Zara Case Study

Despite the current centralized distribution model working well and at below capacity, continuous rapid expansion outside of Spain for Inedited brands (exhibit 8) would bring problems of; larger amalgamation of dispersed network pictures, rater demand and customization for Ezra offerings from consumers. This would further bring the effects of discomposes of scale; increased transportation costs, top heavy Organization, potentially exceeding working capacity, increased risk if central distribution centre fails.No standardized market position – Sara's expansion approach have led them to be positioned differently in each geographical market despite targeting the same consumer segment, Ezra currently use company-centered knowledge to determine price and positioning strategies for different geographical segments. This has caused inconsistent consumer perception of their brand e. . Americas and Spain. Being in a globalizes marketplace, this poses a problem to the global perception a nd position of the Ezra brand.Competitive Environment -? Ezra is competing in a competitive market where the competition are seeing similar growth in stock prices and revenue (Exhibit 3, Exhibit 5). Competitors such as have already achieved similar competencies to Ezra in terms of variety and stock refresh, and have obtained more advanced competencies such as localization of distribution centers, reducing the competitive advantage that Ezra has in terms of flexibility in their products array and enabling the threat f substitution.Other competitors such as Unique have further gained competitive advantage by differentiating themselves in the saturated market of fast retailing by using an undifferentiated marketing approach targeting a larger customer base, leading to a revenue growth rate greater than Ezra from 2009-2010 (Exhibit 5). Potential Solutions A potential solution for Ezra is the possibility of forming a joint-venture distribution centre in China as a precursor for localizat ion of design and production in Asia.This joint-venture promotes multilateral exchanges with other economic actors within the network. Helping Ezra maintain a competitive advantage over competition by allowing for Ezra to assess their ‘STEP based on network insight to better standardize their market positioning. However, internal clashes can arise from a shift from a centralized to decentralized distribution business model. Also both organization can clash due to the rejection Of the partner-organization's underlying logic, objectives and business culture.Another potential solution is for Ezra to expand their e- commerce presence in Asia and America to gain competitive advantage, such as the growing market of e-commerce in America. This allows for Ezra to extend their reach to customers, and further gives them a competitive advantage over competitors such as who have yet to setup an e- commerce presence in Asia. This would also compliment the rapid expansion into the Asia regi on specifically targeted at India and China.However, this method would entail higher outbound shipment costs as individual items will have to be shipped from the central distribution center in Spain to the consumer in Asia or America. This leads to another potential solution on focusing on their existing supply chain competency in Europe to further expand e-commerce presence beyond the 8 countries that use a Ezra online store. This would utilize Sara's existing centralized supply chain in Europe to expand reach to the existing customer base.However, this would give Ezra little long term competitive advantages over competition as competitor brands can easily implement the same marketing approach. Ezra may also want to consider adopting an undifferentiated approach by expanding their basic line to further compete with a larger customer base as Unique have done with a large amount of success (exhibit 5). This solution however would to be a viable long term solution and has the possibil ity of affecting their overall brand perception if less fashionable items of clothing were being pushed to the consumer.Best Solution The best solution for Ezra would be to open a joint-venture distribution centre in China as a precursor to opening localized design and production facilities in Asia, this fits into Sara's objective to expand rapidly in a very competitive landscape (Exhibit 5). This is also consistent with their joint- venture with Data group in opening up Ezra stores in India with the potential for Network Insight. The overall issue to this solution is that Ezra will need to find a partner to form a joint venture with, this may also require exchanges with local economic actors in China to gain insight.China is a rapid growing market for Ezra with 71 stores opening in 4 years and on target to becoming Sara's 2nd largest market. Opening a distribution center in China entails the following; 1 . Network Insight for ‘STEP' Competitive advantage – Whilst openi ng a distribution centre in China itself is not a major competitive competency in comparison to R&M's localized distribution centers, by operating a joint- entire in China and through the recursive exchange in the joint-venture structure along with exchanges with other economic actors, this promotes multilateral exchanges which will lead to a realistic and better understanding of the market.This can be used by Ezra to help better periodically evaluate their ‘STEP' due to changes in consumer needs, this ensures maximized long term success and competitiveness by assessing actions against modern network insights 2. Reduced re-stock time – Currently the existing distribution model for Ezra means that they can only ship to 1 geographical region per ay. By including a distribution center in Asia, it means that stores within the growing market can be restocked much more effectively to better satisfy consumer needs 3.Allows the introduction of e-commerce in Asia -? with a distr ibution center in Asia, this allows for the possibility of establishing e- commerce in China ahead of Sara's competition. This can