The Role Of Zara As A Brand Commerce Essay

The Role Of Zara As A Brand Commerce EssayZara is a expressive style brand from the offer of Inditex SA, of Spain, which is iodin of the leading counterfeit retailers of the world. Zara started its retail operations for the in 1975, with its for the first succession terminus opened at La Coruna in Galicia, Spain. Presently this is the point office of Zara. Zaras retail operation like a shot extends to about 650 memorys operating in 50 distinguishable countries. Over the last five categorys Zaras gross revenue has emergenced at a steady rate of 25% and Zara as a brand contributes to about 80% of the comp whatsoevers total profits.There argon questions that pull forward the need for this research to be under taken. nigh of these questions would be that when most room retailers reported negative annual profits overdue to the global economic recession, how has Zara been able to continuously increase its profitability? What ar the strategies employed by Zara? What are the timbre restrain checks employed by Zara? How scalable is Zaras line of work model and finally what does Zara follow to main(prenominal)tain its in high spirits market share and at the same time compete with former(a)wise modality retailers?Zara focuses on the apparel business more as a consumption market rather than being a commodity market. thereof Zara focuses on move and thus looks at continuous reduction of retort time.Hence to achieve this Zara has an effective vertically compound come forth filament which is very closely integrated with the customers. It is from here that the current trends in fashion are identified and the garments are declared accordingly and delivered to stores within a stopover of 2 weeks. .1.3 Competitive Priorities of ZaraThe identifiable emulous priorities on which Zara has built up its successful business model are as follows1.3.1 Fast speed of turnout Zara has the ability to vary a fashion theory and bug out finish products in th e stores within a period of 2 weeks. Zara has consecrated squads at stores which allow the retailer to get designer influenced products at a very rapid pace within the stores.1.3.2 Variation of Production Zaras honour reach comprises of members who dedicated work closely with customers in spotting untested trends of demand in fashion. They dumbfound the ability to launch bracing trends, designs and discrepancy of products.1.3.3 Cost Leadership Zara produces fashionable range of products at an affordable pricing. When compared to other competitors in the same strategic group, Zaras products are priced lower than GAP and Benetton.The main reasons due to which Zara can achieve woo leadership is because they keep a very low aim of inventory in stores. Their efficient scattering system allows them to get products in the store just in time. As a result of which Zara has a high annual inventory turnover.1.4 Applying Porters generic wine StrategyOn application of Porters generic strategy it has been observed that Zara looks at the broad scope of the market. Zara uses a combination of differentiation and overall cost leadership. The ability to produce different range of fashion at a fast pace is the differentiating particularor of Zara that gives them a high sustainable competitive advantage.Overall cost leadership is achieved with the vertically integrated bring chain that Zara possesses. Due to the efficient supply chain, Zara can achieve a high run turnover and at the same time guarantee a low take aim of inventory in stores.1.5 The practice of jibe Quality attention and its implementation in Zaras vertical supply chain1975-1995 Since its inception in 1975 till 1995 Zara has followed the method of inspection in position to keep a check on the quality of its products. Zaras blueprint team up has worked closely with customers and have spend their time in spotting the in vogue(p) trends in demand. An instant sketch of the design has been analy sed and the accordingly produced. The quality control teams at Zara inspected the designs before placing them in stores.1995 till find After 1995 Zara has implement the practice of Total Quality focusing. In this practice Zaras vertically integrated supply chain tries to achieve never-ending Improvement of their borderes, which includes spotting of the fashion trends, designing, and procurement of their materials, the computer-aided design engineering they use for designing, their mitigated inventory management and finally their centralised logistics and statistical statistical distribution system. Each of the components of the supply chain process has been explained below.From the aspect of employees, Zara invests a lot on the motivation of employees. They mainly utilise young pile who are creative and can understand the latest trends of fashion.Collectively these two aspects are used to achieve high take aim of customer satisfaction.1.6 Supply Chain View of ZaraAccording to McMillan and Mullen (Operations Management mountain 2 2002), the purpose of SCM is to integrate all tasks associated with the bi-directional flow of materials, reading and pay into organized, coherent, managed processes in order to provide end-to-end management and control.One of the pivotal examples that support this view is the Supply Chain Management in Zara.1.6.1 public figure and Production Zara uses concurrent designing process which integrates members from the entire organisation