Zara Case
- Submitted by: meenamenon65
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- Category: Other
- Date Submitted: 01/16/2015 08:04 PM
- Pages: 5
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What is the Zara “business model”? What weaknesses, if any, do you seen in this business model?
Zara’s business model is based on “fast fashion” strategy, requiring a highly responsive supply chain that can support a set of products that is constantly evolving. In this way, items are produced in small batches and within short lead times. By resorting to fast fashion, Zara has undertaken a radical change in the design cycle, synchronizing supply with ongoing changes in customer demands. By vertically integrating stages of production within the company, Zara can choose to work at the item level, rather than using collections, where production adapts to customer demand – focusing on trend changes that occur each season. This control structure allows Zara to avoid batching thousands of products together, leading to lean inventory.
By understanding what the customer’s exactly wants in every store on a regular basis, and seeking information on items sold, broken down by color and size – through a sleuth of “commercials” – Zara learns about customer reactions more quickly which are fed back to the design teams. The customers’ response are evaluated and incorporated into new designs, resulting in a cycle of iteration and innovation. Through this, Zara is able to turn around many new designs swiftly since its manufacturing plants are located close to headquarters.
At its core, Zara’s business model links customer demand to manufacturing, and connects manufacturing to distribution. Its inherent fashion philosophy that ties creativity and quality design together with a quick response to market demands brings profitable results. The goals of short lead times, decreased inventory risk, and dynamic choice of style and clothes have helped dictate Zara’s unique value proposition and business model.
As to its weaknesses, Zara’s vertical integration often leads to its inability to acquire economies of scale. Moreover, Zara’s speedy introduction of new products entails...
Zara’s business model is based on “fast fashion” strategy, requiring a highly responsive supply chain that can support a set of products that is constantly evolving. In this way, items are produced in small batches and within short lead times. By resorting to fast fashion, Zara has undertaken a radical change in the design cycle, synchronizing supply with ongoing changes in customer demands. By vertically integrating stages of production within the company, Zara can choose to work at the item level, rather than using collections, where production adapts to customer demand – focusing on trend changes that occur each season. This control structure allows Zara to avoid batching thousands of products together, leading to lean inventory.
By understanding what the customer’s exactly wants in every store on a regular basis, and seeking information on items sold, broken down by color and size – through a sleuth of “commercials” – Zara learns about customer reactions more quickly which are fed back to the design teams. The customers’ response are evaluated and incorporated into new designs, resulting in a cycle of iteration and innovation. Through this, Zara is able to turn around many new designs swiftly since its manufacturing plants are located close to headquarters.
At its core, Zara’s business model links customer demand to manufacturing, and connects manufacturing to distribution. Its inherent fashion philosophy that ties creativity and quality design together with a quick response to market demands brings profitable results. The goals of short lead times, decreased inventory risk, and dynamic choice of style and clothes have helped dictate Zara’s unique value proposition and business model.
As to its weaknesses, Zara’s vertical integration often leads to its inability to acquire economies of scale. Moreover, Zara’s speedy introduction of new products entails...