RETAIL COMPETITIVENESS
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Contents
The Supply Chain of Zara from Raw Material to Consumer Purchase. 2
Vertical and Horizontal Integration and their Effects on Zara Competitiveness. 4
Retail Competitiveness
Introduction
The performance of a company depends on its investment in different areas of its operation. A company that combines various aspects of the operational processes can develop products and services that attract the attention of many customers. Planning the operation process to meet the needs of the customers influences the performance of an organization (Zentes, Morschett, & Schramm-Klein 2011). Zara operates in such a way that it has the customer’s interest at heart at all points within its supply chain. Its production strategy is a dynamic process that has facilitated a fast production process in the course of its operations. The “fast-fashion” strategy has enhanced the operations of the company. The planning of its management has facilitated operations in the market, giving it a competitive advantage over the competitors. The analysis of the operation of Zara Company will give insights into understanding the implications of the ‘fast fashion” strategy for operations in the market.
The Supply Chain of Zara from Raw Material to Consumer Purchase
In the production process of Zara, the company undertakes the analysis of the customer needs and design strategies for ensuring that it achieves them. The company monitors the fashion trends in the markets and establishes the designs of products that fit customer’s needs. The process of monitoring these trends is similar to the research and development that companies undertake to understand the situation of the market. Zara depends on Vogue Magazine and the information from store managers to get information about the design of the clothes in the most recent fashion. In its production process, the company’s strategy is to produce clothes that suit the customer demands in regulated quantities. The supply implies that the company can provide much-needed clothes to its customers. Zara creates demand for its products by supplying them with just enough quantities before they exit the fashion.
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Moreover, Zara undertakes the production of many of the cloth designs it has in the market. The process has greatly contributed to its fast response to the changes in the market. Production at Zara’s premises starts after designs have been completed by the employees of the company. After the completion of the stock through customer purchases, the company embarks on another research and development process to determine the next product in the market. The company produces commodities that suit demand from customers who are apt with fashion. In essence, the supply chain cycle of the company involves research and development, designing, production, and supply to consumers. The repetition of the process has led to the development of about 11,000 items each year.
The Disadvantages of the “Fast fashion” Distribution System of Zara and their Implications on its Advantages
In Zara’s production process, many risks are involved. The disadvantage of the “fast fashion” distribution system is that it produces low-quantity clothes in the market. The fear that customers may not appreciate the new designs causes the company not to invest in the production in large quantities that could last long in the market. The system makes it difficult to understand the item designs that could facilitate the company’s growth because they change within a short time. Zara has undertaken the production of low quantities that may compromise its profit because of a lack of the consideration of economy of scale. The distribution system may lead to low customer satisfaction because some of the customers who want particular designs might not get it after a short time. The problem happens because Zara never restocks any design once it is out of stock (Pantano 2015).
These disadvantages have many implications for the quality of services that Zara offers to its customers. However, they have little effect on the success of the company. Although customers may not have a second chance with a certain design, they get the opportunities to interact with other new items that are more current in terms of design (Choi 2014). The “fast fashion” distribution system has promoted a culture of expectation of new fashions that has made customers to be always on the lookout. Moreover, it has helped the company to attract a variety of customers who are interested in its designs.
Vertical and Horizontal Integration and their Effects on Zara Competitiveness
Vertical integration is the situation in which a company controls the various steps of the production and distribution process with the aim of gaining market power (Kazmi 2008). In simple words, it represents a situation in which a company manages its own supply chain (Pratt 2016). On the other hand, horizontal integration involves a company’s acquisition by another with the aim of improving the latter’s strength in the market (Mulvaney 2011). The combination of vertical and horizontal integration techniques has enhanced Zara’s competitiveness.
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Vertical integration has enhanced Zara’s speed of production of new designs within the market. The strategy has enhanced the reduction of logistical processes of contracting producers of desired fashions and designs of clothes (Jannesson, Nilsson, and Rapp 2014). Zara has organized its supply chain in such a way that all processes –production, distribution, and retail operations – happen within the company. The strategy has enhanced the collection of information from customers that help shape the production process in addition to helping the company to respond to customer needs (Dekkers 2005).
Zara operates as a subsidiary of Inditex, which has facilitated the growth of products of the company to reach many customers in the market. The operation of many subsidiaries of the company has increased its market base. Moreover, it has enhanced the establishment of a great portfolio that ensures that the company is always making money by meeting the various needs of customers (Bijman 2006). The horizontal integration of Inditex has expanded its source of information about customer needs. Such an opportunity has expanded the growth of the company in the market because it has helped in the understanding of trends in the market (Manuel’evna 2010).
Conclusion
Consideration of the various opportunities in the market is the critical undertaking of a company’s operations. Zara has focused on meeting the demands of the customer through the “fast fashion” strategy. Although it has exposed the company to various risks in the production process, the strategy has also led to massive advantages. The vertical and horizontal integration of the company has also led to numerous benefits in the competitive fashion industry.
Reference List
Bijman, JT 2006, International Agri-Food Chains and Networks: Management and Organization, Acad. Publishers, Wageningen.
Choi, TM 2014, Fast Fashion Systems: Theories and Applications, CRC Press, Boca Raton
Dekkers, R 2005, (R)Evolution: Organizations and the Dynamics of the Environment, Springer, New York.
Jannesson, E, Nilsson, F& Rapp, B2014, Strategy, Control, and Competitive Advantage: Case Study Evidence, Springer, Berlin. Kazmi, A 2008, Strategic Management and Business Policy, Tata McGraw Hill Education, New Delhi.
Manuel’evna, MD 2010, Global Governance as Business Strategy: The Case of Gazprom, Diplomica-Verl, Hamburg.
Mulvaney, D 2011, Green Food: An A-to-Z Guide. Sage Publications, Thousand Oaks. Pantano, E 2015, Successful Technological Integration for Competitive Advantage in Retail Settings. Business Science Reference, Hershey.
Pratt, JR 2016. Long-Term Care: Managing Across the Continuum. Burlington, MA: Jones & Bartlett Learning.
Zentes, J, Morschett, D & Schramm-Klein, H 2011, Strategic Retail Management: Text and International Cases, Gabler, Wiesbaden.
