new software
Magnitude
If workers fail to work with the new software the level of the customers satisfaction will decrease and Zaras incomes will become lower.
EIT Why statement.
Identity
Communication between the company and its partners
Location
Zara fails to align a clear and stable connection with one of its partners
Timing
Problems with connection began several months ago after the implementation of the new software
Magnitude
Problems of this sort might result in the failure of various negotiations and lead to the collapse of the company.
Zara is amongst the successful companies in the fashion industry. Clothing by Zara is sold in boutiques. The company does everything from designing to sampling to in-house production. They primarily use silks in production, which involves printing on silk georgette, crepe de chine, silk satin, and silk jersey. However, the company faces competition from rival firms in the industry. This is because it deals with the production of clothing, which is a necessity, and therefore many firms have been established to merchandise in the sector. These firms produce brands that compete with those of Zara in the industry.
Fashion clothing is known to have a short product life span given market segmentation and product differentiation, which means that firms such as Zara have to constantly reassess the brand’s strengths, product life cycles, and revenues to sell its products and to recover losses in the event of a change in fashion. It is thus appropriate for Zara to always take into account the market life of new products and to attempt to optimize life cycle revenue and profits. In making such strategies, brand consumers will have enhanced learning about the brand, while Zara would be able to fill the identified gaps.
Background analysis
The fashion industry is one of the major sectors of the economy. It is usually engaged in the production of designer products at a large scale, which has expanded its business significantly. Increased level of business activity in the industry is necessitated by the fact that clothing is usually a necessity and therefore people need clothes at all times. However, the weather is a principle determinant in demand for fashion design products in the fashion industry (Yuanyuan, Holland, Shengfeng, and Weicheng, 2008).
There is a wide range of factors that facilitate an increased level of business activity in the fashion industry of Sudan. These factors are the driving forces since they increase the willingness of firms to engage in production activities. People with less income also purchase luxury products since they are usually pressured by conformity needs. This is a driving force in the industry since it implies that demand for fashion design products is significantly high in Sudan.
High level of demand in any industry increases the willingness of investors both locally, internationally, and therefore more firms are likely to be established with primary objectives of profit maximization. This is a driving force in the industry since it increases the demand for fashion products significantly. The other driving force in the industry is the need for people to remain stylish and classy. Moreover, the frequency of shopping increases the level of business activity in the industry (Barlett, 2001).
It has been found that 24.8% of people buy luxury products once a month while 4.3% do it weekly. This is a driving force in the industry since it guarantees business entities, a continuous flow of customers. Firms in the industry have already formulated policies that imply adherence to the driving forces. Also, strategies have been laid down to facilitate the implementation of the policies.
Since it has been found that people prefer to do their shopping in well-established department stores, this explains why there exists a large number of such stores in the main cities of Sudan that merchandize in fashion design products. Also, this is the reason why well known departmental stores have established different branches in the main cities of Sudan. The need for people to buy luxurious products has increased the development of different brands of products that increase the utility of consumers (Montaña, Guzmán, and Moll, 2007).
Different firms have also increased their investments in innovation and technology to improve the quality of clothing, brand reputation, trendy and stylish aspects, impulsiveness and brand loyalty. This is because these are other driving forces in the industry since they play a significant role in the determination of product demand (Burkhardt, 2008).
The industry is significantly large and competitive since it is characterized by the existence of many firms. This means that it has the features of a perfect competition market structure. Porter’s analysis of the industry will be based on five aspects. These include; threats of new firms’ entrance, bargaining power of suppliers, rivalry among existing firms, bargaining power of buyers and threats of product substitutes (Cai, 2008).
Cost of entering the industry is not high as the case is in other sectors, for example, the telecommunication industry that requires a large capital base. This means that new firms can easily join the industry since barriers to entry are significantly minimized. This increases competition, which further reduces profit for individual firms (Humphry, 2010).
