Zara Company Analysis

Introduction Background Zara is among the leading textile and apparel companies in the world. The company was founded in 1963 by Amancio Ortega Gaona and was later joined by Jose Maria Castellano in 1985. Zara is a force to reckon with in the global textile and apparel market (Thomas, 2006, p. 47). Locally, it is considered to be among the biggest success story in the history of Spain.Advertising We will write a custom report sample on Zara Company Analysis specifically for you for only $16.05 $11/page Learn More Zara’s success is a lesson on how to develop and maintain a groundbreaking strategy (Ferdows, Lewis Machuca, 2003, p. 62). The consumer is always at the centre of the company’s business model. The two founders shared the belief that swift response to consumers, the use of IT (Information Technology), and decentralized decision-making were important for the success of the business (McAfee, Dessain, Sjoman, 2007, p. 5). Inditex own s more than 2000 stores across the globe out of which 600 stores are exclusively part of Zara chain. The largest share of Inditex’s sales is generated by Zara. Zara offers a variety of clothes for people of all walks of life at a reasonable price. However, the major portion of Zara’s revenue is from the female clothing (McAfee, Dessain, Sjoman, 2007, p. 7). Zara developed a marketing model which relies entirely on trends and styles, with minimal advertising. The vertically integrated marketing model emphasizes on swiftness, efficiency and the global fashion trend. However, the company’s approach to IT is not in-line with its marketing model. In addition, its websites are only for display and not for sales purpose (Ferdows, Lewis Machuca, 2003, p. 64). According to Azuma and Fernie (2003, p. 413), Zara’s success in the apparel industry can be linked to the application of successful competitive marketing strategies, which encourages global expansion. Zara ’s successful entry into the global apparel market was a result of their spirited marketing strategies, for instance, promotional techniques which increased the contents of their fashion line. Zara classifies its products into three fundamental groups namely: gentlemen, ladies, and young ones. The company’s low priced products attract and retain customers, thus creating sustainable growth of their value chain in the apparel market (Azuma Fernie, 2003, p. 415).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Report Purpose The general purpose of this report is to explore the problems and challenges facing Zara Textile Company. Our study will be narrowed to the company’s ICT which has been criticized by a number of authors for being outdated. The study will explore the extent of the problem and the risks it poses to the company. The study will also evaluate strategies t hat the company can take to arrest this problem. In addition, the paper will look at other alternatives that the organization can pursue. Nature of the problem In the last two decades, the company has been developing its own applications rather than purchasing the commercial ones. The company has an outdated operating system known as P-O-S. Zara entirely depends on P-O-S, which lacks full-time network for its store terminals. P-O-S (Point of Sale) runs on DOS which is not compatible with Microsoft applications (Bhagwat, 2011, p. 3). The company’s management argues that the operating system is easy to maintain and operate. On the other hand, experts feel that it’s time for the company to upgrade the current system or risk reliability. They argue that the current system will not be attuned to the future changes in the fashion industry (McAfee, Dessain Sjoman, 2007, p. 6). Zara’s use of IT is not in line with its goal of swiftness and autonomy in decision-making. The company has spent very little on IT and does have any definite budget for it. It has more confidence on individual brainpower than on the machines in decision-making (McAfee, Dessain Sjoman, 2007, p. 6). The company prefers to develop its own system than purchasing the commercial software. Zara’s IT department is separated into three sections: data storage solutions, logistic support and management system. This department has witnessed a very low turnover since its inception (Bhagwat, 2011, p. 5). Analysis of the Problem Before moving to the problem, the study will make use of the conventional model designed by Michael Porter to get a grasp of the company’s operations. Porter came up with a set of activities that can be used to assess a company’s competitive advantage.Advertising We will write a custom report sample on Zara Company Analysis specifically for you for only $16.05 $11/page Learn More It is important to model a comp any as a string of value-adding activities. The value chain helps to identify areas of weaknesses and strengthens (Porter, 2008, p. 83). The model is important in determining the best strategies to be adopted by the company. The value chain categorizes company’s operations into crucial and secondary operations. The crucial activities