Kuwait Industrial Markets
Question one Introduction
Zara is a first glowing fashion design firm in the world located in Northeast Spain where it was started in 1975. Zara is the first fast-fashion seller in current design overtaking the older giants in this industry. The company has revolutionized the trend in this market, changing the speed at which a certain fashion trend is discovered and implemented Zara identify a certain trendy fashion research it within 3 to4 weeks and design it within 7 to10 days. When Zara sees demand for a certain fashion, it produces it in masses and avails it in the market in a period of 7 to 10 days (Mo, 2015).
Supply chain from the raw materials to the finished product and finally purchase by the end user involves several distribution networks (Sodhi, 2005). The supplier of the raw material is the first in this line and he provides the input needed to manufacture the products. For instance, Zara raw materials are textile and some horticultural product Zara produces 40 % of its fabric material and 50% of clothes products. After the raw materials are bought, they are transported or shipped to the manufacturing plant. In the manufacturing plant the raw materials are turned into finished products labeled and packaged and transported to their over 1645 stores. This model of supply chain allow Zara to introduce new goods as much as 11000 items compared to just 2000 to 4000 produced by H&G and Gap combined. From there, the finished goods are taken by the various distributors and taken into their over 1495 outlet stores. From there, the customers can get the goods from there and the process ends (Guo and Tang, 2009).
Most company don’t optimize on this entire process leading to delays and inconveniences. At Zara, things are different as shipment are made in small bunches within a short period of time like six times a month. The company also grows all its horticultural raw materials or buys locally that is 40 % of its fabric material and 50% of clothes products . This allows them to speed up the processing rate with 80000 items produced in every hour as there are no delays in delivery of the raw material. At the factory, there are no workers a part from the 300 fashion observers who are ranked as manager and report their finding back to production team. A state of the art automated machines which produces at a rate of 80000 items at an hour connections allow Zara to produce in bulk within a period of 5 days. Finally, Zara distribute their product to their sales outlet within a matter of one week and those nearer outlets are reached within 24 hours. Inditex grew by 25% and to 1.8 billion with Zara been ranked as the number 64 on interbrand’s top 100 list.
One major disadvantage of Zara style of fast fashion is that the fashion ends so fast even without some customers having a chance to buy the fashion. The limitation may annoy customers and they may decide never to wear any fashionable outfit from this company. Also Zara is forced to restock very fast even before the stock at their outlet is over and bringing in the new fashion make customers loose taste with the older trend and go with the new trend. Even though it is a disadvantage, it might also be an advantage in that the customer has to constantly look out at their outlet to make sure they don’t miss out on any upcoming fashion or new release from the designer.
The fast fashion strategy employed by Zara mostly focus on copying older original brands and selling them at a cheaper price. This might be a disadvantage especially to people who value quality than fashion. Such people prefer to go for the original brands instead of the trendy fashion. Also people who don’t mind about the fashion or what they wear will only buy there because maybe the stall is near them or within reach (Arrigo, 2010). However it can be an advantage to Zara for most people are dazzled by fashion and will prefer to buy the trend photocopy produced cheaply by Zara than go for the original one.
Therefore it is obvious that the advantage of fast fashion used by Zara far much outweigh the disadvantages. This is so since most of the disadvantages turn out to be advantages for Zara.
Vertical integration is where the company runs different companies producing the same goods or different parts of its end products but own all these companies (Frésard, Hoberg and Phillips, n.d.). This is the case with Inditex which owns Zara and other companies that produce fashion wares. Zara is one of the most successful of these chains of companies and is the one that introduced the idea of fast fashion. Horizontal integration is where a company subcontracts other companies to run various operations that lead to their success. For instance most United State companies subcontracts Chinese firms to design and produce their ware as they consider it to be cheaper. However, this introduces issues of delays and it may take even months before the order is implemented.
Zara has taken the advantage of vertical integration to position itself in the global market. Zara runs it shipments companies and all its design are produced at their headquarters in Spain. Furthermore most of its horticultural raw products are produced locally to avoid the issue of delay. Therefore, Zara is able to do timely supply of their fashion design to the market unlike other firms that use the traditional methods of production and supply of products (Tokatli, 2007). In addition, Zara is able to control the quantity of raw materials they ship and how frequent they get them. This makes Zara do their production at the right time and release the required quantity.
Zara also benefits from vertical integration as it has managed to run both the upstream and downstream with maximum perfection and efficiencies. Its backward stream firms are its shipment companies for the raw materials, transporters of raw materials to the firm’s headquarters and the production team (Al-Obaidan and Scully, 1993). The forward stream of the Zara is made up of its cargo transporter to their outlet both trucks transporting to nearby outlets and cargo planes that transport the products to far away outlets. Being in control of all these upstream and downstream firms, gives Zara a bird eyed view of all its activities making sure everything goes as planned and meet their deadlines.
Zara also gains an advantage by use of vertical integration on advertisement as most people are able to see the brand all over due to the fast fashion strategy which also advertises the other companies associated to Inditex. Another advantage of vertical Integration is that clients are willing to buy the same brand of product from the same shelf (Aarts and Eisenloeffel, 1990). Traditionally, most people could not pick items that had the same brand label as long as they fulfilled the same purpose.
Zara though not a big name; its brand has been on the move due to the use of vertical integration and fast fashion. This upcoming global company has become a threat to even big luxuries fashion design firms. This has made such firms reorganize their supply chain strategies. For instance with the great competition Zara has posed on America fashion firms, most of these firms have decided to relocate some of their production team to America instead of sourcing them from China. They have taken the slogan and the propaganda of American fashion ware made in America. But all in all with the way Zara has been growing it would be hard for any Fashion or cloth line to kick out of the market especially in developed countries where Fashion is so valued
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