body social organisation in creating its designs for fashion. This includes members from the procurement team, designers, market specialists and finally feedbacks obtained from gross revenue executives and store manager.The bonnie age of the designing team is 26 years. These designers spot the latest trends from different sources such as fashion shows, magazines and trade fairs. Then they make a sketch of the design and these designs are consulted upon by different members from the procure ment and intersection departments. Only 25% of the total number of concepts are accepted and very executed. Zaras business processes are integrated and cross functional teams work across all processes. Due to this there is a rapid flow of information which reduces the decision making time and in turn the lead time.1.6.2 procurance 60% of the products produced by Zara are by their own factories. Zara has about 25 factories across the world and most of the plants run on a champion shift basis. Thus Zara has unutilised capacity which they use for quick response to increase in seasonal demand. As a result of this Zara can transform their products quickly to the stores even when the demand is high. Although the design and automated manufacturing is done by Zara in house, most of the labour intensive activities are outsourced to reduce overall cost.1.6.3 Information Systems Most of the designs developed are done using CAD. This is a major reason for making the manufacturing process rapid. Apart from this ZARA invests considerably on technology in order to aid in the flow of information. Zara store managers posses hand held PDA which they use to send information such as sales figures, order placing and customer feedback to the head office in La Coruna. Based on this designing team confirms the design and sends them across to manufacturing building blocks wherein CAD is used to manufacture the products.1.6.4 Inventory Management Zara replenishes its inventory from one of its 650 stores at least twice a week. However the stock quantities are special so that they ensure not to carry excess inventory. On indicate Inditex has the least inventory as a percentage of annual sales as compared to Gap, which is its closest competitor.1.6.5 Centralised Logistics and diffusion Zara has a centralised distribution unit that operates from its head office in La Coruna. Zara uses all modes tape drive for dispatch namely trucks, trains and even planes in some cases. Trucks are puckish as per the specific order in the evening and they are dispatched at night at a specific time.1.7 Employees at Zara Employees at Zara is one of the main reasons for the effective quick response system of Zara. The HR policies vagabond around high level of employee motivation. Zara believes in hiring young and creative people. Employees are Zara are given holistic training across all adroitness sets and they are also given high incentives. These practices motivates employees to market the brand Zara effectively.1.8 quantify Chain framework of Zara Based on the above research a value chain frame work of Zara is given below2. A comparative study of Zara with Benetton2.1 Introduction to Benetton The Benetton brand was established in the year 1966 by Luciano Benetton as an Italian fashion brand that produces wide get of coloured clothes. The Benetton group has 150 million garments rolling out of their stores and they have a mammoth number of 6000 contemporary stores world wide.2.2 Operational check into Since its inception, until 2004 Benetton had a centralised production and distribution system. It also did inspection of its products and rapid quality checks from 1980 to the mid 2004. However in 2005 the control has become decentralized and Benetton right away follows the Total Quality Management practices in its entire value chain.2.2.1 Continuous Improvement in the Production Process Benettons production system had undergone a major transformation in the year 2005. It evolved from an organisation based on divisions such as wool and cotton, to a structure based on answer units such as planning and quality control.The spic-and-span production system is flexible, and it integrates all the position holders in the value chain. Thus it helps in reducing product delivery time and it also optimizes the quality and service levels.In this process there are three teams that work in tandem to deliver greater value to customers. These are the Logistics un it, the quality checking unit and the customer service unit.The customer service unit plays a major role in analyzing customer demands and level of satisfaction. This team has departments which keep a close compensate on the sales staffs and the store managers, whose inputs are taken into consideration during the production process.The quality checking unit keeps a track of the level of confirmation of specification of each design. Tagging and labeling of the units of garments are also taken compassionate by them.The Logistics team is by far the most important team in the organisation. There is now a young Hong Kong hub that has become fully operational along with the European hub and the U.S hub. Benettons logistic system has now modify from a centralised system to being a satellite control system. This facilitates the individual hubs to concentrate on their particular regions of distribution and supply the usurp number of units and the appropriate design at the right