1. The author describes Zara’s business strategy as “counter-intuitive” (p.2 line 4). Do you agree? Please explain why/why not. (If you use technical terms from the case, please ‘translate’ them into plain language)
OR
2.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)
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2.In your view, what is the key reason for Zara’s success?
ReplyDeleteIn my view the firms “positioning for speed” strategy is the main reason for Zara’s success. Positioning for speed strategy prepares an organization to react as quickly as possible.
Zara stores are always stocked with new and limited designs. Thus Zara’s designs were always unique as one customer confirmed “It’s like you are walking into a new shop every two weeks” Their designs were always unique because they responded as quickly as possible to customer needs. After finding out what customers needed, Zara’s designers would quickly design the merchandise and within 15 days the items will be appearing in stores. Zara’s rival on the other hand received new styles once or twice a season. Therefore the fact that they responded quickly to customers’ needs and served their customers exactly what they wanted based on data collected from the customers and not on speculation is probably the key reason why Zara is successful.
2.In your view, what is the key reason for Zara’s success?
ReplyDeleteFor me, the reason why Zara has been one of the most successful businesses around the world is because of their deep understanding of their target market meaning they know what appeals to the consumers.
In my opinion, customers are the main key drivers of a business. If a business doesn't look at it in a consumer's perspective, then surely the business is gonna die out one way or the other. However, if the business knows what appeals to their consumers, then the business will certainly survive for a foreseeable future which is what every business wants. This is the reason why Zara has been so successful.
GAP, one of the leading fashion retailers in the 90's, learned it the hard way. The retailer was forced to shut down hundreds of stores because of the debts that they owe. The reason for this is because they guessed what the youth market, which is their target market, wants. They didn't make the right guess on what's going to appeal to these consumers not just currently but in the future as well.
Zara meanwhile didn't guess. They know what their target market wants by simply just asking them. The staff of Zara uses personal digital assistants (PDAs) to get the customer's inputs as well as the feedback on what they want to see more of in Zara's store racks.
Zara also uses the point of sales (POS)system which combines the results of the sales from the cash register as well the customer insights about the store. This system ables Zara to plan the styles that they are going to sell in the future.
2. In your view, what is the key reason for Zara's success?
ReplyDeleteIn my view, I believe the reason why Zara became so successful is the use of good systems in place and the simplicity of manufacturing. This put together had the outcome of speed service.
Walking in to any Zara store was like walking into a new store every time, with stock always updated constantly. Fashion and designs were put together by a system called “The Cube” and were on store shelves before you know it. Not only were they just following other designers for ideas, they were also asking for customer feedback, linking it with most popular items sold via sales, and also analysing the piles of unsold items. This gave Zara more idea of what was wanted by consumers and adjusting this into their designs.
Zara having such a high speed in production gave them a highly competitive advantage over their rival who received new styles and designs once or twice a season. By adapting and quickly responding to customer’s needs is what I believe gave Zara the best advantage and their key reason for success.
2. In your view, what is the key reason for Zara’s success?
ReplyDeleteIn my view, the combination of in-store data collection and a highly efficient value chain is the key reason for Zara’s success.
Data collection: While other clothing manufacturers try to guess what customers will demand in the near future, Zara focuses on collecting customer opinions and other in-store data. Retail store staff have PDAs, and actively seek customer feedback/opinions. Staff will question customers about why they would or would not purchase specific garments, and whether they would purchase these garments if they were altered (different colours, styles, measurements), entering this data into the handheld PDAs.
The staff are also able to retrieve data from their stores point-of-sale system, allowing them to see the ranking of garments, or those garments which are top sellers and those that do not sell particularly well. The sales data and customer feedback/opinions are regularly updated so that the firm may interpret this information and base their production and re-order stock on this; they can rely on accurate and timely information rather than guesswork.
Value chain: Some clothing firms take months to move from planning a new garment to being able to actually provide it for sale in retail stores (speed to market), but Zara is able to achieve this with an average time of 15 days. The main contributing factor to Zara’s superior speed to market is the firms focus on vertical integration. Vertical integration is the combination of multiple stages of production, which may otherwise have been performed by separate companies. Zara is highly vertically integrated, and focuses on speed both between and within the primary activities of its value chain.