are company’s operations that are linked directly to the production of goods and services, whereas the secondary activities comprises of operations that support and facilitate the crucial activities (Porter, 1980, p. 12). The company’s ability to survive in the industry depends on its efficiency in performing these activities (Kroenke, 2012, p. 51). The figure below shows porter’s value chain model for Zara. Source: Bhagwat (2011, p. 7) The figure above shows the various activities performed by the company. The crucial activities include ordering, completion, designing and manufacturing. Among these activities, ordering is t he most popular, specifically defined, and consistent around the globe (Bhagwat, 2011, p. 7). Zara’s competitive advantage lies in its value addition in every stage right from production to marketing. The company has a decentralized structure and therefore the store managers are allowed to make decisions on behalf of the company (Ferdows, Lewis Machuca, 2003, p. 63).Advertising Looking for report on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Inbound logistics, warehousing and stock control are done at the distribution centres (DC).Zara’s DC receives large volumes of inventory and distribute them to company’s stores all over the globe (Waarts van Everdingen 2006, p. 645). IT helps the company to keep track of the stock keeping units (SKU). The company’s distribution centres and the stock keeping unit control the outbound logistics (Ferdows, Lewis Machuca, 2003, p. 65). As mentioned earlier, the company has an internal IT department which is mandated to develop applications used in different operations. This department is managed by the company’s Chief Executive Officer (CEO) instead of the Chief Information Officer (CIO) (Bhagwat, 2011, p. 8). IT is used both in the functional areas and in decision-making. Zara’s operating system is outdated, and as a result primary activities such as ordering, design and production are inefficient (Bhagwat, 2011, p. 9). The PDAs are used for ordering , handling returns and conveying information to the headquarters (McAfee, Dessain Sjoman, 2007, p. 9). The P-O-S terminals make it so hard for the staff to monitor incoming inventories, to verify stock in other stores, and share information among the stores. In most cases, the store managers have to make a phone call to verify stock, which consumes a lot of time given the large volume of inventories handled by the company (Bhagwat, 2011, p. 9). In addition, Zara has not taken advantage of the internet to market its products. The company has been criticized for using its website for display purpose only. The company is believed to rely too much on the word of mouth to market its products instead of advertisement (McAfee, Dessain Sjoman, 2007, p. 9). The company’s decentralized structure, where store managers make decisions on behalf of the CEO, deserves the best IT system to enhance efficiency and productivity. For this reason, the company has to invest heavily in a suitable IT infrastructure to enhance its value chain operations (Brà ¯dson Jody, 2004, 404). Current position of the company The company has maintained the use of P-O-S terminals based on DOS system up to date. The management argues that the current system is cost effective compared to other systems, for instance, it requires minimal maintenance and generally costs less. Besides, the company has an internal IT department which develops applications that are compatible with the system. This IT department has less than 50 staff, which account for less than 0.45 percent of the total number of employees. They also argue that managing operations using the commercially available software is not easy (Bhagwat, 2011, p. 3). Previously, the company used to make orders using a fax machine. At the moment they are using PDA which they consider effective (Capell, 2008, 66). Zara’s stores are not interconnected and therefore the employees have to make phone calls to check on the stocks. This no t only increases phone costs and time wastage but also decreases the company’s productivity. In addition, the lack of interconnectivity translates to lack of numerical data that can be used to make a comprehensive evaluation. In a nutshell, the current outdated IT infrastructure hinders the growth of the company through countless inefficiencies and information loss (Ferdows, Lewis Machuca, 2003, p. 64; Bhagwat, 2011, p. 13). Alternative Approaches The company has two major alternatives for improving the current system and at the same time maintaining lower cost. First, the company can upgrade its system using the latest operating systems. Examples of the latest operating systems include UNIX, Linux (Ubuntu) or Windows 8. According to McAfee, Dessain and Sjoman (2007, p. 10), the best option among the new operating systems with regard to cost is Linux since it has no one-time license cost. Both Windows and UNIX have one-time license costs of $145 and $160 respectively, theref ore are relatively expensive. However, Linux has a relatively high