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Management strategies- A key to the success of ZARA

Discuss about the Comparison of Dell and Zara Supply Chain.

Zara is a very popular and famous brand of clothes and accessories and it’s the best-known fashion brand of Spain. This company started its operation in the year 1963 by Amancio Ortea Gaona. He started his career by establishing a factory named as Inditex and after 10 years, he set up a store named as Zorba in Spain at the cost of 30 euros. Without any intention, he changed this name to Zara. With the passage of time, the Zara fashion stores expanded in US, France, and Europe by the year of 1990. Currently, the number of Zara Stores is 6500 in 88 countries and it is expected to be double in the coming future (Team, 2016).

Zara started operating from India in the year 2010. The founder of Zara Amancio Ortega is the 4th richest man in this world. Zara is also coming under the list of eco-friendly companies as it makes use of the solar panels and wind turbines and also produces the 100% toxic free clothes. The Headquarter of Zara is situated in La Coruna. There are many outlets available across the world like in New York, Paris, Tokyo, Rome, Petersburg and many more other countries also. The products offered by the Zara group are both men’s as well as women’s. Except for clothes they also deal with the footwear’s, cosmetics and accessories. Zara also sells their products by online mode by visiting directly to the website of Zara.

Zara is one of the fastest growing fashion brands and it produces around 450 million items within one year and all these items are delivered twice a week in all the outlets or stores around the world with proper management strategies and controlling. A key to success of Zara is its own supply chain management and the ability to compete with the speed to market and literally introducing the new idea of Fast Fashion. The fundamental reasons that why Zara is so successful, are described below:

Just in time production: Zara is expert in delivering the fashionable and trendy clothes of different variety and styles just in time through very controlled and integrated process. The strategy of Zara is this that keeps a very important and major amount of in-house production and 85% of the Zara production in factories is reserved to make the seasonal adjustments (Toni & Tonchia, 2003). The in-house production helps the organization in launching new items with proper amount, variety, and frequency. Although the European workers are getting high compensation for the production purposes, but the turnaround time of this worker is just incredible. Zara always takes care of the seasonal trends as 50 percent of the production of clothes is done in the middle of the season. The most important strategy used by Zara is Customer Feedback as the store managers communicate with the customers about their likings and disliking and then this collected data shown to the designers who will come up with new ideas on the spot. Zara has also the ability to respond to the changing as well as developing demands. Zara only works for 4 to 5 days in the week for the full capacity of production and it also leaves some work for extra shifts when needed. This is done because to increase the number of client visits to store and creates a situation of scarcity. This strategy of Zara helps to make the price of items higher due to the shortage (Lu, 2016).

Marketing mix of ZARA

There is only 10 percent of the stock of unsold items. This is only the reason that Zara Manage to pay for the workers and focus on to satisfy the changing demands of the customers either seasonal or casual.

Inventory management: Inventory Management plays a very significant role in the success of Zara because Inventory management models help the company to find out the quantity of stock that is delivered to the retail stores twice every week and this stock is very limited and it’s very important to check that each store is getting the required stock what they want. This quick service of shipment of stock is easy and feasible for Zara because production houses are situated near to Zara’s distribution headquarters in Spain.  Inventory is managed by the workers and they are taking care of in how many batches the stock is to be delivered and what should be the quantity (Vincent, et al., 2013).

Centralized logistics:Another reason of Zara success is that the decisions taken by this company are very centralized and these decisions help in the growth of the company.


Zara is very stuck to its rules and regulations and implementing of plans. The days and timings are fixed for the Zara outlet to receive the orders. The timings of trucks are fixed and they leave at the specific time similarly the shipments also arrives in stores at the certain time. The labeling and pricing of garments are done upon the destination. However, each and every employee of the Zara Company that is involved in the designing, production and distribution knows about the timeline and the activity management. This also helps to increase the number of customer visit who know when to go for shopping in Zara outlet for fresh stock (Hansen, 2012).

Solid Distribution Network:Zara has a very strong distribution channel as compared to the other fashion brands that facilitate the company to deliver items to the stores in Europe within 24 hours. Similarly to deliver in America and Asian Outlets, it will take less than 40 hours to deliver the goods. Zara is the only industry that takes only 15days to get a product out from the production house to stores whereas another company standard is less than six months.

Fast Fashion Success:The operational strategy of Zara is the strength of Zara. The supply chain management helps in the mass production that leads to well-managed inventories and higher profits. The main motive of Zara is to stay on the top as the best Fashion brand in the world. Zara always focuses on the new trends and it offers a lot of varieties with the fast changing demands of the customers. The process of introducing the new designing, the styling of clothes is very fast (Lopez, 2009).

Comparison of Dell and Zara Supply Chain

Product in the marketing mix of Zara:  As coca cola is the famous brand of Refreshment, in the same way, Zara is the brand of fashion. Zara is very much focused on its new products and respond very quickly   towards the demand of the customers. Its USP is to create the latest trends and new styles and normally available in the stores in a few weeks. If some of the products are unsold in the store, then it's immediately pulled away from the stores. The Marketing approach adopted is to identify company’s exposure exchange risk includes evaluation of  sales of the company in the domestic market compared to foreign market, competitors in the domestic and foreign market, sensitivity of demand to price, production of the company, from where the company’s input coming, pricing of the company’s output and input (Bhasin, 2016).

Pricing in the marketing mix of Zara: Zara always tries to set the reasonable prices for its items to increase the sales and the number of customers in stores. Zara always takes care of the cream customers who compare the products of Zara with H &M, Myers, Dell and others. There are some Zara stores that might be very expensive, whereas others will be very much affordable, but because of the popularity of Zara, it chooses to opt premium pricing strategy (Isabelle, 2012).

