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Zaras business model and competitive advantages


Posted: September 8, 2012 in BUSI 3810 Course
Tags: Business model, Inditex, Spain, Zara

11
Zara a Spain-based high-fashion, low-cost retailer, stunned investors and analysts by
revealing that its profits climbed 30% in the first quarter of this year along with an increase in
sales of 15%. Yet, 70% of its revenues come from Europe, and it is based in a country where
the macro economic situation is quite challenging. Zara is the flagship chain store of the
Inditex group and is considered a Spanish success story. How is Zara doing it so well while
other eurozone firms have stuggled?
Well, Zara has a unique business model. Innovation in business models does create value,
and is generally cheaper than product and technology innovations. Countless companies
such as IKEA, Dell and Zipcar are highly successful due to innovative business models.
Questions (2nd individual reflection for my 3810 students but open to all to comment):
1. What is unique about Zaras business model compared to more traditional fashion
retailers?
2. How does Zara create value to customers?
3. What do you consider Zaras competitive advantages to be?
4. What about its online strategy?
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Comments

1.

zachary Brandt says:


September 26, 2012 at 5:18 pm
What is unique about Zaras business model compared to more traditional fashion
retailers?
In order for a business to stand above the rest of its competition, its important that
they develop a strong business model. Without a strong business model, companies
fail to gain market share and fall behind. A business model that stands out compared
to the rest of the competition will also gain more market share as they are operating
differently then the rest of the companies. Zara, as introduced above in Dianes short
article, is one of the largest international fashion companies. It belongs to Inditex, one
of the worlds largest distribution groups. (Company). Zaras business model is
distinctive compared to more traditional fashion retailers because the company has
several strategies that other fashion retailers dont do. Firstly, Zara stocks clothing in
scanty quantities. When a clothing design runs out, it runs out. They dont order more
stock in. Theyve trained consumers not to wait for it to go on sale, says Don
Huber. (Bryan September 06, 2012). Secondly, Zaras factories are based in Europe,
so new designs can get into stores in as little as two weeks. Other retailers are faced
with the disadvantage of having their products shipped from China and facing a lag
time of more than two months. Now, Im going to discuss why these two strategies
are an advantage for Zara compared to other fashion retailers. Considering the fact
that Zara will not order new merchandise after a line is sold out, it forces customers to
purchase the product right away and not wait for discounts. The European fashion is
an important aspect of society. Everyone is always dressed fashionably and what they
are wearing is important to them. They understand that if they dont purchase the
product when they see it, they may never get the opportunity to again. This also works
to the advantage for many customers that want to distinguish themselves from others.
With the limited stock, there will not be as many people wearing the product if they
only carry a small amount of inventory. This is important for actresses/actors as they
try to be different than the rest of society. The next advantage that Zara holds
compared to other retailers is having their factories in Europe compared to China.
With the distribution center being close to the retailers, the cost of distribution is
lower and the merchandise can reach the stores in a lot less time. This will allow Zara
to only order what they are going to sell because if they want to put in a new order,
they know they will not have to wait two months for new inventory. Other retailers
have to order enough inventory to be able to get them through two months. If they
cant sell these items, they have to put them on sale, and this is when the majority of
customers purchase the product.

Zara, Company. Accessed September 26, 2012.


http://www.zara.com/webapp/wcs/stores/servlet/category/ca/en/zaraW2012/11112/Company.
Bryan, Borzykowski. Canadian Business, Zara escapes economic recession in
Spain. Last modified September 06, 2012. Accessed September 26, 2012.
http://citationmachine.net/index2.php?
reqstyleid=10&mode=form&reqsrcid=ChicagoWebsite.
How does Zara create value to customers?
Zara creates value to its customers in a number of ways. A few ways were discussed
above in the previous question. The first way that Zara creates value to their
customers is by being able to provide them with the newest and most up to date
fashions. Zaras distribution center is out of Europe and therefore the wait time is at
most two weeks compared to Chinas of two months. The customers of Zara are able
to wear the newest fashions as they enter the market. People are always trying to find
a way to be the first one representing the newest fashion. With Zara making this
possible, they have established a strong customer loyalty to the ones that always want
to be the first one wearing a new coat or shirt. Another way that Zara creates value to
its customers is by pricing clothes differently depending on the location. The cost of
clothing from Zara is cheaper in Europe and more expensive in Asia and North
America because the North American and Asian countries are able to afford the latest
clothing designs compared to Europe. This allows Zara to accommodate all customers
in every country. It doesnt limit the company to one country. The customer base can
range all over the world. The company has also cut costs on advertising and in other
areas of the company in order to maintain their high quality and low cost fashion
designs. If a company can produce a product at low cots and sell to all potential
buyers, they will generate a lot more revenue than a company that produces a product
at high cost and is forced to sell the product at a high cost.
What do you consider Zaras Competitive advantages to be?
I think Zaras competitive advantage is the fact that they are fresh. They have a
fast production and distribution strategy that allows them to offer the latest fashions in
less than two weeks. Also, with them being able to produce and distribute new
fashions in a short amount of time, it allows Zara to change over 75% of the
merchandise on display every 3 or 4 weeks. This increases the frequency of customer
visits. (Zara).
SlideShare, Zara. Accessed September 26, 2012.
http://www.slideshare.net/mericarla/zara1.
What about its online strategy?
After doing some research, it appears that Zara also has a strong online appearance
in the market. They have over six million facebooks friends that describe the company
as possibly the most innovative and devastating retailer in the world. Zaras online
strategy is the same as the stores. Its possibly even better as shoppers can purchase
products 24/7. They expect on-line retail to grow $144 billion in Western Europe by

