Zara Case Study
Zara case study
Business model
Amancio Ortega Gaona, a Galicia native, opened the first Zara stores in La Coruna in 1975 and has begun international expansion ever since. Zara is a part of Inditex, which is one of the world’s largest fashion distributors. Zara is known for its fast respond to ever- changing fashion trends to satisfy customers’ needs.
The purpose of this paper is to discuss issues and alternatives of Zara’s operating system. The three key success factors in Zara’s business are: • Short lead time to reach the market • Low quantities to create scarce supply • More styles
By focusing on shorter lead time, the company guarantees that the stores will carry fashionable clothes that consumers want at that time. Assuming the company has the fabric in stock, in-house design, pattern making, and cutting capabilities, Zara can go from start to finish on a style production within as little as 10 days. Zara can quickly identify fashion trend by studying consumer market research and updating information from store managers.
By reducing quantity manufactured in each style, Zara reduces fashion risk as well as creating scarcity (more demand). The customers might not be able to find their favorite clothes if they do not make immediate purchases. Clothes will not stay in one location so that they will be on sale. Instead, they are moved between locations in order to drive demands.
Most competitors increase quantities per style while Zara produces more styles, about 12,000 a year. Each style sells out quickly so new styles can take up the space.
Problems
The company is facing several issues: • Inability to enter U.S. market. The management announces that significant expansion in the U.S. market is not a near- term goal. The differences in the tastes and preferences of American consumers, the lack of strong supply chain, distribution and production centers, and the cost of advertisements are main reasons why the company decides to focus on other
Business model
Amancio Ortega Gaona, a Galicia native, opened the first Zara stores in La Coruna in 1975 and has begun international expansion ever since. Zara is a part of Inditex, which is one of the world’s largest fashion distributors. Zara is known for its fast respond to ever- changing fashion trends to satisfy customers’ needs.
The purpose of this paper is to discuss issues and alternatives of Zara’s operating system. The three key success factors in Zara’s business are: • Short lead time to reach the market • Low quantities to create scarce supply • More styles
By focusing on shorter lead time, the company guarantees that the stores will carry fashionable clothes that consumers want at that time. Assuming the company has the fabric in stock, in-house design, pattern making, and cutting capabilities, Zara can go from start to finish on a style production within as little as 10 days. Zara can quickly identify fashion trend by studying consumer market research and updating information from store managers.
By reducing quantity manufactured in each style, Zara reduces fashion risk as well as creating scarcity (more demand). The customers might not be able to find their favorite clothes if they do not make immediate purchases. Clothes will not stay in one location so that they will be on sale. Instead, they are moved between locations in order to drive demands.
Most competitors increase quantities per style while Zara produces more styles, about 12,000 a year. Each style sells out quickly so new styles can take up the space.
Problems
The company is facing several issues: • Inability to enter U.S. market. The management announces that significant expansion in the U.S. market is not a near- term goal. The differences in the tastes and preferences of American consumers, the lack of strong supply chain, distribution and production centers, and the cost of advertisements are main reasons why the company decides to focus on other