However, this is beneficial to the customers since they are entitled to a wide range of products, which facilitates the maximization of their utility subject to their incomes. Also, they can access a large number of luxurious fashion design products at reduced costs. An increased number of firms further implies an increase in product substitutes, which increases competition in the industry. This increases bargaining power among suppliers and consumers to determine the equilibrium price and quantity in the industry through the forces of demand and supply (Dwivedi 2002, p 51).
PEST analysis
PEST analysis defines an outline of macro-environmental aspects that are employed in the environmental scrutiny of tactical management. The clothing industry in Sudan has and is facing several issues in its business environment such as political, social, economic, and technological issues.
With increased economic growth, the demand for clothing also augments a case, which makes big clothing firms to put efforts to surpass the demand to make considerable profits. The manufacture, as well as the production of clothing in Sudan, has serious effects on people’s health, traditions, and economic as well as social compositions of the local communities. As a result, the clothing industry is put in a tough situation where it has to meet the interests of the stakeholders, the government, and citizens as well (Daniels, Radebaugh and Sullivan, 2009).
Political aspects
Cloth is a very precious commodity in human life. One of the main political factors that have affected the clothing industry is tax policy. Just the other day, the government increased payable corporation tax. This led to a profound criticism geared towards firms saying that the revised tax policy, which was publicized, would cause long-lasting damage to the business. The division of Sudan into north and south has also brought in new challenges. The warrant of arrest issued against Sudan president will also affect operations of a fashion firm from the western world operating in Sudan.
Economic aspects
The Sudan economy depends on the oil and gas sector to finance the budget and cessation of Sudan, which is oil-rich, puts the north in economics limbo. Conversely, the oil reserves in Sudan are reducing and oil production is expected to decline by 70% by the end of 2012. Future supplies to counter the production decline are expected to be mainly from Libya, the Middle East, and Malaysia.
The clothing sector offers employment opportunities to people both directly and indirectly. Employment laws are changing about minimum wage and employment benefits. The cost of living in Sudan is going up and thus the clothing companies are expected to raise their employees’ compensation to match their living standards. Such laws have led to an increase in the cost of operation for the industry through an increase in salary overheads. More so, banks and other lending institutions have raised their lending rates, which have led to high costs of capital as well as non-availability of funds for firms, especially for expansion purposes. The sluggish growth rate of the industry has augmented the decline in production problems.
Social Aspects
The country is not yet ready for the accompanying cultural and political aspects of globalization, which is seen as an unwanted threat to its social values. Many social issues such as obesity, consumer-driven attitudes, westernization of culture, increase in the gap between the rich and the poor are some of the drawbacks attributed to the entry of new western companies. privatization and free-market ideas flourish in Sudan as a result of globalization leading to healthy economic growth.
Globalization has the power to pollute unique cultures, religions and the mentality of people. In Sudan, there is a general fear that globalization can corrupt Islamic beliefs and practices in the country. However, a country can’t win businesses, especially in the tourism sector if it is a strict follower of its culture and religion. The Sudan traditional life will be affected to a certain extent by modernization and westernization brought about by globalization. Globalization in Sudan has brought about a mixture of challenges some of which are due to the infiltration of Western culture into the traditional Islamic culture. Other concerns relate to the distribution of the nation’s wealth and high levels of personal income.
The social setting aspect is becoming progressively more crucial to firms in Sudan because it has a direct impact on the firm’s external undertakings especially in interactions with the public. This setting deals with the attitude and viewpoints that are generated by the public as well as the insinuations that may apply to the expansion and improvement of the industry.
Technological aspects
Technological advancements influence the industry’s modes of communication. Globalization has ushered in an era of technological advances within Sudan. With its capital surplus, the country has swiftly embraced the information technology sector and has opted for computerization, wireless, and the internet. Sudan has in particular taken many initiatives in this direction by allocating necessary funds for the development of the e-commerce market).