ongoing cost, for instance cost of servicing contract. Nonetheless, this cost depends on the knowledge of the company’s IT staff in the operating system. These costs are very important and must be considered by a company, especially Zara which has massive numbers of computers (McAfee, 2004, p. 19). To improve the current system the company will also have to install latest hardware and replace the outdated P-O-S terminals (McAfee, 2004, p. 20). The cost of outdated P-O-S is currently above $6000, whereas the cost of wireless routers and Ethernet plus associated expenses per store connectivity will not cost more than $240. Even though this somewhat expensive in the short-term, the cost will go down with time. The overall system upgrade will have tangible benefits to the company. It will enable the company to minimize general expenses, minimize operational expenses and enhance efficiency. In addition, the company can continue developing its own applications. System upgrade will also mean less IT staff and IT expenses (Bhagwat, 2011, p. 13). The second and most recommended approach is the use of cloud computing. Cloud computing is a novel term in the computing world, but it is not a new concept (Catteddu Hogben, 2009, p. 3). Cloud computing is an IT infrastructure delivered as a public utility where companies are allowed to pay for what they use. Computers and data can be accessed from any corner of the world. In other words, the company does not have to install state of the art system or develop applications they only have to hire it at an affordable fee (Williams, 2010, p. 6). Cloud computing can be delivered as a platform, infrastructure or software depending on the client’s needs. The three categories can be delivered in four deployment forms namely: private cloud, public cloud, hybrid cloud and community cloud. Cloud computing has no definite architecture and depends on the mode ls used by the provider and the needs of the consumer (Catteddu Hogben, 2009, p. 3). According to Khajeh-Hosseini et al. (2010), the third party infrastructure presents numerous prospects for businesses to enhance the management of their revenues and information exchange. Cloud computing improves cash-flow management given the fact that it reduces the overall costs and periodical billings as well as minimizing the inconsistency of expenditure on energy. It also assists companies to reduce administrative costs. According to Miller (2009, p. 15), the pricing methods for data storage service depend on three distinctive characteristics namely: durability, accessibility and speed. Therefore, according to him the cost of cloud computing decreases with the number of the service groups. He also argues that the cost of cloud computing is twice less than that of the in-house data centres. Williams (2010, p. 6) stress that small and medium businesses are the most suitable for cloud computing services. He argues that these businesses are incapable of developing huge data centres. Catteddu and Hogben (2009, p. 6) add that changes in the cloud computing cost variables come with new opportunities. As said by Khajeh-Hosseini et al. (2010), cloud computing offers easy access to an organization’s computing and storage infrastructure via the web. They also assert that cloud computing conceals the intricacy of information technology infrastructure management from the consumers and offers increased flexibility, steadfastness, soaring performance and specific configuration. All the above capabilities of cloud computing are offered at less cost in comparison to in-house data centres. As already been mentioned, many businesses are migrating to cloud computing to save cost. Cloud computing provides cheaper and scalable data storage for these businesses; however, the biggest question that lingers in the mind of many people is whether the data stored in the cloud are secure. Thu s, the most imminent task for businesses is the security of data. In accordance with the survey conducted by Catteddu and Hogben (2009, p. 65), the biggest concern of many organizations is the security of cloud computing. Security controls for cloud computing are almost similar to security controls in a conventional IT environment. However, cloud computing uses a divergent service model, functional model and technologies which present new types of risks (Cloud Security Alliance (2009, p. 19). The business IT security is normally tackled in different faces ranging from physical security, network security, system security, and application security. The security responsibility of the cloud computing service providers and users depends on the type of model used. In most cases the cloud provider is responsible for physical security, environmental security and virtualization Security (Cloud Security Alliance (2009, p. 20). On the other hand, at the lower levels of the platform consumers a re tactically responsible for the security, especially of the application and data. Besides the architecture, there are other areas that must be taken into account when tackling security