For example, Zara cuts and dyes the its fabrics by machine in highly automated factories, instead of purchasing the fabrics pre-cut and pre-dyed from a supplier (inbound logistics). While some of Zara’s operations are performed by contract manufacturers, these manufacturers are tightly networked, ensuring the production process is as fast and responsive as possible. When the garments have been produced, they end up in Zara’s 5 million square foot warehouse, where they are ironed, security and price tags affixed, and packed on hangers. No garment stays in-house for longer than 72 hours, with trucks able to deliver to nearby stores overnight and cargo flights used for destinations farther from the warehouse (outbound logistics). Because the garments are pre-prepared for sale in Zara’s warehouse, staff simply move garments straight from box to shelf, allowing time for other activities. Additionally, Zara does not advertise, and instead relies on its use of ‘limited runs’ to ensure the customers purchase garments straight away at full price; customers know that if they wait before purchasing they will likely miss out (marketing and sales). As already mentioned, staff request customer feedback/opinions at time or purchase, and use this information to form future production plans (service).
Combined: One of the biggest issues clothing firms face is that fashion changes very quickly, and what may be popular one week may not be popular the next. When combined, data collection and Zara’s highly efficient value chain allow Zara to react to changes in customer demand extremely fast. Through actively seeking customer feedback/opinions, retail store staff may find that many customers would prefer if a certain shirt was red rather than blue. The staff would record this information on their PDAs, which would then be sent to Zara’s production managers, who could decide that they will produce the shirt in red. As Zara is highly vertically integrated, the production involved with the red shirt can move along the value chain (from inbound logistics to marketing and sales) so that in just 15 days, customers will now be able to buy the shirt in red. This would be impossible for most other clothing firms, and is therefore the key reason for Zara’s success.
2. In your view, what is the key reason for Zara’s success?
ReplyDeleteIn my opinion, the key reason which made Zarah successful is their ability to gather the right kind of information of what customers want, bring it back as an insightful feedback to the company, and then translate that information into production with high-speed.
Data Gathering:
Staffs gain feedback as they regularly chat up with customers to get details of which items they would want to see more of. This is done with the help of staff PDA's (personal digital assistant) which is used to gather customer input on what items they would actually prefer to have. This PDA’s are connected to their POS (point of sale) systems, which shows managers the updates of which items are top-sellers as garments are ranked according to sales. They make use their collected data, both from customer interaction and sales update to make effective and valuable decisions on which items and designs to produce next.
Responsiveness:
Since Zarah’s ultimate goal is to improve the quality and frequency of ‘sense making’ for the design and planning team, it is important that their responsiveness is fast enough to cope up with the quick pace of customer wants. The success in their fast response to customer demands was made possible through the way they have managed their operational systems.
Zarah has been able to be responsive to its actual demands through a combination of several ways. This includes vertical integration, which is the process in which the production and distribution of products and services are controlled by the company itself, and just-in-time manufacturing, which is the purchase of materials, production of items, and product distribution, done only as it is needed in order to meet the actual demand. This enabled them to translate data gathered from customers into production faster compared to the average time of competing retailers.
Manufacturing & Logistics:
I think therefore, that the main factor which helped Zarah to be successful is the combination of their well performed data collection and their counter-intuitive strategy of manufacturing, performing, and distributing their products.
1. The author describes Zara’s business strategy as “counter-intuitive” (p.2 line 4). Do you agree? Please explain why/why not.
ReplyDeleteI agree that Zara’s business strategy is counter intuitive because it goes against standard and proven retail practices. Most of the clothing industry has 4 seasons that match the weather seasons and bring in new stock one or twice a season. Zara goes against this trend by having twice weekly shipments to stores. Zara also has virtually no advertising, they rely on their quick turnover of stock drawing in customers and its reputation that customers regularly visiting stores with an average of 17times per year. This is significantly higher than the average of 3 visits per year. They break the mould of the clothing industry which has created a competitive advantage. In an industry that has become so reliant on outsourcing all production to low labour cost countries, Zara keeps 60% of production within its home country of Spain. They are dependent on their highly in demand products and competitive advantage of quick inventory turnover and small amount of stock to keep profits up without having to resort to outsourcing all production to reduce costs which could jeopardise their time deadlines.
