Zara's Global Supply Chain Management: Business Strategy Analysis

This report provides an analysis of Zara's global supply chain management, focusing on its international business strategy and the alignment between the two. Zara employs a global business strategy, leveraging a vertical model of production for diversified product offerings. The report examines elements of supply chain management, including procurement, collaboration, local manufacturing, and demand forecasting, highlighting Zara's responsiveness and cost-effectiveness. Recommendations for improvement include building supplier relationships, establishing green initiatives, improving returns management, and implementing real-time inventory management. The report concludes that effective supply chain management is crucial for Zara's competitive advantage and customer satisfaction.

GLOBAL SUPPLY CHAIN
MANAGEMENT REPORT
Assessment 1

Table of Contents
INTRODUCTION....................................................................................................................3
TASK.........................................................................................................................................3
International business strategy...............................................................................................3
Supply chain strategy.............................................................................................................5
Strategic fit between international business strategy and supply chain strategy...................6
Analysis of elements..............................................................................................................6
Recommendations for improving global supply chain..........................................................7
CONCLUSION.........................................................................................................................8
REFERENCES.........................................................................................................................9

INTRODUCTION
Supply chain management is the activity which focuses on management of flow of
goods and services which involves the processes that transforms raw material into final
products. The supply chain management streamline the activities helps in maximizing the
customer value and gain competitive advantage in the marketplace (Supply chain
management, 2021). Zara is one of the largest international fashion companies which belongs
to Inditex which is the world’s largest distribution group (About Us). The company is a
Spanish apparel retail brand which was established by Amancio Ortega and Roselia Mera in
the year 1975 in Spain. The apparel brand is operating under its parent company Inditex when
offering their services all around the world with around 2270 stores. The purpose of this
report is to discuss the concepts of global supply chain management. The report will throw
light on the international business strategy and will analyse the supply chain strategy. The
study will examine the elements of supply chain management and will state some
recommendations which will be helpful in improving the global supply chain activities.
TASK
International business strategy
Business strategy is the layout which describes the course of action which will be
helpful in securing a competitive position in the market which will improve the customer
satisfaction and mobilise their business operations (Business strategy, 2021). International
business strategy focuses on exporting products and services to foreign markets and in
importing the goods and resources from other countries for domestic use. In context of Zara,
the international business strategy is based on vertical model of production where the brand
has centralized control over the production process through which they can offer diversified
range of products as per the changing demands of customers.
 International- The internalization business strategy focuses on exporting the products
and services to global markets or importing the goods and services from other countries
for domestic use. International business strategy is commonly used which creates a
domestic platform through which business can adjust their strategy and create a domestic
platform which will help business in manufacturing and selling its products more
efficiently. Companies adopting an international strategy don't have to think about costs,

and they don't have to worry about adhering to local cultural norms. They try to sell their
products all over the world with little or no changes in their policies and approaches.
 Multi-domestic- Multi domestic business strategy invest in creating business presence in
foreign market and tailoring their products to the local market. In this type of business
strategy companies adapt their products and reposition their marketing strategy to engage
with foreign consumers (International business strategy in globalizing world, 2017). This
type of multi domestic strategy focuses on focuses on gaining competitive advantage
separately for each country. When a multi-domestic business strategy is employed,
company headquarters are typically retained in the country of origin. The company may,
however, establish a regional headquarters in another country to better manage
relationships with international customers.
 Global- This business strategy is used to expand customer base in sell products foreign
market. Global companies have little local variation as products and services are
homogenised printer to reduce cost for rating greater number of people. This form of
strategy is an integrated approach across different countries where small adjustments are
made for expanding into international market. When a company adopts a global business
strategy, it views the entire world as a single market and uses economies of scale to
extend its reach and revenue.
 Transnational- The transactional business strategy is an intricate method which is used
by business while expansion in international market. It is the combination of global and
multi domestic strategy. With the help of transaction business strategy, the organization
maintains their headquarters in the country of origin which allows the organization to
establish a full-scale operation in foreign market (Four international business strategy,
2020). Transactional companies sell their products multiple countries all around the
globe. The companies operating weather transactional start video business expansion
have separate marketing research and development departments through which they can
respond to local customers.
In context of Zara, the brand uses Global business strategy which allows the
organization in expanding their customer base and diversify their target market. Through the
global business strategy, Zara attracts opportunities of Foreign Investments and strengthen
their brand reputation through which they can maintain their competitive position and gain
competitive advantage. By implementing global business strategy of internationalization this
will offers access to talent and will expand the target market through which greater number of