issues in cloud computing. Cloud Security Alliance (2009) divides these areas into two namely: governance domain and operational domain. Governance domain encompasses strategic and procedural issues, while the operational domain tackles technical aspects of the security and implementation within the architecture. Governance domain takes in into account business risks caused by cloud computing, legal and electronic risks, and data management. On the other hand, operation domain consists of operational procedures used to tackle security, operations of data centres, incident handling and forensics, application security, encryption and scalability management, and virtualization (Cloud Security Alliance (2009). Given the fact that cloud computing is generally implemented in large scale they are cheaper t han other alternatives. Therefore, by embracing cloud computing Zara will enjoy better protection at an affordable rate (Catteddu and Hogben (2009, p. 17). Cloud computing also enhances the network effect of collaboration among different businesses using the service. Other security benefits include multiple locations, edge networks, instant response, and improved risk management (Cloud Security Alliance (2009. With multiple locations the cloud computing providers have adequate resources to avert system failures and data recovery. The edge networks avert the problems associated with local networks. Lastly, cloud providers have a large scale system that is able to respond to incidences in time. Conclusion and Recommendation Zara is among the leading brands in the globe and from a general point of view one would expect it to have the best management practices and state of the art IT system. However, this is not the case. The company has one of the oldest IT/IS infrastructure which is b elieved to have contributed to its slow rate of growth and inefficiencies. Some experts believe the company could have been number one in the globe if it had had an upgraded IT system. The company’s management argues that the current system is cost effective compared to other systems, for instance, it requires minimal maintenance and generally costs less. However, in the real sense this is far from the truth. Indeed, Zara has no alternative but to upgrade the current system. Their focus should be on the operating system and the terminals. Nonetheless, the best alternative is cloud computing which has been covered comprehensively in the report. References Azuma N, Fernie J 2003, ‘Fashion in the globalized world and the role of virtual ne ­tworks in Intrinsic fashion design’, Journal of Fashion Marketing and Management, vol.7, no.4, pp. 413-42. Bhagwat, S 2011, Zara: IT for Fast Fashion Case Analysis, University of Houston, Victoria. Brà ¯dson, K, Jody, E 2004 , ‘The secret to a fashion advantage is brand orientation’, International Journal of Retail Distribu ­tion Management, vol. 32, no. 8, pp. 403-411. Capell, K 2008,’ Zara thrives by breaking all rules’, Business Week, 20 October, pp. 66. Catteddu, D, Hogben, G 2009, Cloud Computing: benefits, risks and recommendations for information security, European Network and Information Security Agency New York. Cloud Security Alliance 2009, Security Guidance for Critical Areas of Focus in Cloud Computing, Cloud Security Alliance Inc, New Jersey. Ferdows, K, Lewis, M, Machuca, JAD 2003, ‘Zara Supply Chain Forum’, International  Journal, vol.4, no. 2, pp.62-66. Khajeh-Hosseini, A, Sommerville, I, Greenwood, D, Sriram, I 2010, Research Challenges for Enterprise Cloud Computing, Submitted to the 1st ACM Symposium on Cloud Computing November 2010. Kroenke, D M 2012, Experiencing MIS (3rd ed.), In Organizational strategy, Information Systems, and Compe titive advantage, Pearson Education, Inc, Upper Saddle River. McAfee, A 2004, ‘Do you have too much IT?’ MIT Sloan Management Review, vol.45, no. 3, pp.18-22. McAfee, A, Dessain, V, Sjoman, A 2007, ‘Zara: IT for Fast Fashion’, Harvard Business School, 1-23. Miller, M 2009, Cloud computing: Web-based applications that change the way you work and collaborate online, Que, Indianapolis. Porter, M E1980, Competitive strategy: Techniques for analyzing industries and competitors, Free Press, New York. Porter, M E 2008, ‘The five competitive forces that shape strategy’, Harvard business review, vol.5, pp.78-93. Thomas, RJ 2006, ‘Uncovering Zara’, Apparel Magazine, 27 January, p. 47. Waarts E, van Everdingen Y M 2006, ‘Fashion retailers rolling out across Europe, Inter ­national,’ Journal of Retail Distribution Management, vol. 348, pp. 645-657. Williams, M I 2010, A quick start guide to cloud computing moving your busines s into the cloud, Kogan Page, London. This report on Zara Company Analysis was written and submitted by user Beetle to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here. Zara Company Analysis Introduction The product under analysis is a Zara tulip Dress; it is red, pleated and has a jewelled collar. The garment is available in size XS and costs approximately  £40. The company sells it in most retail outlets around