Zara Case Study

\CASE STUDY QUESTIONS _ Zara                        

1) Is the Zara model sustainable? What would you do to preserve their edge over the next 5–10 years, given that many other players are now looking to follow their example? If you don’t think it can survive, give your reasons for why you think the model is unsustainable and will fail.

 The Zara model is sustainable basically because of its high flexibility and fast response to market demand. Innovation plays a key role for Zara’s success, both in products and processes:  it launches approximately 11.000 new items per year, compared to 2.000 – 4.000 for H&M and Gap;  Zara always focus on reducing time, it holds 6 days worth of inventory, while H&M holds 52 days and Spanish retailer  holds 94 days of inventory.

The innovation in processes is given by the high centralization which characterize this firm.

In fact, whether a shirts is made in China or Bangladesh it still goes to Spain before being shipped to a store; it is sent directly to the distribution center via an automated underground monorail.

Zara is in continuous search for new fashion signals, new models, trends and needs. They make use of those needs to select the most appropriate strategic choice and then the chosen designs are executed and delivered to the market in a very short time- three weeks or less- which is much less than its competitors.

Moreover, a key feature of Zara’s success is the extensive use of information and communication technologies: twice a week, the store managers send a feedback of  sales back to the headquarter in Spain, providing an immediate idea of what is selling and what is not, so the stores can be highly responsive to customers preferences.

In order to provide a better answer to the question, we made some researches of what are the Zara’s main weakness and strengthens. We believe that if Zara want to preserve its competitive advantage for the next 5-10 years, it should focus on increasing global market penetration, in particular in China and in US. For doing so, Zara should create two more manufacturing and distribution centers ( in China and US) that should work exactly like the ones already existing, and intertwined with each other; this could be possible only by improving a strong communication and information system that would provide a direct and immediate connection with Spain.

Furthermore, Zara could work on improving the advertising and developing its online shop.  

2) You have been hired as a consultant to a small clothing manufacturer who wants to emulate the success of Zara and Benetton. She wants advice on an innovation strategy which takes the key lessons from these successful firms. What would you offer? 

Taking into account the key success factors of Zara, some advices for a small clothing manufacturer could be the following.

On the first place, investing in non-price trends, creating several models of clothes with the aim of a very fast turnover.  Then focusing on choosing good raw materials and fabrics, due to ensure better quality products and wider choice for customers.