also be used to further gather consumer insight into preferences. By operating as a joint- venture, risks will be shared with the partner organization, not only this, but resources can be shared to achieve maximum efficiency. However, by opening a distribution center in China, it will start to dissolve the existing centralized structure that Ezra has created.But to expand overseas, Ezra cannot rely on company-centered extant knowledge for expansion and understanding of new customers, as seen through their existing differentiated positioning in Americas and Spain. Ezra must start to take a more decentralized approach in terms of global expansion. The notion of decentralization may come with hesitance from Ezra stakeholders due to Bonnet's failure with a decentralized business model, however as Ezra loud maintain and own a large stake in the joint venture, they would still maintain a large control.With greater network insight, this provides a pathway for Ezra to Open design and production facilities in Asia to improve operational efficiency in the long-term; 1 . Economies of Scale – despite the current centralized distribution model not effecting gross profit growth (exhibit 4), the rapid expansion into Asia can cause discomposes of scale through higher transportation costs. By having design and production local, this will reduce transportation costs to ship to Asian regions, this can Hereford be beneficial in further reducing Sara's carbon footprint and improving CARS 2.Efficient Amalgamation of Consumer Feedback – With rapid expansion, there will be greater consumer feedback. By opening up design and production in China, it allows for efficient and focused amalgamation of Asian consumer perceptions through having an established network insight. This will allow both faster response time to customer feedback and potenti al for exchange of designs between Asian and European markets to expand Sara's product portfolio. 3.Closer to Fabric Suppliers – Currently, Ezra arches fabric from their Hong Kong office, this office could be used to further utilize Asian suppliers to supply fabric for Asian production facilities, therefore reducing costs in importing fabric from overseas suppliers. Overall this solution aims to provide sustainability to Ezra for future growth in Asia. Application of Concepts From the available case study, we can see the 3 components of a Market; the suppliers, product and customer come into play.For suppliers, we can see that suppliers such as H and Inedited offer a large variety of product entries, whilst Fast Retailing offer product specialization and have a small reduce portfolio. However the most important component within this case is the customer aspect, due to the large influence that customers have on product portfolios of Inedited and H. Fast retailing unique has ad opted an undifferentiated approach by treating consumers as a homogeneous segment.Therefore they attempt to reach a large customer base through a single marketing strategy of offering a large variety of basics in a large array of colors. This is different to the approach made by and Inedited, who utilize a differentiated marketing approach. Inedited has multiple brands such s Ezra and Berserk utilizing different Segmentation, Targeting and Positioning. This similar concept is used by in which sub-brands are marketed to different segment groups.This therefore means that Inedited and H aim to have a full-market coverage by offering a wide variety of offerings to different segments. However, as Unique is the largest retailer to use a undifferentiated marketing approach, it has successfully differentiated itself from Inedited and Ezra by implementing product specialization, therefore Fast Retailing have benefited from rising revenue growth comparable to H and Inedited (Exhibit 5). Zara Case Study Despite the current centralized distribution model working well and at below capacity, continuous rapid expansion outside of Spain for Inedited brands (exhibit 8) would bring problems of; larger amalgamation of dispersed network pictures, rater demand and customization for Ezra offerings from consumers. This would further bring the effects of discomposes of scale; increased transportation costs, top heavy Organization, potentially exceeding working capacity, increased risk if central distribution centre fails.No standardized market position – Sara's expansion approach have led them to be positioned differently in each geographical market despite targeting the same consumer segment, Ezra currently use company-centered knowledge to determine price and positioning strategies for different geographical segments. This has caused inconsistent consumer perception of their brand e. . Americas and Spain. Being in a globalizes marketplace, this poses a problem to the global perception a nd position of the Ezra brand.Competitive Environment -? Ezra is competing in a competitive market where the competition are seeing similar growth in stock prices and revenue (Exhibit 3, Exhibit 5). Competitors such as have already achieved similar competencies to Ezra in terms of variety and stock refresh, and have obtained more advanced competencies such as localization of distribution centers, reducing the competitive advantage that Ezra has in terms of flexibility in their products array and enabling the threat f substitution.Other competitors such as Unique have further gained competitive advantage by differentiating themselves in the saturated market of fast retailing by using an undifferentiated marketing approach targeting a larger customer base, leading to a revenue growth rate greater than Ezra from 2009-2010 (Exhibit 5). Potential Solutions A potential solution for Ezra is the possibility of forming a joint-venture distribution centre in China as a precursor for localizat ion of design and production in Asia.This joint-venture promotes multilateral exchanges with other economic actors within the network. Helping Ezra maintain a competitive advantage over competition by allowing for Ezra to assess their ‘STEP based on network insight