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Zara spanish apparel brand

Zara spanish apparel brand

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Published by Nelum Shehzade
case study answers on zara
case study answers on zara

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Published by: Nelum Shehzade on May 17, 2009
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05/21/2013

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 Zara
ZARA
ASSIGNMENTINTERNATIONAL BUSINESS ANALYSISSUBMITTED BY : NELUM SHEHZADE
1.Explain how Zara utilizes its design strategy and how ithelps its business model.
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 Zara
Zara produces up to 11,000 different articles each year. Thecompany employs 200 designers who work in collaboration witheach other based on feedback taken directly from in-storecustomers. Partial vertical integration, with owned factories;owned factory production is reserved 85% for in-seasonproduction. The designers worked in large open spaces at Zarasheadquarters, with one design center for each of the women’s,men’s and children’s lines. Designers often prepared sketches byhand but eventually worked on a CAD system to illustrate thedesign and associated specifications. The store specialists workedin the same rooms, reviewing daily detailed printouts of storesales and speaking to store managers by phone to gatherinformal feedback. Patterns once finalized could be madeavailable to the computers that would guide the cutting tools.Based on samples, the initial collection for the season is finalizedand shown within Zara. The company uses a vertical integration system (devised byInditex) to fulfil demand for its wares. This business model coversall phases of the fashion process: design; manufacture; logistics;and distribution to its own managed stores. The key is the ability to adapt product to customer demand in theshortest time possible, offering a significant advantage overcompetitors.In fact, the turnaround time for bringing a design concept to theshelves at Zara can be as short as 15 days.All Zara stores receive new product twice a week. This comparesfavourably with many of the chain's competitors, which usuallyreceive new styles just once or twice each season. The fact thatnew stock arrives so frequently has several benefits. Most
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 Zara
importantly, it encourages customers to come back regularly and,because styles are only available for a limited period, it promotesa sense of exclusivity.Small batch production creates a scarcity premium andencourages impulse purchase. The process starts with an order from the store manager. Becauseof the logistics system, the time between receiving the order atthe distribution centre and delivering the goods instore is, onaverage, 24 hours for Europe and 48 hours for the remainingstores.Inditex's roots as a manufacturing company served as a greatasset in devising the efficient fulfilment model it uses today. From1975 onwards its factories manufactured specifically for its stores. The advantage of having started the supply chain process frominside the company meant customer service was always at theforefront.
2.How does its pricing structure impact the marketing andbusiness strategy?
Zara’s business model makes it more profitable then any otherretailer. We already know from marketing that the retailer getsalmost half the price of the commodity sold. So by playing boththe role of the manufacturer and the role of the retailer, Zara isdefinitely much more profitable than the average retailer withsimilar posted prices.Zara’s pricing strategy is to set price equal to cost plus a targetmargin. “Zara prices are based on comparables within the targetmarket, subject to covering costs plus a target margin.”
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