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Published by: Shelfiah Manap on Mar 13, 2011
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Lecture : Prof. Dr. Basu Swastha Dharmmesta, M.B.A

Group 4
Anne Stam Febrini Wulandari Irwan Arfandi Bachtiar [Student Exchange] 08/277511/PEK/12841 08/277521/PEK/12851


org/wiki/Zara_(clothing). and it s business structures. 2009. as of its counter -intuitive business strategies. . Oysho.wikipedia. It is claimed that Zara needs just two weeks to develop a new product and get it to stores.000 new designs each year. one can certainly learn from its experiences. Zara has resisted the industry -wide trend towards transferring fast fashion production to low -cost countries. compared with a six month industry average. Zara s success is as much a result of its history and location. If you want to find out what s currently available at the Zara stores you have two options: go to the web site or go to the store. the company preferred to invest a 1 percentage of revenues in opening new stores instead. 1 Data accessed on http://en. and launches around 10. COMPANY PROFI E Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega.000 different items on the store shelves in a single year. Zara locates its stores close together. Perhaps its most unusual strategy was its policy of zero advertising. who also owns brands such as Massimo Dutti. Uterqüe. Pull and Bear. The group is headquartered in A Coruña. and store location. In its primary European markets. March 12. speed -to-market. Stradivarius and Bershka. Spain. While it may not be possible for another company to exactly duplicate the conditions under which Zara flourished. Zara puts 10. where the first Zara store opened in 1975. It is also notable for what it excludes. It can take a new style from concept to store shelf in 10-14 days in an industry where nine months is the norm.CASE SUMMARY Zara s marketing strategy focuses on product variety.

MAIN ISSUES and interde endent. Communication and information Technology are absolutely vital to managing the constant interface of various and management of the huge variety of product information. 2. 3. Marketing Management 13th edition. Locating various business function in close proximity of the headquarters. Control also refers to early investment in raw material. . and tight control. Prentice Hall   Z s bus ess s uc ure and s rate y are als greatly interlinked And also.. These provide the capability to respond very quickly to the market research-influenced decions. rather than in batches or discrete seasons. men and women. Extensive market research providing a constant stream of inputs into the product development process. and direct or indirect ownership of processing and production capacities.    Pro urement 2 Taken from Kotler and Keller. ¥ ¦ © £ £ §£ ¢¨ § ©¢¨£ §¦ ¥¥¤ The e e e s s £¢  ¡ How Zara manage the strategy of distribution and vertical integration ?  On which way can vertical integration of zara be an advantage for the company?  On which way can the fact that zara has a single distribution centre be an advantage? What to do before:2    T rget   Produ t ssortment Zara is broadly and deeply assorted. The following three factors stand out: 1. PROBLEM STATEMENT ANALYSIS rket Zara s target market is people from teens to adults.. allows the various functions to coordinate and take joint -decision very quickly.

In fact. Zara keeps almost half of its production in-house. It holds its retail stores to a rigid tmetable for i placing orders and receiving stock.  Location decision Zara locates themselves in central business districts with as many outlets as possible.  Prices Zara product price is affordable  Services Prepurchase service. Instead of relying on outside partners. when taken individually. Even many of its day -to-day operational procedures differ from the norm. Zara manufactures and distributes products in sm all batches.Establishing merchandise sources.  Store activities and experiences Stay update through the website. rather .  Overall about vertical integration Zara defies most of the current conventional wisdom about how supply chains should be run. but free press is good advertising. warehousing. It puts price tags on items before they're shipped. some of Zara's practices may seem questionable. ancilary service.  Communications No advertising. the company intentionally leaves extra capacity. postpurchase service. policies and practices.  Store atmosphere Zara store s athmosphere is high end but classy. high lighting. Rather than chase economies of scale. no pictures on the wall. and logistics functions itself. the company manages all design. Unlike so many of its peers in retail clothing that rush to outsource. distribution. Far from pushing its factories to maximize their output. if not downright crazy.

Also. Zara is able to be flexible in the variety. occasional stock-outs. This is due to the fact that the global apparel industry is highly-labor intensive rather t    capital i t iv . t istedesign. This strategy has led Zara to create a climate of scarcity and opportunity as well as a fast-fashion system.pdf. In contrast. 3 Under computerized system.    Str tegi Adv ntages Zara has been able to achieve excellent financial status due to its core competencies that provide the chain with a competitive advantage over traditional retailers in the industry. the company developed its own in-house team of designers more than 200 by the turn of the 21st century who began developing clothes based on popular fashions. the company reduced its design to distribution process to just 10 to 15 days. Generally. Zara by working through the whole value chain is very vertically integrated and highly capital intensive. Zara is an apparel chain that works differently from traditional retailers. while at the same time producing the company s own designs. Vertical integration. And it tolerates. It leaves large areas empty in its expensive retail shops. amount. a traditional retailer outsources all of its production while focusing on distributing and retailing those goods. even encourages. . has allowed the company to successfully develop a strong m erchandi ing strategy. Rather than placing the design burden on a single designer. enabled the company to avoid taking on the risk and capital outlay of developing and maintaining a large back inventory. the team was able to respond almost immediately to emerging consumer trends as well as to the demands of the company s own customers for instance. Fashion retailers and apparel manufactures are always seeking to lower costs by outsourcing production to developing countries where the lowest labor rates are found. as well as the installation of computerized inventory systems linking stores to the company s growing number of factories. Zara manufactures 60% of its own products. 85% of 3 $ # " ! Data accessed on http:// March 11. In this way. 2009. a distinctive feature of Zara s business model.than at each store.2 06/ ara%20rapid%20fulfillment. by adding new colors or patterns to existing designs.com/master_logistica/ 5. Zara is a chain that has developed a successful diverse method of doing business in the fashion industry. State-of-the-art production and warehousing procedures. By owning its in -house production. and frequency of the new styles they produce.