2014. Zara is hoping to see a 10% rise in revenue linked to its online store, theyve
even released an iPad & iPhone apps. (Don 03/09/2010). This demonstrates a great
understanding of societys use in communication and technology devices. Zara is truly
the innovator of fashion retailers.
Don, Tercio. AQNB, Zara bites the internet. Last modified 03/09/2010. Accessed
September 26, 2012. http://www.aqnb.com/2010/09/03/zara-bites-the-internet/.
Reply

2.

Zachary Brandt says:


September 27, 2012 at 2:04 pm
What is unique about Zaras business model compared to more traditional fashion
retailers?
In order for a business to stand above the rest of its competition, its important that
they develop a strong business model. Without a strong business model, companies
fail to gain market share and fall behind. A business model that stands out compared
to the rest of the competition will also gain more market share as they are operating
differently then the rest of the companies. Zara, as introduced above in Dianes short
article, is one of the largest international fashion companies. It belongs to Inditex, one
of the worlds largest distribution groups. (Company). Zaras business model is
distinctive compared to more traditional fashion retailers because the company has
several strategies that other fashion retailers dont do. Firstly, Zara stocks clothing in
scanty quantities. When a clothing design runs out, it runs out. They dont order more
stock in. Theyve trained consumers not to wait for it to go on sale, says Don
Huber. (Bryan September 06, 2012). Secondly, Zaras factories are based in Europe,
so new designs can get into stores in as little as two weeks. Other retailers are faced
with the disadvantage of having their products shipped from China and facing a lag
time of more than two months. Now, Im going to discuss why these two strategies
are an advantage for Zara compared to other fashion retailers. Considering the fact
that Zara will not order new merchandise after a line is sold out, it forces customers to
purchase the product right away and not wait for discounts. The European fashion is
an important aspect of society. Everyone is always dressed fashionably and what they
are wearing is important to them. They understand that if they dont purchase the
product when they see it, they may never get the opportunity to again. This also works
to the advantage for many customers that want to distinguish themselves from others.
With the limited stock, there will not be as many people wearing the product if they
only carry a small amount of inventory. This is important for actresses/actors as they
try to be different than the rest of society. The next advantage that Zara holds
compared to other retailers is having their factories in Europe compared to China.
With the distribution center being close to the retailers, the cost of distribution is
lower and the merchandise can reach the stores in a lot less time. This will allow Zara
to only order what they are going to sell because if they want to put in a new order,
they know they will not have to wait two months for new inventory. Other retailers
have to order enough inventory to be able to get them through two months. If they

cant sell these items, they have to put them on sale, and this is when the majority of
customers purchase the product.
Zara, Company. Accessed September 26, 2012.
http://www.zara.com/webapp/wcs/stores/servlet/category/ca/en/zaraW2012/11112/Company.
Bryan, Borzykowski. Canadian Business, Zara escapes economic recession in
Spain. Last modified September 06, 2012. Accessed September 26, 2012.
http://citationmachine.net/index2.php?
reqstyleid=10&mode=form&reqsrcid=ChicagoWebsite.
How does Zara create value to customers?
Zara creates value to its customers in a number of ways. A few ways were discussed
above in the previous question. The first way that Zara creates value to their
customers is by being able to provide them with the newest and most up to date
fashions. Zaras distribution center is out of Europe and therefore the wait time is at
most two weeks compared to Chinas of two months. The customers of Zara are able
to wear the newest fashions as they enter the market. People are always trying to find
a way to be the first one representing the newest fashion. With Zara making this
possible, they have established a strong customer loyalty to the ones that always want
to be the first one wearing a new coat or shirt. Another way that Zara creates value to
its customers is by pricing clothes differently depending on the location. The cost of
clothing from Zara is cheaper in Europe and more expensive in Asia and North
America because the North American and Asian countries are able to afford the latest
clothing designs compared to Europe. This allows Zara to accommodate all customers
in every country. It doesnt limit the company to one country. The customer base can
range all over the world. The company has also cut costs on advertising and in other
areas of the company in order to maintain their high quality and low cost fashion
designs. If a company can produce a product at low cots and sell to all potential
buyers, they will generate a lot more revenue than a company that produces a product
at high cost and is forced to sell the product at a high cost.
What do you consider Zaras Competitive advantages to be?
I think Zaras competitive advantage is the fact that they are fresh. They have a
fast production and distribution strategy that allows them to offer the latest fashions in
less than two weeks. Also, with them being able to produce and distribute new
fashions in a short amount of time, it allows Zara to change over 75% of the
merchandise on display every 3 or 4 weeks. This increases the frequency of customer
visits. (Zara).
SlideShare, Zara. Accessed September 26, 2012.
http://www.slideshare.net/mericarla/zara1.
What about its online strategy?
After doing some research, it appears that Zara also has a strong online appearance
in the market. They have over six million facebooks friends that describe the company

