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Zara In China And India Case Solution
Zara employed an unorthodox method of “anti-advertising” to promote its fare and decided not to spend more than 0.3% of its annual revenues on the advertisement and rather spent the funds on the refurbishment of their physical stores and making products more attractive to a global audience. Zara created exceptional stores modelled to portray compelling visions of its complete image. The store designs were managed centrally with the objective of keeping the outlay consistent and communicate a uniform image. Moreover, keeping up with the new trends with constant purchase of new styles and making updated fashion available in the store was also a factor to derive success for the company (Harbott, 2011). The company put a close eye on the customer’s preference and tried to incorporate their requirements in their design and a small run of production with subsequent roll out in test stores to assess the customer’s response.
Following questions are answered in this case study solution
Zara’s value proposition
Zara’s supply chain operations
Alignment of supply chain with value chain
Case Analysis for Zara In China And India
There was another unique ability of Zara which allowed it to make amendments to the latest high-end designs and turning it into lower price luxury apparel items within tight timelines (Harbott, 2011). The company employed the approach to change the inventory every three to four weeks while every week new designs were rolled out in the stores. This resulted in the introduction of 18,000 new styles in a year as compared to competitors Uniqlo and H&M which introduced around only 2000 to 4000 styles only. Zara willingly created stock out while keeping limited inventory of each style at the stores. The same was on account of making the style limited addition thereby creating more demand (Danziger, 2018). The idea is to get the customer to visit the store more frequently resulting in impulse purchase of other items.
The pricing strategy of Zara was customized to the demographics of each country it operates in however the same was positioned slightly at the higher price as compared to its rivals. The company also used radio frequency identification for ordering inventory in real time saving cost and time as compared to the traditional barcode method. These unique aspects of Zara’s value proposition allow Zara to create value for its various stakeholders including employees, suppliers, shareholders, and customers.
2. Zara’s supply chain operations
Zara’s retail stores were managed by Inditex Group which has registered more than $24.9 billion of sales across the globe. The success of the retail chain is attributable to visionary founder Amancio Ortega, who despite of leaving the position of the chairman involved in the decision-making of the company (Martinroll, 2020). Zara is considered to be a devastating and innovative retailer in the world and consistently booking growth in sales whereby retail concept stores booked sales growth of 11.5% and 13% respectively.
Zara operated its stores worldwide with a physical presence in Spain, the rest of Europe, Asia, and America. The company had 2213 physical stores mostly located in prime locations in the central shopping districts of large cities. Out of 2213 physical stores, the company owned 91% of them while the remaining were operated on the franchise or joint venture. In addition to the physical presence, the company reached e-commerce in 39 countries since e-commerce was gaining popularity and growing substantially.
The production took place in company-owned and outsourced factories located in close proximity to the headquarters in Europe or Northern Africa such as Portugal, Spain, Morocco, and Turkey. The company did not produce in Asia wherein labour cost is lower as compared to contemporary production cost. The production setup consisted of factories and small finishing shops which created unfinished goods to be sent to factories for final assembly to complete the entire design. The company also outsourced from Asia and Europe with basic and staple items were outsourced from Asia (Tradegecko, 2018). Since the Asian markets have access to basic raw material i.e. cotton, which was imported from these markets. More customized, trendy, and in fashion material was procured from Europe.
The design to distribution process takes place in a huge open structure called “cube” located at headquarter of the company having the raw material and finished goods to move within it from suppliers or to stores respectively. The company had employed more than 200 market specialists, a team of procurement experts, production engineers, and designers who work in close coordination to produce the company’s product. The designer was educated from prominent design schools who ensured that the latest trends are being followed in line with information provided by the market specialists. Market specialists represent various countries and keep close liaising with multiple store managers to have real-time information of the items in demand (Yau, 2019). Additionally, fashion scouts and runway watchers to bring the latest information about the catwalks, streets, clubs, and malls thereby designers having access to updated fashion information.
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