May 15, 2020 in Case Study

Zara Case Study Example

Situation Analysis

Inditex retailer group has a very efficient supply chain that allows the organization to deliver products within a short period. Zara is its oldest brand and a forerunner of a novel retailing model called fast fashion. This category includes catwalk inspired products that are manufactured rapidly and sold at reasonable prices. Zara can produce new products and distribute them to the stores within three weeks comparing with other top brands that spend six months on this task. Consequently, this management model has enabled the firm to respond to changing demands every season.

In an average season, Zara produces approximately eleven thousand products whereas major competitors make about four thousand items. Furthermore, the firm has a good flow of information between the store and regional managers and the commercial agents. The commercial agents monitor sales figures and communicate with local managers on a daily basis to identify and analyze trends. Store managers regularly request to alter the design. They specify whether color or sizes of a product should be changed and  introduce new ideas.

In 2008, Zara was recognized as the largest brand of Inditex. The store runs three separate product lines that include apparel for children, women, and men. The firm has created a culture that encourages instant decision-making process, continuous improvement, and a focus on employee retainment. The autonomy at Zara is extremely important since the enterprise operates in numerous locations that have diverse needs. Furthermore, an independent nature permits Zara to develop new ideas for the augmentation.

Even though the store managers have relative freedom in running the stores, the firm has established the rules of corporate control. This remote management aims to ensure that the brand of the company has the same representation for the clients in different geographical locations. The country managers meet twice a year to discuss the firm’s culture, best practices, performance, and expansion plans.

The firm has two principal selling seasons. Before they commence, Zara design teams present their initial sketches. After approval, the company makes approximately thirty percent of the production of new designs and sends them to suppliers. When the season begins, the factories in close proximity allow to introduce an original design that corresponds to the fashion trends and client needs. At the start of every season, new goods are shipped to the stores according to the requirements presented by the commercial agents. CEO recently introduced various improvements to the logistics and planning. For instance, he lowered the transportation costs by merging the logistic plans of the firm’s brands. The changes included shifting time-consuming tasks away from store workers. Also, the company introduced an automatic replacement scheme for primary products.

The store management is also effective. Each store has section managers that should monitor precise collections. Since women clothes disappear more rapidly compared to the other two lines, a chief section manager addresses the aspects of the women products. The section managers do not have a chair in the store since they always walk to study client needs. They also supervise the employees and specify the areas that they should improve.

The customer service in the stores favors customers as the employees do not often disturb them by telling them what they should buy. As a matter of fact, the employees should only offer help when they approach by the customers. This method allows the buyers ample time to check the products displayed and make a careful choice. In fact, many clients that are interested in the fashion know what they want. Therefore, they do not appreciate when the workers give them numerous products to try because they have a particular design in mind.

Despite the firm’s strategic approach in the supply chain, Zara needs to make changes that will not lead it to bankruptcy. The financial crunch of 2008 decreased the company’s growth and reduced the number of new stores opened. Furthermore, labor is the largest expense, thus finding the ways to cut its costs might increase the profit. The company should make a decision that will either reduce the labor cost and maintain the same profits or sustain the labor costs and increase the profits.

 

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Alternatives

The firm should introduce appraisal programs for the employees. This approach entails the firm assessing and rewarding the best performing workers. Thus, the employees will improve their individual productivity so that they receive the associated rewards. Staff appraisal programs will have various advantages, including enhanced performance, low turnover, and increased sales. The improved operation will be achieved if all the employees remain cognizant of their duties. The low turnover will be attained if they produce better quality goods within a short time. Furthermore, the increased sales will provide the high labor costs. Nevertheless, staff appraisal programs may have various disadvantages, including unhealthy competition, shift from the organizational culture, and additional expenses. The unhealthy competition will occur as a result of employees’ intentions to impress the management and to avoid helping each other.

Zara should invest in staff training as this policy will instill confidence and competence amongst the workers. It will also have several advantages, including low defective items, higher sales, and low turnover. The employees will be trained to produce quality goods with minimal defects. Thus, the high cost of labor will not affect the organization since the employees will become more productive. However, it will produce several drawbacks encompassing high costs, time expenses, and misplaced resources. The training is conducted as the seminars where professionals teach the employees various skills. This training costs the management a significant amount of money. The process also takes a considerable amount of time. Furthermore, when the employees do not master new skills, the organization would waste many resources for training and would not obtain the associated benefits.

Zara should open more stores in different countries and diversify the products manufacture. This strategy would bring numerous positive aspects, including higher sales, increased growth rate, and bigger market. The higher number of products would ensure that Zara’s growth rate increases as the firm starts supplying the products to a larger market. Thus, the business can obtain higher revenue from increased sales. Nonetheless, diversification of items would have several disadvantages as well, including high competition, loss of competitive edge, and compromise of the current products since the focus on new products will entail the firm producing products that have been already produced by other big players in the industry.

Recommendations

Out of the three alternatives, the introduction of staff appraisal programs in the organization is obviously the most effective. In fact, staff assessment program will ensure that the employee’s individual productivity increases which will, in turn, boost the productivity of the entire organization. The workers will be motivated to work harder as they anticipate being recognized and rewarded for their efforts. Employees that receive the rewards will encourage the other members of the staff to keep working hard. Thus, personnel evaluation will allow the organization to receive larger income which will reduce the labor cost. Furthermore, staff evaluation programs contribute to a higher growth rate of the company. The additional revenue obtained from the stores will allow to open new stores in other regions that have a stable market. This alternative will reduce the labor cost since the total revenue will be high.

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