to better standardize their market positioning. However, internal clashes can arise from a shift from a centralized to decentralized distribution business model. Also both organization can clash due to the rejection Of the partner-organization's underlying logic, objectives and business culture.Another potential solution is for Ezra to expand their e- commerce presence in Asia and America to gain competitive advantage, such as the growing market of e-commerce in America. This allows for Ezra to extend their reach to customers, and further gives them a competitive advantage over competitors such as who have yet to setup an e- commerce presence in Asia. This would also compliment the rapid expansion into the Asia regi on specifically targeted at India and China.However, this method would entail higher outbound shipment costs as individual items will have to be shipped from the central distribution center in Spain to the consumer in Asia or America. This leads to another potential solution on focusing on their existing supply chain competency in Europe to further expand e-commerce presence beyond the 8 countries that use a Ezra online store. This would utilize Sara's existing centralized supply chain in Europe to expand reach to the existing customer base.However, this would give Ezra little long term competitive advantages over competition as competitor brands can easily implement the same marketing approach. Ezra may also want to consider adopting an undifferentiated approach by expanding their basic line to further compete with a larger customer base as Unique have done with a large amount of success (exhibit 5). This solution however would to be a viable long term solution and has the possibil ity of affecting their overall brand perception if less fashionable items of clothing were being pushed to the consumer.Best Solution The best solution for Ezra would be to open a joint-venture distribution centre in China as a precursor to opening localized design and production facilities in Asia, this fits into Sara's objective to expand rapidly in a very competitive landscape (Exhibit 5). This is also consistent with their joint- venture with Data group in opening up Ezra stores in India with the potential for Network Insight. The overall issue to this solution is that Ezra will need to find a partner to form a joint venture with, this may also require exchanges with local economic actors in China to gain insight.China is a rapid growing market for Ezra with 71 stores opening in 4 years and on target to becoming Sara's 2nd largest market. Opening a distribution center in China entails the following; 1 . Network Insight for ‘STEP' Competitive advantage – Whilst openi ng a distribution centre in China itself is not a major competitive competency in comparison to R&M's localized distribution centers, by operating a joint- entire in China and through the recursive exchange in the joint-venture structure along with exchanges with other economic actors, this promotes multilateral exchanges which will lead to a realistic and better understanding of the market.This can be used by Ezra to help better periodically evaluate their ‘STEP' due to changes in consumer needs, this ensures maximized long term success and competitiveness by assessing actions against modern network insights 2. Reduced re-stock time – Currently the existing distribution model for Ezra means that they can only ship to 1 geographical region per ay. By including a distribution center in Asia, it means that stores within the growing market can be restocked much more effectively to better satisfy consumer needs 3.Allows the introduction of e-commerce in Asia -? with a distr ibution center in Asia, this allows for the possibility of establishing e- commerce in China ahead of Sara's competition. This can also be used to further gather consumer insight into preferences. By operating as a joint- venture, risks will be shared with the partner organization, not only this, but resources can be shared to achieve maximum efficiency. However, by opening a distribution center in China, it will start to dissolve the existing centralized structure that Ezra has created.But to expand overseas, Ezra cannot rely on company-centered extant knowledge for expansion and understanding of new customers, as seen through their existing differentiated positioning in Americas and Spain. Ezra must start to take a more decentralized approach in terms of global expansion. The notion of decentralization may come with hesitance from Ezra stakeholders due to Bonnet's failure with a decentralized business model, however as Ezra loud maintain and own a large stake in the joint venture, they would still maintain a large control.With greater network insight, this provides a pathway for Ezra to Open design and production facilities in Asia to improve operational efficiency in the long-term; 1 . Economies of Scale – despite the current centralized distribution model not effecting gross profit growth (exhibit 4), the rapid expansion into Asia can cause discomposes of scale through higher transportation costs. By having design and production local, this will reduce transportation costs to ship to Asian regions, this can Hereford be beneficial in further reducing Sara's carbon footprint and improving CARS 2.Efficient Amalgamation of Consumer Feedback – With rapid expansion, there will be greater consumer feedback. By opening up design and production in China, it allows for efficient and focused amalgamation of Asian consumer perceptions through having an established network insight. This will allow both faster response time to customer feedback and potenti al for exchange of designs between Asian and European markets to expand Sara's product portfolio. 