as possibly the most innovative and devastating retailer in the world. Zaras online
strategy is the same as the stores. Its possibly even better as shoppers can purchase
products 24/7. They expect on-line retail to grow $144 billion in Western Europe by
2014. Zara is hoping to see a 10% rise in revenue linked to its online store, theyve
even released an iPad & iPhone apps. (Don 03/09/2010). This demonstrates a great
understanding of societys use in communication and technology devices. Zara is truly
the innovator of fashion retailers.
Don, Tercio. AQNB, Zara bites the internet. Last modified 03/09/2010. Accessed
September 26, 2012. http://www.aqnb.com/2010/09/03/zara-bites-the-internet/.
Reply

3.

Andrew Newton says:


September 30, 2012 at 2:19 pm
Zaras business model is focused around maintaining a design, production and
distribution process that enables Zara to adjust simultaneously with shifts in consumer
demands. By keeping production in-house and only strategically partnering with
manufacturers near Zaras headquarters Zara has ensured fast and efficient delivery.
This creates flexibility that is necessary in constantly designing and producing over
12,000 new products every year (123HelpMe 2012).
One of the main differentiators against Zaras competitors is that, compared to many
low customer cost and high production costs, Zara is able to sell products at a low
cost to consumers and still keep production costs low (Borzykowski 2012). Zaras
success in implementing this skill can be seen through the companys growth in 2012,
providing value to stakeholders and making it a high and well preforming company.
The company grew from 65-share value to 96.63 in the past year (stock market watch)
Compared to other retailers and fashion, Zara stocks clothing in limited quantity. With
its high turnover of styles, customers dont wait for items to go on sale, rather they
purchase when its available, ensuring high profit margins (Borzykowski 2012). Since
factories are based in Europe, all new styles are available in stores much faster than its
competitors, ensuring that Zara is always ahead of the fashion curve. This is compared
to companys manufacturing in China who faces a two-month lag period before
designs are seen in stores. This provides maximum customer value.
Included in their business model, and what I personally consider to be Zaras main
competitive edge, is its pricing model. Zara will price its styles based on location. It
tends to be more expensive in the Americas and in Asia compared to Europe. In
doing so, all markets are being reached. In Europe there is still hard financial times,
therefore having access to more affordable and still trendy, good quality and
fashionable clothing, Zaras customers are still being satisfied. In the U.S. market,
there is more free income for clothing therefore higher prices are justifiable.
According to an analyst at Morningstar when you can move inventory through like
they do, you can react very quickly to what buyers want, Jaime Katz, adding to their
competitive edge (Borzykowski 2012).

Zara produces their clothing to have a short wear span (10 wears) forcing consumers
to need to purchase more designs sooner. This ensures a high competitive edge for
Zara in product development, strategic partnership and advertising and marketing. In
doing so, Zara has become much more efficient and is able to better serve their
clientele in providing additional value and profitability to the company (Borzykowski
2012). Having a quick distribution time of 3-4 weeks, a design team of 200 people
(compared to competitors who have significantly smaller design teams) there are
more options for new clothing lines and more efficient manufacturing times. This also
gives more options to store managers, who have more autonomy than their
competitors do, in what to stock, what to put on sale as well as store design and
layout. This allows managers to better serve customers who are more aware and are
listening to customer needs than the CEO and designers in the company who are not
always surrounded by customers (123HelpMe 2012).
Zaras online strategy is lagging behind other fashion retailers (Kenna 2011). In the
article found in the Bloomberg Businessweek, it states that Zaras move to the online
retail world was long over-due, although it is a great strategy for the company, as it
is much more cost effective for the company to launch a web-service as opposed to
opening and investing in 50 more malls in the U.S. (Kenna 2011). According to
Jesus Echevarria, a spokesperson for Zara, they will be effectively managing and
operating an online presence, however the company is not rushed, as there is no need
to rush expansion. Zaras strategic online presence will help in expansion and to
trump rival H&M in the U.S. market (Kenna, 2011).
References:
123HelpMe.com, 2012. Zaras Business Model, Information and Communication
Technologies, and Competitive Analysis. [Accessed September 28 2012]
Borzykowski, Bryan, 2012. Zara Eludes the Pain in Spain. Canadian Business 85,
no.14, p67: (September),
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?
vid=3&hid=111&sid=4afece85-a31b-48ef-baa17ad7eb57d193%40sessionmgr104&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=78584873.
Kenna, Armorel, 2011. Zara Plays Catch-Up with Online Shoppers. Bloomberg
Businessweek (August), http://www.businessweek.com/magazine/zara-plays-catchupwith-online-shoppers-08252011.html.
Reply

4.

