Reference no: EM132129443

Zara's Stategy Execution Capabilities.

Zara, a major division of Inditex Group, is a leading "fast fashion" retailer. As soon as designs are seen in high-end fashion houses such as Prada, Zara's design team sets to work altering the clothing designs so that it can produce high fashion at mass-retailing prices. Zara's sttategy is clever, but by no means unique. The company's competitive advantage is in strategy execution. Every step of Zara's value chain execution is geared towrd putting fashionble clothes in stores quickly, realizing high turnover, and strategically driving traffic. The first key lever is a quick productionprocess. Zara's design team uses inspiration from high fashion and nearly real-time feedback from stores to create up-to-the-minute pieces. Manufacturing largely occurs in factories close to headquarters in Spain, northern Africa, and Turkey, all areas considered to have a high cost of labor. Planning the factories strategically close llows for more flexibility and greater responsiveness to market needs, thereby outweighing the additional labor costs. The entire production process, from design to arrival at stores, takes only two weeks, while other retailers take six months. Whereas traditional retailers commit up to 80% of their lines by the start of the season, Zara commits only 50 to 60%, meaning that up to half of the merchandise to hit stores is designed and manufactured during the season. Zara purposefully manufactures in small lot sizes to avoid discounting later on and also to encourage impulse shopping, as a particular item could be gone in a few days. From start to finish, Zara has engineered its production process to maximize turnover and turn around time, creating a true advantage in this step of strategy execution. Zara also ecels at driving traffic to stores. First , the small lot sizes and frequent shipments (up to twice a week per store) drive customers to visit often and purchase quickly. Zara shoppers average 17 visits per year, versus 4 to 5 for the Gap. On average, items stay in a Zara store only in 11 days. Second, Zara spends no money on advertising, but it occupies some of the most expensive retail space in town, always near the high-fashion houses it imitates. Proximity reinforces the high-fashion association, while the busy street drives significant foot traffic. Overall, Zara has managed to create competitive advantage in every level of strategy execution by tightly aligning design, production, advertising, and real estate with the overall strategy of fast fashion: extremely fast and extremely flexible.

Question:

In what way does Zara develop competitive advantage through excellent strategy execution?