Zara Case Memo

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To: Zara Management
From:
Subject: Zara's US Expansion
Date: 2001
Background
Following is an analysis of Zara's current expansion strategy into the US retail market and recommendations on future tactics to ensure a successful expansion. Zara's expansion strategy thus far has been quite successful; however, with every new store opened, its ability to maintain an efficient centralized production system and a strong, unique culture will be diminished. Analysis

Let us first consider Zara's main competitive advantage before analyzing how current and potential future strategies will affect this competitive advantage. Zara currently employs a "design-on-demand" retail model allowing the company to bring the latest fashion trends from conception through production and into the stores in less then 15 days. This advantage is harnessed through Zara's high degree of vertical integration. Zara is involved with almost every aspect of the retail clothing value chain, from fabric cutting and dying through distribution and sales. Integral to Zara's competitive advantage is its strong and distinctive culture, both at the production facilities and in the stores. This unique boutique-style culture entails a minimalist store design centering attention on the clothes, as well as very high throughput rates resulting in customers returning to Zara stores an average of 17 times annually. As its supply chain is strained through expansion, Zara might consider the movement of production facilities to the US. This may allow items to be brought to market more quickly within the US, however, it will inevitably increase labour and production costs. The current production process entails two main steps. The cutting and dyeing, featuring many flow shop characteristics, occurs at Zara headquarters in Spain. These steps leverage many efficiencies of scale due to a high level of automation. It would likely be more efficient over the long-term to maintain the location of these facilities and...
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