Matt MacDougall says:


October 1, 2012 at 10:28 am
The middle aged mother buys clothes at Zara chain because they are cheap, while
her daughter aged in the mid 20s buys Zara clothing because its fashionable. Cleary,
Zara is riding two of the winning retails ends, being in fashion and low prices which
make a very effective combination out of it. (Dutta, Third Eyesight).

1. Most retailers outsource production to low cost Asian countries, where as Zara is
vertically integrated with the majority of production carried out in owned and
controlled facilities in Spain. This allows a lot more flexibility and speed. Zara is able
to identify trends and have the clothes in the store within 30 days. Zara will catch
fashion while it is hot to attract more sales at full prices and fewer discounts. Most
retailers try and forecast what customers might buy in later months while Zara
supplies its consumers on demand. Trend identification comes with constant research,
thats why Zaras machinery can react to the reports of modification within 30 days.
Zara can offer more choices in more current fashion than its competitors because it
delivers products to its stores twice a week.
2. Zaras business is all about reducing response time, fashion stock is like food. It
goes bad quickly. Zara value proposition is concentrates on three winnings aspects.
-Short lead time= More fashionable clothes
Zara is continuously keeping up with fashion and ensuring consumers get what they
want. By keeping open dialogue with purchaser to receive a sense of what they want,
along with staying in line with latest trends.
-Lower quantities=Scare supply
Zara reduce quantity manufactured, to create a scare for its product and in fashion the
less availability, the more desirable. Also lower quantities create less risk if a style
does not work well because less will be exposed to its purchasers.
-More styles= More choice and more chances of getting it right
Zara produces more styles then more quantities per style on the bases that if one sells
out there are another style waiting to replace it. Fresh produce thats moving in step
with fashion trend and updated frequently will keep consumers happy.
3. Zaras competitive advantage is its ability to react to change in a short period of
time, rather than concentrating on forecasting for later seasons or trends. The only
forecasting efforts Zara implies is towards the kind and amount of fabric it will buy.
There is less risk and margins lost on fabrics than finished goods errors. Furthermore,
Zara has such flexibility which its production that some fabric are semi-processed or
un-coloured for any immediate product needs.
4. Information and communication technology is the heart of Zaras business. Zaras
success is based on collecting information on consumers needs, trends flows and
feeding the information to the database at head office for quick transitions. The online
strategy allows the warehouses to receive product information, to prepare quick and
accurate designs. Also, the distribution process does not waste time waiting for human
sorting, it ensure each orders reaches its right destination immediately.
http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf
http://www.inditex.com/en/who_we_are/concepts/zara
http://www.123helpme.com/view.asp?id=97642
http://www.businessmodelalchemist.com/2005/06/zaras-business-model.html
Reply

5.

Sara Faisal says:


October 1, 2012 at 11:12 am
1) Zara uses short supply chain business strategy that controls the steps on the supply
chain from designing, manufacturing, to distributing its products. Zara business model

is vertically integrated compared to their competitors business models. The company


has a flexible structure, strong customer focus in all its business areas, and is able to
adapt and offer customer what they want in a short period of time.
The short supply chain business applied by Zara is an innovative strategy that suits
businesses with short product cycle that are sensitive to consumers preferences when
demands change quickly. I believe that one of the things that differentiates Zara
business model from other competitors is the companys ability to identify and bring
out their customers needs at a fast pace. Other fashion chains simply cannot keep up
with Zara.
2) High Fashion, affordable clothes: Zara keeps up with styles that are in, and
brings out the latest styles in the stores immediately. Zara identifies a trend and has it
ready for sale within 30 days whereas most retailers take 4-12 month and they are
able to do this by controlling most of the supply chain from design to retail.
Large choice of styles: new fashion trends reach the Zara stores quickly because Zara
produces 11,000-12,000 styles per year compared to a typical retailer that averages
about 3000 styles per year.
Prime locations: Zara does not spend much on advertising (0.3% of revenue)
compared to traditional retailers (up to 5%), Zara reachs its target market by locating
their stores in busy locations.
3) Besides the fact that Zara is a high fashion affordable company, Zara targets the
young audiences, who are sensitive to the latest fashion trends and price. Zara sells
three lines of items, for women, men, and children. This company has an advantage
over other retailers because they dont define their target by grouping ages or lifestyle,
due to that Zara is able to target a broader market.
Zara tends to meet consumer likings and react to new trends in a quicker way
compared to competitors. The company can design a new product and have the
finished goods for sell in its stores in less than five weeks. Zara studies its customers
demand in the stores and tries to instantly deliver and this is why they are leading the
way and leaving their competitors behind.
4) Inditex is relying on e-commerce instead of physically expanding Zara stores, in
order to drive US sales and defeat competitors such as H&M. The company is only
now beginning to use the online channel to gain the competitive edge. Last
September, Inditex launched out a Zara online web for Spain, UK, and Germany.
Zaras move online in the United States was late but now running. As stated on one of
the articles the Web is a great strategy for them. Its much cheaper with their
nationally recognized Zara brand to launch a Web store than to invest in real estate in
50 more malls in the U.S.
Reference list:
Kale, Neha, 2011. Online Sales Central to Zaras US Growth Strategy. Power retail.
[Accessed September 28, 2012].
http://www.powerretail.com.au/multichannel/online-sales-central-to-zaras-us-growthstrategy/

