Spanish clothing retail group of zara
Zara is the most profitable Spanish clothing retail group. Its first store was opened in Spain in 1975 and completed its expansion in the Spanish market by 1990. Since then it has began to move into operation worldwide in 73 countries. Nowadays, it has 1500 stores located in the most attractive shopping districts in cities. Zara as fast fashion manufactures has a unique business model. Zara's success is quick response in customer's fashion need, designing and producing clothing with short life spans. Its significant competitive advantages derive from its product development, marketing, operation management and information technology system.
Zara combined its Information System strategy with business strategy and organizational strategy together. This framework is called the Information systems strategy triangle which means a company's business strategy, organizational strategy and information system strategy should be interacted. Changes in IS strategy should response to the changes in business strategy and must accompanied by changes in its organization strategy. Because a company's IS strategy can support and be affected by changes in its business and organizational strategy.
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Zara has most obvious three business strategy: More fashionable clothes (Short life pan product); Scare supply ( lower quantities); and More styles ( more choice)
Zara is not like its major competitors such as Gap, H&M, which have completely outsourcing to cheap Asian manufacturers. Zara doesn't outsourcing its manufacture to Asian factories, even though cost of production is more expensive than Asian. Zara has 80% of materials made in Europe. Half of them are produced in Zara controlled facilities in Spain. As Zara's local strategic manufracture in Europe allows the time of launching a new product reduced to less than 30 days form a conception to final customers. Zara's fundamental strategy is to quickly identify and catch up a fashion trend faster than its competitors. With shorter response time, Zara could ensure the company is able to catching the fashion trend and produce clothes that the consumers want. Thus manufacturing in europe gives Zara a competitive advantage to keep up with fashion. In comparison, most of Zara's competitors have a long timeline from design to distribution which usually stretch into 4 months. Therefore, they have to attempt to forecast what their customer want to buy and how much they will sell. While Zara moves in step with fashion and accurate customer's need.
Zara outsourced fabric to external supplier worldwide with the help of its purchasing office in Barcelona and Hong Kong. Among half of the fabric purchased was undyed to maximize the usage flexibility. Zara designed and cut the grey fabric in house and dyeing and printing design until close to produce clothes in order to reduce waste and maximize flexibility in adopting various design with grey fabric and raw material base on changing fashion trend and market demand. Moreover, it also lower the cost of holding inventory.
Organizational strategy is the organizational design and the choices it makes to define, set up, coordinate and control its work processes.(……….)
Zara gave significant autonomy to each store manager in deciding the quantity of product its need for a store and determining the products to display in their stores and which product to place on sale. It's responsibility is to make these decision based on market research and store trends back to their headquarters. There are specialized team in headquarters to deal with feedbacks and information from each store, then design and produce their products. Zara's design team came up with approximately 12,000 new styles per year. In the contrary, most of apparel firm give little autonomy in determining which products to display or place on sale, because headquarters planed everything according to its market forcast. Therefore, Zara's rapid speed to market in product development outperformed its competitors.