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introduction
Companies can effectively compete within an industry through innovative models.
Zara is an example, and its competitors are such as Gap, Southwest airlines, Wal-Mart and Dell among others.
Business model and key disruptive elements
Model Innovation disrupted market
-Deliver styles while still hot -marketing to convince buyers
-Reduce marketing cost and increase- -Increase marketing cost
layout cost.
-Hasten shift to customer demand -clearing the stock
Disruptive business model
The disruptive business model reduces the performance of the competitors by introducing new technologies that disrupt the normal activities in the industry.
4
most demanding use 1 2 3 4 3 4 5 6 30 1 2 3 4 2 3 4 5 low qu ality use 1 2 3 4 1 2 3 4
Ordering- orders are made on time and regulation made to ensure that the order is not late.
Fulfillment-the order is fulfilled by the La Coruna team.
Design and manufacturing- Design is made so as to meet the customers taste and ever changing desires.
Operations
The disruptive models change the way the operations are done. It introduces new operation models such as Zara’s the process of ordering, fulfillment and design.
5
Approaches and organization-consistent with the preference for speed and decentralized decision making.
Application development and other IT activities were the responsibility of an Is department of approximately 50 people
Information Technology(IT)
In side the factories,, relatively simple applications were used to plan production.
Most sophisticated ones were large computer controlled equipment that cut cloth into patterns.
Factories
Automated distribution centres e.g miles of automated conveyer belts facilitated the ongoing task of receiving bulk quantities of each garment from factories then recombining the garments into shipment for each store.
Distribution centres
Personal digital assistants(PDAs) and POS systems. Allows redundancy and division of labor.
Constantly upgrades PDAs to meet technological advancement.
POS terminals remained unchanged since they are remarkably stable, effective and easy to roll out and maintain over time.
stores
Zara leads in the profit margins and growth rate due to unique business model within the industry.
conclusion
Work sheet 4
What business is Zara in?
Worksheet#4
Core Competencies & Competitive Advantages
Learning Task#8
Zara Competencies
There are essentially business results and primary business measures which are reflective of Zara’s competitive advantages and core competencies. These are financial and operational. Write them down in the space provided on Worksheet #4
Zara’s core Competencies and how Zara has built them to execute the behavior drivers.
· To create a timely and accurate “one-number plan” that drives all the business functions and enables planning initial assortment at the store level.
· To develop a synchronized supply chain.
2. Business model and key disruptive elements
Model Innovation disrupted market
-Deliver styles while still hot -marketing to convince
buyers
-Reduce marketing cost and increase- -Increase marketing
cost
layout cost.
-Hasten shift to customer demand -clearing the stock
Disruptive business model
The disruptive business model reduces the performance of the
competitors by introducing new technologies that disrupt the
normal activities in the industry.
4
most demanding use 1 2 3 4 3 4 5 6 30
1 2 3 4 2 3 4 5 low qu ality
use 1 2 3 4 1 2 3 4
Ordering- orders are made on time and regulation made to
ensure that the order is not late.
3. Fulfillment-the order is fulfilled by the La Coruna team.
Design and manufacturing- Design is made so as to meet the
customers taste and ever changing desires.
Operations
The disruptive models change the way the operations are done.
It introduces new operation models such as Zara’s the process
of ordering, fulfillment and design.
5
Approaches and organization-consistent with the preference for
speed and decentralized decision making.
Application development and other IT activities were the
responsibility of an Is department of approximately 50 people
Information Technology(IT)
In side the factories,, relatively simple applications were used
to plan production.
Most sophisticated ones were large computer controlled
equipment that cut cloth into patterns.
Factories
4. Automated distribution centres e.g miles of automated conveyer
belts facilitated the ongoing task of receiving bulk quantities of
each garment from factories then recombining the garments into
shipment for each store.
Distribution centres
Personal digital assistants(PDAs) and POS systems. Allows
redundancy and division of labor.
Constantly upgrades PDAs to meet technological advancement.