Dishman, Lydia. 2012. The Strategic Retail Genius behind Zara. Forbes.
[Accessed September 28, 2012].
http://www.forbes.com/sites/lydiadishman/2012/03/23/the-strategic-retail-geniusbehind-zara/
Harbott, Arif. 2011. Analyzing Zaras business model. Business thoughts.
[Accessed September 28, 2012]
http://www.harbott.com/2011/03/03/analysing-zaras-business-model/
Burgen, Stephen. 2012. Fashion chain Zara helps Inditex lift first quarter profits by
30%. The guardian.
[Accessed September 28, 2012].
http://www.guardian.co.uk/business/2012/aug/17/zara-inditex-profits
Kenna, Armorel. 2011. Zara plays catch-up with online shoppers. Bloom berg
business week magazine.
[Accessed September 29, 2012].
http://www.businessweek.com/magazine/zara-plays-catchup-with-online-shoppers08252011.html
Reply

6.

Conor Nisbet says:


October 1, 2012 at 7:31 pm
Zara is considered one of the worlds largest fashion companies, and operated under
the multi-national distribution group Inditex. Part of the reason that Zara has become
so successful is due to their unique business model, which puts the consumer at the
heart of the company in relation to aspects such as deign, production, distribution and
sales (Zara, 2012). One of the main factors in the Zara business model is the speed at
which they can get the newest fashion to market. Zara operates on a small but
frequent shipping system, where a store could receive two separate deliveries in the
same week. This results in each store having few, but select choices of items that give
the consumer a new and different experience each time they visit a store. Most of the
companys competitors receive a shipment 5 7 months after the order has been
placed, however Zara has managed to cut that time down to just 2 2- months.
Some other factors that contribute to the uniqueness of Zaras business model are:
Only 0.3% sales profits are spent on advertising.
Zara operate a counterintuitive strategy by sourcing more than half its goods (60%)
from its home country as well as neighboring Portugal and Morocco.
Empowered retail managers inform head office of what their consumers and buying
and what items they prefer.
Zara operate their own dying plants, and do the majority of sewing themselves.
Collections are designed by young creative teams and not solely by groups of
designers.
Clothing is cheaper than competitor, but in no way poorer quality.

With the unique business model that Zara operate with, it is clear that they have some
certain competitive advantages in the marketplace. One of the main points being that
they are able to differentiate their product line faster than any other close competitor.
As Charles Darwin once said, it is not the strongest of the species that survive, nor
the most intelligent, but the one most responsive to change. However, without a
doubt Zaras main competitive advantage is the fact that they have completely finetuned their supply chain. The majority of the aspects listed above that add to Zaras
business model are due to the fact that the company uses its supply chain as more than
just a strategic tool, but as a fundamental aspect of their company. Zara have shown
that in todays competitive environment, it is essential to do more than simply go for
the cheapest options. The supply chain has shown that if managed correctly, then it
can provide sustainable competitive differentiation and positioning, whilst also
reducing operating expenses and increasing throughput.
In terms of Zaras online strategy, they only began to sell their products over the
Internet in North America in September 2011. For a long time, the website was only
used for the promotion of their brand unlike their main competitors who were
receiving the main share of online sales. What is interesting about the strategy of Zara
is that when implementing the new online store, they sold to markets in Britain,
Spain, Portugal, France, Italy and Germany. These are places where the competitor
Gap was not shipping or ready to launch yet (Tercio, 2010). Zara also has a large
Social media following, and their Facebook page (with 14,738,872 likes as of
01/10/12) is one of the most followed clothing brands online. The Zara brand has
created more of an online community, and part of the reason that consumers shop at
Zara is for the enjoyment f seeing what clothes they have in stock. If a customer
purchases something that they believe not many others have, then it gives them the
sense of individuality. It is quite clear that Zara are to continue having their main
focus on their key competitive advantages in their retail outlets rather than putting to
much emphasis on online sales.
References:
Don Trecio, 2010.
Zara Bites the Internet
http://www.aqnb.com/2010/09/03/zara-bites-the-internet/
Accessed 01/10/12
Lydia Dishman, 2012
The Strategic Retail Genius Behind Zara, Forbes
http://www.forbes.com/sites/lydiadishman/2012/03/23/the-strategic-retail-geniusbehind-zara/
Accessed 01/10/12
Andrew Pearson, UBS
The Story Of Zara The Speeding Bullet
http://www.uniquebusinessstrategies.co.uk/pdfs/case
%20studies/zarathespeedingbullet.pdf
Accessed 29/09/12
Reply

7.

