Zara's Fast Fashion Strategies and Challenges

This assignment delves into the innovative business model of Zara, a leading fast fashion retailer. Students are tasked with analyzing Zara's unique approach to supply chain management, marketing strategies, and overall impact on the global fashion landscape. The analysis should also consider the challenges Zara faces in maintaining its competitive edge within a rapidly evolving industry.

Running head: ZARA 0
Logistics and Supply Chain Management

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Executive Summary
Zara is world’s largest fast fashion retailing chain which offers its service worldwide. The
company has implemented different logistics strategies to reduce the time in distribution and
increase the efficiency of its supply chain. Due to global expansion, the company faces
various issues such as increased competition, changing demand, compliance with legal
regulations and shorter product cycle. The corporation control different part of its supply
chain operation which assists them in reducing its product’s price and increase overall
efficiency. The firm has centralised various operations and it controls them directly from
head office such as distribution, sourcing, warehousing, production, designing and others.
Effective control over supply chain reduces Zara’s cost of manufacturing and distribution; it
also reduces company’s operations’ cost. The corporation has gained a competitive advantage
due to effective communication system, efficiency in operations, and control over different
processes. Other corporations can also implement the logistics strategy of Zara to reduce their
cost and increase their efficiency which provides them a competitive advantage. Various
recommendations can be implemented by the enterprise to address its issues such as
cooperating with a variety of designers to offer new products. Opening new distribution
centres for reducing refurbishment time and warehousing cost. The firm should increase its
investment in marketing strategy to attract new customers. These strategies can assist the
company in maintaining their competitive advantage and sustain their future development.

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Table of Contents
1.0 Introduction..........................................................................................................................3
2.0 Current Situation/Issues Analysis........................................................................................4
3.0 Fundamental Reasons for Zara’s Success............................................................................4
3.1 Communication System...................................................................................................5
3.2 Control over Operations...................................................................................................5
3.3 Rapid-Fire Supply Chain Management............................................................................5
3.4 Positive Brand Image.......................................................................................................6
4.0 Comparison between Zara and Other Corporation..............................................................6
4.1 Comparison between Zara and another Successful Company.........................................6
Dell’s Supply Chain...........................................................................................................6
Zara’s Supply Chain...........................................................................................................6
4.2 Comparison between Zara and an Unsuccessful Company.............................................7
Target Canada’s Supply Chain...........................................................................................7
5.0 Zara’s Competitive advantage..............................................................................................8
6.0 Suitable for Other corporations............................................................................................8
7.0 Conclusion..........................................................................................................................10
8.0 Recommendations..............................................................................................................10
References................................................................................................................................11

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1.0 Introduction
Zara is a well-known multinational retaining chain which offers fast fashion products to its
customers; it was founded by Amancio Ortega in 1975. The company is considered as one of
the most innovative and devastating retailers in the fashion retailing industry. As per 2017,
the corporation has established more than 2200 stores across 93 nations worldwide (Forbes,
2017). The parent company of the enterprise is Inditex Group. In 2017, Inditex’s profits jump
more than 18 percent as Zara’s global sales increases and the firm reported revenue of 654
million euros in the first quarter of the year (BBC, 2017). Due to its global expansion, Zara
has reported a growth in its sales by 14 percent in the first quarter of 2017. In 2017, Zara
started offering its products through online platforms in various new locations such as
Vietnam, Malaysia, Singapore, and Thailand and it is planning to expand its operations in
India through an online platform. The corporation has achieved tremendous success because
of its effective and efficient supply chain which allows the company to offer new products to
its customers in just 14 days (Bagaria, 2014). This report will focus on analysing the
attributes and issues of Zara’s supply chain operations by examine the case study called
“Zara: A case of Rapid-Fire Fast Fashion Strategy”. The report will evaluate the reason for
success for Zara and compare its operation with a successful and an unsuccessful firm.
Further, the report will examine the reason due to which Zara has gained competitive
advantage and provide recommendations that can be implemented by the firm to maintain its
competitive advantage.

