Zara Case Study

contempt the underway centralized dissemination exercise works fountainhead and at below capacity, continuous fast expansion away of Spain for Inedited brands (exhibit 8) would bring problems of bigger amalgamation of dispersed network pictures, rater demand and customization for Ezra passs from consumers. This would nevertheless bring the personal effects of discomposes of scale increased superman cost, top heavier-than-air Organization, potentially special working capacity, increased risk if central dispersal centre fails.No standardised grocery memory board thought Saras expansion attack give led them to be positioned diversely in each geographical commercialize despite tailing the aforementioned(prenominal) consumer segment, Ezra currently use gild-centered intimacy to de edgeine value and positioning strategies for contrary geographical segments. This has caused in invariable consumer perception of their brand e. . Americas and Spain. cosmos in a globoseizes marketplace, this poses a problem to the global perception and position of the Ezra brand.Competitive Environment -? Ezra is competing in a agonistic market where the competition atomic number 18 seeing same growth in wrinkle prices and revenue enhancement ( give 3, Exhibit 5). Competitors much(prenominal) as do already achieved similar competencies to Ezra in term of variety and stock refresh, and have obtained more than advanced competencies such(prenominal) as localization of diffusion centers, step-down the belligerent proceeds that Ezra has in ground of flexibility in their carrefours array and enabling the threat f substitution.Other competitors such as droll have farther gained competitive advantage by distinctiating themselves in the staring(a) market of fast retailing by utilise an consistent market approach targeting a salientr node base, jumper cable to a revenue growth rate greater than Ezra from 2009-2010 (Exhibit 5). Potential Solutions A potential resultant role for Ezra is the porta of forming a joint- proceed distribution centre in mainland China as a precursor for localization of concept and w atomic number 18 in Asia.This joint-venture promotes four-party exchanges with other sparing actors at heart the network. Helping Ezra get a competitive advantage over competition by allowing for Ezra to assess their STEP base on network insight to better standardize their market positioning. However, inside strikees nookie arise from a shift from a centralized to decentralized distribution business model. Also both scheme spate clash due to the rejection Of the partner-organizations underlying logic, accusatorys and business culture.A nonher potential effect is for Ezra to develop their e- calling 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 deliberate to nodes, and promote gives the m a competitive advantage over competitors such as who have in so far to setup an e- commerce presence in Asia. This would too compliment the fast expansion into the Asia region specifically targeted at India and China.However, this mode would entail gamyer(prenominal) outbound shipment costs as soul items allow have to be shipped from the central distribution center in Spain to the consumer in Asia or America. This leads to a nonher potential firmness of purpose on think on their brisk supply chain competency in europium to and dramatize e-commerce presence beyond the 8 countries that use a Ezra online interpose. This would utilize Saras active centralized supply chain in europium to expand get ahead to the vivacious node base.However, this would give Ezra little longsighted term competitive advantages over competition as competitor brands arsehole easily pass the same trade approach. Ezra may also pauperism to consider adopting an un differentiate approach by expanding their basic line to further compete with a larger node base as crotchety have done with(p) with a large amount of success (exhibit 5). This solving however would to be a viable long term upshot and has the possibility of poignant their overall brand perception if less in vogue(predicate) items of clothing were creation pushed to the consumer.Best Solution The best solution for Ezra would be to blossom forth a joint-venture distribution centre in China as a precursor to orifice localized figure and yield facilities in Asia, this fits into Saras objective to expand rapidly in a very competitive grace (Exhibit 5). This is also consistent with their joint- venture with Data group in open up Ezra stores in India with the potential for Network Insight. The overall issue to this solution is that Ezra provide destiny to find a partner to form a joint venture with, this may also require exchanges with local sparing actors in China to gain insight.China is a f ast growing market for Ezra with 71 stores theory in 4 years and on target to becoming Saras second largest market. Opening a distribution center in China entails the chase 1 . Network Insight for STEP Competitive advantage Whilst opening a distribution centre in China itself is not a major competitive competency in comparison to R&Ms localized distribution centers, by operating a joint- entire in China and by dint of the recursive exchange in the joint-venture social organisation on with exchanges with other economic actors, this promotes multilateral exchanges which will lead to a virtual(prenominal) and better brain of the market.This tin be used by Ezra to tending better sporadically 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 beat Currently the real distribution model for Ezra means that they can wholly ship to 1 geogr aphical region per ay. By including a distribution center in Asia, it means that stores within the growing market can be restocked a lot more effectively to better satisfy consumer needs 3.Allows the introduction of e-commerce in Asia -? with a distribution center in Asia, this allows for the possibility of establishing e- commerce in China ahead of Saras competition. This can also be used to further gather consumer insight into preferences. By operating as a joint- venture, risks will be sh atomic number 18d with the partner organization, not solely this, but resources can be shared to achieve maximum efficiency. However, by opening a distribution center in China, it will diverge 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(prenominal) sta rt to interpret a more decentralized approach in terms of global expansion. The notion of decentralization may come with hesitance from Ezra stakeholders due to Bonnets mishap with a decentralized business model, however as Ezra loud cover and own a large stake in the joint venture, they would suave maintain a large control.With greater network insight, this provides a track for Ezra to Open design and return facilities in Asia to improve operational efficiency in the long 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 decrease transportation costs to ship to Asiatic regions, this can Hereford be beneficial in further reducing Saras carbon footprint and improving CARS 2.Efficient Amalgamation of Consumer Feedback With rapid expansion, there will be great er consumer feedback. By opening up design and production in China, it allows for efficient and focused amalgamation of Asiatic consumer perceptions through having an established network insight. This will allow both rapid response season to customer feedback and potential for exchange of designs between Asiatic and European markets to expand Saras product portfolio. 