All across the city of Khartoum, one can see the imprints of globalization – international brand names, events, issues, and companies. The impact of such an international presence has helped Khartoum adopt a very liberal social lifestyle with infrastructures such as shopping malls, cinemas, hotels, leisure facilities and resorts of world standards. Khartoum has become the preferred center for many international consulting and legal firms, news agencies, advertising houses, and television networks.
A PEST analysis of the oil and gas industry in Sudan reveals several environmental factors that have and are currently influencing the industry. These factors are grouped into four categories, which are political, economic, social, and technological factors.
SWOT analysis about your preferred entry strategy (20%)
The SWOT analysis considers Strengths, Weaknesses, Opportunities, and Threats that are faced by different industries in their daily operations (Richter & Pahl 2009, P 6). The efficiency of operations in the clothing industry is enhanced by various strengths. These include the existence of designers who are experts in the field and the existence of different brands of products that diversify the market. However, some weaknesses act as disincentives to business operations in the region. Examples include increased competition between different firms, which demoralizes motivations of individual firm managers towards production. Besides, the demand for fashion products depends on weather conditions and therefore unfavorable conditions reduce the level of business activity significantly.
There exist a wide range of business opportunities in different regions of the world especially in Sudan in which firms in the clothing industry can diversify their portfolios. Also, different brands can be traded in overseas countries to increase market capitalization in the industry. This is because different nations are faced with different seasons in specific parts of the year. This means that varied brands will be demanded differently in various regions covered by the industry. Available opportunities, therefore, increase chances of success for the benefit of the clothing Industry. This is analyzed as follows;
Strengths
Reputation is one of the most important aspects of the business since people tend to pass that information to others. A good reputation would do more for a business and thus an organization must ensure that it creates a reputable name and relationship with the community. A company entering the Sudan market has to create a brand for itself through corporate responsibility. The organization can rely on the popularity of the parade to continue with its business responsibly.
A large number of outlets enables it to reach more consumers and thus is more likely to have a larger consumer base than its competitors are. Also, as a firm with a large consumer base, the organization can be able to bargain for the purchase of its goods. This means that its size can enable it to provide consumers with better prices resulting from its bargaining power as a seller (Pride, Hughes, & Kapoor, 2008). Apart from the bargaining advantage, the organization can also benefit from discounts arising from bulk purchases. This means that the organization can have a massive financial ability to manipulate prices in favor of the consumers, an advantage smaller firms do not enjoy.
The net income realized by the company enables it to rearrange its marketing strategies and improve consumer as well as investor confidence in the organization. The organization has capitalized on the growth of technology and has been able to utilize this avenue to grow its sales. With changing consumer dynamics, the organization has done well in keeping up with consumer growth and needs. This means that the organization is also able to tap other markets outside its physical locations (de Mozota, 2008).
The costs and the quality of the product being provided by the organization coupled with the various partnerships that the organization has evolved to provide the customer with the quality product set it apart from other organizations providing the same products (Keller and Kotler 2007; Kearns, 2003).
Weaknesses
Despite the advantages of decentralization to the operations of the business, it is important to note that the top-level management, which is charged with the development of strategies of growth for the organization, may lose touch with the people on the ground (Garrison, Noreen, & Brewer, 2009). An important part of any business is to recognize the needs of the consumers and make sure that products from the organization fulfill this need.
Since the branch managers are only responsible for responding to consumer queries and not organizational decisions, strategies developed by the top management may prove to be ineffective for the organization. The use of middle-level managers to assess consumer needs may lead to the reduced provision of adequate services and goods from the organization. This scenario is most likely to develop with the decentralization strategy adopted by the organization (Holston, 2011; Halton, 1999).
Zara has merged with several fashion firms and these mergers have led to the re-branding of the fashion firm. Consumers rely on a brand name to buy their products. The consolidation and subsequent marketing of the organization have not been able to achieve the goals of the organization. Despite the successful mergers, the organization has been unable to retain the same trust that consumers had given the previous fashion firm. This can explain the decline in sales for the organization.