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2.0 Current Situation/Issues Analysis
As per the case, Zara effectively manage its supply chain operations by using smart
communication systems and by controlling each function of the operations. Inditex, the
parent company of Zara, is currently the world’s largest fashion apparel retailer and it
maintains various international brands including Zara, Pull & Bear, Bershka, Oysho and
others (Farfan, 2017). Zara is Inditex most popular brand, and it is also the largest contributes
to its total sales. The company has increased its operations worldwide, and it maintains its
competitive position through effective Supply Chain Management (SCM) strategy. Although
the firm has reported tremendous success, it faces various political, economic, environmental,
technological, social and legal issues at a global stage. The firm has to comply with different
legal and social policies while operating in different countries and global economic
conditions also influence company’ profits. The corporation is facing fierce competition from
various multinational brands such as H&M, Marks & Spencer, GAP, and many others (Joy, et
al., 2012).
In global markets, the supply chain operations of the company are also affected because
nowadays products have a shorter lifespan and fashion trends changed rapidly due to social
media sites. The company also facing issues in maintain effective supply chain operation as
its operations grow in international markets (Barnes and Lea-Greenwood, 2010). Many of the
competitors have started imitating Zara’s supply chain which all them to increase their
efficiency which increases Zara’s competition. Zara’s competitive advantage include it fast
fashion system through which it offers newly designed products to its customers in 14 days
whereas other companies take months. However, many corporations have reduced the time
taken by them in offering new products, for example, Benetton Group SpA offer new clothes
in one week and other companies such as Fast Retailing Co. and Forever 21 display new
products within six weeks. The fashion retailers are facing unstable demands from customers
worldwide which increases the issues face by Zara in global markets (Caro and Gallien,
2010).
3.0 Fundamental Reasons for Zara’s Success
Zara has achieved substantial success in international markets because of its effective supply
chain and communication system. The business logistics of Zara include inventory

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management, purchasing, transportation, and warehousing. Zara implements a strategic
logistic theory which focuses on different parts of its supply chain (Christopher, 2016).
Theoretical framework of the enterprise includes Just-in-Time manufacturing, Porter’s
generic strategies, and supply chain patterns which increase the efficiency of company’s
supply chain operations. The company has three intangible in its value chain which provides
them a competitive advantage; it includes information system, process model, and brand
image. Following are various factors which assist in increasing Zara’s success in international
markets and provide them a competitive advantage.
3.1 Communication System
The company has tight communication loop and effective IT infrastructure which assist them
in establishing high responsive communication system across its international stores. All the
necessary information regarding sales data, changing market trends and global demand is
shared between retailer stores and company’s head office which is situated in La Coruna.
Effective communication channels enable the company to implement Just-in-Time
manufacturing theory which reduces the time of decision-making which allows the company
to quickly offer new products to its customers (Qrunfleh and Tarafdar, 2014).
3.2 Control over Operations
Zara has total control over its sourcing and distribution channels which allow them to modify
them as per company’s demands and increase its efficiency. In Porter Generic strategy,
corporations focus on establishing competitive advantage across its market scope. Zara
maintains a competitive advantage due to effective control over logistic operations which
enable it to perform all design, warehousing, distribution and logistics functions internally
and display new items in the stores in less than 14 days. More than 50 percent of company’s
production is in-house which increases its efficiency (Caro, et al., 2010).
3.3 Rapid-Fire Supply Chain Management
The corporation has implemented “Rapid-fire” supply chain through which it has established
a rigid schedule that allows them to place Just-in-Time inventory orders. The firm uses self-
made software for performing logistic operations which increases shipments accuracy to 98.8
percent and reduced shrinkage to 0.5 percent. It enables the corporation to ship products in
European stores in 24 hours and American and Asian stores in 48 hours. Effective supply
chain operations allow the corporation to target “fast fashion” industry (Mehrjoo and Pasek,
2016).

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3.4 Positive Brand Image
The enterprise has a positive brand image of offering high-quality products at inexpensive
prices which allow them to increase its global operations. The company has implemented “no
advertising strategy” in which it spends only 0.3 percent revenue on marketing expense. In
comparison, other competitors spend around 3.5 percent of their revenue on advertising. It
allows Zara to increase its investment in store locations and open stores in prime locations.
The firm also refurbishes its stores more than its competitors that increase company’s
reputation and allow them to maintain their positive image by word-to-mouth marketing
(Rageh Ismail and Spinelli, 2012).
4.0 Comparison between Zara and Other Corporation
4.1 Comparison between Zara and another Successful Company
Zara maintain its competitive advantage through effective supply chain operations and
controlling its distribution and sourcing channels. Similarly, Dell is another company which
has established an effective supply chain and control over its distribution and sourcing
channels. Following is a comparison between supply chain of Dell and Zara.
Dell’s Supply Chain
Dell is a successful corporation which operates in computer hardware and software industry.
The company has gained a competitive advantage due to its effective and minimalistic supply
chain. There are three key players in Dell’s supply chain: customer, company, and supplier.
The customer book place order and Dell manufacture such products by getting quality parts
from suppliers. Effective communication between supplier and the company and just-in-time
strategy are key part of the success of Dell’s supply chain (Tang and Musa, 2011).
Zara’s Supply Chain
Zara’s supply chain is different from Dell; the company’s supply chain includes different
functions such as designing, manufacturing, sourcing, and distribution. The company closely
monitor its supply chain operations which increase its efficiency. Though, the company also
uses effective communication channels and just-in-time ordering strategy just as Dell to
increase its efficiency.
Point of Difference