the world. Clients can also get it from the internet through the firm’s website or e-bay.Advertising We will write a custom coursework sample on Zara Company Analysis specifically for you for only $16.05 $11/page Learn More An analysis of the production process of the commodity illuminates the intricacies of innovation and creativity within the fashion industry. Main results and findings Retailer Background and analysis Zara is a public company headquartered in Spain. Its founder –Amancio Ortego –has presided over the rapid growth of a small business into a multinational conglomerate known as Inditex. The latter organization is among the top three fashion companies of the world. It started in 1975, and by 1985 had made $ 0.086 billion in sales. This increased to $0.8 billion and $8.2 billion in 1995 and 2005 billion respectively. Currently, the organisation has over sixty thousand employees and over 4000 stores around the world (Ferdows et. al. 2010). For a graphic explanation of the financials in the company, refer to the appendix. Brand/retailer positioning Zara is a clothing retailer that created and perfected the fast fashion model. Unlike other clothing retailers who persuade clients to like and buy their designs, Zara does it in reverse. It prefers to study consumer demand in order to use it as a basis for its designs. The company’s approach has been so successful that other organizations are imitating components of their model. When a product becomes available in Zara’s retail outlets, it only stays there for a few days. This creates scarcity in the minds of consumers who must purchase the item or miss it altogether.Advertising Looking for coursework on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More The firm has also positioned itself as one that does not advertise. It relies on impressive in-store displays, low prices and central locations in fashion districts. Rarely does this organisation hire well-known designers or use complicated technologies for production. As such, competitors must struggle to keep up with their prices. The corporation sells affordable and trendy garments. Collections are not elaborate as the company focuses on selling all items within two weeks (Crofton Dopico 2007). Consumer focus This organisation prioritises consumer needs over and above any other factor of production. Zara has chosen to integrate the production processes vertically in order to accommodate customer needs. The length, size, colour, fabric and methods of construction represent 2013 spring trends. The company’s employees have training on how to get information from buyers about how they feel about a certain product. For instance, some buyers will state that they do not like straight collars or they prefer zippers on heavy garments. Employees will note this information; convey it to store managers who then transfer the information to their headquarters in Spain daily (Pearson 2009). Customers’ reactions determine how the company carries out its business. The organisation realised that fashion clients want a firm that responds to their needs in the fastest way possible. Price was less essential to their buyers than flexibility. Description of the product Seamstresses made the garment from polyester fabric, and it is red in colour. The dress has a round collar that covers most of the chest area. It also has embroidered jewellery that blends perfectly with the colour of the outfit. At the waistline, the dress has modest pleats that give it the shape of a tulip.Advertising We will write a custom coursework sample on Zara Company Analysis specifically fo r you for only $16.05 $11/page Learn More The garment spreads out into an A-shape at the bottom and its fabric is linen. Since it is available in a small size, then ladies with small frames are well-suited to the piece. Furthermore, those with pale skin would look good in the outfit. The item is a few inches above the knees thus giving it a youthful and flirtatious feel. It is something that can be worn to a cocktail party, wedding, outdoor event or any other daytime festivity. However, because of the boldness of the colour, one should only select the item if one wants to stand out from the crowd. Mood board influences fabric Following the need to keep things formal and subtle, the designers chose fabric that went with such a design. The collection consisted of a lot of woollen items as many of them match with grey. There was a healthy dose of polyester in the collection as well as linen and cotton. A few dashes of silk and leather were prevalent; for inspir ation one can use furniture and hair respectively. However, because the latter are salient fabrics, then it was essential to make the products in black and other neutral items. The red tulip dress was mostly linen, which resembles the balls shown below. Mood board colour In this design, the concerned team members drew inspiration from nature. A grey cloud would be the ideal example. This would be accentuated through the presence of metallic machines as seen through the craft in the Mood