From personal experience shopping in Zara throughout Europe and the United States their stores are very high class fashion with up to date styles but at affordable prices which lead to quick purchases.
In my view, the key success for Zara’s is that they make use of the information gathered from their customer, and transform that information into the products. Instead of guess what products should be produce, they allows the store manager to frequently ask their customers of what would they like, the kinds of question that the manager would ask is what if this products available in black and with round neck, would you consider of buying it? Together with the PDAs technology it allows the store to transfer the data collected in real-time to the head-quarter, where they then decided what to produce according to the customer demands.
ReplyDeleteThey are able to introduce new style frequently by having those information and feedback from their customers, which make them gain a competitive advantage, they able to transform idea to appearance in store in 15 days where their competitors Gap received new style once or twice a season.
By combining the information that they gathered and the speed to transform ideas to appearance, it help Zara’s design to be unique. One of the customer confirm by saying “You’ll never end up looking like someone else” and “It’s like walk into a new store every two weeks”. This idea encourage their customers to buy the cloth at the full price, because they believe those clothes will be long gone if they waiting to buy on the next visit.
Altogether, I believe that their key success is the information gathered and the ability to introduce new styles more quickly than their competitors.
2. In your view, what is the key reason for Zara’s success? (Please explain why.
ReplyDeleteI believe that the key reason for Zara’s success is its speed to the market. Most of its competitors take a season for new clothing lines to come out and into the shops, whilst Zara can get new garments out within about 15 days.
Zara achieves this speed to the market with its intelligent gathering PDA’s (Personal Digital Assistants) which sends trend data within hours to the Zara’s own designers which produces 30,000 garments a year.
The company is vertical integrated allowing it to very quickly get it’s manufacturers to produce the garments designed and get it sent off to one of it’s two warehouses in Spain where the they delivered to the separate stores in the two drop offs a week.
With this speed to the market, it allows Zara to follow current trends and beat it’s competitors to produce and sell its garments and it also increases customer visits with its constant limited run items. Zara’s customers visit it’s stores on average 17 times per year compared to it’s competitors who visit an average of only three visits a year.
2. In your view, what is the key reason for Zara’s success?
ReplyDeleteIn my opinion, Zara’s success is determined by their strategies to gather the right information and also the improvements in their value chain. Zara’s ability to distinguish information needed by each important factor of the business e.g. suppliers, customers, production management, etc. It helps Zara to increase their production, bring customer feedback and improve production strategy to have competitive advantage.
Gathering Data:
Zara focuses on gathering the right information needed for their on-going job process. By doing this, they can improve their strategies, staff can gain feedbacks and management team can determined the sustainability of the business. Staffs are directly interacting with the customers and can get more information regarding on what the customers want to buy. Zara provide its store managers with personal digital assistants (PDAs) to gather input from customers as well as staff chatting up with customers, which helps to increase inflow of information to Zara. The gathered information in the PDA’s are quickly transmitted and linked to the store’s point-of-sale (POS) system which shows the garment rank by sales. This gives Zara the advantage of knowing the revenue for a store each day, and most importantly what the customers want to see and buy in their stores. Zara will have the competitive edge, as they can predict both profitability the company and the customer fashion trend in the future.
Value Chain improvement:
Zara’s value chain has improved over the years; the speed of their production process is one of the contributing factors that build up Zara competitive advantage. Zara’s competitors take months to move from planning and designing a new garment to being able to actually produce and provide it for sale in retail stores, but Zara is able to achieve this with an average time of 15 days. Zara’s ability to take one customer’s request, and actually make it and bring it to the store in 10 days is unique and unbeatable. Zara focuses on vertical integration, combination of multiple stages of production, which led them to a better speed-to-market and the speed of the primary activities in the value chain. Zara is able to be very responsive through combination of vertical integration and technology-orchestrated coordination of suppliers, manufacturers and logistics.