To be able to overcome this setback, the organization must come up with a marketing plan that will enable it to gain trust from customers. Although this is a tall order, its recent rise in sales can be a useful tool to display that the organization can be able to fulfill the needs of the people. The organization can also create awareness of its business in these areas and this will lead to improved sales for the firm (de Mozota, 2003.
Opportunities
Zara’s has a potential influence on the suppliers of the various products in which it trades in as well as other new products which it can decide
to introduce to its customers. At present, several fashion firms tend to sell outdated products that do not match the current needs of customers a situation that has a substantial problem to this fashion firm, especially when dealing with customers. With the advent of edge-cutting technology, customers are interested in products that move hand in hand with technology and are not only able to save them time but also energy as well. For quite some time now, most firms have not been in a position to present their customers with such kinds of cloths and thus some of the customers’ needs have been left unsatisfied.
Zara is a well-established firm, a feature that gives it a competitive advantage over its rivals and thus it is possible for it to persuade the suppliers or even manufacturers of certain products to supply it with the latest products in the market. This is a business opportunity which if Zara’s capitalizes on early in advance before its rivals discover it, can lead to the enhancement of its customer base hence its sales. This is so because for customers who are not loyal to their sellers will not hesitate to look for a seller who trades in products that fully satisfy their needs hence in the process of looking for such a supplier, they may end up and remain at Zara’s(Hill, 2005).
Zara has an opportunity to strengthen its financial standing. Through its acquisition of the regional fashion firms and merging them into a single business, Zara’s should be able to enhance its financial stability since the various finances from the mini fashion firm will all be accumulated into one account. The acquisitions also offer an opportunity for Zara to increase its sales since its sales will be somehow an aggregate of the various regional fashion firm’ sales. Sales volume directly corresponds to profits hence increased sales will mean increased profits for the business which further will boost the financial health of the firm (Garrison, Noreen, & Brewer, 2009).
Threats – Zara is facing very stiff competition from several other businesses which range from specialty outlets, online merchants to middle-sized businesses. Such rivals pose a threat to Zara’s national scheme since they are also targeting the same customers that Zara’s is targeting. One of its main competitors is luxury fashion firms through the creation of a satisfactory experience and presents its customers with fashionable products (Lockwood, 2009).
The economy is experiencing a very slow growth rate which presents a threat to Zara’s business activities. The poor economy has led to high-interest rates which may affect Zara’s financial position. This is because high-interest rates imply high costs of capital especially from bank loans and thus the firm may end up lacking financial resources to take up new business opportunities which may slow down its business growth(Dunning, and Lundan, 2008).
SWOT Matrix
Strengths
The organization provides low-cost fashion cloths to Sudanese
The quality of cloths being provided by the organization is not compromised at any point
Opportunities
The growing awareness among the masses about the advantages of fashion allows the organization to access new consumers.
The growing consumer base means the organization can create new fashions aimed at generating funds which can be used in pursuit of organizational goals
Weaknesses
The organization lacks the funds to properly finance its objectives
The organization lacks a management structure which results in a shortfall of resources at times due to the inability of the different offices to communicate with each other.
The organization is unable to reach a wide array of potential consumers who may be more deserving of the organizational programs and who may eventually benefit the organization via their affiliation.
Threats
The organization is facing increased competition from pseudo organizations purporting to promote art by providing products at an even lower cost.
The organizational operational costs will also increase due to the frail economic conditions; this implies that there will be an increase in the costs of cloths being provided by the organization.
The increased costs of cloth mean that the organization will either have to increase the costs that the customers have to pay or it will have to decrease the quality of service that it is providing, neither of which are acceptable actions.