3.Closer to Fabric Suppliers – Currently, Ezra arches fabric from their Hong Kong office, this office could be used to further utilize Asian suppliers to supply fabric for Asian production facilities, therefore reducing costs in importing fabric from overseas suppliers. Overall this solution aims to provide sustainability to Ezra for future growth in Asia. Application of Concepts From the available case study, we can see the 3 components of a Market; the suppliers, product and customer come into play.For suppliers, we can see that suppliers such as H and Inedited offer a large variety of product entries, whilst Fast Retailing offer product specialization and have a small reduce portfolio. However the most important component within this case is the customer aspect, due to the large influence that customers have on product portfolios of Inedited and H. Fast retailing unique has ad opted an undifferentiated approach by treating consumers as a homogeneous segment.Therefore they attempt to reach a large customer base through a single marketing strategy of offering a large variety of basics in a large array of colors. This is different to the approach made by and Inedited, who utilize a differentiated marketing approach. Inedited has multiple brands such s Ezra and Berserk utilizing different Segmentation, Targeting and Positioning. This similar concept is used by in which sub-brands are marketed to different segment groups.This therefore means that Inedited and H aim to have a full-market coverage by offering a wide variety of offerings to different segments. However, as Unique is the largest retailer to use a undifferentiated marketing approach, it has successfully differentiated itself from Inedited and Ezra by implementing product specialization, therefore Fast Retailing have benefited from rising revenue growth comparable to H and Inedited (Exhibit 5). Zara Case Study MGMT 6620: Operations & SCM HBS Case Study Zara: IT for Fast Fashion 4/9/2013 1. What is the Zara â€Å"business model†? What weaknesses, if any, do you seen in this business model? The value propositions offered by Zara to its main customers who are young, fashion conscious city-dwellers is offering new styles within the time-frame of several weeks as well as providing assortment of choices for customers and the uniqueness of clothing styles fitting individual customer needs. To achieve this Zara’s business model had the following: 1.Incorporating the horizontal structure for placing orders and deciding which items to push aggressively by delegating decision making responsibilities to store managers; 2. Low volume production of any item and high inventory turnover, which secured better tracking of â€Å"hot† items, which can be sold well; 3. Reduction of losses on items which are not selling well- Company was eliminating inventory build-up by managing low invent ories and by their frequent updates company achieved high foot traffic in its stores and used the stores as focal points of its marketing campaigns.Weakness in Zara’s business model is that each store is highly dependent on decision making capabilities of store managers, which might cause the problem if many of them decide to leave. Moreover, since company relying on small shops scattered throughout Spain and Portugal for its production any economic downturn in those countries can cause the increase the cost of manufacturing or COGS. 2. In your opinion, what are the most important aspects of Zara’s approach to IT? Are these approaches applicable and appropriate anywhere? If not, where would they not work well?The Most important aspect of Zara’s approach to Information technology is the use of DOS-POS in its current store to track customers demand quickly, decentralize the company and provide customer with trendy clothing options. Yes these approaches are essenti ally applicable starting from production till distribution, but Zara’s current IT is outdated and needs to be upgraded from future sustainability point of view to network with various retailors and distribution centers. Zara could face challenges in longer run from operation front with new technology.Zara must keep upgrading them with the latest technology to beat the competitors that might cost high. New technology demands training on usage to employee that again involve cost. 3. Should the company build in-store networks? In our group’s opinion, Zara should build in-store networks. First of all, the store manager has difficulties in ordering without in-store networks. Aim of Zara is to provide its clothes quickly while the system which Zara currently has cannot reach this requirement.The store personnel could not look up their inventory through in-store computer; they need to talk to salespeople to determine the quantities, which is time-consuming. Secondly, for the fulfillment process, the level of the SKU is hard to determine without in-store networks. More importantly, if in-store networks would not be built, the infrastructure that Zara stores currently have cannot provide information among stores about the SKU. Store personnel have to use obsolete methods such as having telephone call or carrying disks to report the inventory or calculate the total sales.Last but not the least, the low cost wireless networks help and favor the building up of in-store networks. Zara, as a company, which has a promising future, should also update its network infrastructure, as its business scope will grow bigger. 4. How would you advise Salgado to proceed on upgrading Zara’s POS system? The POS terminals using DOS has been unchanged for over a decade, which made Zara difficult to manage the daily operation effectively. Upgrading Zara’s POS system would utilize the large screen, keyboard and mouse to quickly provide service to customers.It is ve ry important because time is money. Customers are now very busy with their daily schedule; faster service will attract more customers. Furthermore, the modern POS terminals would be able to execute more sophisticated capabilities such as sharing with other stores the inventory. This is essential for the company to manage the inventory and promote the brand network. It shows to the customers that Zara store is a global network and has the same value of providing the best service to customer anywhere. It will reduce the cost of phone call by using the communication inside the company’s online network.