Zara’s Competitive Advantage

Zara’s Competitive Advantage

Expected Learning Outcomes

• Zara’s innovative business model and supply chain
• How Zara sustains its competitive advantage and consistently delivers value to its target customers?
• Should Zara localize or continue with its serving business and operating model to maintain its unique identity?

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Zara’s Business Model

1. What do you mean by a business model? What are the differences between a business model, a revenue model and a business plan?

2. Using the article Reinventing Your Business Model1, can you analyze the following for Zara:

a) Customer Value Proposition – job to be done, target customer
b) Profit Formula – revenue model, cost structure, margin model, resource velocity
c) Key Resources – people, technology/products, equipment, information, channels, brand, partnerships/alliances
d) Key Processes – processes, rules and metrics, norms

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Zara’s Business Model: Delivering Value

1. Using Michael Porter’s Value Chain framework can you put together Zara’s value creation architecture?

2. What do you think is Zara’s unique value proposition to its target customers among the following:

a) Fashion
b) Fast Fashion
c) Affordable Fashion

3. What do you think is the role of the headquarters/central command in delivering unique value to its customers?

4. ...........

Zara’s Business Model: Global Expansion and Global Challenges

1. The accompanying article says that, “The secret to their success has been centralization... they can make decision in a very coordinated manner.” With its target customers’ tastes and preferences evolving and changing with time, do you think, Zara should revise its core principles of centralization of design, manufacture and distribution?

2. ................

Exhibits

Exhibit I: Resources – Competitive Advantage Cycle

Exhibit II: Zara’s Realized Price

Zara’s Competitive Advantage

Synopsis

The focus of this case flyer is on Zara’s centralized business model. The company had built a competitive advantage based on its centralized business model and supply chain and offered a unique value proposition to its target customers. The company had been operating this model successfully since 1975 and could not be duplicated by any of its competitors. Though the centralized model has its own merits and demerits the company was successful in using them to its advantage. However, its expansion into China had raised questions over the localization of its business and supply chain model. The case flyer helps debate whether Zara should localize or stay centralized. And if localized, will it be able to give the same value proposition to its customers or will its competitive advantage be compromised?

Expected Learning Outcomes

• • Zara’s innovative business model and supply chain
• • Zara’s sustaining competitive advantage and consistently delivering value to its target customers
• • Should Zara localize or continue with its serving business and operating model to maintain its unique identity?

Positioning and Setting

The case flyer can be used in the following courses:

• a) Business Strategy
• b) Business Model/Operating Model
• c) Supply Chain Management

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Suggested Orchestration

Before the Case Flyer Discussion

a) The students/participants were asked to read the following articles:

• Reinventing Your Business Model

• What is Strategy?

• Michael Porter’s Value Chain concept and Generic Strategies

b) Most importantly, the students should be encouraged to analyze all the questions given in the case flyer (either individually or in learning teams or in appropriate discussion forums) to enable them to participate effectively and enrich the learning outcomes.

During the Case Flyer Discussion in the Classroom

This case flyer can effectively be discussed in the classroom under three broad related topics.........

The flow of questions to be discussed in the classroom has been elaborated in Annexure (TN)-I: The Board Plan

I. Zara’s Business Model

• The class was initiated by discussing concepts like business model, revenue model and business plan.

• The discussion was then taken forward in relation to Zara. Here Zara’s centralized business model and supply chain, its revenue model, cost structure, resources, key processes and value propositions offered to its customers were discussed.

• Then students were asked to explain the reasons behind Zara choosing such unconventional model (centralized). Students discussed the advantages of having such model.

• The class was then asked to come up with reasons as to why Zara’s business model was not duplicated by its competitors. Students discussed the disadvantages of having such business model – the resources required to sustain the business model and the cost factor – as the reasons that this model was not duplicated by its competitors.

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Exhibits

Exhibit (TN)-I: Zara’s Supply Chain