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Executive Summary:
This paper presents the analysis of Zara, a Pilot retailer of Spanish retail giant Inditex which has become successful through its simple Business model of speed, flexibility and high fashion. The main issue in this case is to decide by the company whether to upgrade current system risking reliability with the current system or continue using DOS based operating system which is not compatible for future changes or improvements. The current system followed by Zara is effective and easy to maintain which persuaded the company to continue without any changes in the system. Although the sense of urgency for new system is not high, MS DOS is obsolete technology. So, it has been recommended that Zara should upgrade IT infrastructures and introduce modern information systems in modular basis to capitalize strength, shore up weakness, invest in opportunities and identify threats in Asian apparel Industry to capture the market shares. Introducing new POS networking system is beneficial to Zara because 1) It creates more robust and scalable system that is more responsive to Inditexs Supply Chain Network, 2) helps to maintain and improve efficiency of decentralization because of effective flow of information between stores, Distribution Centres and Plant and 3) removes the risks of the system becoming obsolete.
Background of Zara
Zara is flagship chain store of Spanish retail giant Inditex Corporation owned by Spanish tycoon Amancio Ortega. Headquarter of the group is in Corua , Spain where the first store of Zara, most renowned and fashion icon is founded in 1975. Zara, well known fashion designing and manufacturing company is declared most effective and market responding enterprise in Fashion Industry (Murphy, 2008).
Strategic Planning:
Mission Statement:
Zaras Vision: Leading apparel industry driven by customer demand and fast fashion. Zaras Mission: To hold big market share among young and fashion conscious city-dwellers in all continents by quickly responding their demand Zaras Goal: Long term goal: Open 120 new stores in prime location of Asia, America, Europe and Africa by 2021 with all business functions of the company interlinked via computer network. Short term goal
Zaras Objective: Marketing objective: To increase market share of Zara in Asia by 5% and sales by 10% by 2016. Marketing Strategy: Increase purchase frequency among current customers by 15% by 2016. Increase the number of new customers by 10% by 2016. Open 30 stores (10 stores per year) by 2016 in prime location of Asian cities.
Communication Strategy: Build strong relationship among existing and potential customers through CRM.
Customer satisfaction objective: To create convenient shopping environment and instant acknowledgement of customer feedback by February 2014. Customer satisfaction Strategy: Make business online by end of January 2014. Introduce Brick and click e-commerce business model Integrate customer forum page in website.
Technological Objective: To collect and analyse information to achieve effective and efficient uses of company assets/resources by 2015. Technological Strategy: Set up integrated ERP, CRM and SCM by 2015. Generic Marketing Strategy of Zara: Zara mainly adopts Differentiation Strategy to meet its mission statement. Zara produces and markets unique clothes base on sense of style and fashion. However, it also blends Cost Leadership Strategy and Market Segmentation Strategy to some extent to its main strategy. Zara produces in small quantity to lower the inventory cost. It employs a group of commercials dedicated to a section of store namely Men, Women, or Children. Core Strategy of Zara: Decentralize the decision making process Integrated supply chain Stores in prime places Short lead time Small quantity production principle to lower the inventory risk and cost
PEST analysis:
Political Environment: East Asian countries have liberal trade policies and are well integrated to global economy. Hong Kong and Singapore are free ports. South Korea and Taiwan are liberalized substantially in recent years. Malaysia is fairly open but with significant protection. China has open trade policy with European Countries while Japan has defensive (Sally, 2012). There are around 52 countries in Asia. Asia currently has mixed political situation. West Asia and South Asia has fragile political situation. Countries like Afghanistan, India, Pakistan, Iraq, Israel, and Syria lie in West Asia and South Asia where the political situation is delicate because of domestic conflict and war. However, Arabic countries like United Arab Emirates, Saudi Arabia, Oman, Qatar and Bahrain have stable political situation. On the other hand, most of the countries in Southeast Asia and East Asia have sound political situation. Countries like Singapore, Brunei and Malaysia in Southeast Asia and China, Hong Kong, Japan, South Korea, and Taiwan (Republic of China) are best potential countries for the company to expand.
