Supplement Chanin Management Essay

1953 words - 8 pages

Firms strive for sustainable competitive advantage, financial performance that consistently outperforms their industry peers. The world is so dynamic, with new products and new competitors rise seemingly overnight, that truly sustainable advantage might seem like impossibility, but there are winners and the Zara chain is one of them. The Zara fashion chain, founded in 1975 in Arteixo, is perhaps the world's most successful clothing chain. Zara has helped its parent, the Spanish firm Inditex, grow from obscurity in the mid. 90’s to the world's third largest pure-play fashion retailer after the Swedish H&M and US-based Gap Inc. with financial performance well ahead of these rivals. With 1021 ...view middle of the document...

Instead of building computers according to a sales forecast and letting other companies sell them, Dell sells directly from its own website and call-centers and then builds to order. That way, it not only cuts distributors and retailers out of its supply chain but also gets paid up front. Mainly vertically structured fashion companies offer an attractive and frequently varying range of goods, in order to increase households’ propensity to consume textiles. By using a dynamic strategy, the traditional bi-annual collection cycle (spring/summer and fall/winter) is accelerated more and more, so that new collections are launched in increasingly shorter cycles, e.g. on a monthly basis.

Another characteristic of a dynamic strategy is the acceleration of the value chain processes. In the fickle world of fashion, even seemingly well-targeted designs could go out of favor in the months it takes to get plans to contract manufacturers, tool up production, then ship items to warehouses and eventually to retail locations. While it takes 60 to 90 days in order to design and deliver a new fashion style in a traditional value chain, it only takes 12 to 15 days for Zara who is vertically integrated. Zara’s in-house production purposely creates a rapid product turnover since its “runs are limited and inventories are strictly controlled” The business model for the company is based on offering the latest style in a high quality product at a good price. In one telling example, when Madonna played a set of concerts in Spain, teenage girls arrived to the final show sporting a Zara knock-off of the outfit she wore during her first performance. The average time for a Zara concept to go from idea to appearance in store is 15 days vs. rivals who receive new styles once or twice a season. Smaller tweaks arrive even faster. If enough customers come in and ask for, say a round neck instead of a “v” neck, a new version can be in stores with in just 10 days. To put that in perspective, Zara is twelve times faster than Gap, despite offering roughly ten times more unique products! Contrast this with H&M, where it takes three to five months to go from creation to delivery and they're considered one of the best. Other retailers need an average of six months to design a new collection and then another three months to manufacture it. With a creative team of more than 200 professionals, Zara’s design process is closely to the public. Information travels from the stores to the designers, transmitting the demand and concerns of the customers. Zara's shops use Information Technology to report directly to its production centers and designers in Spain. Shop managers use PDAs to check on the latest clothes designs and place their orders in accordance with the demand they observe in their stores. Thus, they directly contribute to a streamlined fashion collection of the entire company. The designers at headquarters collect and evaluate these suggestions and they arrive, produce designs on...

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