Please read the Zara case study by Gallagher (in Blackboard course resources) and the two sections about Zara in the textbook (chapters 2 and 5).
In your opinion, what in the main reason for Zara's success in the highly competitive fashion industry? (How easy will it be for Zara to sustain this success?)
By reading through the article I found several things that lead to Zara’s success which is stated below, to summarize the findings Zara achieves success from industry differentiation and its IT solutions for everyday operations.
ReplyDeleteBrand image - The firm shuns advertising, rarely runs sales, and in an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly vertically integrated, keeping huge swaths of its production process in-house.
Low cost high quality - Zara’ duds look like high fashion, but are comparably inexpensive.
Up to date fashion - “Z-day” each Zara location’s twice weekly inventory delivery that brings in the latest designs.
Customer opinions – staff at each Zara store chat up customers to get feedback of what they like and store on a handheld PDA
closing down inspection – after closing staff examine the piles of clothes unsold
POS system - point-of-sale (POS) system, showing how garments rank by sales. In less than an hour, managers can send updates that combine the hard data captured at the cash register combined with insights on what customers would like to see.
Fast alterations to clothes and styles - The average time for a Zara concept to go from idea to appearance in store is 15 days vs. rivals who receive new styles once or twice a season
technology based advantage in manufacturing - nearly 60% of Zara’s merchandise is produced in-house, with an eye on leveraging technology in those areas that speed up complex tasks, lower cycle time, and reduce error.
Limited production run - While running out of bestsellers might be seen as a disaster at most retailers, at Zara the practice delivers several benefits.
In my opinion can easily sustain its success as the way that Zara operates is hugely different from what normal fashion organizations do, as seen above Zara has many different norms of practice compared to normal fashion organizations and has Zara also has a IT as a key component in its everyday operations so I believe that this would be hard to copy and therefore leave Zara with a sustainable competitive advantage which has already lasted 2 decades. Other things that help Zara sustain its success also include its value chain which is said to be difficult to copy; “Zara’s winning formula can only exist through management’s savvy understanding of how information systems can enable winning strategies. It is technology that helps Zara identify and manufacture the clothes customers want, get those products to market quickly, and eliminate costs related to advertising, inventory missteps, and markdowns. A strategist must always scan the state of the market as well as the state of the art in technology, looking for new opportunities and remaining aware of impending threats. With systems so highly tuned for success.” (reference – Zara article)
With 650 stores around the world, Zara is able to design, produce and deliver a product within 15 days which is 12 times faster than one of their competitors “GAP”. I think the reason to Zara’s success in the fashion industry is due to the implementation of the Process Perspective. The focus of the process perspective is cross functional which allows managers to avoid or reduce the number of work being duplicated, facilitate cross functional communication and also optimise business processes. With the cross functional processes, Zara are “highly vertically integrated” which means the organisation is designed to make the transferring of information quick and easy. An example of this could be Zara designers are collocated with the production team (this includes marketing, procurement and production planners) allowing the designers and others on the cross-functional teams to discuss and check their ideas quickly. Production planners are able to update designers about the manufacturing costs or marketers are able to respond to designers about their designs regarding the colour, fabric and style etc.
ReplyDeleteWith disadvantages such as cost rises or operation vulnerabilities, I think it will still be easy for Zara to sustain their success. That being said, if their competitors were to copy their value chain (which the article mentions is “more difficult to copy”) and succeeded, then their success will weaken. Therefore it is important for managers to use information resources in order to make strategies/decisions that will create new opportunities for Zara as well as gain competitive advantage in their market/industry.
Zara’s success stems from the way they react to their customers. Fashion is part of the retail industry and the customer must always be given what they want. While many other fashion companies try to predict what the customer will want Zara takes a more reactive approach. Their sales staff engage with the customer while they shop, asking them questions about the styles the like or dislike. They also record what products are tried on then discarded and which products are selling well. All of this information is then sent to head office for analysis. This rich data flow allows Zara to see what the customer wants, almost in real time. They can then change their product lines to suit with revisions in the store in 10 days or new products in 15.
ReplyDeleteWith Zara reacting so quickly to changes in customer tastes they are almost always giving the customer what they want. This is the key to their success, developing the systems that allow the customers opinion to be incorporated into Zaras products.
It is possible for Zara to sustain this system for a long time as customers will always want products that suit them. However, given time, other companies can replicate this system and Zara will lose their advantage. They need to develop new ways of attracting the customer so that other fashion retails are always trying to catch up. They system they use now will always benefit Zara but they need to stay ahead of their competition.
The main reason for Zara's success is their strong focus on customer demand. A focus on customer wants is incredibly important in the fashion industry as customers have so many options put in front of them that if they do not like something it is very easy to go to the competitor next door. Zara use many methods of determining what their customer actually wants and focus production around their findings. These methods include:
ReplyDelete•Asking customers casual questions about what they want in their clothes and record the answers on PDA’s.
•Trolling through unsold clothes and searching for similarities to find why the items aren’t being sold.