Brian Zhangda Yang says:


October 1, 2012 at 8:30 pm
1. What is unique about Zaras business model compared to more traditional fashion
retailers?
Zaras business model is characterized by a higher degree of vertical integration
compare by the other traditional fashion retailers. It covers all the phases of the
fashion process cycle, which conations: design, sale, manufacture and distribution
to its own retail store.
The key to this model is the ability to satisfied customer desired in the shortest
possible time. Time is the main considering factor in Zaras business operation. The
vertical integration helped them to shorten turnaround time and achieve the greater
flexibility, reducing stock risk and get greatest profit.
Zara sells three lines of items, women, men and children. Each of their product lines
has its own independent creative team who carries out the fashion proposals for each
fashion campaigns.
The key parent of Zara fashion Retailer Company will be their team of designers.
Zara has more than 200 professional designers, who are continuously assessing the
customers preferences. Furthermore, Both in-house manufactured and those
purchasing from external suppliers, will shift their garments to hubs Zara in Spain,
wherefrom they are dispatched to their worldwide stores.
2. How does Zara create value to customers?
The key valued that Zara created to customers is the ability to adapt the offer to
customer desires in the shortest time. Zaras designer team will continuously assessing
the customers preference, wishes and demands. They are offering 12000 different
models for sale in its store each year.
Zara has three target customers: Women, men and children. Each of them has its own
designing line. This is the key reason for why their customers may loyalties to Zara
store. And also people can find Zara in most of the major stopping streets of more
than 500 cities in the world, which created a high quality fashion proposal into
account for the latest trends at a reasonable price. Also Zara has the ability to have the
manufacture goods for sale in store worldwide with in 2 weeks of shipping.
3. What do you consider Zaras competitive advantages to be?
Most of their factories owned by the company, together with a wide range of highly
experience external suppliers who have a solid commercial relation with the format,
which allow Zara to manufacture a model and to have it for sale in its stores within
the average of two weeks.
Zaras business is characterized by their vertical integration. The vertical integration
enables their shorter turnaround times and gains greater flexibility while reducing
their stock risk. Time will be their important factor for their decision-making, and this
helps them controlled their production costs.

The team of designers will be another advantage for Zara compare with other fashion
retailers. The three lines of items help Zara achieve their different target market.
What about its online strategy?
Zaras online strategy helps them to shorter their turnaround time and increase their
flexibility. Also the online store helps Zara to create a high-virtualized sales network.
On the other hands, the online store will help them to deliver the new item
information to their customer in a shortest time.
Also the online store will enable the communication between Zara and customers
including the existing customers and future customer. The online strategy will let
people know Zaras latest news and status, and also people can find the newest
fashion item online and purchasing through online. Furthermore, the online store will
also help Zara to reduce their stock risk and increasing the freshness of their items.
Reply

8.

Nick Sevenhuysen says:


October 1, 2012 at 8:59 pm
1.) Zaras business model is unique to traditional fashion retailers because they do not
imitate trends but instead create their own. Uniquely Zara does not market or
advertise themselves largely but instead focus on the growth and creation of new
stores. Zara truly cares and strives to understand what customers want and then
produce and deliver them in unmatched time. Their secret to success is a completely
integrated and mostly local supply chain that can have an entirely new collection in
stores in little as two weeks. Due to the adaptability and flexibility of the stores
merchandise, items are only produced in limited quantities which allow for a much
greater selection in the store compared to rivals. These limited quantities also
encourage buyers not to wait because the unique item usually only has a shelf life of
four weeks before it is gone.
2.) Zara creates value to its customers by anticipating and reacting to their everchanging tastes and preferences. Zaras staff members are well trained to not only
provide great service in shop but also in determining which items are selling and
which are not. Items usually have a one week test period which they can then be
promptly replaced if need be. By carrying limited quantities of particular designs
allows for more unique designs in store compared to competitors. Zara has retail
locations in 84 different countries and the company adapts each design collection to
suit the regional tastes. This combination produces unique and distinct items all for
relatively fair prices.
3.) Zaras competitive advantage is their extremely flexible and responsive supply
chain. In comparison to other retailers, most of Zaras suppliers are local European
establishments. By having 50% of manufacturers in Spain, 25% in Europe and 25% in
Asia, the company can have changes in merchandise in unparalleled speed. Another
major competitive advantage is in an area with unprecedented financial uncertainty,