Recommendations for preferred consequent entry strategy (10%)
Entering Sudan’s clothing should be strategically managed to avoid unnecessary losses. A company has to consistently review its marketing strategies to suit the market changes and demands. This is only possible when the company carries out self-analysis and that of other relevant companies and competitors. A company may use the Strength, Weakness, Opportunity and Threat Analysis (SWOT) or the Political, Economical, Social and Technological analysis (PEST) before choosing the mode of entering a new market and or entering the respective market (Pati, Park, & Augenbroe 2010).
A SWOT analysis may be helpful in strategic management because it concentrates on potential issues that affect an organization the most. This analysis is also useful in addressing strategic situations that are complex in case time is limited. It also allows an organization to understand its position in the market. Moreover, it also enables an organization to understand the position of other companies in the market; hence may determine the best company to acquire or merge with (Pati, Park, & Augenbroe 2010).
On the other hand, Political, Economical, Social and Technological (PEST) analysis, analyses the macro-environment affecting firms. These factors are external, and firms have no direct influence over them hence may turn out to be threats to firms. Since the management does not influence these factors, they may pose to be threats since the business has to operate despite the changes. Expected changes in these factors are difficult to determine; therefore, organizations have to monitor them and prioritize those that affect or influence their operations. Therefore, firms should strategically plan to deal with these uncertainties (Pati, Park, & Augenbroe 2010).
The management also has to analyze the competitors. A business has to know the capabilities and weaknesses of its competitors hence work on gaining a competitive advantage through the weak points while majoring on the strengths of the organization. This will help it obtain information concerning close competitors and hence use the information to predict the behaviors of competitors. This analysis helps an organization to understand a competitor’s plans and objectives, the reaction of competitors towards their actions, and how to influence behaviors of competitors to the advantage of the firm. The analysis should also assist the firm to determine the strategies, objectives, capabilities, and assumptions of competitors (Pati, Park, & Augenbroe 2010).
Reference List
Barlett, P., 2001. Business Case from Strategic Management Concepts and Cases.New York: Allworth Press
Burkhardt, R. 2008. ‘Reputation Management in Small and Medium-Sized Enterprises. Analysis and Evaluation of the Use of Reputation Management’. A Survey of Small and Medium-Sized Enterprises in Germany. Hamburg: Diplomica Verlag.
Cai, J., 2008. ‘An Evaluation of the Positional Forces Affecting Design Strategy’. Design Management Journal, 3 (1), pp. 23-29.
Daniels, J., Radebaugh, L. & Sullivan, D., 2009. International business: Environments and operations. Upper Saddle River, NJ : Prentice Hall, 2009.
De Mozota, B., 2003. Design management: Using design to build brand value and corporate innovation. New York: Allworth Press.
De Mozota, B., 2008. ‘A Theoretical Model for Design in Management Science: The Paradigm Shift in the Design Profession, from Management as a Constraint to Management Sciences an Opportunity’. Design Management Journal, 3 (1), pp. 30-37,
Dunning, J. H., & Lundan, S. M. , 2008. Multinational enterprises and the global economy. Cheltenham: Edward Elgar Publishing.
Dwivedi, L., 2002. Microeconomics: Theory and Applications. New Delhi: Pearson Education.
Garrison, N., & Brewer, K., 2009. Managerial Accounting 11E W/Dvd. New Delhi: Tata McGraw-Hill Education.
Kearns, P., 2003. HR Strategy – Business Focused, Individuall Centred. Jordan Hill – Oxford : Butterworth-Heinemann – An imprint of Elsevier.
Halton, R., 1999. ‘Marketing Policies in Multinational Corporations’. California Managment Review, 13 (4). Pp. 12-14
Hill, C., 2005. International Business: Competing in Global Marketplace. New York : McGraw-Hill/Irwin, 2005.
Holston, D., 2011. The strategic designer: Tools and techniques for managing the design process. Cincinnati: HOW Books.
Humphry, J., 2010. ‘Porter’s Five Forces Model’. Journal of External Industry Analysis, 27 (1), 1-5.