•Point-of-Sale system gathers up to date sales volumes for each product allowing for quick re-orders
•Opting to follow rather than create trends allows them to create products they know will sell.
Once this data is gathered they begin designing to suit customer tastes and can have an item on the shelve in 10-15 days. Their in house design and production allows them to give the customers what they want, when they want it. Other companies may know what their customers want but can take up to 9 months to have it in stores and by this time trends have changed and what could have been a success becomes a major failure.
Zara's customer focus and effective use of systems to meet demands creates a huge competitive advantage as they can give customers what they want when they want it. This advantage is sustainable because even though competitors may be able to replicate their system eventually, there are high costs involved and replication of the system will not stop Zara from continuing it. The nature of meeting customer demands and following trends means they will always be able to keep customers and pull in new ones as trends in the fashion industry are constantly changing.
Spanish apparel company Zara has built its strategy around consumer trends, embracing the fast-changing tastes of its customers. To do this successfully, Zara has developed a highly responsive supply chain that enables delivery of new fashions as soon as a trend emerges.
ReplyDeleteZara is able to do this by being fast and flexible.Zara leverages automaker principles; these automated factories use a “just in time” inventory approach pioneered by Toyota Motor Company.
But I think IT is the most important tool to make Zara's strategy effective and keeping as leader in the fashion industry. They was designed to be responsive from its inception. Zara utilizes human intelligence (from store managers and market research) and information technology (such as their PDA devices) in order to have a hybrid model for information flow from stores to headquarters. For example, managers at Zara stores use handheld devices to send standardized information regarding customer feedback and ordering needs directly to in-house designers. This not only keeps Zara's designers informed of fast-changing customer trends and demand, but also provides the company with insight on less-desirable merchandise. Unlike Zara’s hybrid model (which incorporates human intelligence and IT applications), competitors rely almost completely on information technology. Zara’s unique approach of human intelligence assisted IT solutions results in well-managed inventories, linkages between demand and supply, and reduced costs from obsolete merchandise; however, there is still room for improvement in their IT processes to realize more effective management of inventory levels. Zara’s information and communication protocols are significantly different from its competitors. Zara spends less than 0.5% of total revenue on IT and IT employees account for only 0.5% of Zara’s total workforce. This differs from their competitors who spend on average 2% of total revenue on IT expenditures and have 2.5% of their total workforce devoted to IT.
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 imitate or equal Zara’s positioning and it is this achievement that has given Zara sustainable competitive differentiation and positioning.
There are many reasons for Zara's success in the fashion industry as Jason has mentioned, but the main reason for its huge success in the fashion industry is its management of understanding information system that enable their winning strategies. It is their technology that helps Zara identify and manufacture cloths that customer want which only would take 15 days, shipping products out of their warehouses and making sure a products is not left there for longer than 72 hours, getting the products from warehouses and selling them to the markets quickly, and eliminate the cost related to advertising as it is not a necessity. Zara is capable to sustain this advantage for a long period as the company is earning profit and customers are happy with their products. However, Zara can lose their competitive advantage if other competitors copy their information system. Zara needs to find other means of information systems that can help them gain and sustain their competitive advantage.
ReplyDeleteI agree with Amy that Zara's success is due to their strong focus on its customer demands. In my opinion, Zara’s success comes down to the inventory levels they choose to keep very low. Customers who visit the store have knowledge that if they do not purchase the item at that very moment, the chances of the product being there the next time is very slim. This would be different if Zara had a high inventory stock level, the situation with the customers would be opposite. If I was a regular customer at Zara’s and I knew that there was a large stock number of a particular item I was interested in, I would have second thoughts of buying it at that very moment.
ReplyDeleteThe trend of customers buying products when they see them, is also credited to the system Zara has in place, for example, store managers report daily to the designers what products are popular with customers. This information are then analysed to create new ideas and designs which is reported to be 15 days from idea to the shelf. This success is maintained due to the technology which used to create thousands of new ideas/products in a small amount of time.
As mentioned by most people above, the main reason that Zara is successful is their focus on the customer and the fact that their business processes are based around this focus. As Jesse said, unlike most other fashion retailers who try to predict the fashions of the season in order to get them made and shipped to stores in time, Zara are able to interact with the customers in their stores to see what they are truly looking for, feeding this information back to the designers at Head Office to interpret. This is only effective because of the short turnaround from design to store shelves, and is a unique feature that contributes to Zara’s competitive advantage. Another reason for their success is the structure of their business. It is relatively flat and most staff are co-located in cross-functional teams which enables quality collaboration when designing and manufacturing the new clothes. Zara also make effective use of Information Systems to enable their business strategy to succeed, although it isn’t as modern and automated as the ERP systems used by other companies, the processes they have in pass to share information along the value chain is still effective. This perhaps is a key requirement in the fashion industry because computers and algorithms are unlikely to be able to interpret designs that customers are looking for. As long as Zara look to the future and ensure that their technology is not obsolete, and also never forget their customer focus I believe they will be able to sustain their success.