POS terminals remained unchanged since they are remarkably
stable, effective and easy to roll out and maintain over time.
stores
Zara leads in the profit margins and growth rate due to unique
business model within the industry.
conclusion
Work sheet 4
What business is Zara in?
Worksheet#4
5. Core Competencies & Competitive Advantages
Learning Task#8
Zara Competencies
There are essentially business results and primary business
measures which are reflective of Zara’s competitive advantages
and core competencies. These are financial and operational.
Write them down in the space provided on Worksheet #4
Zara’s core Competencies and how Zara has built them to
execute the behavior drivers.
· To create a timely and accurate “one-number plan” that drives
all the business functions and enables planning initial
assortment at the store level.
· To develop a synchronized supply chain with the ability to,
react to trends and real-time market opportunities.
· To identify the recent fashion trends at the store level in real-
time to determine how best to maximize sell-through
Learning task #10
Now that you have completed learning task’s 5-9, you should
behave a good picture in your mind of how Zara’s approaches
the apparel manufacturing and retailing industry. Draw a
pictorial view of Zara’s business model. Make sure this view
somewhat compatible with the Gap Inc’s business model from
learning task#4. Please do this in power point(or an equivalent
application) as you will need this for your final presentation.
This model should clearly define how Zara approaches this
6. business, the results of those efforts and how the standard
industry risks are mitigated.
Worksheet#3
What business is Zara In?
Worksheet#3
Target Customer and Trained Behaviors
Learning Task#5
Zara Customer Characteristics
Describe the core characteristics of Zara’s target customer
group in the space provided. Be sure to “draw a picture” of who
the primary Zara customer is and what their basic behaviors and
attitudes are towards their apparel. Please note this section is
not specific to Zara, only their customers. You are essentially
building a profile of Zara’s target customer group.
Zara’s target customer group is the young, fashion-conscious
urban dwellers. The customers are fashion conscious and their
taste change quickly.
Work sheet #2
Learning Task #3: Disruptive Business Models
Discussion Question #1: Briefly discuss the business model and
key elements of the disruptive businesses identified.
A business model is the plan implemented by a company in
7. order to make more profits than its competitors in a highly
competitive industry. The model includes the company’s
components and functions of the business, and the revenue it
generates.
Discussion Question #2: Be sure to identify at least two
distinctive competencies of the disruptive companies
They are:
· Ability to create a timely and accurate “one-number plan” that
drives all the business functions and enables planning initial
assortment at the store level.
· To develop a synchronized supply chain with the ability to,
react to trends and real-time market opportunities.
· To identify the recent fashion trends at the store level in real-
time to determine how best to maximize sell-through
Discussion Question #3: Discuss the key competitive
advantage(s) of the disruptive companies?
The competitive advantage of the disruptive companies is that
they are able to meet the clients’ needs when the time is right.
They are flexible and can manipulate technology to suite the
market trend.
1. There is a very good description of disruptive technology in
this Wikipedia post -
http://en.wikipedia.org/wiki/Disruptive_technology. Please
don’t confuse disruptive technology with disruptive business
models.
2. Clayton Christensen of Harvard first adopted this theory. His
groundbreaking book, The Innovators Dilemma, defines the
notion of disruptive business models quite succinctly. Search
Google on this topic and find a rich array of information
pertaining to this topic.
8. 3. Neusa Hirota wrote this informative article on disruptive
innovation . . .
http://www.12manage.com/methods_christensen_disruptive_inn
ovation.html.
4. Here is a Wired article on Dell as a disrupter . . .
http://www.wired.com/wired/archive/10.07/dell.html.
5. MITWorld has this video of Clayton Christensen describing
disruptive innovation in a 36 minute lecture at MIT. If the flash
video below does not work you can click on this link to view it
from MITWorld's web site - http://mitworld.mit.edu/video/108.
Well worth a watch.
Worksheet #1
What business is Zara in?