board below. The woods would also capture the colour essence of the collection if sparsely populated by vegetation. Black and red dresses in the collection stem from red tulips and the night sky respectively. The design process – from concept to consumer Research Designers of the red, tulip dress sought information from a myriad of sources. First, they analysed their current customers’ tastes through in-store purchases. Sales information of items sold by colour and size gave the designers information on consumer preferences.Advertising Looking for coursework on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Store managers furnished these designers with the information. The other sources of inspiration for the creation were magazines, celebrity trends, runways shows in fashion capitals as well as trends in social and recreational centres like restaurants (Crofton Dopico 2007). Colour Palettes The above combination represents the inspiration for the entire collection. The palette contains saturated neutrals. Since the combination consists of three versions of grey, it is not surprising that a number of the dresses in the collection belonged to this category. The first was ribbon red while the last is ultramarine green. Bright white and blue (sodalite) also form part of this colour scheme. The team drew inspiration from flags as most of them contain these kinds of colours. As it can be seen, the colours above are quite subtle. International designers have moved away from bright colours and are using more neutrals this year. Yarn and fabric fairs Workers thread fabrics for this company f rom scratch in Spanish factories. Yard fairs are, therefore, crucial to the organisation because they assist in the development and enhancement of existing colour and fabric palettes. The organisation’s representatives often attend fairs in production capitals of the world so as to gain knowledge on new production techniques, as well. The red dress was not pure linen as it contains small percentages of synthetic yarn. It would not have been possible for the organisation to develop this hybrid without input from industry experts. Presentation of trends – mood boards This season-Spring 2013- short dresses are in and most designers are experimenting with short lengths. The trend explains why most of the garments in their collection were above the knees. Additionally, grey is the go-to colour as the public is moving away from the bold colours of 2012. Most of the outfits in Zara’s collection reflected this pattern. Stripes are also in; many designers have found new ways of experimenting with the patterns. The striped green and white dress in the company’s collection epitomised this style. Leather is here to stay thus proving that Zara is well in tune with consumers’ tastes. Garment design The design of the garment occurred through creative teams at Inditex. Unlike other fashion retailers who focus on groups of designers, Zara combines several professionals under one team. For instance, designers will work alongside product development experts as well as raw material specialists (Pearson 2009). All of them are keenly aware of the time constraints, so they avoid making too many product alterations. While making the red, tulip dress, the creative team also worked on a number of other samples that belonged to the collection. They used information from the earlier mentioned research sources (in-store information, magazines etc) to make the dress. The group consisted of young designers who did not get penalised for making po or decisions. However, they tried as much as possible to make the products quickly. Sampling Several fashion retailers in the fashion retailers often decide on certain fabrics and then look for those fabrics before making their products. However, this pattern is not applicable to Zara. The organisation realises that it has a lot to lose if it waits for the lengthy process of fabric formation (Ferdows et. al. 2010). Therefore, it makes it garments using available fabrics. When creating the red dress, Zara selected fabrics that were already there. The sampling process proceeded on the basis of available fabric selections so as to save on time. Construction Machines did most construction of the garment. There were a number of similar red, tulip dresses in the firm’s premises. The company trimmed and assembled them using automated processes. Machinists were responsible only for one aspect of the dress; for instance, some of them made collars while others focused on hems, shoulder s and pleats. In essence, the construction of the dress followed the following process. After the design, workers assembled sample fabrics. They made trims, which came after pattern making. Cutters then worked on the garment and machinists handled the assembly of the dress. Large scale construction of the garment meant that most of the processes had to be done through the use machines (Crofton Dopico 2007). Manufacture supply chain and critical path As mentioned earlier, Zara’s supply chain is vertically integrated thus