Zara s product development teams are constantly researching the market by traveling to universities. Zara s unique quick response system. fashionable. composed of human resources as well as information technology. allows Zara to respond to the demand of its consumer better than the competition. Zara has human resource teams in the retail and manufacturing environment that wo exclusively rk toward this goal. Traditional retailers lack this flexibility. Furthermore.this production is done through the season. This strategy minimizes Zara s total cost because it reduces 15-20 of markdown merchandise compare to a traditional retailer. % % % % & % % . It is extremely important for Zara to speed the information flow of consumer desires to their apparel designers. Zara s in-house production purposely creates a rapid product turnover since its runs are limited and inventories are strictly controlled . Additionally. and international staff helps to interpret the desire of the moment. Zara s product development teams are responsible for attending high-fashion fairs and exhibitions to translate the latest trends of the season into their designs. Regular customers know that new products are introduced every two weeks and most likely would not be available tomorrow. In the retail environment. places more emphasis on using backward vertical integration to be a very quick fashion follower than to achieve manufacturing efficiencies . Also throughout the season. Zara s managers and sales associates are in charge of transmitting the sales analysis. In the manufacturing environment. Zara. and clubs around the world to track customer preferences. Traditional retailers are obligated to place production orders to manufacturers overseas at least 6 months in advance of the season. Zara s scarcity climate allows the company to sell more items at full price. and the store trends to the designers. the young. the product life cycles. Therefore. The climate also increases % % the frequency and rapidity with which consumers visit the stores and buy the products. For that reason. which allo the chain to constantly provide its ws costumer with very updated products. This rapid product turnover creates a climate of scarcity and opportunity in Zara s retail stores. who focuses on the ultimate consumer.

3% as compared to traditional retailers who expends 3 4% (13). Ortega has effectively transmitted the values of the company. still owns 60 of Zara s shares. These divisional headquarter teams are composed of a head country manager who is constantly communicating with local managers and ' ' ( ' ' reporting to top management. Zara s advertising investment is 0-. Also. Zara s quick response communication strategy is effective due to its management and corporate culture. This has created a very autonomous and flexible corporate culture for Zara. which results in increased sales. Zara s managers work in teams in the countries where the chain is located. which make the tal international expansion more economical. The constant flow of information between managers allows the company to keep its customers happy. Amancio Ortega. since Zara s distribution center is a place where merchandise is moved rather than stored (12). Due to this. the founder of Inditex. This also signifies that Zara relies mainly on its stores to project their image. Zara s internally or externally produced merchandise goes to the distribution center. to increase delivery speed. and land. Zara s cuts in advertising investments reduce to expenses. Then.This allows the designers in Spain to develop the right products w ithin the season to meet consumer demand. to his management team. this department is ' ' ' ' ' . Moreover. In the distribution center. Zara also has an advantage over its competitors due to its low advertising costs. products are inspected and immediately shipped. Mr. For that reason. responsibility. flexibility and respect to others. The typical delivery time within and outside Europe is between 24 to 48 hours. This is cost-effective due to the close proximities of the distribution center in Arteixo and their factories in Coruña. In addition. which exclusively works in acquiring global prime real estate locations. which are: freedom. perfectionism. The transfer of this communication is also accelerated by IT software that is specifically designed for Zara s diverse business. rapidness. this has allowed thecompany to work horizontally with an open communication environment rather than a hierarchal one. Zara s centralized distribution facility gives the chain a competitive advantage by minimizing the lead-time of their goods. the shipments are scheduled by zones and shipped by way of air. Zara has a department.

Sao Paulo or Madrid since fashion has become more globally accessible .  Cutting time. fashion has become more globally standardized and Zara uses this to their advantage by offering the latest in apparel.responsible for the frequent refurbishing of store layouts. as well as the creation of a common window display for Zara s global stores.  Avoid conflicts emerge from different channels.85% of the products that Zara offers globally are relative standardized fashionable products. For that reason. focused on one rather than managing several different time schedules. and efficient. Zara s target market is very broad because they do not define their target by segmenting ages and lifestyles as traditional retailers do. This is due to the fact that Zara s marketing teams believe that a product that sells well in a fashion capital such as New York will most likely sell well in another such as Milan. more faster. Therefore. On whi h way an the fact that zara has a single distribution centre be an advantage?  Centralized control. Zara s target market is a young.  Because of managing distributions on their own. educated one that likes fashion and is sensitive to fashion. . 80. effective. The display positions Zara in the industry with a prestigious and elegant image. On which way can this be an disadvantage?  Diseconomic of scale in long term. Today. people around the world through various communication devices have more access to information about fashion. On whi h way an verti al integration of zara be an advantage for the ompany? ) ) ) 0 ) 0  Cutting cost because they do not outsource any channel.  Manageable time scheduling. designing and production process might not be in its optimum level. the costs is getting higher and higher . By targeting a broad market Zara has an international advantage over its competitors. avoid misunderstanding or conflicts .

RECOMMENDATION  Design Cooperate with vary range of designers so Zara can maintain its competitive advantage to be the fast fashion but remain more and more creative. and efficient in distributing their products to the retailers. Netherlands.  Production Cooperate with any channel of productionall over the world so new improvements in operation technology can be applied into Zara instead of keep using the old ones. .  Advertising Advertising might be important in the future when competitors are becoming more competitive and demands are declining -FIN- Typical Zara Store. at Almere. effective.  Distribution Making more distribution centres so they will enable Zara to be more faster.

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