What is Zara's fundamental business strategy? Is it simple? What are the principles for Zara's business operation?
Fundamental business philosophy of Zara
The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly.
Thus, the main business tactics of the company in context of this business philosophy is ;
[ Short lead time ] More fashionable clothes and embracing quick changing customer's tastes
[Decentralized Management] Taking advantage of the intelligence and trust the judgment of employees
[Lower quantities] Inventory will be formidable burden in perishable products
[More styles] Providing more choices for customers and more chances of hitting it right.
< Zara's Business Concept >
Fashion at Low Cost
Reduce Creative Design ( Copy of leading styles )
Define a fast response process
Optimize the process ( lean organization)
Advertising only for new arrivals
No discounted sales
Specialized network for production
Interdependent between design and product team
Low product complexity : 3 types, size and colors
More choices ( approximately 11,000 new items in a year)
No classics ( Design for clothes to be worn 10 times )
The principles for Zara's business operation
Based on the business strategy and tactics, Zara has been trying to optimize its business operation largely in three cyclical processes ordering, fulfillment, and design and manufacturing. Much of the process are standardized and simplified under the excellent control and employee's intuitive decision making latitude. In short, the principle of Zara's business operation is optimization of all business process and get rids of all redundancies and unnecessary things. More extended or peripherals of the principles can be summarized as follow;
Keeping up with fashion ; short lead time and quick response to the market
Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales
Ownership and control of production ; vertically integrated manufacturing operation to enable its constant introducing of new items and also ensure short lead time
Highly people intensive process ; place great autonomy on employees
React rather than predict
What is the essence of Zara's IT strategy?
Zara runs an information-intensive business with remarkably little information technology. Since it has established such a standardized operational process, one might be assume that the company adopted significant and substantial IT packages. Zara, however, relies on people to make many crucial activities, without much help of computers. IT seems like an investment without returns which was described in the article of Mr. Nicholas G. Carr, "IT Doesn't Matter" In IT system, Zara positioned itself more likely as a laggard, but sophisticated and clever buyer of the commodity product, IT.
Many others who do spend on IT may leave the business process definition to IT vendor, and buying to an IT developing manager who has very little understanding of the business as it is and also do not know exactly where it could go. Zara has a perfect IT team with low turn over ratio last ten years and develops most of the system or writes the applications they need by themselves, sometimes with a little help of their vendor. It means that they perfectly understand what IT system is needed in when and where.
The reason we described IT...
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