Zara Case Write-Up
Case 2: Zara
1. What are the essential elements of Zara’s business model? The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of the nature of its DCs and complication of online selling. Also, Zara has clear positioning that its clothes are always in style and not for durable use. Third, Zara has lots of stores and large scales, which has promising financial achievements as well as potential growth point. In general, Zara has a business model of preferences for speed and decentralized decision making.
2. How is Zara’s business model reflected in its operational capabilities? In other words, does Zara operate in a “turbulent environment” and how is this reflected in the way the company manages its operations? Turbulent environment is described as unpredictable demand and consumer preferences, new technology development, changing competitive environments, which in this case the rapidly changing fashion style and unpredictable customer demand is the key that made the environment turbulent. In its operations, Zara has 3 cyclical processes which are ordering, fulfillment and design and manufacturing. First, in ordering we can see speed and decision making method. The order frequency for each store is twice a week, which means that the selling is fast, and Zara keeps face with the instant customer demand, adjust their selling(replenishment or request for
1. What are the essential elements of Zara’s business model? The business idea of Zara is to link customer demand to manufacturing, and to link manufacturing to distribution. And based on this general idea, Zara has several essential elements for its business model. First, speed and decision making, which means that in the external level, Zara need to respond very quickly to demands of target customers, and always keep in style. While for the inside, Zara treasure intelligence and judgment of common employees who enjoy a great deal of autonomy. Second, its marketing, merchandising and advertising strategy. Zara does not spend on virtually advertising, while it spends heavily on stores, and no selling online because of the nature of its DCs and complication of online selling. Also, Zara has clear positioning that its clothes are always in style and not for durable use. Third, Zara has lots of stores and large scales, which has promising financial achievements as well as potential growth point. In general, Zara has a business model of preferences for speed and decentralized decision making.
2. How is Zara’s business model reflected in its operational capabilities? In other words, does Zara operate in a “turbulent environment” and how is this reflected in the way the company manages its operations? Turbulent environment is described as unpredictable demand and consumer preferences, new technology development, changing competitive environments, which in this case the rapidly changing fashion style and unpredictable customer demand is the key that made the environment turbulent. In its operations, Zara has 3 cyclical processes which are ordering, fulfillment and design and manufacturing. First, in ordering we can see speed and decision making method. The order frequency for each store is twice a week, which means that the selling is fast, and Zara keeps face with the instant customer demand, adjust their selling(replenishment or request for