Value chain analysis of Zara
Zara value chain analysis includes the following:
Raw material: Zara purchases unique and effective fabrics to maximize the number of customers across the world. The company buys fabric in 4 different colors and designs them effectively and successfully. The firm focuses on the needs, demands and requirements of the customers to maximize the profitability and sale. Therefore, raw material plays a unique and empirical role in the organization (Turker and Altuntas, 2014).
Suppliers: It is the second stage of Zara value chain analysis that helps to make a strong financial image globally. Suppliers give great contribution in success and growth of the firm. The suppliers are all closed to the factories so Zara can order on a need and requirement of the customers.
Manufacturing: There are approx 50% products of Zara manufactured in Spain, 25% come from Europe and the remaining production is manufactured in Asia and Africa. In this way, manufacturing process of Zara is attractive and unique to gain competitive benefits.
Warehousing: The whole production of the company is received and warehoused in the logistics centers and stores in Spain. The company looks after the warehouse and stores to maintain sufficient stock in the stores.
Distribution: The products are distributed among the customers effectively. For this purpose, stocks and products are stored in the warehouse and it send to the different stores globally.
Stores: Zara’s stores play a significant role in success and profitability of the firm. They maintain enough stores in all over the world. The organization has approx 2169 stores around the world.
Consumers: The mangers and leaders communicate with consumers to analyze and identify tastes, preferences and desires of the customers to beat the competitors
It shall be noted that the company cannot attain success and growth without maintaining an effective and sustainable value chain analysis within the organization. This analysis helps to create value for the customers as well as suppliers (Holweg and Helo, 2014). It helps to fulfill the demands and requirements of the customers all over the world by using unique and attractive fabric in clothing. Furthermore, it protects the rights and interests of the suppliers to satisfy the customers. Along with this, dynamic distribution strategies are initiated by Zara to promote and enhance the products and services. In this way, the organization has been able to create a dynamic and unique image in the minds of the customers (Qrunfleh and Tarafdar, 2014).
Value chain analysis of Zara
Zara resources and capabilities
Zara resources and capabilities play an empirical role to stay in the competitive market and increase returns and revenue (Royo-Vela and Casamassima, 2011). The resources can contribute in the rivalry advantages of the firm. The resources of the firm include (1) The company has approx 3000 designers in the market, (2) Effective brand image and excellence presence in the global world, (3) Very flexible, agile and efficient value and supply chain management, (4) Zara uses unique manufacturing system to cope with the different needs and requirements from the different countries, (5) The company has a buyer driven supply chain that is formulated by made- to order- system. In this way, it is assumed that the firm uses attractive resources within the organization (Li et al, 2014). Along with this, the capabilities of the firm include the following:
- The firm sells the stock in short term; stock is brought in twice a week.
- Zara provides unique and fashionable products at reasonable prices.
- Integration production system is used by the company.
- Capital intensive operations are done by the organization.
- Along with this, feedback and reviews are collected by the managers and top management evaluates the choices of the customers. These are unique capabilities that help to beat the competitors all over the world.
One of the significant resources is effective and dynamic brand image that helps to stand out against the rivalries globally (Hopkins, 2012). By using effective brand image, the company has been able to differentiate its products and services from the competitors. On the other hand, significant capability of the firm is that Zara changed its product in every week to satisfy the demand of the customers. In this way, the organization has been able to recognize and analyze the market trends and choices of the consumers worldwide. Furthermore, it can improve and enhance the brand image in the competitive market. This capability helps to stand out against the rivalries in the market (MacCarthy and Jayarathne, 2013).
After the various studies, it has been evaluated that Zara uses unique business model to hit the competitors across the world. It shall be noted that the firm has been able to keep its higher margins and economic savings because of its effective and attractive value chain. Let’s talk about the raw material, approx 50% of the fabric the firm purchases is “grey” which permits it to facilitate in season updates with maximum quality and flexibility at the workplace. The company also reduces and cuts the costs by keeping most its production and manufacturing in one central location in Spain. This helps the firm to reduce and avert shipping and distribution costs in the marketplace. Apart from this, the firm allows relies heavily to turnaround and low inventory stock levels (Sorescu et al, 2011). In addition, the company produces and manufactures of its items and products in smaller batches which permits it to have bring the products to the market in just 5 weeks. Furthermore, the firm is known and famous for its ability to respond quickly on the demand of the customers. Effective business model of Zara helps to predict the future demand of the customers (Bruce and Daly, 2011). In contrast between Zara and Hollister, Zara provide high competitive advantages as opposed to Hollister. Zara is one of the biggest Spanish retailers in the world that helps to attract more consumers where as Hollister needs to follow enormous regulations and policies in its retails stores. Along with this, competitors also influence the profitability of the Hollister Company. On the other hand, Zara provides unique and stylish products at appropriate prices where as Hollister charges high prices for products and services. In this way, Zara can gain competitive benefits in the international market. It is assumed that Hollister faces several challenges in U.S market related to price and quality of the products. Apart from this, Zara offers fashionable apparel, accessories and clothing at suitable prices. Zara uses pricing strategy to differentiate its products and services from the competitor’s products (Taplin, 2014).
Business model of Zara
Conclusion
On the above mentioned study, it is concluded that Zara is a biggest Spanish retailers which offers unique and attractive products to the customers. Unique and effective value chain analysis is done by the company to destroy the competitors globally.
References
Bruce, M. and Daly, L., 2011. Adding value: challenges for UK apparel supply chain management–a review. Production Planning & Control, 22(3), pp.210-220.
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Crandall, R.E., Crandall, W.R. and Chen, C.C., 2014. Principles of supply chain management. CRC Press.
Hemantha, Y., 2012. Indian Consumer’s Perception of Spanish Fashion Brand Zara. Advances In Management.
Holweg, M. and Helo, P., 2014. Defining value chain architectures: Linking strategic value creation to operational supply chain design. International Journal of Production Economics, 147, pp.230-238.
Hopkins, J., 2012. Fashion Design: The Complete Guide (Vol. 36). A&C Black.
Inditex. 2018. About us [Online]. Retrieved from https://www.inditex.com/about-us/our-brands/zara, [Accessed on 23rd Appril 2018]
Li, Y., Zhao, X., Shi, D. and Li, X., 2014. Governance of sustainable supply chains in the fast fashion industry. European Management Journal, 32(5), pp.823-836.
MacCarthy, B.L. and Jayarathne, P.G.S.A., 2013. Supply network structures in the international clothing industry: differences across retailer types. International Journal of Operations & Production Management, 33(7), pp.858-886.
Qrunfleh, S. and Tarafdar, M., 2014. Supply chain information systems strategy: Impacts on supply chain performance and firm performance. International Journal of Production Economics, 147, pp.340-350.
Royo-Vela, M. and Casamassima, P., 2011. The influence of belonging to virtual brand communities on consumers’ affective commitment, satisfaction and word-of-mouth advertising: The ZARA case. Online Information Review, 35(4), pp.517-542.
Sorescu, A., Frambach, R.T., Singh, J., Rangaswamy, A. and Bridges, C., 2011. Innovations in retail business models. Journal of Retailing, 87, pp.S3-S16.
Taplin, I.M., 2014. Global commodity chains and fast fashion: How the apparel industry continues to re-invent itself. Competition & Change, 18(3), pp.246-264.
Turker, D. and Altuntas, C., 2014. Sustainable supply chain management in the fast fashion industry: An analysis of corporate reports. European Management Journal, 32(5), pp.837-849.
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