implying that employees made the red Tulip dress within its facilities. The diagram illustrates the critical path for the manufacturing process. Sometimes the company chooses to outsource non value adding activities like sewing. The company handled all the above processes aside from sewing. The firm’s manufacturers are in Spain, Portugal and Turkey. However, the primary production site is Spain. For the red dress, the fabric probably came from Italy, Germany, Turkey, India or China. Employees in the firm’s subsidiary then dyed, printed and marked the fabric after obtaining the raw materials. These activities precede the cutting process in which a seamstress follows designers’ patterns concerning the garment. In certain circumstances, Zara may contract its sewing process to cooperatives in Portugal. If this happened to the garment, then the product was in the hands of third parties for a short period. Thereafter, the garment came back to Zara’s intermediaries where it carried out quality checks, packaging as well as finishing. The final aspect is distribution and logistics control (Crofton Dopico 2007). Range building – what is its function within the range The red tulip dress is part of a collection of garments for spring 2013. The collection includes a series of other dresses in different colours and designs. Most of the items in the collection are not as brightly-coloured as the red dress. This ye ar, they range from white and green, grey, and black. In fact, the garment is the only one that pops out in the collection. Most dresses in the collection are subtle. Furthermore, the accessories at the collar are also unique because most items in the collection make use of conventional accessories like buttons. In this regard, this item was the classiest piece in the collection. The designers wanted to respond to a unique need among its clientele for a dominant fashion item. Sample collection When creating the sample collection, neutral colours, like grey and black, inspired the company’s designers. As seen above, the red garment was the exception rather than the rule. Machinists made one garment from the beginning to the end. Initially, the team rejected some of the samples and had to refine them. For instance, the third last dress had grey sleeves. It was after taking certain suggestions that the product was altered to its present status. Delivery The time it takes for Zara to procure material for fabric and deliver a product to a retail outlet is roughly five weeks. Competitors’ lead times pale in comparison to Zara’s because most of them take half a year to finish a garment. After completing the dress, the company shipped it to its respective retail outlets in the UK within 24 hours. Since the latter is in the European continent but not in Spain, the company had to use air transport to meet the 24-hour window. Zara entered into partnerships with Air France and Emirates Airlines because it values flexibility and speed during delivery. The company shipped the dress to the Middle East and certain parts of Europe through this arrangement. The same platform shipped back raw materials from Asia. Zara is willing to do whatever it takes to reduce delivery times (Cecilie 2008). Visual Merchandising in-store Most Zara stores are famous for their uniformity and uniqueness. They are white, spacious and modern. Mirrors cover the wall s, and they are quite attractive. Since the Tulip dress is one of the latest fashions, sales assistants hanged it on store racks. The organisation selected prime locations in stores for the dress. They also put it directly under a light to as to illuminate it and attract it to its clients. This dress can be found in similar locations around fashion capitals around the world. Therefore, international visitors could learn about the dress on the internet but find it on display in Milan or Paris. Even in-store designs reflect these patterns. A team of designers normally decide on window displays as well as store layouts. Therefore, the red, tulip dress was a central piece of the collection, so placement in the middle of the store was appropriate. The designers tried out this display from their headquarters in Spain and then photographed it. They then sent the photos to all fashion capitals with Zara’s retail outlets. Monitor and response to sales One of the most dramatic ways in which Zara has curved a niche for itself as a top fashion retailer is its fast response to sales figures. About 40% of the products sold in the company represent costly new designs. Other products reflect trends in cuts, fabrics and colours. The red Tulip dress happens to fall in the latter category. An analysis of sales figures within the company’s stores led to the design. As mentioned earlier, Zara keeps its costs down by avoiding massive investments in technology. To obtain sales information from retail stores, the company uses personal digital assistants for its store managers. Store managers must rely on sales rankings to reorder existing garments (Ferdows et. al. 2010). Prior to the development of