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Company case 19 Zara – the fast and furios giant Ques&ons 1. As completely as possible, sketch the supply chain for Zara from
raw materials to consumer purchase.
2. Discuss the concepts of horizontal and ver&cal conflict as they relate to Zara.
3. Which type of ver&cal marke&ng system does Zara exhibit? List all the benefits that Zara receives by heaving adopted this system.
4. Does Zara incur disadvantages from its “fast-‐fashion” distribu&on system? Are these disadvantages offset by advantages?
5. How does Zara add value for the customer through major logis&cs func&ons?
1. As completely as possible, sketch the supply chain for Zara from raw materials to consumer purchase.
• Zara can recognize and respond to fashion trends very quickly, create products that mirror these trends and get those products onto shelves much faster and more frequently than the industry norm.
• Zara can take a product from concept through design, manufacturing and store shelf placement in as liRle as two weeks much quicker than any of its fast-‐fashion compe&tor. For more mainstream clothing chains, such as Gap and Next, the process takes months.
• This gives Zara the advantage of virtually copying the fashions from the pages of Vogue and having them in the shelves before the next issue of the magazine hits the newsstands.
• Zara controls every aspect of the supply chain. Zara makes 40 percent of its own fabrics and produce more than half of its own clothes, rather than relying on a hodgepodge of slow-‐moving suppliers. Even things that are farmed out are done locally
Value
Ac@vity
1 2 3 4 5 6 7 8 9
Value adding ac@vi@es CoRon Procurement Kni]ng Damping Dyeing To make up Shaping Packaging Branding Selling Service
2. Discuss the concepts of horizontal and ver@cal conflict as they relate to Zara.
Horizontal conflict occurs among firms at the same level of the channel (i.e. between two retailers). Ver@cal conflict is conflict between different levels of the same channel (i.e. between a wholesaler and a retailer). Some conflict in the channel takes the form of healthy compe&&on. Severe or prolonged conflict, however, can disrupt channel effec&veness and cause las&ng harm to channel rela&onships. Zara is not really effected from these conflicts because the company controls the supply chain and sells the products in shops owned by Zara.
3. Which type of ver@cal marke@ng system does Zara exhibit? List all the benefits
that Zara receives by heaving adopted this system. Zara controls every aspect of the supply chain, from design, produc&on to distribu&on and retailing. All the value adding ac&vi&es are made by Zara. The high-‐tech informa&on system offers the opportunity to have an ear on customers needs and wants. If customers are asking for a new product such an item can be in stores in seven days. A lot of products are manufactured in Spain. This factor improve &me efficiency.
4. Does Zara incur disadvantages from its “fast-‐fashion” distribu@on system? Are these disadvantages offset by advantages? Produc&on is more expensive in Spain. Zara can’t profit from economies of scale because the number of produced items is not so high. Advantages Zara doesn’t need to follow the industry paRern of marking prices down as the season progresses. Thus, Zara reaps the benefit of prices that average much closer to the list price. This concept makes customers curios about products because thy (maybe) didn’t get it. Zara can offer “brand-‐new” products to the costumer.
5. How does Zara add value for the customer through major logis@cs func@ons? Customer can profit from innova&ve products. Customer can influence product development, because of the informa&on system of Zara. Customer wear (maybe) a unique product.
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