Global Strategy case study analysis about Zara

Question 3:
Zara's business models allows for substantial economic savings throughout their value chain.
Starting with raw materials, Zara has a policy of acquiring only un-dyed fabric initially,
allowing he flexibility to change colors and designs and netting a substantial material saving.
In terms of manufacturing and production, Zara relies heavily on their central location in
Spain to reduce shipping and distribution costs, tap into skilled labor in a high wage
economy and keep the flow of items moving from production to distribution with minimal
storage times. To that point, the Zara case highlights the Zara view that warehouses are
viewed more as a pass-through area rather than a storage area.
Adding to operating economic efficiency, Zara works simultaneously on multiple lines and
process phases. As one item is being finished, another may be in early or mid-production
phases. Zara also splits their production forces, using Asia for their less risky, basic clothing
lines. Critical, high-risk lines are created and controlled internally. Asia provides labor and
production savings. In addition, eight-five percent of their product line is made and
distributed after the fashion season begins. They wait to see what trends are solid bets. They
also observe market failures to make rapid adjustments to avoid similar mistakes.
Further, Zara produces distinct items in small batches for faster turnaround and placement.
With all of this rapid flow of product to market, their speed to market is reduced to just five
weeks. Competitor time to market averages six months! Rapid flows of small batches create
a sense of urgency and demand for Zara clothing lines, with the consumer feeling the push
to buy a limited offering during a limited availability.
Finally, Zara does very little marketing. They rely heavily on high-traffic and beautiful, high-
visibility stores to attract customers. They also use customer preference tracking to stay on
top of changing consumer demand.

Question 2:
Zara has chosen to compete in the garment retail industry as a quick-response, small
production run chain that targets fashion-conscious middle- to high-income sectors of
society. Their large proportion of design and trend-spotting staff allows them to stay abreast
of current fashion movements and, coupled with their quick-response small-run production,
minimizes the risk involved with introducing new products. In addition to this, their relatively
early embracing of the use of telecommunications and information technology to track
trends in sales from their own stores has kept them ahead of the competition when it comes
to producing only what sells.
Zara has also built an image that fosters an atmosphere in which it is the buyer more than
the seller who is under pressure. Zara buys and leases prime locations for stores in central
shopping centers, adding to their fashionable image; at the same time, their small
production runs and ever-changing inventory communicates and environment of scarcity,
pressuring the buyer. They know that if they do not buy what they see now it will not be
there the next time they visit the store.
The linkage of the previously mentioned elements is what has been truly crucial to Zara's
success- the big picture, rather than any one item, has led to their competitive advantage. As
a prime example of this point, the case discusses how World Co. of Japan achieved a
comparable response time in production along with similar gross margins, but failed to reach
such a favorable bottom line.