Promotion in the marketing mix of Zara: Another very good thing about Zara is that it does not spend any money on its promotion and marketing of new products. The company always spends that money on the advertisement of the opening of new stores.  The important marketing strategy of Zara is based on its experience, differentiation, and affordability that makes the Zara most popular brand as well as successful (Crofton & Dopico, 2007). 

Place in the marketing mix of Zara- The Zara has that much potential that it can distinguish itself from the other competitors in the market as for Zara target the product to consumers belonging to high sections of society and people who have a mind set up of spending money only on branded clothes and who believe in quality than in quantity and are less price, sensitive customers.

Both the companies Dell and Zara are very famous and successful companies. Dell is the one which deals with the production of computers while the Zara garments. Not only the products are different, but the structure of the companies is also different.

The Dell Company follows a horizontal supply chain, whereas Zara follows a vertical chain. The production line of both the companies is very different. Dell has come up with “isolated” approach to the production as it is dependent on third parties like on suppliers for the final product and delivery of these products, whereas the Zara is not dependent on any third party for its clothes production. The success of the company is totally because of the control on every aspect of designing, production, and distribution (Alexan, 2012). This control in all business activities also helps Zara to manufacture and deliver new designs in a short period of time and this is the only reason that Zara is more successful than the other companies.  The horizontal supply chain management has an advantage that it is very easy to control as you have only minimum responsibilities on the part of the company. On the other hand, coordinating a number of small activities has the benefit of being able to control the whole picture of the company. Zara also has a control on the suppliers too as it adopted the vertical supply chain.

Similarly, there is a comparative analysis between Zara and Myers also explained and this analysis will be successful in providing help to the supply chain management facts defined in Australia. The Myers is the departmental store, which is helpful in providing products like household items, electronics, and all other products that are needed in the daily life of the customer. As compared to ZARA the distribution of the product is not identified on the demographic and psychographic before starting any new outlet. The market of Myers is ambiguous and the target market is also consisted with different categories of customers.

Myer does not have the approachable customer service, no matter how many products its offering to the customer and but the drawback is that very few customers get attracted. But talking about ZARA the Zara possesses specific customer services to serve its customers. There are various offers and promotional aspects applied for the customers in Australia.

Conclusion

It is an unbelievable fact that Zara comes out with at least 500 or more new designs per month. The prices of their products are according to the new trends and they all seem to be more costly. However, the employees at Zara are sensible enough to fix a price by doing a proper analysis of the competitive brands like Pantaloons, and Phoenix etc. in India as well as other parts of the world. It is clear from the report that a company can reach great heights of success if a better customer feedback system is adopted to reach the core areas of customer's queries and solve them keeping in mind the other prospects. As we have seen in the case study the personnel are very serious when it comes to solving queries of the customers and they have adopted the policy of speedy disposal of their queries. Zara is successful because it adopted the customer feedback strategy and this is the reason that Zara is so popular brand of fashion. The service of the ZARA Company is very quick and if it is found that the customer is dissatisfied, the very next day that the customer is approached to know the tastes and preferences. The sales of the company are impacted positively when the sales are directed towards customers and their demands are met. This is the most important factor to be focused in order to improve the sales. If the customers are satisfied, it will have a direct impact on the sales. Thus, Zara presents a good analysis of interesting strategies and all the business activities and how the management strategies are vital to reaching the success.

References

Alexan, P., 2012. Comparison of Dell and Zara supply chain, Available at: https://www.scribd.com/document/52789329/Comparison-of-Dell-and-Zara-supply-chain

Bhasin, H., 2016. Marketing mix of Zara, Available at: https://www.marketing91.com/marketing-mix-zara/

Crofton, S. & Dopico, L., 2007. ZARA-Inditex and the growth of fast fashion, Available at: https://www.ebhsoc.org/journal/index.php/journal/article/viewFile/216/218

GbolagadeAdewale, A., 2013. Impact of Marketing Strategy on Business Performance A Study of Selected Small and Medium Enterprises (Smes) In Oluyole Local Government, Ibadan, Nigeria.. IOSR Journal of Business and Management (IOSR-JBM), July, 11(4), pp. 59-66.

Hansen, S., 2012. How Zara Grew Into the World’s Largest Fashion Retailer, Available at: https://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html

Isabelle, D., 2012. Zara’s business model and competitive advantages, Available at: https://dianeisabelle.com/2012/09/08/zaras-business-model-and-competitive-advantages/

Lopez, C., 2009. Internationalizationof the Spanish fashion brand ZARA. Journal of Fashion Marketing and Management, 13(2), pp. 279-296.

Lu, C., 2016. Zara supply chain analysis - the secret behind Zara's retail success, Available at: https://www.tradegecko.com/blog/zara-supply-chain-its-secret-to-retail-success

Team, Z., 2016. ZARA official website. [Online]
Available at: https://www.zara.com/

Toni, A. & Tonchia, S., 2003. Strategic planning and firms' competencies: Traditional approaches and new perspectives. International Journal of Operations & Production Management, 23(9), pp. 947 - 976.

Vincent, J., Kantor, P. & Geller, D., 2013. Inditex: Strategy report: Bridges Consulting, Available at: https://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2013/reports/inditex.pdf?bcsi_scan_f5761508bdf24bd5=4BIgGsNexKv/rI2F93conJON9/o5AAAA2HGeAw==&bcsi_scan_filename=inditex.pdf

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