SWOT Analysis
Strength: High Brand Value: Zara is also known as popular clothing brand. Vertical integration: Zara apparel chain works differently than the traditional retailer. Traditional apparel retailers generally outsource all of their productions while Zara manages all design, warehousing, distribution and logistics functions itself. Advantage of vertical integration:
Strong distribution channel: Zaras distribution channel is expensive but is very strong. Its distribution network mainly works by plane and trucks rather than trains and ship to deliver twice a week. By this system Zara has achieved 98.9% accuracy in distribution process (Dishti, 2010). Spot emerging trend and react quickly: Zara has pull strategy rather than forecasting. Designers of Zara walk around the world to pick the latest trend. Store managers frequently report the central office about the inventory and sales which helps to identify the tendency of customers. Another strong aspect of Zara is that the items are produced in the decision of manager and as per the customers choice rather than mere designers creativity. Stores around the world: Zara has 1,721 stores over 70 countries to capture the apparel market. Inexpensive but fashionable: The apparel in Zara is fashionable and affordable which is helping Zara to undercut its rivals. Customers comments and feedbacks: Zara remains very close to customers. Each Zara store wants and welcomes customer comments and feedbacks which help stakeholders to make future merchandising policy and strategy. One of the managers of Tesco says Our customer is based on listening to customers. Weakness: Advertising: Advertising is the persuasive communication device through which customers become aware of the product and services of a company. Through awareness and knowledge thus acquired by the buyers, they show their likings and interest towards products and finally purchases. But, Zara has zero advertising policy. Online presence at Zara is weak: Online is becoming very essential tool to display and sell the products. The rival companies like H&M and Gap are much more benefited by their online business activities. Centralized distribution system: Centralized distribution system involves suppliers delivering products in a centralized warehouse rather than to retail store. Sometimes centralized distribution system may cause delay in meeting the demands in the stores. Opportunities: Online Market: The internet marketing provides tremendous opportunities to a business to improve marketing effort and achieve competitive advantage. Online marketing can benefit business mainly on three ways: Effective communications Product development Business efficiency
Investment on opening New Political, Economic, Technological, SocioStores cultural, Environmental and Legal background and status of location of interest. No advertising strategy marketing Analysis of advantages and disadvantages in opening new store over advertising. Quality and reliability issue as well as legal system of country. Information gathered by team of 200 experts in design and development field. Consumer behaviour and psychology Research about consumer behaviour How unique the company operation is.
Look and feel of stores Life-span of product In-house building of software. Tactical Level Online presence company of
the Pros and cons of online shopping and online shopping trend and behaviour. In addition, competitive advantage achieved by rival apparel industries like GAP and H&M. Geography and geographical distance among manufacture, Distribution Centre, and sales stores. Employee and customer feedback and competitive advantage gained by competitors like GAP and H&M.
Requirement of IT
Future production of each Ratio between demand and supply of each Stock Level Unit (SKU) SKU. Price determination Production cost, distribution cost and market condition.
Outsourcing for synthetics and Cost, turnaround time and geographical fabrics distance. Inventory Planning optimizations and Statistics of desired service level, demand, supply and supply lead time.
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Effective Transportation Pros and cons of all transportation means strategies to be adopted. like roadway, railway, airway, and waterway. Moreover, geographical location and distance between manufacture, Distribution centres, and store. Knowledge Level Which store would get the Which store is more successful to sell the available stock in case demand particular garment? exceeds supply? What clothes would designed and produced Operational Level be Inventory information, store sales records, information regarding climatic factors.
Where to send and assess the Socio-cultural background, geography, demand of completely new climate, and fashion trend of a place where product. the store resides. Also the sales history of a particular store is informative Placer order of a particular Inventory details and sales trend of the garment garment. Order replenishment quantity Sales record, sales trend, stock in store of a particular product. Store demand What residents are wearing and what garments are selling? Sales record
Change merchandise over four Understanding about consumer psychology week and behaviour.
IS Recommendation:
Zara has flaws in existing information systems in terms of its expensiveness, effectiveness and efficiency. Thus, following information systems are recommended to Zara to further improve in its performances.
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Strategic Level
Stakeholder analysis
Stakeholder management
Situational analysis
Lead management
Sales trend
Tactical level
Pricing analysis
Determines price
MIS
Knowledge level
Market analysis.