Worksheet#1
Answer to the question from learning Task#2
Zara is a Zara is a successful multinational firm that retails and
manufactures apparel. The company is a success due to its
linking of the retailing process to the manufacturing process so
as to reduce the situation in the apparel industry whereby it is
difficult to forecast customers demand. The firm responds
quickly to the target customers’ demand, most of whom are
young and fashion-conscious city dwellers. The firm responds
quickly due to the fact that the customers’ tastes are hard to
predict and change very fast. By so doing the company
outsmarts its competitors in the industry such as Gap. Zara,
through its innovation creates and captures a new market
thereby displacing new technology.
Answer to the question after completing Learning Task #9
Task #9-The core competencies that Zara has built up to allow
9. them to effectively execute the behavior drivers are:
· Forty-six percent of the groups sales were inside Spain in
2003
· 60% of the sales was to women
· 20% of the sales was to men
· 20% of the sales was to children
· In 2002, inditex posted a net income of $502 million on
revenues of $4, 544.
In its operations, as the company’s goal is, it quickly and
accurately responds to shifting consumer demands through its
three cyclical process of order fulfillment, design and
manufacturing. Ordering process is the most regular, precisely
defined and standardized around the world.
Zara Case
1
Zara Case
2
Zara is a successful multinational firm that retails and
manufactures apparel. The company is a success due to its
linking of the retailing process to the manufacturing process so
as to reduce the situation in the apparel industry whereby it is
difficult to forecast customers demand. The firm responds
quickly to the target customers’ demand, most of whom are
young and fashion-conscious city dwellers. The firm responds
10. quickly due to the fact that the customers’ tastes are hard to
predict and change very fast. By so doing the company
outsmarts its competitors in the industry such as Gap. Zara,
through its innovation creates and captures a new market
thereby displacing new technology.
Zara spends heavily on its stores rather than on advertising
unlike its competitor Gap. The store layouts are usually changed
every four to five years, altering the artworks, the windows
displays and sales racks. In so doing the customers are attracted
by the stores which are strategically placed, along busy streets.
Gap on the other hand invests heavily in marketing, as it
believes that marketing attracts and convinces the customer to
buy its apparels. Zara has a 1,500 square-meter pilot store that
is used to test store layouts before being rolled out to the world.
The firm operates 1, 558 stores in 45 countries, 550 of which
are part of Zara chain. In the fiscal year 2002, Inditex which is
the companies head made a net income of $502 million U.S.
dollars in revenues. It maintained its profitability in a
continuous trend.
Operations
In its operations, Zara quickly and accurately responds to the
ever shifting demands through its ordering, fulfillment and
manufacturing cyclical processes. Every major section of the
firm’s store place orders twice a week to for the group of
“commercials” at La Coruna. Through talking to the salespeople
the hand held computers, the managers learn about newly
available garments. The clothes are then shipped to the stores so
as to satisfy the orders. That thus matches up the supply of
finished clothes from the factories with the demands from the
stores. Deliveries show up at the stores after a period of one or
two days after the order is placed. Zara has no storage room
where excess inventory may be kept.
Zara introduces new design collections at the start of the fall
and spring buying periods and besides that it introduces new
items throughout the year. The constant introductions of new
items throughout the year are enabled by the company’s
11. vertically integrated manufacturing operation. The company has
no chief information officer and no formal processes for setting
the IT budget, which therefore makes the firm consistent with
its preference for speed. The systems that supported ordering,
fulfillment and manufacturing were largely developed
internally.
The applications used in Zara to plan production are simple
ones. The applications simply present the factory managers with
quantities and due dates for all the production requests. The
only complicated machines are the ones that are used to cut
clothes into patterns. The company’s distribution centers rely on
automated conveyor belts which facilitate the ongoing task of
receiving bulk quantities of each garment from factories rather
than recombining the garment into shipment for each store.
The stores of the firm uses technology such as the personal
digital assistants to reduce the much time wasted to transfer
order forms from store to store around the world. The
technology is also used in tasks such s handling garment returns
to distribution centers and transmitting the information from
headquarters to all the firm’s stores. Zara constantly upgrades
its technology so as to remain technologically valid in terms of
efficiency and effectiveness.
