Zara Case Study

1. What are Zara’s competitive advantages, and what are they based on?

Zara has almost three key factors to act successfully within the fast changing fashion industry:

* Short Lead-time

* Lower quantities

* More styles

Firstly, by putting their focus on shorter lead-times. So the company ensures that the stores are able to offer clothes that the consumers want at that time. Zara identifies a trend and have clothes in its stores in about 1 month, this means that Zara can quickly identify and catch a winning fashion trend, while its competitors need a longer period. Catching a fashion trend is a clear advantage for better margins with more sales. You’re able to offer your clothes at full prices and need fewer discounts. In comparison most retailers of comparable size or even smaller need about 4-12 months. Most retailers try to forecast what and how much its customers will buy many months in the future, while Zara moves in step with its customers. Zara identifies trends through permanent research. This means not just traditional consumer market research, but a daily cooperation through emails and phone calls between the stores and the head office. In contrast with other retailers, Zara's machinery can react to the report at once and produce new styles or a modification of a style within 2-4 weeks. Other retailers with longer supply chain lead times would see in the attempt to try and reply to a sales report a loss.

Secondly, by avoid mass production. Zara not only reduces its exposure to any single product but also creates an artificial scarcity value. As with all things that are fashionable, the less the article is available, the more desirable the object becomes. Another advantage of lower quantities is that if a style does not work well, there is not much to be sold during the season-end sale. The result of this is that Zara discounts a very small percentage of its production.

Thirdly, Zara produces and designs more styles. They introduce...