Zara gains local support based on their local supply of jobs to the community. To
enhance this further, prices are different based on the location and Zara has kept
Europe prices low in comparison to Asia and North America. Zara refrains from
advertising and instead focuses its capital on the creation of new stores. This in turn is
almost the best advertising as it places the brand in not just any ordinary mainstream
context.
4.) Zara launched the first online boutique on September 6, 2010. I was in some
senses late to the game but they wanted to ensure a strong online demand before
initializing it. The online service matches the level of service and quality that the real
stores posses. The site offers all the same selection as the stores and all at the same
prices. Free pick-up from the stores is available and so is paid delivery. Zara also
offers the same 30 day return policy as in-store with customer support workers
accessible through email and text. However after reading many customer reviews of
Zaras online service it seems to be very unreliable for customer service and delivery
times. Zara will have to ensure that their online quality lives up to their world wide
respected success.
References
1. Kenna, Amorel. Bloomberg Businessweek, Issue 4342. Zara Plays Catch-Up with
Online Shoppers. September 29, 2011. Accessed October 1, 2012
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=e94a2867-bcd3469f-aa6a415de93a53f7%40sessionmgr112&vid=1&hid=108&bdata=JnNpdGU9YnNpLWxpd
mU%3d#db=bth&AN=65076276
2. Speer, Jordan K, Apparel Magazine, Aug2006, Vol. 47, Issue 12. Top 5 Sourcing
Strategies. Accessed October 1, 2012.
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=c65b5e5e-ac2e4888-aeaf-9cf9613153ba
%40sessionmgr115&vid=1&hid=108&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=22112593
3. BORZYKOWSKI, BRYAN. Canadian Business, October 17,2012, Vol. 85, Issue
14. Zara Eludes the Pain In Spain. Accessed October 1, 2012
http://web.ebscohost.com.proxy.library.carleton.ca/bsi/detail?sid=fda2b969-43a34c46-9062-3fcbd5b1caca
%40sessionmgr114&vid=3&hid=108&bdata=JnNpdGU9YnNpLWxpdmU
%3d#db=bth&AN=78584873
Reply

9.

Andrew Glass says:


October 1, 2012 at 9:01 pm
Unlike most competitors, Zaras unique business model is cemented in it having
total control of every part of the business. It designs, produces and distributes itself
(CNN.com). In a world where sweatshop labor is a constant issue due to

mistreatment of employees, Zara is an example of a successful company that has


maintained control over their factories and gone away from the cheaper costs of
outsourcing. One competitive advantage that results from their control is their ability
to adapt effortlessly to style trend shifts. Able to design and manufacture new
merchandise in a matter of weeks gives their customers value in knowing they will be
able to purchase the newest fashion styles. In comparison, this rapid production
process contrasts the usual six-month average of most other retailers.
In addition to the successes of staying away from the common motions towards
outsourcing, Zara has also had a zero policy rule in using their revenues towards
advertising. In a fashion world where selling a style is at the forefront of most retail
company strategies, Zara uses this unorthodox approach. Amancio Ortega, Zaras
founder, has harnessed the belief that advertising is useless for the customer. Instead
the idea is that what is offered on the shelves and presented in the windows of each
store on display are more than sufficient for each customer. One could ask themselves
that if a retailer is meeting the customer needs on a timely fashion, what is the use of
taking up time on TV advertisements or using space on billboards to promote their
products, right? It is clear that if customer demand is met, and the company continues
to see success, Ortegas strategy is hard to argue with.
This company has harnessed a unique and innovative business model. Unlike most
competitors, Zara has proved to become a massive brand without the norms of
outsourcing their manufacturing sector and using a wide array of advertising. This is
an important example in showing how a high-fashion, low-cost retailer can stun
investors and analysts by using one simple yet innovative approach, or what is
focusing solely on satisfying the market need.
(I used both CNN.com and Wikipedia as my main sources of resource for this blog
post)
Reply

10.

Abdulrahman Alamoudi says:


October 1, 2012 at 11:15 pm
1. What is unique about Zaras business model compared to more traditional fashion
retailers?
Zara effectively implements a vertical marketing system (VMS), which combines
successive stages of production and distribution under single ownership. Its effective
integration makes it faster, more flexible and more efficient than most of its
competitors. Zaras success secret resides in its ability to control over almost every
aspect of the supply chain and production. It can take a new line from designing and
ending by worldwide distribution in less than a month. (Kotler et al., 2011).
2. How does Zara create value to customers?
It provides them with the latest fashion trends, with quality in affordable prices for
different age segments and lifestyles. Thats not only for clothing, but for accessories
too. Zaras image is globally perceived as a luxury fashion brand, in which adds an
extra value when buying a product from this symbolic retailer. (Willems et al., 2011)

