Innovative Business Model

Inditex, the company that owns Zara has an innovative business model that serves as the foundation of its strategic capability. The business model of Zara gives utmost importance to customer and continuous innovation. The organization considers the customer as the beginning and end of its business. However, Zara has pushed forward by giving the customer an active role from the start of the chain and turned it into the principal drive for its entire business model.

The requests, comments and suggestions of the customers are considered by the design team which, based on this, create some proposals that are sent to stores immediately. The start of the company’s business model is the store. The store is important to the company’s business model because this is where informatio0n from the customers are received and collected. These information are sent to design centers and commercial departments in real-time. The response from the customer with new requests sets the process going.

Zara stores receive new products twice a week , thereby giving a quick response to the customer. Excellent Supply Chain Management For Zara stores to be able to offer cutting edge fashion at affordable prices requires the firm to exert a strong influence over almost the entire garment supply chain: design, purchasing, production, distribution, and retailing. Zara produces clothes that resemble the latest couture creations, but they beat the designers to market. Because they use less expensive fabrics, they can also provide the product at a lower price.

To achieve this type of competitive advantage, Zara controls most of its supply chain, by managing all design, warehousing, distribution, and logistics functions. Zara design the organization, operational procedures, performance measures and even office configurations to make information and product transfer easy. Because Zara’s merchandise is produced in small quantities, provided on predictable schedules, and displayed in the stores for only a short amount of time, customers visit Zara stores more frequently. This has an added advantage of helping Zara avoid the cost of advertising.

The scheduling techniques of Zara is also very efficient. * Centrally Managed Inventory – controlled and timely delivery of clothing to all stores across the world * Reduced Design Cycle Time – timely response to items that sell well and ability to quickly alter or enter new designs * Strong IT System – allows almost immediate communication of sales and inventory information across enterprise * Logistics and Distribution – clothes move within hours to their destination, efficient scheduling of shipments * Fashionable Items at Real World Prices

The particular operation strategy used by Zara helps it respond quickly to shifts in customer demand and build a powerful brand. Zara estimate that it takes only two weeks to convert design ideas into products on the shelf to satisfy its young, hip, clientele with fashion for the masses. Store employees regularly tour urban hot spots looking for new trends and reporting back to designers. Knowing what’s in today may be out next month is the secret of the success of the Spanish retailer as is the ability to apply operations strategy that puts new fashion concepts on the shelf twelve to fifteen days.

Zara’s appeal is in its clothes themselves. Zara has earned a reputation of being able to come up with more affordable interpretations of catwalk styles into its stores with breathtaking speed. A design presented in a fashion show by a luxury design house will not be available to the masses for months, but Zara is able to create something that looks like it in just two weeks. This enables Zara to attract a large number of customers who cannot afford designer clothes or who are looking for a more affordable alternative (Tungate 2008).

Although Zara is known for its ability to provide more affordable interpretations of catwalk clothes, it is also known as a company that can create innovative fashion pieces. This is attributed to its highly effective design strategy that starts in the stores. The customer feedbacks, requests and suggestions that are gathered from the customers in every store is passed to the design team. The design team also consult magazines, trade fairs, and fashion shows to know the latest in the fashion industry. The company ensures product quality by designing its own products.

Zara employs around 300 people in its headquarters in Spain. The headquarters staff is composed of designers, specialists and buyers. Together they produce designs for approximately 40,000 items per year from which 10,000 are selected for production. Unlike their industry peers, these teams work both on next season’s designs and, simultaneously and continuously, also update the current season’s designs. Extensive feedback from the store network also forms an integral part of the design process. Women’s, men’s and children’s designers sit in different halls in a modern building attached to the Inditex headquarters.