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 Zara follows a vertical integration supply chain through which it controls the
operations of its suppliers which allow them to easily meet the demand of customers
and manufacturing process. Dell manages different suppliers to maintain speed and
accuracy in its supply chain, but it faces various risks including a shortage of goods,
uncertainty, delay, and insecurity. Therefore, more than 95 percent of company’s
suppliers are located new the manufacturing units (Christopher and Holweg, 2011).
 Zara has a number of warehouses to store its inventory and make them quickly
available in the production unit which increases their warehouse costs. On the other
hand, Dell has low inventory costs since it has 7 hours of inventory, unlike Zara
which has ten days of inventory (Choi, et al., 2011).
4.2 Comparison between Zara and an Unsuccessful Company
Target was founded in 1902, and it is second largest discount store in the United States after
Wal-Mart. The company has achieved tremendous success in the US markets, but they failed
terribly in Canadian markets. Target Canada was the subsidiary of Target which established
discount stores across Canada in 2013. The company failed to attract customers and decided
to shut down its operation in 2015 due to lack of effective supply chain system (Dahlhoff,
2015).
Target Canada’s Supply Chain
The company did not have control over its suppliers and ordering operations, and they failed
to assess its customers’ demands. Lack of effective communication channels between the
corporation and its suppliers increase the confusion, and it also increases unnecessary stock in
the company.
Points of Difference
 Zara maintains control over different sections of its supply chain by effective
communication system. Target Canada, on the other hand, did not have an effective
communication system which increases unnecessary stock in its stores. Zara use just-
in-time strategy, whereas, Target Canada did not have such strategy (Gabrielli, Baghi
and Codeluppi, 2013).
 Zara spends significantly low on advertisements and uses the revenue to open its
stores at prime locations and continuously refurbish them for customers (Li, et al.,

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2014). Whereas Target Canada spends more on advertisement, and their stores did not
provide a premium experience to customers, therefore, the company failed.
5.0 Zara’s Competitive advantage
Zara has become world’s largest fast fashion retailing corporation because of its effective
supply chain, brand image, control over distribution and efficient communication system. The
company uses Supply Chain Management (SCM) strategy, Just-in-Time strategy, and
Porter’s Generic Strategy that assists them in gaining a competitive advantage and sustains
their future growth. Sustainability or sustainable development is defined as development that
fulfils the requirement of the present without compromising the growth of future generations
and their needs (Turker and Altuntas, 2014). Zara uses effective supply chain for sustainable
development. The company’s supply chain reduces the waste of products which protect
natural resources; it controls over suppliers, distribution system, and effective communication
channels assist in reducing overstocking its stores. The production operations of the
enterprise reduce its manufacturing costs and wastage of material. All these factors assist in
the sustainable development of the enterprise which provides them a competitive advantage
and creates a positive brand image.
6.0 Suitable for Other corporations
The supply chain management strategy of Zara is suitable for other corporations as well, and
they can use it to gain a competitive advantage. Many multinational companies find it
difficult to maintain a similar level of quality and services while offering services in different
countries. For example, Marks & Spencer failed to increase its operation in Canadian markets
because the company failed to maintain a similar level of quality which did not attract
customers. Therefore, organisations can implement the strategy of Zara which assists them in
establishing effective communication channels that connect every retailing store to the firm’s
head office (Jang, et al., 2012). Organisations can also control the distribution and sourcing
operations which will reduce their overall cost. Effective supply chain allows fast fashion
corporations to offer the latest design products to its customer in less time which will assist
them in increasing their operations worldwide (He, 2012). Therefore, other companies can
implement business strategy of Zara which can provide them a competitive advantage and
sustain their future development.

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7.0 Conclusion
In conclusion, Zara has implemented various logistics theories that provide them a
competitive advantage in fast fashion retailing industry and sustain their future growth
worldwide. The company uses effective communication channels to manage its operations
worldwide, and it also assists in quick decision-making process. The firm control various
supply chain functions including distribution, operations, productions, suppliers, sourcing,
and others to maintain efficiency. Due to effective supply chain management, the corporation
is able to reduce the waste of material and overall costs. Other corporations can also
implement strategies of Zara to effectively manage their worldwide operations which can
assist them in increasing their efficiency and sustain their future development.
8.0 Recommendations
Following recommendations can be implemented by Zara to address various issue face by the
company to maintain its effectiveness.
 The company should increase its investment in marketing strategy that can assist them
in increasing the number of customers worldwide. Zara can use their positive image in
marketing strategy to increase its operations in global markets and attract new
customers.
 Zara’s competitors such as Benetton group SpA and Forever 21 are able to offer new
clothes to their customers in less time than Zara. Therefore, the company should
invest in new markets to set up new manufacturing and designing plants that can
increase the speed of production in global markets.
 Zara should also cooperate with a wide range of designers to offer new products to its
customers that will assist them in maintaining a competitive advantage.
 The firm can also establish new distribution centres in different countries that can
speed up the process of distributing products and reduce overall costs (Garcia-
Alvarez, 2015).

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2891805 > [Accessed 29 January 2005].

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