Keller, P. & Kotler, K., 2007. A Framework for Marketing Management. USA : Prentice Hall, 2007.
Lockwood, T., 2009. Design thinking: Integrating innovation, customer experience and brand value. New York: Allworth Press.
Montaña, J, Guzmán, F, & Moll, I. 2007. ‘Branding and design management: a brand design management model’. Journal Of Marketing Management, 23 (9/10), pp. 829-840.
Pati, D., Park, C. & Augenbroe, G., 2010. ‘Facility Maintenance Performance Perspective to Target Strategic Organizational Objectives’. Journal of Performance of Constructed Facilities , 180-187.
Pride, W. M., Hughes, R. J., & Kapoor, J. R., 2008. Business. Boston: Hoghton Mifflin Company.
Richter, A, & Pahl, N. 2009. SWOT Analysis – Idea, Methodology and A Practical Approach. Munich: GRIN Verlag.
Yuanyuan, Y., Holland, R., Shengfeng, Q., & Weicheng, W., 2008. ‘Development of a Customer Experience- Based Brand Strategy for the Lenovo Group to Explore the UKMarket’, Design Management Journal, (3) 1, pp. 60-68.
The benefits that accrue from RFID tags in this industry
The automatic ID system (RFID) has won over the retailers’ use of barcodes in their operations. The effectiveness of radio frequency identification has proven to be very efficient especially in stocktaking. Radio frequency ID is automatic, and cans scan multiple items at the same time such that no physical scanning is required. Through RFID, it is easier to locate all the items needed within a very short time.
The ability of the RIFD tags to contain more information, which can be changed or added, helps companies such as Zara in keeping up records especially when pricing. That implies that, RIFD helps companies in monitoring their sales including what sells best and what remains standstill. The cost of labor is also highly reduced. For instance, considering the speed of the RFID systems and efficiency, few labourers are required to help along with the scanning job.
The downsides of the RFID tags in this industry
Even though RFID systems are dependable, there are drawbacks noted that come along with its operations. For example, acquiring and installing the RFID systems to be used by a corporation is very expensive and could be a challenge to smaller businesses. Besides, scanning more than one item at the same time could create problems if the tags collide.
The collision could result to a breakdown in case many signals are picked up at the same time. Additionally, there are RFID systems that are not able to scan metallic items besides being unable to go through water as they are easily diffused. Therefore, it shows that while scanning of items is automatic, other items are scanned manually to avoid any due damages.
On the other hand, labour reduction is also a disadvantage to the employment seekers. Due to the speed of the systems, only a few personnel are considered necessary to help in the scanning division.
Wal-Mart slowed its use of RFID
Wal-Mart was determined in developing a more efficient electronic based RFID, which could enable companies do all tracking for all their products. Unfortunately, it faced a few challenges before it could fully settle down to use the RFID. For instance, the operation was to be a way of eliminating manual scanning that was used earlier in such operations.
However, doing away with the initial system meant that employees had to be trained on the usage of RFID, which meant incurring additional costs. At the time of this discovery, other technologies had emerged promising the same quality of services. The ‘Arkansas based’ RFID had been announced at the same time with the Wal-Mart’s RFID and had its shortcomings. Their systems (Arkansas) failed to work with metallic items as well as in water.
Conversely, among the items to be tagged by Wal-Mart, there were also products that had slender margins that needed tagging. The tagging operation of these items proved to be much expensive. The products’ approximation of their worth tagging was bound to bring both profit and losses. In addition to the tagging expenses, there were also the maintenance expenses that had to be catered for by Wal-Mart, other inventory groups and tag readers. Bearing these costs seemed to be much of a loss than profitable.
Wal-Mart still faced a great challenge even after the sales spread of RFID. The company experienced technical problems including poor network, which failed to activate. Apart from that, they experienced refrains from suppliers and retailers who lost confidence in their systems. Due to this, Wal-Mart sales never grew despite spending more on the production while everything turned profitless.