customers can be targeted through which competitive advantage can be gained. This strategy
helps Zara in enhancing their brand awareness and generating new sales. This strategy will
foster new culture and diversity in the operations of Zara where the brand makes minimal
changes at per the market through which they can meet demands of customers and increase
the sale of their products which will also strengthen their brand name in the industry.
Supply chain strategy
Supply chain management SCM focuses on the movement of products and services
from suppliers to distributors. The approach of supply chain management involves the flow
of information in products between and among supply chain stages in order to maximise
profitability. The major functions involved in SCM our procurement of raw materials product
development marketing operations distribution finance and customer service where customer
plays integral part in SCM. The primary focus of supply chain network is to maximise the
overall value and profitability. Responsiveness in supply chain management represents the
ability of supply chain management of an organization to respond purposefully in appropriate
time frame to the customer request or changes in the marketplace. The cost responsiveness
frontier represents a range of possible strategies eat with corresponding cost turn response
time. However, a highly responsive supply chain strategy can increase cost but is responsible
to reduce customer response time.
The supply chain management of Zara is the strength of the brand which make them
earn good revenues and profits while the brand does not heavily engage in advertisement.
While the brand has low advertisement activities, with the help of effective supply chain
management Zara is able to manage their financial status, competitive position, revenues and
profitability of organisation. The supply chain strategy of Zara is briefly discussed below:
The supply chain management strategy of Zara is broken down into several sections.
It all begins with redesigning high fashion trends for the mainstream market, then progresses
through manufacturing, distribution, and eventually selling (Zara supply chain management
strategy, 2016). Zara has retained its position as a worldwide leader in the apparel business.
The brand can boost net sales and retain its image as a fashion-forward but low-cost brand.
 Procurement methodology- The procurement staff at Zara is more concerned with the
quantity of raw materials needed to make the outfits than with the number of finished
items. As people may reuse fabric but not resell a garment that didn't meet your

expectations, this helps to reduce waste. This explains how you can improve
sustainability while lowering costs.
 Deep collaboration- Supplier relationships are critical since suppliers are all located near
Zara plants and collaborate closely, allowing Zara to place daily orders. Through strategic
alliance, Zara can make use of their effective supply chain activities which can be fruitful
for earning higher revenues.
 Local manufacturing- Zara approaches its competitors with an entirely new strategy. It
opted to manufacture things with more fluctuating demand in Galicia rather than
exporting all of its production to Asia or Eastern Europe. While lower-cost manufacturing
may be available in other countries, the advantages of a faster time to market, reduced
shipping costs, and less vulnerability to changing tariffs and politics outweigh that one
factor. When compared to more wide, global supply networks this reduces total supply
risk by focusing on a fewer number of dangers. By lowering transportation, this also
contributes to a reduction in overall carbon emissions.
 Demand forecasting- Zara has incredibly good inventory management procedures that
help them figure out the exact number of items needed for each location. They send out
incredibly little amounts twice a week. As a result, there is a sense of scarcity; few things
go unsold, and if the trial fails, there is plenty of time to try different varieties. As a result
of this Zara is almost always able to find the right product.
 Spare capacity- Zara deliberately idles up to 85% of its operations in order to better
adapt to market movements throughout the world. Another unusual method that varies
from competitors' attempts to maximise utilisation.
Strategic fit between international business strategy and supply chain strategy
Analysis of elements
Supply chain management is the process of handling production flow of goals or
service from the initial stage starting from raw components to the last stage of delivering the
final product to customers. Supply chain activities are carried out with the help of suppliers
where companies create a network of supplier’s for moving their products from one place to
another.
 Analyse facilities-

