Group 9 - ob report - Analysis on Zara\'s operation. PDF

Preview

Summary

Analysis on Zara's operation....

Description

RUNNING HEAD: THE FAST-FASHION SUCCESS OF ZARA

Case Study Report: The Fast-Fashion Zara Group members: Thien Nhan Huynh (N01274578) Tran Tuong Vi Le (N01289939) Derin (N01336446) Harjot (N01188361) Samad Hassan (N01349648) Gulled Omar (N01359001)

Part 1: Understanding the Case

Success of

The Fast-Fashion Success of Zara ] Derin/Ivan/Vivi This case study illustrates and analyses the business

operational

methods of the quickly trending Zara enterprise which has its

headquarters in

Inditex Spain and is well-known for being among the most

successful and

profitable fashion companies in the world. This in-depth case

study will

analyse the reasons in which Zara has proven to be the among the

most successful

companies in the fashion industry; more specifically, they have

been able to

successfully recognize how to create a business operational

model which

addresses customer service/feedback and also addresses business

profitability and

efficiency. Furthermore, by uniquely implementing this system

into the real

market, they have been able to differentiate their model from

competitors and

ultimately achieve a greater market share, resulting in increased

consumer

demand for their products and therefore, increased revenue and

profitability.

In further detail, Zara was able to construct an operational model, known as the “FastFashion Model,” which prioritizes consumer interests, preferences, and trends in order to adapt and adjust its product portfolio to satisfy the rapidly and on-going changes in the fashion industry. Moreover, the way in which the Fast-Fashion Model operates efficiently is by having Zara employers continually receive feedback from customers regarding their favourite and least favourite products, along with qualitative feedback regarding the specific details about Zara products that customers would change to make them more appealing and thus, demanded. This communication method between Zara and its consumers has proven to be successful when addressing the main issue in the fashion industry; adapting to rapidly changing fashion trends

1

The Fast-Fashion Success of Zara ] and maintaining a good-quality and affordable product.

What’s more, it is evident that the implementation of the

Fast-Fashion

model into Zara’s business model has established a competitive

advantage for

Zara over other key players in the market. It is therefore apparent

that Zara’s

communication method between customers and its employees

can arguably be

considered a significant factor in explaining the success of the

Fast-Fashion

Model, notwithstanding, is it also important to acknowledge how

the geographical

component of the this model played a principal role in its

success. In detail,

although Zara’s processing and production headquarters are in A

Coruna Spain,

the Fast-Fashion Model was also described in the case study as

having Zara

production facilities nearby to Zara’s major markets, specifically

by having low-

cost production facilities in Spain, Portugal, and Turkey.

Resultantly, this

ability to produce new products nearby to Zara’s major markets

per say, has also

given Zara a competitive advantage over competitors in the industry, specifically, because the Fast-Fashion model enables Zara to design and produce products that satisfy fashion trends and then ship them to their retail stores faster than any other competitor in the industry.

In addition, the Fast-Fashion Model operates profitably by maintaining a wide variety of clothing products with low inventory per product, as supposed to a limited variety of clothing products and large inventory per product. Consequently, this operation method is clearly more profitable in the fashion industry as it addresses rapidly changing consumer demands/trends while also not risking having excess inventory.

2

The Fast-Fashion Success of Zara ] This method is called JIT; Just-in-time, production and is

the most logical

and profitable inventory strategy when in rapidly changing

markets. This is

why Zara has proven to be the most successful and profitable

fashion company

in the industry, simply because they have been able to

successfully

integrate the components of a Fast-Fashion model into their

business and

operations, whereas competitors have struggled to do so and in

result, are much

slower in addressing the ongoing changes in fashion trends,

preferences, and

interests.

Part 2: Analyzing the Data Harjot

The open systems perspective of organizational

effectiveness is

one of the earliest and most well entrenched way of think about organizations; whether that comes from success, development or failure. Open systems depend on the external environment from the resources like raw materials, financial resources, equipment etc. With those external resources, Zara uses it to create their products in a limited quantity for all locations throughout the world. Zara is a Spanish fashion retailer that originated in Spain and is now famously known throughout the world for their quality, prices and their ‘fast-fashion’ sense.

3

The Fast-Fashion Success of Zara ]

One aspect that Zara really focuses on is feedback.

Getting feedback

is very important not only from customers but also from

employers as

from a customer's’ point of view. Their management will want to

know what a

company like Zara can improve on like in the article which states

that customers

will buy a product if it was in a different colour or minor tweaks

are made. Then

the designers will take note of it then it will try to create that

product but in

limited quantity and they would only release that in different

regions. It shows

that Zara is willing to meet customers’ demands and opinions as

it really matters

to them and management.

This is one reason why they are successful because there saying that “the customer is always comes first” and they

is always this definitely follow

that as they have as they respond to feedback and they take everything (good or bad) into consideration. That is always a good thing by a company like Zara even though that phrase has its own negatives, it still proves to be a good way for Zara and their approach for the latest styles and products they produce. Plus, customer loyalty does come into play as a lot of customers do like their products, so they know what to expect from them and a lot of shareholders that have invested into the company to where it is right now.

Zara is a good fit for their external environment as their fast fashion sense really keeps up for their adaptability to the environment, they keep close tabs with the competition (such H&M and Uniqlo) that’s in front of them as they keep a close eye on the environment. For example, 4

The Fast-Fashion Success of Zara ] Zara can create and produce a lot of products in different

variations such as

colour, style and they would have a better production process.

For influencing

the environment, they market their “products with minimal effect

as they spend

around 0.3% of their sales for advertising” (Payton, 2018). For

example, if

shoppers buy a shirt at Zara, there’s a good chance that other

people won’t

have that same shirt at work or school. The fact that the store

stocks little

inventory helps with that exclusivity factor but they do market

their products on

the usual social media websites (Instagram, Facebook).