The stage that RFID got into named ‘the furrow of disillusionment’ seemed to be the worst given that the required output was mined by the system. The stage almost got RFID stagnated. The only ground that Wal-Mart offered to keep it going was the ability to single-tag items that were being produced in the retail industry. The situation proved tough in that loss continued to add up despite the huge investments made in the industry.
Nowadays, Zara could be considered a recognizable brand that attracts the attention of thousands of customers all over the world. The company is focused on retailing clothing and accessories that are described as different from the rest of goods that are presented on the market. Besides, the given market sector is characterized by the increased rivalry because of the high expected incomes. For this reason, Zara tries to preserve its current state by attaining a competitive advantage. Its practice of making limited production runs could be considered one of the ways to maintain the current leading position.
The efficiency of the approach could be explained by several factors. Today we could observe the oversupply of different goods. However, because of the mass production approach used to manufacture such an ample quantity of commodities, very often these goods possess similar qualities and might look identical. For this reason, customers who buy them could be deprived of the feeling of oneliness as many other people wear the same clothes. At the same time, the improved well-being results in the increased level of demands to the quality of goods.
Zara realizes this trend perfectly. That is why by making limited production runs it emphasizes the unique character of its products. As a result of this approach, there are not so many accessories or pieces of clothes produced by this brand and a customer could enjoy the feeling of belonging to the privileged class which is able to buy Zaras products. Finally, limited production runs could also state for the improved quality of goods as more attention is given to details. For this reason, the given approach helps the company to preserve its competitive advantage and remain profitable.
It is possible to single out several elements on which Zara competes; the most important elements are the ability to follow fashion trends and the variety of the items which they manufacture. Zara produces approximately 11.000 different items of clothing. Moreover, this company has established a well-developed supply chain and they can bring new articles of clothing every two weeks (Tiplady, 2010, unpaged). Thus, one can construct a product positioning map based on these attributes
Primary Target Markets
The target audience of Zara is very wide. It includes people of both sexes, whose age ranges from 17 to 30. These people represent the upper-middle classes and their purchasing power is very high. However, one should also mention that Zara manufactures children, especially girls, aged more than seven (Zara, 2011, unpaged).
Product Categories
Zara’s products can be subdivided into several categories: 1) jeans and trousers; 2) jackets; 3) shirts and T-shirts; 4) handbags; 5) belts; 4) footwear and so forth. These items are intended for both male and female customers.
Product-Market Grid.
Product Category
jeans and trousers
Jackets
shirts and T-shirts
Handbags
belts
footwear
Market Segment
Male customers aged 17 – 25 – 1, 2, 3, 4
Female customers aged 17- 25 – 1, 2, 3, 4, 5.
Children aged 7 and above 1, 2, 3
Thus, we can argue that jeans, jackets, and T-shirts are the most popular of Zara’s products. They are marketed to every group of the target audience. Some of the items of clothing, which they manufacture, are primarily intended for women, for instance, handbags and belts.
Strategy Opportunities
At the given moment, the company should pursue a product development strategy, which means that they need to offer new products to its current customers. For example, Zara can offer a wider range of winter apparel to their customers, both male and female. Secondly, they need to increase the number of footwear items. Currently, they manufacture shoes which are suitable for people, who live in areas with a very warm climate. A product development strategy has been chosen because it will be rather difficult to promote the company’s products to different layers of the population. More importantly, Zara is already well-known among its potential customers, and these people will receive their new articles of clothing favorably.
Product Mix
It is possible to say that Zara does have a competitive advantage which is primarily related to its product mix. This concept can be understood as a range of products that are marketed together (Christ, 2008). The customers of this company prefer to buy several of its clothing items at a time, for instance, T-shirts and cardigans, belts and jeans, knitwear and so forth. Zara’s products create a distinct value for the customers and they prefer to buy a set of clothing articles from this manufacturer rather than from different companies. Certainly, Zara does not force customers to purchase their products as a set of items but in many cases, the customers prefer to do so. In part, it can be explained by the act that these people are not very price sensitive and they are quite loyal to this brand, and this gives Zara a competitive edge.