 Inventory-
 Sourcing/procurement- This element of supply chain management helps the
business in selecting the suppliers who will be providing the required products and
services in order to create the product. This element of supply chain management
determines vendors who will produce goods and services for meeting actual and
planned demand with the help of economical and effective approaches. Sourcing can
be of perishable as well as non-perishable products.
 Transportation- this element of supply chain management focuses on coordinating
customer orders scheduling deliveries dispatching clothes creating invoice customers
and receiving payments. However, the transportation element of supply chain
management focuses on delivery and logistics practices of the organization. It is an
important component of supply chain management which contributes to direct
integration with the consumers. This element creates a significant contribution to
research the brand expectation through the company delivery channel and logistics
services. In order to maintain seamless delivery options Zara, use various freight
options which are via road, air and rail.
Recommendations for improving global supply chain
The supply chain management is the crucial activity of management. Through
effective supply chain management, Zara can save money and meet customer satisfaction
through which they can gain competitive advantage. Some of the recommendations which
can be helpful in improving the global supply chain activities are listed below:
 Build healthy supplier relationships- relationship with suppliers creates an impact on
the supply chain activity of an organization. Through cultivating establishing turn
maintaining supplier relationship on ongoing basis this will help in maintaining a long-
term relationship with suppliers through which Zara can maintain the effectiveness of
tehri supply chain activities and meet customer demands in timely manner (Successful
strategy to improve supply chain, 2021). In order to maintain a strong relationship with
customers, Zara can form strategies through which they can effectively collaborate and
work with their suppliers which will be helpful in meeting customer demands.
 Establish green initiatives- The companies can engage in green initiatives through
which they can minimize the carbon footprints of the supply chain management. With the
help of green initiatives, Zara can make their supply chain activities more sustainable and

socially responsible through which they can create a positive impact on the overall
society.
 Improve returns management- An effective returns management system is required for
any effective supply chain strategy. Manufacturers must be able to properly manage
returns in order to re-process or re-manufacture returned products or units as soon as
possible. Naturally, many manufacturers are focused on continuously pushing new things
out the door, and as a result, returns usually do not receive the attention they require.
Being able to manage returns more efficiently will help Zara to save money and identify
recurring product issues.
 Real-time inventory management- Traditional inventory management is highly reliant
on spreadsheets and manually validated lists. Modern ERP software, on the other hand,
has inventory tools that enable real-time visibility of accurate inventory levels
(Approaches to improve supply chain strategy, 2015). Furthermore, traditional inventory
management software has limited scalability, but current ERP software will offer endless
flexibility to Zara through which they can meet the company's growth and specialised
demands.
 Embrace technology- As technology have been developing every day and technological
advancement has been a source of innovation in business through which an organization
can make use of their resources effectively and smartly. In case of Zara, the company can
make use of modern technology for their supply chain management through which they
can effectively keep a track of their inventory, manage their logistics and focus on their
supply and demand of the brand. By incorporating the right technology such as industrial
scales, it will support Zara in streamlining the supply chain activities which will make all
resources more accessible and through which business can meet demands of their
customers and create a unique position within the dynamic business environment.
CONCLUSION
From the above report, it can be concluded that supply chain management is the
activity which is performed by business through which they can meet the demands of
customers in timely manner. Business strategy is the plan which creates a structure of an
organization to meet business objectives. Globalization can influence world economies which
can reduce the tariffs, enhance communication and increase the mobility which help in
connecting the global financial markets. It can be understood that there are various strategies
of internalization through which business can expand in foreign markets. The supply chain

activities are the core activities which helps brand in meeting demands of customers in
international market. The supply chain's complexity may increase as a result of the
dependence on exports from other emerging economies.

REFERENCES
Books and journals
Christiansen, B. ed., 2015. Handbook of research on global supply chain management. IGI
Global.
Cohen, M. A. and Lee, H. L., 2020. Designing the right global supply chain
network. Manufacturing & Service Operations Management. 22(1). pp.15-24.
Ivanov, D., Tsipoulanidis, A. and Schönberger, J., 2017. Global supply chain and operations
management. A decision-oriented introduction to the creation of value. 2.
Joshi, S. ed., 2015. Designing and implementing global supply chain management. IGI
Global.
Kim, M. and Chai, S., 2017. The impact of supplier innovativeness, information sharing and
strategic sourcing on improving supply chain agility: Global supply chain
perspective. International Journal of Production Economics. 187. pp.42-52.
Tannous, K. and Yoon, S., 2018. Summarizing risk, sustainability and collaboration in global
supply chain management. International Journal of Supply and Operations
Management. 5(2). pp.192-196.
Um, J. and Han, N., 2020. Understanding the relationships between global supply chain risk
and supply chain resilience: the role of mitigating strategies. Supply Chain
Management: An International Journal.
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