time. S ince 2005 till date the stores have thus reported low levels of inventory and high stock turnover rate.2.2.2 Customer Satisfaction perspective Since 2005, Benetton has also rejuvenated the concept of obtain experience by providing a new range of concept stores. Some of them are the Pentagram concept for glamorous clothes and the Cool concept for producing casual lines of clothing. Aspects of visual merchandising are taken better electric charge of in order to strengthen the shopping experience of customers and developing stronger relationships with them.2.2.3 Employees With the implementation of TQM in 2005 the organizational functioning and structure has also been majorly transformed. Benetton now looks at hiring young individuals who takes the challenge of a fast paced environment. In 2005 a new project called the Wanna Sell? was introduced as a part of the training and ripening programme. In this project young and enthusiastic individuals were chosen and put into teams to han g sales workshops. During the 2008 economic meltdown Benetton continued to provide their staffs with incentives and thereby supporting then to work with greater passion.3.1 The Comparative Quality timeline4 hit the books Analysis of Zara4.1 StrengthsVertically Integrated Supply ChainQuick receipt SystemIntegration of IT in the Information SystemEfficient Distribution FacilitiesPresence of Brand Globally4.2 WeaknessOverdependence of Inditex over Zara as besides one brandLesser efficient supply chain management in U.S than Europe. (A negative effect of centralization)Location of Shops It is often seen that Zara has too many an(prenominal) shops in the same geographic area, thus causing canibalisation of its own sales.4.3 prospectMoving out to emergent markets such as Brazil and India where people are now more conscious of fashion.4.4 ThreatsCompetitors such as HM who are also rapid innovators of fashion.In certain countries such as India, China and some of the Middle East nation s there are companies that produce fashion at a high price but keeping a low cost.5 Recommendations5.1 DecentralisationLooking at the fact that Zara faces certain challenges logistically in markets such as United States and certain move of Asia, Zara should now go for a decentralised structure in their distribution channel. As we have seen in the case of Benetton, due to the decentralised structure Benetton can efficiently manage their operation on such a large scale. For a confederation like Zara which is looking to penetrate the emerging markets, it should bring about a decentralised structure in the adjacent waysZara should build controlling units of Distribution and Production in every geographic region where it has its operations. In this way it would help Zara to concentrate on each and every region rather than controlling the entire business from their headquarters in La Coruna.Zara should not bring about any change in the overall Supply Chain View which it now follows.5. 2 cardinal Sigma Practices Being a high innovator of fashion, Zara should consider Six Sigma practice in order to mitigate the risks of innovation.It has been a proven track record that through Six Sigma companies have been able to reduce a high amount of their process costs, according to Six Sigma Academy companies save up $230,000 per project by applying six sigma practices. Six Sigma practices help in alter ongoing processes of an organisation very effectively.For an organisation like Zara, at the save situation the application of Six Sigma will complement their high level of innovation that they do in order to bring in new fashion to the market continuously.Six Sigma practices can be implemented through in Zara through the application of DMAIC model.The DMAIC model can be lucubrate as Define, Measure, Analyse, Improve and Control of the processes in Zara.Define The new fashion that has to be developed should be outlined properly according to the specifications, the technolo gy to be used to manufacture and the budget required for carrying out the designing process. Also the defining process must include the tasks that individuals within the supply chain must undertake.Measure Measure the time taken to apprehend the entire manufacturing process for every product line (i.e. the new fashion that has been conceptualised). It is also important to measure the extent to which the measurements of the finished garments match with that of the defined plan.Analyse Analysis is to be made from the perspective of the product movement. The time taken to complete the entire process of shipment is to be monitored, and a continuous effort should be made in reducing the shipment time.Improve Areas of improvement in Zara comprises of confirmation of specification of measurement, reduction in production time, reduce in transportation or shipment time, improve the quality of service at stores, improve facilities at store and the store ambience and reduce the time taken for checkouts at stores.Control Control in the organisations processes are to be brought about through a equilibrize score card that is customised for Zara balancing the four stake holders perspective. These four stake holders include the learning and innovation perspective comprising of Zaras ability to innovate new lines of fashion the level of customer satisfaction the financial performance of the company and the operational effectiveness of the supply chain system of Zara.