3.Closer to Fabric Suppliers Currently, Ezra arches framework from their Hong Kong office, this office could be used to further utilize Asiatic suppliers to supply fabric for Asian production facilities, thusly reducing costs in importing fabric from overseas suppliers. overall this solution purports to provide sustainability to Ezra for future growth in Asia. Application of Concepts From the on hand(predicate) 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 en tries, whilst libertine retail offer product specialization and have a crushed reduce portfolio. However the most important component within this case is the customer outlook, due to the large influence that customers have on product portfolios of Inedited and H. unfluctuating retailing unique has adopted 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 then means that Inedited and H aim to have a full-market coverage by offering a extensive variety of offerings to different segments. H owever, 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 retail have benefited from rising revenue growth comparable to H and Inedited (Exhibit 5).Zara character reference StudyDespite 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 Saras 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 and 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 retai ling by exploitation 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 localization 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-organizations underlying logic, objectives and business culture.Another potential solution is for Ezra to expand their e- commerce presence in Asia and America to gain compet itive 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 region 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 foc apply 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 Saras 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 th e 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 possibility of affecting their overall brand perception if less excogitateable 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 Saras 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 Saras 2nd largest market. Opening a distribution center in China entails the following 1 . Network Insight for STEP Competitive advantage Whilst opening a distribution centre in China itself is not a major competitive competency in comparison to R&Ms 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 military work 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 distribution center in Asia, this allows for the possibility of establishing e- commerce in China ahead of Saras 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 Bonnets 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 Saras carbon footprint and improving CARS 2.Efficient Amalgamation of Consumer Feedback With rapid expansion, there wil l 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 potential for exchange of designs between Asian and European markets to expand Saras 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 adopted 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 retail er 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 StudyMGMT 6620 Operations & SCM HBS Case Study Zara IT for Fast Fashion 4/9/2013 1. What is the Zara 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 Zaras 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 product ion of any item and high inventory turnover, which secured better tracking of hot items, which can be exchange well 3. Reduction of losses on items which are not interchange well- Company was eliminating inventory build-up by managing low inventories and by their frequent updates company achieved high foot traffic in its stores and used the stores as central points of its marketing campaigns.Weakness in Zaras business model is that each store is highly dependent on decision making capabilities of store managers, which expertness 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 Zaras approach to IT? Are these approaches applicable and let anywhere? If not, where would they not work well?The Most important aspect of Za ras 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 all-important(a)ly applicable starting from production till distribution, but Zaras 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 facial expression 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. raw technology demands training on usage to employee that again involve cost. 3. Should the company build in-store networks? In our groups 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 Zar a currently has cannot reach this requirement.The store personnel could not look up their inventory through in-store computer they need to talking to 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 round the SKU. Store personnel have to use obsolete methods such as having telephone call or carrying disks to report the inventory or place 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 shiny future, should also update its network infrastructure, as its business scope will grow bigger. 4. How would you advise Salgado to proceed on upgrading Zaras POS system? The POS terminals using DOS has been unchang ed for over a decade, which made Zara difficult to manage the daily operation effectively. Upgrading Zaras POS system would utilize the large screen, keyboard and pussyfoot to quickly provide service to customers.It is very 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 discharge 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 companys online network.