Zara as one of the world’s leaders of fast fashion makes use of its understanding of the QR strategy importance (Dutta, 2002). The phenomenon of short lifecycles influences the strategies implemented by fashion businesses considerably as the mood of the moment or the seasonal demand make companies think fast of what trends will dominate the next period. High volatility is also an issue as customers change their tastes and demands in accordance with the most recent popular clothing trends, movie stars’ examples, etc. High impulse purchases also make the tasks for fashion companies harder as customers decide to buy something spontaneously, and it is the work of the designers and marketing managers to guess correctly what trends will make customers decide in their favor (Fast Fashion, 2009). To achieve this, the companies have to reduce forecasting horizons and face challenges for logistics management. Zara does this by transferring the production process and sourcing offshore, which does not involve additional transportation costs as international markets form a substantial part of Zara’s business (Infosys, 2008). Thus, becoming a global company allows Zara to choose the regions with the most appropriate tax climate, labor force costs, and potential markets, although without the necessity to face the issues present in them at all (Craig, 2004).
Moreover, to ensure comprehensive control over its modernization and development, Zara implements the speed-to-market program whose essence lies in speeding the production process up to get the competitive advantage in the market. This program makes the lifecycle shorter but is an integral part of the QR strategy. Moreover, the speed-to-market program needs less time for product refinement and allows launching quality production to the market within a shorter timeframe. Long-term relations with suppliers, manufacturers, and retailers constitute the basis of Zara’s international success as being confident of these suppliers, manufacturers, and retailers allow Zara to be sure about the quality of the raw materials they use and about the sales of their products in various markets. (Christopher, 2000). Besides placing its sourcing and production process in offshore zones, Zara also develops long-lasting business relations with its branches all over Europe, including its Russian, Spanish, English, German, etc. branches (Zara, 2009).
However, Zara can not be distinctly called either a demand-driven or a forecast-driven company because these two notions overlap to some extent. For example, a demand-driven company is oriented on the current trends in the market, but the implementation of the QR strategy in the modern quickly changing market at once makes the company into a forecast-oriented one (Zara, 2009). It becomes necessary to prepare forecasts to be ready for the new moods of the moment or volatility manifestations, and Zara comprises the features of both mentioned types of companies. Also, Zara displays considerable flexibility in shortening its development cycles and postponing certain color or design trends (Zara, 2009).
The company, working with numerous smaller contractors and long-term partners, has at its disposal the qualified management team that provides the senior management with adequate and permanently updated EPOS data and strong IT support presenting the latest computer innovations to Zara (Lowson, 2001). The latter includes information about the product lines of the company, detailed accounts on Zara’s customer base and the recent demand trends in the market. The information about the company’s suppliers is also included in the EPOS reports to ensure a comprehensive overview of the market situation (Zara, 2009). Finally, the proficient transport and delivery services add to the positive image of Zara as a reliable partner in the fast fashion business.
Reference List
Christopher, M 2000, ‘The Agile Supply Chain: Competing in Volatile Markets’, Industrial Marketing Management, Vol. 29, pp 37-44.
Craig, A 2004, ‘Zara: Fashion Follower, Industry Leader’, Business of Fashion Case Study Competition, pp. 1 – 7.
Dutta, D 2002 ‘Retail at the Speed of Fashion’, Third Eyesight, pp. 1 – 7.
Fast Fashion 2009, Fast Fashion is a Collaborative Process. Slideshare.
Infosys 2008, Moving Work Offshore: It’s More Than Just Numbers. Infosys.com.
Lowson R 2001, ‘Retail Sourcing Strategies: are they cost effective’, International Journal of Logistics, vol. 4, no. 3, pp 271-296.
