ZARA IT for Fast Fashion ( Case Analysis)
1) Please describe three most important competitive advantages of ZARA (Inditex) over its main competitor. How sustainable is this advantage?
2) Assume that ZARA is considering to enter the US market. Please recommend actions for ZARA. Please make clear assumptions when necessary.
After reading and analyzing the Zara case we came several conclusions when it comes to Zara’s competitive advantage over its competitors. We understood that Zara is using totally distinctive business model compared to other more traditional fashion retailers. In our opinion there are three most important advantages that Zara has over its competitors. These are : IT Software/internal information flow, Factory locations/Geographic placement, Just in Time approach. We believe that these three factor are the main determinants when it comes to Zara’s strong current position on the market. Below I will go more in detail and explain every single factor individually.
Software/internal information flow
First factor which gives Zara competitive advantage according to me is their software. The fact that all the software (PDA) used currently by Zara is developed by them gives them huge competitive advantage. Having the software developed internally makes it much more efficient and user friendly because it is compatible with the companies daily operations. Everything starting from the operational procedures, performance measures, and even office and store layouts are designed to make information flow simple. Making the internal information flow faster and more efficient is one of the key success factors for Inditex.
The fact that all the stores are directly connected to the main system which in collects all the data is a great way for analyzing things that are going on in different stores. But all in all we would say that this factor is not a sustainable advantage. Everyone can copy the system or even create their own. The issue might be cost of R&D connected to development of such a system. But if we are talking about Zara’s main competitors it is fully possible.
Manufacturing and Distribution (Factory locations/Geographic placement)
The firm has built its highly developed strategy around consumer trends and embracing the fast-changing tastes of its customers. The fashion industry is a fast changing industry with new trends appearing on daily basis. Zara produces their clothing to have a short wear span (10 wears) forcing consumers to need to purchase more designs sooner. This ensures a high competitive edge for Zara in product development, strategic partnership and advertising and marketing. In order to respond to this fast changing trends Zara has developed a highly responsive supply chain based mainly on internal communication. They have a fast production and distribution strategy that allows them to offer the latest fashions in less than two weeks. It is very important to mention that Zara manufactures its products on all the continents. The manufacturing is divided between Spain where around 50% of Zara’s products are manufactured, rest of Europe where 26% are manufactured and the remaining 24% is outsourced to the Asian and African countries. So what is so special about this division of manufacturing ? Well firstly we have to look at the costs of production. The cost of production in Northwest Spain (wages are relatively low/unemployment high 17%) or northern Portugal are significantly lower than in other countries around Europe. The products which have longer shelf life like sweatpants, singlet’s or t-shirts are outsourced to Asia, while the fashionable product with constantly changing trends are produces in Portuguese and Spanish factories. Because of the strategic location of the factories in Europe Zara is able to produce and transport much bigger amounts of products to their stores in much shorter amount of time. Zara’s new designs can get into stores in as little as two...
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