The core competencies that Zara has built up to allow them to
effectively execute the behavior drivers are:
· Forty-six percent of the groups sales were inside Spain in
2003
· 60% of the sales was to women
· 20% of the sales was to men
· 20% of the sales was to children
· In 2002, inditex posted a net income of $502 million on
revenues of $4, 544.
In its operations, as the company’s goal is, it quickly and
accurately responds to shifting consumer demands through its
12. three cyclical process of order fulfillment, design and
manufacturing. Ordering process is the most regular, precisely
defined and standardized around the world.
A business model is the plan implemented by a company in
order to make more profits than its competitors in a highly
competitive industry. The model includes the company’s
components and functions of the business, and the revenue it
generates.
Distinctive competencies of disruptive companies.
·
Ability to create a timely and accurate “one-number plan” that
drives all the business functions and enables planning initial
assortment at the store level.
· To develop a synchronized supply chain with the ability to,
react to trends and real-time market opportunities.
· To identify the recent fashion trends at the store level in real-
time to determine how best to maximize sell-through
The competitive advantage of the disruptive companies is that
they are able to meet the clients’ needs when the time is right.
They are flexible and can manipulate technology to suite the
market trend.
Gap spends more on advertising since advertising is believed to
convince the customer into buying a product. Gap believes that
by advertising the sales will increase and so will the revenue
and profits. The primary objective of the advertising is to
13. convince its customers to buy more products which are lying in
their “backrooms” and thereby increasing sales.
Gap introduces a new line of clothing twice in a fiscal year.
That is done during the fall and spring buying periods. Gap
manufactures at the preseason level, before the early season
wets in.
The primary sources of risk for Gap with the approach to the
apparel manufacturing and retailing business
Agile vertical retailers, mass merchants and retail private label
brands are the primary source of risk that the apparel
manufacturers face. This erodes the prices and profit margins
and demands more flexibility.
Gap makes money by using the product life cycle. At first
forecasting of the product demand is done, followed by
identifying demand trend versus forecast. After that is done, the
right price strategy to maximize revenue is identified.
Additional shipments for the fast moving replenishes able items
are done and then finally transfer the products not yet sold to
another store.
Gaps core competencies are:
· To create a timely and accurate “one-number plan” that drives
all the business functions and enables planning initial
assortment at the store level.
· To develop a synchronized supply chain with the ability to,
react to trends and real-time market opportunities.
14. · To identify the recent fashion trends at the store level in real-
time to determine how best to maximize sell-through
The competitive advantages are:
· The company brand is known to many and enjoys a large
market share
· It enjoys the economies of scale that are associated with being
in the company for long.
· It has financial advantage as it has many financial partners.
Zara’s target customer group is the young, fashion-conscious
urban dwellers. The customers are fashion conscious and their
taste change quickly.
Zara in response to that the rapid change of taste, developed an
operation system that ensures the products get to the market
when the product is hot in demand. The firm links the
manufacturing unit with the retail unit and the retail unit with
the supply unit.
Zara ensures that the customers’ behaviors of going with
fashion are fulfilled by producing the right apparel at the right
time to the customers. The customers’ taste and preference
changes very fast, since they follow the fashion trend. Zara
ensures that happens by linking the manufacturing department
with the retail and by linking the suppliers with the retail.
In highly competitive industries such as that of apparels,
disruptive model gives the company a competitive edge over the
rest of the companies. In disrupting the technology of the other
companies, Zara increased its profit margins and increase sales.
15. Zara is the best example of how such disruptions increase
revenues of a firm as it is the world’s leader in terms of revenue
and growth rate.
References
(2013, 13). Zara’s case Quest. Retrieved from
http://www.casequest.net/Zara%20CaseQuest/process.html
(2013, 13). Responding to new challenges in the branded
apparel industry. Retrieved from
http://www.veritypartnersllc.com/files/phatfile/Verity%20Brand
ed%20Apparel%20whitepaper%20final.pdf?&MMN_position=3
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