ReplyDeleteI'm not so sure I have anything new to cover here - Everything looks pretty well covered already.
ReplyDeleteThe sucess of Zara stems from the customer. As previously mentioned, the heavy focus on what the customer wants at the time, rather than trying to predict what the customer is after makes for the far shorter delivery times. The combination of factors such as staff with PDA's surveying customers, short stock runs and the statistic tracking from POS systems ensures a the perfect balance of supply with demand.
With regard to sustaining Zaras advantage, as the case mentions, there are problems with the current economic climate potentially increasing costs dramatically. I feel it would be very hard for Zara to lose the competitive advantage so significantly. The case mentions that they are twelve times quicker at getting stock to the shelves over, say, gap, however, if Zara even doubled the time it took stock to get to the shelves (therefore halving transport costs), they would still be six times that of Gap. Although not ideal, I feel that there are ways for Zara to maintain an advantage while still cutting costs.
The one major thing that would screw Zara over completely would be a natural (or other) disaster to the distribution center. If the DC was to get completely destroyed, the lack of inventory in other locations may provide a logistical nightmare for whoever has to resolve the problem.
In my opinion, I believe that the main reason for Zara's success is its use of information systems and using it far more effectively than its competitors.
ReplyDeleteThe main advantage Zara's information system allows is speed. Each employee has access to a PDA which also connects to the store's POS system. The purpose of this is to gather data about the customers and use the data to accurately predict the current or future trends in the fashion industry. This works extremely well in relation to the high demands of the industry and Zara's strategy of limited supply for in demand products because Zara is able to quickly manufacture and deliver next trend products to their stores at a level which would not have been possible without this data to work off of.
Along with the data gathering, Zara's information systems also allows higher executives in the business have more control in the general operation of each store, rather than relying on local managers. This creates consistency and provides better all around management.
As information systems continue to be more prevalent in the industry, it will be harder for Zara to maintain this advantage as more competitors implement better systems. However, Zara has a head start in the use of information systems and they can use this as an advantage by constantly upgrading their systems so that other competitors are unable to match them.
Based on the article, I think these are the important reasons for Zara's success:
ReplyDelete> Customer preferences: Unlike GAP (guessed what custmoer would like), Zara gathers data. What customers prefer is what Zara stores would sell. this requires consistent effort of gathering data but the result is evidently worth it. It's like "We can have what you want, just tell us." This strategy shows that customers are in control.
> They don't create trends: creating a new trend is a very dangerous risk to take - if customers like them, it's good but when they don't they just wasted their investment, time and effort in creating the trend. Zara's focus is on what the customers demand. Thi keeps them safe from wasting/losing their resources.
> Timing: Media is the most influential aspect in fashion industry. Let's say Selena Gomez wears a jacket in her music video, it is to be expected that teenagers would want to have those and this is what Zara is good at, they're fast. As mentioned by other bloggers, it only takes 2 weeks to have those in Zara stores. By the time other brands sell those, most of the customers already got some from Zara. Being late is a no in fashion industry.
> Flexible: They purposely do not finish the cloths. Fashion trends have seasons too, when this trend is dying and new trend is starting, Zara is prepared. They are flexible when it comes to changes, even the simple things like round neck or v-shaped cut, length, colours and style.
Those are just few of the strategies that sustain Zara's success. Looking at all these strategies and adding them up means it would be very difficult for the competitors to replicate - and that is, in my opinion keeps their sustainable competitive advantage. Zara's right priorities and taking advantage of IS will keep them successful.
Zara’s success against their competitors was largely due to the vertical integration of their supply chain, allowing them to be more responsive to a fickle consumer market.
ReplyDeleteThis started on the shop floor, with both quantitative and qualitative sales data gathered from the customer and sent directly to HQ. Not only did the sales staff collect real time sales information such as which shirt was sold, in what store, and for how much, but they also gathered data such as the customer’s thoughts and opinions towards a certain line of clothing, whether or not they had found what they were looking for, etc.
This valuable information was passed onto HQ, where it was then utilised by in house designers, most of whom were young and ambitious, who worked quickly to design new styles, with a fifteen day period from conception to in-store, finished product.
Zara was able to achieve this fast turn around largely due to fact that a lot of their manufacturing was also produced in-house. Zara also dyed almost 50% of their own fabrics, which allowed them to have the flexibility to change colours halfway through a season, responding rapidly to an easily swayed market.
Garments were produced, ironed, bagged, and tagged before leaving HQ, allowing for easy transportation and less time spent organising stock at the sales end. This meant that sales staff were free to focus on what they do best, selling.
One major problem for Zara, however, is that the competitive advantage they have created for their Spanish market does not translate well into other markets, as the infrastructures for manufacturing and shipping are not well established and it still takes time for designs to reach the stores. One way that Zara can sustain their competitive advantage is to set up other manufacturing warehouses close to lucrative markets or trade routes, as this will allow them to be more responsive to that markets’ needs.