MGMT 2020_Lecture 8_Strategic Management - Case study

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Nov 24, 2024

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MGT 2020 (2023-2024 Fall Term) Principle of Management 8. S trategic Management ： Zara
Fast Fashion
Fast Fashion
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Fast Fashion
Fast Fashion
1. What is your favorite garment brand? Why do your like it? 2. What is your understanding of fast fashion industry? 3. What do you know about Zara? Do you buy Zara’s products? Why? Fast Fashion Warm-up Questions
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Fast Fashion 1. 1 What is the business model of Zara? • Sell high- fashion look-alikes to price- conscious customers as quick as possible. • Self-service • Transactional relationship • Customer service • Retail/online stores • Website • Social media like YouTube, Twitter, Facebook, • Men • Women • Children • Product design and development • Manufacturing • Product delivery and shipping • Brand value • Global supply chain networks • Ability to quickly copy the latest trend • Shoppers • Manufacturers • Suppliers • Designers • Physical and e- commerce store maintenance costs • Operating expenses, such as facility maintenance, employee wages, legal fees, IT costs, etc. • Marketing and advertising costs • Sales from retail outlets • E-commerce stores
• Functional strategies ➢ those actions and behaviors involved in different functional departments, such as supplier chain, research and development, manufacturing, and marketing. Fast Fashion 1.2 How do Zara’s functional strategies support its business model?
1. Design • Effective designing response : it uses two weeks from deign to store. • Technologies in design department : computer programs arrange and rearrange clothing patterns 2. Manufacturing & Operation • Effective inventory management: sales managers at “the Cube” use computers to check items' sales. • Efficient logistics service ： 60,000 items each hour—more than 2.6 million items a week. • International operational network : proximity to home country Morocco, Portugal, Spain, and Turkey. 3. Marketing • Frequent new product update : twice a week. • Customer service: collect customer information and respond to market demands quickly. 4. Globalization • Global expansion: stores distributed across the world. Fast Fashion
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Fast Fashion 2. How can Zara’s resources and capabilities support its move into online retailing? • Resources – an organization’s tangible or intangible assets. • Capabilities – an organization’s abilities to use resources. Zara should have resources and capabilities that are good match to the demands associated with Internet retailing.
Fast Fashion Resources: • Zara’s intangible resources include its brand value , which is popular among young people allover the world. • Zara’s intangible resources include well-established global network resources with all types of suppliers and buyers. • Zara’s tangible resources include a large amount of designers, workers, factories, advanced computer system, and retail stores. Capabilities • Zara has strong capability of providing fashion products with relative cheap price . • Zara has strong capability of using information technologies in design, inventory, and market functions • Zara has strong capability of integrating global operations and markets to respond to customer preferences quickly.
Fast Fashion 3. Please form a SWOT analysis for Inditex. Then discuss how might SWOT analysis for Inditex be helpful to Inditex executives, and to Zara store managers, respectively? ➢ Strengths (Internal factor) ➢ Weaknesses (Internal factor) ➢ Opportunities (External factor) ➢ Threats (External factor) ➢ Brand value in fashion ➢ Wide range of products ➢ Strong supply chain and retail network ➢ International presence ➢ Increasing online sales ➢ Low focus on marketing and promotions ➢ Low physical presence in key emerging markets ➢ Except for Zara, other firms are not competitive ➢ AI for customer experience ➢ Growth rate in developing countries ➢ The pattern of green economies ➢ Aggressive competition ➢ Slow growth of fast fashion industry ➢ Increasing operational costs (raw material and labor costs) ➢ Uncertain global environments ➢ Resistance to sweatshop
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Fast Fashion ➢ A SWOT is a basic strategic tool that helps executives understand the environment and their own companies abilities. ➢ In this case, a SWOT would point out the internal and external analysis that exists in the garment industry and Inditex’s ability. ➢ For Zara store managers, a SWOT is not particularly useful unless they are able to contribute to the firm’s strategy or they have latitude to implement strategic decisions at the store level.
Fast Fashion 4. The case shows that both Inditex and Zara involve the expansion of markets and products. Is there any difference between the growth strategies adopted by Inditex and Zara? • Inditex ： • Engaging in related diversification strategies by developing various clothing brands, each with its own niche and target market. Zara is one of its critical fast fashion brands. • Inditex has also pursued horizontal integration by acquiring and integrating other clothing brands into its portfolio. • Zara • Zara primarly uses concentration strategies to enhance market share by continuously increasing new stores and new products for existing customers. Zara concentrates on capturing market share in target segments. • Zara is known for its vertically integration , which involves controlling various stages of the supply chain, from design and production to distribution and retail.
Fast Fashion 5. What competitive advantage do you think Zara is pursuing? How does it exploit that competitive advantage? Porter’s three generic competitive advantages: – Cost leadership strategy –competing on the basis of low costs. – Differentiation strategy –competing by offering unique products. – Focus strategy – concentrates its resources in a narrow segment or niche.
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Fast Fashion • The key for Zara is bringing products to market quickly, and the cheapest costs of product is not Zara’s strategies. Thus, they are not pursuing a cost leadership strategy. – Compared with competitors like H&M and Uniqlo, Zara may not compete by low cost strategy. • Zara is implementing a focus differentiation strategy. ➢ They are pursuing a focus strategy by focusing on only the narrow market of fast fashion industry, rather than a broad market including the whole clothing industry. ➢ By using technology and just-in-time design- production-delivery system , they update new products frequently to maintain its high fashion uniqueness by being faster to market and more responsive of customer needs.
Fast Fashion 6. How do you use five forces model to evaluate the competitive pressures of Zara?
Five Forces Model- Zara Bargaining Power of Suppliers: Low The suppliers are labor intensive; Zara has strong supplier network; Alternative suppliers are easily to be found . Threat of New Entrants: Low to medium High entry costs (from design to sell: suppliers, logistics, distribution) requires economies of scale for sustainable profitability; high cost of brand development; The fast fashion products have low technological intensity. Threat of substitute products or services: High Customer propensity to substitutes is high with several alternative choices (light luxury brand like Tory Burch, MK; sporting cloth like lulu lemon) Low customer switching costs and easily substitutable; Rivalry: High Many similar firms (H&M; Uniqlo) High exit barriers due to high fixed costs Bargaining Power of Buyers: High Low switching costs; large number of similar products and styles; fashion changes quickly
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• Fashion's toxic threads https://www.youtube.com/watch?v=Ko_BZhIpI1Q • How Zara Took Over The Industry Using Fast Fashion https://www.youtube.com/watch?v=I8_gmYNCQ1g • 15 Things You Didn't Know About ZARA https://www.youtube.com/watch?v=OZ0Y79DhKkI Fast Fashion Additional Information on Zara
Fast Fashion
Thank you very much!
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