Zara Case Study - Answer the following questions using both the case in the text and online research. Citations (within the text) and a bibliography are required. Be sure to provide an overview of the case in a short paragraph prior to answering each question. List the question you are answering prior to your answer.
Vertical Supply Chain
Zara uses a vertical supply chain, which is an uncommon strategy in the fashion industry. A company that operates in a vertically integrated strategy has total control of the various business activities, such as designing, manufacturing, sourcing, and to distribution to retail stores. This gives the company total business management.
For Zara’s retail stores within a 24-hour drive, goods are delivered by truck whereas all other goods are delivered via cargo jets.
Zara sells to customers at their own retail stores, each managed by a retail manager who gives feedback on fashion trends to the design team. Each store receives goods twice a week so items are moved rather quickly through the production stage, therefore not needing to be stored in a warehouse. The quantity of Zara’s designs are intentionally limited, creating an artificial shortage, which in turn creates a must have attitude. (Supply Chain Brain)
Horizontal conflict is conflict between competitors of the same marketing channel, resulting in oversaturation of the target population area and extreme competition, For example, if two or more large home product retailers operate in the same marketing area, smaller competitors will be at an extreme disadvantage. (Horizontal Conflict)
Conflict occurring between two or more different hierarchical members of a channel of distribution. For example, a retail distributor may refuse to carry a manufacturer’s product because of low sales, further decreasing the manufacturer’s total sales.
2. Discuss the concepts of horizontal and vertical conflict as they relate to Zara. (4 points)
Zara has set up a complex structure and it functions both as a divisional organization and a matrix organization. “Zara's single, centralized design and production…consists of three spacious halls—one for women's clothing lines, one for men's, and one for children's. Unlike most companies, which try to excise redundant labor to cut costs, Zara makes a point of running three parallel, but operationally distinct, product families” (iFashion). Although each line has its own operation, decision making is still done in a single place for all three lines. I think that this set up allows for a flat organization with fewer reporting levels, hence there is a reduction of horizontal conflict.
“A store may receive three different calls from [Zara] in one week from a market specialist in each channel; a factory making shirts may deal simultaneously with two Zara managers, one for men's shirts and another for children's shirts” (iFashion). This is the part of the company that appears to be setup as a matrix organization. Each store may have to answer to more than one individual who controls different aspects of the production process. Store managers have the ability to directly influence the designs by way of communication with Zara’s production manager or designers as well as still having to meet the requirements of their functional manager. I think this organization set up allows for a reduced vertical conflict. To further reduce conflict each Zara store manager can choose what to order for their specific store, which makes each store special and separate from another. While there may be many reasons for vertical and horizontal within Zara, I think that its...