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by: Anuradha Sajwan, Akriti Sood, Rahul Arora, Vrindaa Ashwani Master Of Fashion Management, Semester-II, NIFT, New Delhi
Introduction
Zara was launched in 1975 as a local store, "Zara" is now the world's third largest clothing retailer. The company, Inditex, has two dozen manufacturing plants in Spain and more than 1,160 stores in 34 countries from the United States to Japan.
Zara developed a business model that incorporated the following three goals for operations: 1. Develop a system the requires short lead times, 2. Decrease quantities produced to decrease inventory risk 3. Increase the number of available styles and/or choice. Thus, combining moderate prices with the ability to offer new clothing styles faster than its competitors.
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3. Value drivers : for Zara are both tangible and intangible in the benefits that are returned to all stakeholders. Tangibly Inditex, the parent company of Zara, has 11.02% net margin on operations. Intangibly, customer loyalty and brand recognition have provided significant value to Zara.
INVENTORY MANAGEMENT
50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe, and 24% in Asian and African countries and the rest of the world. The company can design a new product and have finished goods in its stores in four to five weeks It can modify existing items in as little as two weeks. Shortening the product life cycle means greater success in meeting consumer preferences. Zara maintains a design team of 200 people, all of which produce approximately 12,000 new styles per year for Zara.
Though there is a cost advantage in their approach in regards to labor, the lack of flexibility in changing orders based on current trends hinders their operational efficiencies. Inventory costs are higher for competitors because orders are placed for a whole season well in advance and then held in distribution facilities until periodic 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.
Competitive edge
Zara has competitive advantage especially in the areas of product development, strategic partnerships and cost of production, advertising and marketing, and information technology infrastructure.
References
http://www.zara.com/ www.3isite.com/articles/ImagesFashion_Zara_Part_I.pdf www.3isite.com/articles/ImagesFashion_Zara_Part_II.pdf http://hbswk.hbs.edu/archive/4652.html Harvard Business Review, Vol. 82, No.11, November 2004 http://en.wikipedia.org/wiki/Fast_fashion http://www.torex.com/english/news/whitepapers/pdf/Fa stFashion-en-WP.pdf
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