Value chain primary activities:
Inbound logistics - Materials and fabrics are made and cut by Zara in their automated factories, instead of purchasing them from a supplier. This strategy can save them time and help them to cut cost.
Outbound logistics – All the items Zara sells are stored in a large distribution centre, with no items staying in-house for more than 72 hours. Delivery trucks are able to deliver to nearby stores overnight and cargo flights have been arrange to deliver further destinations.
Operations – Zara’s primary goal is to improve the gathering of information which speeds up the designing and planning, manufacturing and production of the business.
Marketing and sales – Zara’s collaboration with various famous artists help them for advertising and marketing their clothing line. Zara doesn’t do much advertising; their strategy focuses on the use of limited item runs which forces customers to buy the garment in limited time. Due to Zara’s speed-to-market, the garments are already delivered in ‘ready-to-shelf’ form so store staffs can easily take out the items and put it on the shelf.
Service- Zara makes sure that staff and customers interact with each other, the use of PDAs for customer feedback/suggestions, on-store order and stock take. This information are important to future production strategies.
Week 4: Question 1
ReplyDeleteZara's business strategy would seem quite counter-intuitive (i.e. contrary to normal expectations) when compared with trends, averages and firmly held conventions of the fashion industry.
First of all, where most in the industry are outsourcing manufacturing to low-cost countries, Zara opts to keeping most of its production process in-house (vertical integration).
Vertical integration coupled with just-in-time manufacturing and a seamless logistics model has enabled Zara to get locally targeted designs into the stores in 15 days (from conception to store appearance). Hence, products continuously change every two weeks.
Furthermore, although Zara utilizes technology in almost every aspect of its business processes its IT expenditure is less than one-fourth the fashion industry average. In my opinion, Zara does not create value by utilizing innovative technology but rather uses technology to innovate their business processes.
Secondly, Inditex (Zara's parent company) spends a meagre 0.3% of revenue on advertising compared to the industry average of 3.5% and on top of that it does not run sales. Yet, the average Zara customer visits the store 17 times annually compared to 3 annual visits to competitors and it manages to sell 85% of its products at full price.
How is this possible? Zara capitalizes not only on speed but also on having limited supply of their products. As one customer comments "If you see something and don't buy it, you can forget about coming back for it because it will be gone."
In addition to this, Zara interacts with its customers frequently in order to more accurately forecast demand ensuring that whatever new style is arriving in a fortnight will be guaranteed to sell.
1. The author describes Zara’s business strategy as “counter-intuitive” (p.2 line 4). Do you agree? Please explain why/why not.
ReplyDeleteI agree with the statement that Zara’s business strategy is counter-intuitive, that is, in the sense that it goes against established industry best practices, for the following reasons:
• While other firms guess about trends or try to ‘push’ trends via expensive ad campaigns and fashion shows, Zara cleverly gathers data about customers’ preferences in order to be able to adapt its offerings to these preferences (use of PDAs, staff asking questions and looking through rejected items, point-of-sale system that ranks garments by sales). Advertising is hardly used by Zara (0.3% of revenues vs 3.5% industry average).
• Zara is vertically integrated (nearly 60% of merchandise is produced in-house and the firm makes 40% of its own fabric) while competitors like H&M fully outsource their manufacturing. By doing so, cycle times (the time it takes to produce a unit) can be reduced enormously by Zara.
• Zara delivers goods to its stores twice a week, while rivals may only receive new products once or twice a season.
• The above and the fact that runs are limited allows Zara to cultivate the exclusivity of its offerings, encourage customers to buy immediately and at full price (while others often have to markdown their products at the end of the season), prevent major mistakes in its products and encourage its customers to visit regularly (17 times per year for Zara compared to 3 for rivals).
• Zara is very Spain-centered, while rivals spread facilities around the globe to reduce risks of disruptions and exchange rate fluctuations.
All in all, this means that I agree with you, Jess, but I think the last bulletpoint mentioned above adds significantly to the argument of Zara’s counter-intuitive strategy.