Operational level
Order processing
Daily sales
TPS
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Strategic Level
Tactical Level
Knowledge Level
Operation Level
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Strategic Level
Inventory Inventory ESS management planning and and control management. system.
Tactical Level
Transportation system
Shipment MIS management, fleet and container management, carrier and freight management. Receiving, TPS put away, storage, order picking, shipping
Operational Level
Warehousing System
Links all pickup and delivery to points with response to time requirements and customer service policy. Minimize cost Increase and fulfilment efficiency time. of entire supply chain.
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Conclusion:
Although the existing system is working fine, Zara has been recommended to upgrade its POS system in order to cope with future changes. Zara has been recommended to introduce modern information systems to maintain the flaws prevailing in current Supply Chain, Customer Relations and Resources Planning. It has also been suggested to implement other Information Systems to make its performance more effective and efficient.
Other Recommendations:
In fashion, what industry requires is information or data about whats going to happen, not what already happened. So, Zara should allow fashion merchants and buyers to leverage crowdsourcing to get forward-looking, fast-turnaround, predictive analytics that can improve the style picking
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Reference:
1. Murphy R. (2008/08/01) Expansion Boosts Inditex Net [Online] Verified on: http://www.wwd.com/beauty-industry-news/financial/expansion-boosts-inditex-net-459628?full=true [Accessed: 28/01/2013] 2. Sally R. (2012) Trade Policy in East Asia: Regionalism Triumphant [Online] Verified on: http://www.lse.ac.uk/collections/globalDimensions/tradepolicy/papers/eastasia.htm [Accessed: 17/02/2013] 3. Drysdale P. (28/03/2012) Asias economic and political interdependence [Online] Verified on: 4. http://www.eastasiaforum.org/2012/05/28/asias-economic-and-political-interdependence/ [Accessed: 16/02/2013] 4. World Economic Forum (2012) Global Agenda Council on South-East Asia 2012 [Online] Verified on: http://www.weforum.org/content/global-agenda-council-south-east-asia-2012 [Accessed: 16/02/2013] 5. Euromonitor International (11/05/2007) East is East and West is West-regional consumer attitude comparisons- Introduction [Online] Verified on: http://blog.euromonitor.com/2007/05/east-is-eastand-west-is-west-regional-consumer-attitude-comparisons-introduction.html [Accessed: 17/02/2013] 6. International Trade Centre (2012) West and South Asia: Situational Analysis [Online] Verified on: http://www.intracen.org/uploadedFiles/intracen.org/Content/About_ITC/Aid_for_Trade/A4T-WestSouth-Asia-ENG.pdf [Accessed: 17/02/2013] 7. Ziv Y. (21/10/2010) Buying Process: Crowdsourcing Styles: Better Projections [Online] Available at: http://mashable.com/2010/10/21/fashion-digital-tools/ [Accessed: 14/03/2013] 8. Murphy R. (2008/08/01) Expansion Boosts Inditex Net [Online] Verified on: http://www.wwd.com/beauty-industry-news/financial/expansion-boosts-inditex-net-459628?full=true [Accessed: 28/01/2013] 9. Nadeem D. (09/12/2010) Zaras supply chain management practice [Online] Verified on: http://itm-rmm1012.blogspot.co.uk/2010/12/zaras-supply-chain-management-practice.html [Accessed: 30/01/2013] 10. Barrie L. (02/02/2012) Just style management briefing: Opportunities for the apparel industry in 2012 [Online] Verified on: http://www.just-style.com/management-briefing/opportunities-for-theapparel-industry-in-2012_id113371.aspx [Accessed: 31/01/2013] 11. Osterwalder A. (23/06/2005) Zaras business model [Online] Verified on: http://www.businessmodelalchemist.com/2005/06/zaras-business-model.html [Accessed 02/02/2013] 12. Evans B. (2010) Case Study of Zara [Online] Verified on: http://newezinearticles.com/Art/119075/149/Case-study-of-ZARA.html [Accessed: 07/02/2013]
13. (2011, 05). Zara It for Fast Fashion Case Notes. StudyMode.com. Retrieved 05, 2011, from http://www.studymode.com/essays/Zara-It-For-Fast-Fashion-Case-710292.html
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