Corporate Strategy †Zara Essay

The core concept of Zaras business model is they sell medium quality fashion array at affordable prices, and vertical integration and quick- solution is key to Zaras business model. Through the entire process of Zaras business system formulateing, sourcing and manufacturing, distribution and retailing, they presented foursome important success factors short cycle judgment of conviction, small batches per product, extensive variety of product every assuage and heavy investment in information and communication technology. These four elements are involved in every aspect of the business.Zaras Business Model Zaras business model can be broken humble into three basic components concept, capabilities, and value drivers. Zaras fundamental concept is to maintain design, production, and distribution processes that will enable Zara to respond quickly to shifts in consumer demands. Jose Maria Castellano, chief operating officer of Inditex stated that the fashion world is in constant flux and is driven not by supply but by node demand. We need to confine consumers what they want, and if I go to South America or Asia to make clothes, I simply cant move fast enough.This highlights the importance of this quick response time to Zaras operations. Capabilities of Zara, or the required resources needed to exploit the opportunities and execute this conceptual strategy, are numerous for Zara. Zara maintains tight control oer their production processes retentivity design and manufacturing in-house or with some strategic partnerships located nearby Headquarters. Currently, Zara maintains 80% of its production processes in Europe, 50% in Spain which is very close to La Coruna home base.They give way strategic agreements with local manufacturers that ensure timely delivery and service. Through these strategic partnerships and the benefits brought by this proximity of manufacturing and operational processes, Zara maintains the flexibility necessary to design and produce over 1 two hundred0 new items annually. This capability allows Zara to achieve their strategy of expedited response to consumer demand. Competitive Advantage Fundamental to Zaras success is their commitment to rapid response in customer trends in fashion, producing clothing often and with short life spans (10 wears).Their commitment to this goal and the capabilities that they have developed to achieve it, have provided significant competitive avail to Zara oddly in the areas of product development, strategic partnerships and cost of production, advertising and securities industrying, and information technology infrastructure. The efficiencies and processes developed in these four functions differ significantly from their competitors and stand out in providing additional value and profitability to Zara. Product DevelopmentZaras unique approach to product development is instrumental to their success. Zara gives store managers significant autonomy in twain determining the products to d isplay in their stores and which to place on trade, and relaying market research and store trends back to their headquarters in La Coruna. At headquarters in that location are teams of commercials who take this information into account to design and effectively plan and produce all of Zaras products. Zara maintains a design team of 200 people, all of which produce approximately 12,000 new styles per year for Zara.The process of obtaining market information and relaying it to design and production teams expedites product development by shortening the throughput time of a product to 3-4 weeks from design to distribution. This process is very different from its competitors. Many competitors rely on a small elite design team that plans both design and production needs well in advance. Stores have little autonomy in deciding which products to display or put on sale because Headquarters plans accordingly and ships quantities as forecasted. Zaras speed to market in product development ex ceeds the capabilities of its competitors.This in itself provides additional value to stakeholders, customers, and stores in producing quality clothing at affordable prices . Zaras product development capabilities are essential to Zaras business strategy and future success. Strategic Partnerships and Cost of Production In comparison to competitors, Zaras business strategy, in regards to strategic partnerships and cost of production, provide for a strategic competitive advantage. Zara, unlike its competitors such as Gap, Benetton, and H&M, does not use Asian outsourcing.Eighty percent of Zaras materials are manufactured in Europe, with 50% made in Zara controlled facilities in the Galicia region of Spain near headquarters. roughly of Zaras competitors have 100% outsourcing to cheap Asian countries. Though the cost of production in Spain is 17-20% more expensive than Asia, Zara does have a competitive advantage over its competitors in regards to operations. The local strategic partne rships that Zara maintains with manufacturers in Europe allow for a product throughput time of 3-4 weeks from conception to distribution.To make this happen, the company designs and cuts its fabric in-house and it acquires fabrics in only four colours to keep costs low. The proximity of these suppliers gives Zara great flexibility in adapting their product lines based on up to date market trends and consumer behaviour. It also decreases costs of holding inventory. Zaras competitors, through outsourcing to Asian countries such as China, sacrifice the benefits of proximity for low labour and production costs.Though there is a cost advantage in their approach in regards to labour, the lack of flexibility in changing orders based on current trends hinders their operational efficiencies. armoury costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until day-to-day shipment to stores. This proximity effect and the flexibility that it gives Zara is fundamental to their basic concept to respond quickly to shifts in consumer demand and has provided them with a competitive edge in comparison to their peers.The striking thing is that Zara has found differences that matter to customers and differentiated itself from its competitors by performing key activities in its supply chain differently. It is this that sets challenges for competitors because they will not find it easy to feign or equal Zaras positioning and it is this achievement that has given Zara sustainable competitive differentiation and positioning. Through a clear focus and vision, Zara has tapped into the power of fashion. It has trimmed conventional supply chain response from 5-7 month down to 2-2? onths and their customers are eagerly awaiting next weekstake note, not next seasons new fashion Zara maintains a strong relationship with their contractors and suppliersviewing them as part of the company. Small and frequent sh ipments keep product inventories fresh and rarecompelling customers to frequent the store in search of whats new and to buy now because it will be gone tomorrow. To successfully react to consumers demands, design decisions are delayed as long as possible.In todays competitive environment, Zara has shown that fine tuning the supply chain is no lasting a strategic tool, but a necessity. It has shown that supply chain management can be managed provide sustainable competitive differentiation and positioning on the one hand and increase throughput, reduce inventories and operating expenses on the other. Decision-making is encouraged and bad decisions are not severely punished. Designers are trained to limit the numerate of reviews and changes, speeding up the development process and minimizing the number of samples made.