the red Tulip garment, sales managers at the headquarters monitored the performance of similar dresses, colours and sizes on their basic computer systems. They immediately conveyed the information to designers in the same building so as to facilitate new designs, including th e red dress. After the placement of the outfit in retail outlets, the organisation also used similar methods to convey information concerning its performance in order to use it for new designs. Since clothes only stay in Zara’s retail outlets for a short time, then sales figures on the performance of the dress do not contribute to the continued display of the same piece. Designers use them to make similar items instead. Factors affecting the design of the dress The most significant factor affecting the design of the dress is the need to keep inventories fresh. This explains why employees designed the product within a relatively short time. Zara considers geographical preference, as well. Persons in Brazil prefer bolder colours to those in a place like Paris. However, when trends go global, they do so simultaneously in almost all parts of the world. Cost cutting is also another factor that affects the design of the garment as few adjustments imply low costs. Consumer needs are a critical parameter in dress design, and so is availability of fabrics. The organisation considers the length of time that a trend has been in season in order to know the colour, patterns and fabric that is most preferable (Pearson 2009). Media coverage and impact No advertisements take place at Zara. It does not even employ public relations tactics or celebrity endorsements to push products. When launching new products, the company will place basic announcements on local newspapers. The organisation’s founder and chairman are all extremely private individuals. Therefore, media stories dwell on the organisation’s successful production, distribution, merchandising or logistical strategies. The media covers Zara’s stories when the company delivers impressive results. As such, customers have come to perceive it as a credible retailer that delivers on its promises. Conversely, many fashion magazines and newspapers have fashion analysts and commentators. A number o f them have criticised Zara for imitating top designers. These comments have hurt the company’s brand to a small extent (Cecilie 2008). Conclusion Plenty of lessons can be learnt from the production process of the red tulip dress. First, fashion organisations must have a clear vision of their brand. They should stick to this strategy even during international expansion as it is a source of differentiation. Zara’s production process is highly efficient because it has streamlined communication processes between different members of the supply chain. Sales personnel, store managers, designers, suppliers and specialists all exchange information seamlessly. Furthermore, the company prioritises consumer needs over any other issues in the business. Its leaders were not afraid to try something different in production. Instead of outsourcing manufacture, they brought it closer to consumers. Additionally, instead of stocking various trends, the company only sold small collection s so as to create scarcity. Fashion companies must be willing to go against the tide in order to become industry leaders. This organisation used the just-in-time model of the automobile industry and vertically integrated production to create its competitive advantage. Such bold decisions are what make the firm an example for other fashion retailers to follow. References Cecilie, R 2008, ‘Pace-Setting Zara Seeks more speed to fight its rising cheap-chic rivals’, The Wall Street Journal, 10 September, p. 15. Crofton, S Dopico, L 2007, ‘Zara-Inditex and the growth of fast fashion’, Economic and Business History, vol. 25 no.3, pp.41-54. Ferdows, K, Lewis, M Machuca, J 2010,‘Rapid fire fulfilment’, Harvard Business Review, vol. 82 no. 11, pp. 59. Pearson, A 2009, The story of Zara – The speeding bullet. Web. Appendix Turnover (in millions of euros) Sales 13,793 12,527 11,048 10,407 9,435 Results and cash flow (in millions of euros) Operating profit (EBITDA) 3,258 2,966 2,374 2,187 2,149 Operating profit (EBIT) 2,522 2,290 1,729 1,609 1,652 Net income 1,946 1,741 1,322 1,262 1,258 Net income attributable to the parent company 1,932 1,732 1,314 1,253 1,250 Cash flow 2,613 2,540 2,060 1,864 1,747 Financial structure (in millions of euros) Net Assets attributed to the parent company 7,415 6,386 5,329 4,722 4,193 Net financial position 3,465 3,427 2,380 1,219 1,052 Other relevant information Number of stores 5,527 5,044 4,607 4,264 3,691 Net openings 483 437 343 573 560 Number of markets with commercial presence 82 77 74 73 68 Number of employees 109,512 100,138 92,301 89,112 79,517 Financial and management ratios ROE 28% 30% 26% 28% 33% ROCE 37% 39% 34% 36% 43% This coursework on Zara Company Analysis was written and submitted by user Guillermo Y. to help you with your own studies. 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