Zara core competences

Introduction

Over the past 13 years Zara has revolutionized the fashion retailing through something called fast fashion. Fast fashion is a competitive advantage created by the efficient functioning and coordination of many operational areas. Zara can produce, market, and sell high fashion look-a-likes at extremely reasonable prices faster than any traditional retailer. Through this paper wewill break down the strategic decisions that Zara has made to create this revolutionary competitive advantage within the fashion industry.

Strategic decision in Supply Chain

Zara favours local production; as a matter of fact, labour intensive operations are outsourced to local subcontractors. Fifty percent of Zara’s products are manufactured in Spain by 22 factories and subcontractorswhich are located in Galicia. Despite cheaper labour costs, Zara avoids sourcing production in Asian countries to avoid waiting long lead times1 for products they need produced. It is noted, that seventy percent of Zara’s production is in Europe to help minimize lead times.

Other areas of operative production are vertically integrated within Zara. Large investments in computer guided cuttingequipment ensure efficiency. With some areas of production being sourced and other areas, such as computer guided fabric cutting, being done in-house Zara maintains a steady stream of information sharing. Almost all areas inside and outside the firm receive information simultaneously. (Exhibit 1)

To facilitate this great supply/production chain, Zara also has a great advantage in logistical power.Products that pass through the logistic platform of La Corogne represent 1 million products a week. There are more than 200 kilometres of cable and a surface of around 400000 m² in this entirely automatic distribution centre. Even more impressive, two times a week the centre is emptied and new turnover replenishes the old inventory.

Due to the high volume of products and information thatneeds to be shared between all areas of the firm, Zara retains ninety percent ownership to avoid conflict between corporate decisions and franchises. Due to the span of corporate hierarchy, Zara pays particularly close attention to teamwork. Zara tries to break the corporate structure and appears as more of a socialistic firm. Ever person is equal in the eyes of the firm and this helps to enable workto be done in an efficient way with the most information sharing as possible. Furthermore, this also reduces the expenditures on fancy corporate offices and helps further reinforce the corporate culture.

Continuing with efficiency and low costs, Zara avoids extravagant and flashy advertising. In-store and point-of-sales promotion is the only advertising that Zara utilizes. Not only is this astrategic decision to lower costs but also to keep consistency with their overall strategy of fast fashion. The high turnover of inventory within the store does not give Zara many opportunities to advertise their in-store selections in catalogues, brochures, or other traditional Medias.

Zara’s Core Competency: Shared situation awareness

Shared situation is the foundation for Zara’ssuccess to respond quickly to changes in demand. This system is built on three main pillars: raw data collection, hypothesis building, and testing.

The first pillar is managing huge amounts of raw data and incentivising managers to collect accurate as well as useful data. Managers are required to collect data that enables those working in Zara headquarters to find patterns and forecast futuretrends. The raw data that managers collect consists of everything from what is on the racks to what has been tried on and left behind.

With the successful collection of raw data, headquarters can analyse, manipulate, and add environmental2 data to the series allowing for the formulation of hypothesises to anticipate trends. Zara’s open concept corporate culture is important here to facilitate...