Week 4 – Zara Case – Option 2:
This week we once again look at the apparel industry, this time the Zara case (see Course Notes). Please answer one of the questions below. Also, please check out the other posts and comment on one of them. If you’re first, please come back later!
In your view, what is the key reason for Zara’s success? (Please explain why. If you use technical terms from the case, please ‘translate’ them into plain language)
A reminder about deadlines
Your blog comments are due at 12.00 on the day of the class (Mondays). The case mini-analysis assignment is due at the start of your tutorial. The Week 4 assignment is also about Zara – check Blackboard later today. The blog discussion should help you with the assignment, but the questions are different.
I think one of the biggest factors for Zaras success was the way the were able to gather data. While other companies were out of touch with what customers wanted, Zara were able to ask their customers what they wanted. The use of pdas linked to pos systems, and looking at what items didn't sell made it possible to narrow down fashion items that would sell.
ReplyDeleteAnother reason was the turnover time it took to get an item fabricated from design. Other stores would take months while Zara could do it in under 2 weeks, this meant that the store was always changing and never had the same stock. It also meant that customers would return as they would most likely not see the same item twice.
I think the fact that they also produced clothes that suited that local area e.g. clothes in asia would be different to the ones in zara store in europe could also be a success factor, what do you think?
Option 2
ReplyDeleteIn 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)
I agree. I also believe that the key reason for Zara’s success was the ability to not only collect data from their retail customers but how they were able to use the data in order to make effective decisions on which styles of clothing to manufacture based on customer demand and preferences, to help them plan new clothing designs, and to help them predict future sales and trends.
There were three ways in which Zara’s store managers collected data. Firstly the store managers would simply approach customers and ask for their input on which clothing items they would prefer to see more of in the future as well as any additional feedback.
And secondly, when store managers closed their retail outlets, they would look at the types of clothing items which customers tried on but did not purchase.
Lastly, PDAs were connected to the store’s point-of-sales system which showed how clothing items graded against sales. Store managers were able to send updates which contained data on the types of clothing items that were sold and their quantities as well as customer feedback.
Zara used this data to help them plan for future designs and styles of clothing which customers preferred and wanted to see more of and to also re-order particular styles of clothing that were high in demand. In a way I think that Zara was able to meet the needs of customers by regularly asking them for their feedback and providing them with clothes that they preferred which essentially increased customer satisfaction.
In addition Zara was able to have some control over their inventory unlike GAP. Rather than guessing forecasts and trends Zara relied on customer feedback which ultimately contributed to their success in the apparel industry.
I also believe that the key reason for Zara’s success was ability to gather information from their customers that helps them tailor to their customer’s needs. With the use of information systems, the company was able to gather data with the use of PDAs and POS system. PDAs are used in Zara to gather customer input and so that staff can regularly chat with customers to gain feedback on what they would like to see more of in store. Zara was able to use the data gained to make effective decisions in order to produce products to suit their customers’ demands and preferences.
ReplyDeleteAlso, the use of POS system shows how garments are ranked by sales. Therefore, managers can send updates that combine the data from the cash register with relation to what their customers would like to see. These processes enable Zara to compete with its competitors by differentiating its products and fasten its services to its customers. Also, these improve the frequency and quality of sense making for the design and planning teams in Zara.
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ReplyDelete“In order to be irreplaceable one must always be different” - Coco Chanel
ReplyDeleteZara core activities include textile design, production and distribution. Zara strategy is a unique IS value proposition which combines moderate prices with the ability to offer new clothing styles faster than competitors through the utilization of information.
Winning and critical success factors for Zara is the coherent differentiation business strategy that integrates IS by blending technology and people is Zara’s critical success factor.
•Relationship Management- Zara IT infrastructure is easily imitable however the integrated relationship between business process and IT make Zara success sustainable. Part of Zara success is due to Zara choosing in-house production rather than outsource. This fosters an organizational culture with 300 designers allowing collaboration to turn out more than 30,000 designs a year. As well as cutting cost, designers have on demand information to make production decisions. Zara combines human intelligence (store managers, research) with information technology (PDA devices). These devices send standardized information regarding customer feedback and ordering needs directly to in-house designers. This enables reduce cost from obsolete merchandise, eliminates guess work, a more effective inventory management and fast responsiveness to demands. Collected information enables redesigns which are manufactured and distributed within a 10day period. While it takes 8-12 months for traditional business process of design, manufacture, distribute and sell. It takes Zara 1-2 weeks. This direct point of contact with the customer means Zara doesn’t have to do advertising campaigns, sales or catwalks to attract customers. It gets locally targeted designs quickly into store shelves.