3. What do you consider Zaras competitive advantages to be?


[1] Logistically, Zaras ability to design, produce and deliver new product lines to its
stores with latest fashion trends in short period of time close to four weeks, versus an
industry average of 9 months; that is a huge advantage over its competitors. Also,
Zara doesnt have huge warehouses as other retailers, because most of its factories are
domestic and the urge to have huge warehouses is trivial in Zaras case. On the
contrary, other retailers spend a lot of money for operating their warehouses.
[2] Technological advantage through the use of a very effective and artificial
information system integrated into its stores. On a daily bases, store managers provide
feedbacks to the system about costumers behaviour and wanted styles. Thus, in-house
designers have updated information and get down to patterns quickly, those will be
sent to the factory and get produced in a short period of time.
[3] As it does not define its target by segmenting ages and lifestyles, it has an
advantage over traditional retailers by having a much broader market. It is targeting
both genders, adults and children alike; providing them with clothes, accessories and
shoes. Even broader, it has home furniture segment, where rugs and home accessories
are sold. (Harbott, 2011).
4. What about its online strategy?
As online marketing being the fastest-growing form of direct marketing. (Kotler et
al., 2011); Zara presence along with other retailers in online marketing is getting
bigger and moving fast. Zara offers different online promotions and reaching out to
customers in many places directly. Zara has many already established online stores in
countries like Spain, UK, Germany, Italy and France. It is also moving toward the
U.S., even though it is considered to be overdue. The company is counting on online
sales in the U.S. more than store expansion due to the promising potential of online
sales there. (Kenna, 2011).

References:
Kotler, P., G. Armstrong, P. H. Cunningham, and V. Trifts. Principles of marketing
8th Canadian edition. Toronto, ON: Pearson Education Inc.
Willems, Kim, Wim Janssens, Gilbert Swinnen, Malaika Brengman,
Sandra Streukens, Mark Vancauteren. From Armani to Zara: Impression formation
based on fashion store patronage. Journal of Business Research. 65.10 (2011): 1487
1494. Web. 1 Oct. 2012.
http://www.sciencedirect.com.proxy.library.carleton.ca/science/article/pii/S014829631
1003596#bb0355 .
Harbott, Arif, 2011. Analysing Zaras business model. [Accessed 29/09 2012].
http://www.harbott.com/2011/03/03/analysing-zaras-business-model/ .
OSTERWALDER, ALEXANDER, 2005. ZARAS BUSINESS MODEL.
[Accessed 01/10 2012]. http://www.businessmodelalchemist.com/2005/06/zarasbusiness-model.html .
Kenna, Armorel, 2011. Zara Plays Catch-Up with Online Shoppers. [Accessed
30/09 2012]. http://www.businessweek.com/magazine/zara-plays-catchup-withonline-shoppers-08252011.html
Zara Online Store. http://www.Zara.com

Reply

11.

Ahsan Tajammul says:


October 2, 2012 at 10:55 am
1. The unique business model which Zara follows as compared to more traditional
fashion retailer is the vertical integration of design, just in time manufacturing,
delivery and sale, flexible structure, low inventory rule, quick response policy and
advanced information technology enabling a quick response to customers changing
demands. These the are two key factors in Zaras business model, the time factor and
the store as a source of information makes them unique as compared to other fashion
retailers.
2. The store acts not only as a point of sale but also influences the design and speed of
production. It is the end and starting point of the business system. Zaras production
cycle starts with customers judgment on the new designs of clothes and the
information collected by staff members who travel to fashion cities, observing people
on the streets, browsing publications and visiting the venues that are frequented by
their potential customers. Zara gets feedback from the customers at the point of sale
about new garments or new products that they are interested in. Store managers report
the demands of customers and the sales trends to the headquarters on a daily basis.
Keeping up with the daily trends is what makes them create value to its customers.
3. A completely new piece of can be designed, manufactured and delivered in less
than four weeks. Changes of an existing garment can be put on display within two
weeks, much faster than the competition. Zara internally manufactures its live
collections the friendliest garments to fashion, which accounts for almost half of its
production, and outsources those that are not subject to seasonal variation. Keeping
with the fast production and getting customer feedback on a daily basis is one the key
competitive advantages of Zara.
4. Zaras online strategy in the begging focused on the countries where e-commerce
sales from its competitors like H&M and GAP werent available. The clothes
purchased online had an option of home delivery as well as store pick-up. The overall
online strategy of Zara focused on reducing the operating cost of the stores, giving
customers freedom of shopping and due to high volume e-commerce sale in the
industry Zara has been able to keep up with its competitors by offering fast shipping
at affordable prices.
Bibliography
Fan, Carmen Lopez and Ying. Internationalisation of the Spanish fashion brand
Zara . Spanish fashion brand Zara (Brunel Business School, Uxbridge, UK), 01
2009.
Kenna, Armorel. Zara Plays Catch-Up with Online Shoppers. 08 25, 2011.
http://www.businessweek.com/magazine/zara-plays-catchup-with-online-shoppers08252011.html.
Tercio, Don. Zara bites the internet. 09 03, 2010.
http://www.aqnb.com/2010/09/03/zara-bites-the-internet/.

Reply

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