Hassan This case study of the fast-fashion success of Zara

explains how

effectively their open system operates. Zara maintains a close

‘fit’ with the

changing trends in fashion. However, the company should

particularly

emphasize their focus more on the external factors of their open

system

perspective which is disrupting their system.

As in the case study, some regional managers received reports that the new line of women’s white jackets is selling slowly. Customers expressed their suggestion that they would buy that style of jacket in a cream-colour with silkier fabric. Designers receive that information and begin to work on the jacket.

However, I feel the feedback process could be done more efficiently; if the company would create an online feedback reward system and allows its sales staff to ask all their customers’ full name and email address and enroll them to participate in an online survey and

5

The Fast-Fashion Success of Zara ] notify their customers about receiving the feedback rewards.

Therefore, the

feedback process can be improved by implementing the

following:

1. The feedback rewards should offer their customers

some percentage

of discount or collecting a certain amount of

rewards that

could be applied towards their next purchase as a

discount.

2. Zara can also allow its sales staff to walk rounds

in store to assist

the customers to find the product that they are

looking for and

analyze their feedback.

3. Zara can also invest money on advertising their clothing and other accessories for all the seasons

new line of to create

awareness of new styles and trends.

Part 3: Alternatives and Criteria Derin

In regards to alternatives for Zara’s Fast-Fashion Model, it is very limited as the FastFashion model has both theoretically and practically exemplified its success in attaining a competitive advantage and also profitability in the fashion industry. This statement is supported by the fact that “...fast-fashion Zara blew away its competition with year-end gains sure to be the

6

The Fast-Fashion Success of Zara ] envy of retailers everywhere1” as stated by Forbes magazine.

Nonetheless,

maintaining a competitive advantage and profitability will

require Zara to

consider a few options as well as achieving the following criteria:

Criteria:

1. Continuation of customers providing feedback to

employees about

Zara’s products 2. Retaining an effective JIT; just-in-time, inventory process 3. Retaining low-costs of production 4. Continuation of production facilities nearby Zara’s major

markets

5. Producing products that satisfy market demands, interests,

trends, etc.

Options/Alternatives:

1. Implementing a quantitative customer feedback system which can use a larger customerbase for feedback in comparison to just using qualitative feedback from customers to employees. 2. Incentivising customers to provide feedback; by implementing a reward system where customers can accumulate points from providing feedback, which can be used to earn 1Heller, L. (2017, March 15). Why Zara Is The Most Exciting Retailer Today. Retrieved from https://www.forbes.com/sites/lauraheller/2017/03/15/why-zara-is-the-most-exciting-retailer-today/#6e59b0ff5cd3

7

The Fast-Fashion Success of Zara ] free/discounted products over time. 3. Implementing Information Systems that will allow Zara production efficiency and reduce production costs/time;

to improve such as software,

programs, databases, etc.

Part 4: Solutions and Next Steps Gulledo For a company such as Zara that is taking over the world's clothing retailer business, there are not many situations that the company has not implanted to improve their overall business. Zara unlike many companies, have been able to build customer curiosity and connection that other companies struggle with. So far, what has given Zara the competitive edge

8

The Fast-Fashion Success of Zara ] over its competition such as H&M or GAP is that the business

model is based

on its customer experience and services knowing that the

company is only

stronger with the help of its customers. In regards to a solution

for Zara’s fast

-fashion model, it is very limited due to its prominent success,

nonetheless,

there is always room for improvement. Furthermore, to keep this

competitive edge

over its competitors, Zara should install a new rewards program

where it offers its

customers a certain amount of points for providing feedback

and/or from

purchases, and eventually, these points can be accumulated into a

free

product/discount on a product over time.. Our plan to kick off

this new rewards

program is to promote a limited offer for 2 weeks, where

customers will be

able to open a loyalty card with our company and upon this

activation receive

a 5% percent discount off their purchase when they complete a

qualitative

survey about Zara’s products. Additionally, as it is a priority to

make the time

customers spend in Zara stores as enjoyable and efficient as

possible, we will

implement a sign-up process for our rewards cards that is short and effective. Moreover, with Zara improving drastically every season, competitors are beginning to take notes, by putting greater emphasis on customer service and feedback and resultantly, creating a better business-tocustomer relationship. An option that would help build up Zara’s brand even more than it is right now would be always having that competitive edge in the production process in the products that will satisfy market demands, interests and current trends. As Zara builds its name and expands around the world, it is essential that the continuation of production facilities near Zara’s major markets increase. The European dynasty of clothing companies; Zara has proven to be among the most successful in the fashion industry with positive reviews and results from their unique

9

The Fast-Fashion Success of Zara ] business operational model. Furthermore, implementing and

introducing to

the world the power of customer service and feedback has

quickly risen the

company’s name in the fashion industry; resulting in increased

consumer

demand for their products and therefore, increased revenue and

profitability.

References McShane, S. L., Steen, S., & Tasa, K. (2018). Canadian Organizational Behaviour. Whitby, ON: McGraw-Hill Education/McGraw-Hill Ryerson.

10

The Fast-Fashion Success of Zara ] Payton, S. (2018, January 26). How Zara Makes Billions In Sales

With Minimal Ad

Spend. Retrieved April 3, 2019, from https://www.referralcandy.com/blog/zara-marketing-strategy/

Heller, L. (2017, March 15). Why Zara Is The Most Exciting

Retailer Today.

Retrieved from https://www.forbes.com/sites/lauraheller/2017/03/15/why-zara-

is-the-most-

exciting-retailer-today/#6e59b0ff5cd3

11...