•Information Repository- Due to the well maintained relationships IS enables Zara to be at the cutting edge of fashion. Responsiveness is enabled through vertical integration, technology blended coordination, just-in-time manufacturing and finely tuned logistics. The creation of information repository with customer preferences is easily retrievable by all departments, therefore enhancing integration of operations and personnel. The analytical ability to track and respond to customer needs and reports trends demanded. This enables Zara to eliminate intermediaries .The volume of information that Zara is able to collect on demand adds value. Lower quantities help achieve exclusivity and more styles attract customer appeal.
Zara success and competitive advantage is through a well fostered relationship using IS to balance supply and demand, by immediate information flow that assist implementation and production behind the scenes.
Agreeing with the above comments by Stefan and Anahwim as the information received from the use of the PDAs gives Zara access to customer feedback. This can be considered the key to their success as knowing what customers want and the preferences is what any fast fashion apparel retailer would want. With managers occasionally asking opinions from customers on the current stock and looking at what would appeal to the customers more.
ReplyDeleteIntegrating the PDAs and the POS systems gives managers the opportunity to issue re-buy orders based on customer feedback and sales, this minimizes the guess work in ordering new stock.
I also agree with Nadia as she stated that'Responsiveness is enabled through vertical integration, technology blended coordination, just-in-time manufacturing and finely tuned logistics. I think that this is probably Zaras second key to success. The vertical integration comes partly from the firm making 40% of its own fabric and purchasing dyes from its own subsidiary. Combining this aspect with the technology and logistics is what contributes the the 15 day concept to the products in store appearance process. This is a competitive advantage for Zara as rivals generally receive new styles maybe once or twice a season.
Concluding this comment i think the keys to Zaras success was their way for information gathering and technology integration and the vertical integration of the organization.
Two success factors for Zara are the integrated nature of its business model and the nature of its partnerships
ReplyDeleteVertically integrated business model
I agree with what Stefan and Dharmistha have said in that a key reason for Zara’s success is not only they way in which they gather data, but in using that data for effective manufacturing decisions and then capitalising on these decisions through utilising their superior time to market.
Another related success factor lies in Zara’s vertically integrated business model (1).
Zara not only makes and sells its own clothes, but produces its own dyes and makes 40% of its own fabric. This business model gives Zara the capability to capitalise on the data they gather and manufacturing decisions such as having the ability to dye their fabric to any colour the consumer wants. This gives Zara the flexibility to respond to fashion changes more quickly than rivals. Vertical integration also facilitates Zara’s fifteen day time to market because Zara does not need to rely on contract manufacturers for 60% of its merchandise; many of whom require months of production time.
Zara’s integrated business model improves flexibility and time to market which both underpins and utilises other success factors such as the way in which they gather, utilise and capitalise on consumer data.
(1) A vertically integrated business model is where a company performs more than one activity within an industry’s supply chain (2).
(2) A supply chain is all the activities required to produce, distribute, and deliver a product or service.
Partnerships
As Nadia said, relationship management is a source of success for Zara especially given its choice to produce garments in-house. Its distribution model requires twice weekly deliveries of new products. In order to ensure the success of this distribution model, Zara has had to be successful in managing its partnerships with transport companies. Zara coordinating its inbound and outbound shipping with their air cargo partners (Air France-KLM and Emirates Air) is one way that Zara has managed their distribution partners in order to be successful in managing its distribution strategy. Without managing their distribution partnerships, Zara would be unable to deliver on its distribution strategy; would not be able to capitalise on its time to market; and would not be able to capitalise on the flexibility that in-house production provides.
I think the key reasons for Zara success is as mentioned in the earlier posts, vertical integration – nearly 60% of merchandise is produced in-house. Zara uses its technology where it is most needed to speed up processes and save production costs. With most of Zara’s production being in-house there is also less risk of having contracts with sweatshop manufacturers which can damage Zara’s reputation.
ReplyDeleteInformation gathering – retail staff use PDA’s to collect information on customer feedback about products offered. Staff engage with customers in store to find out what products they would like to see in store and what their preferences are. This information helps Zara to identify the designs that customers demand. They then produce the designs and send out to the stores within days. This process also helps them with capturing customer demand in the different store locations as they have learned that customer preferences are different in each location. This way they can design what customers will purchase. This means that every Zara store will have a different range of designs to cater for that particular location.
Also the fact that the average time for a new product to appear in stores is 15 days from day of design is a competitive advantage in itself. Most companies take months even years to get new product lines into store from the design phase and even then some of them get it wrong and end up with high inventory holdings. Zara listens to their customer feedback and produce what is being demanded in a timely manner. Their customers know that new designs come out every two weeks and therefore it they want something they will need to purchase it now not later as it could go quickly. This engages customers and keeps them interested in the company because new things are always just around the corner.