INSY 2301 Lecture Notes - Lecture 3: Upselling, Radio-Frequency Identification, Inditex
22 Jun 2018
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Case Study: Zara
Background
Zara has blended IT to create a unique technology-enabled strategy
oShuns advertising and rarely runs sales
oIs highly vertically integrated (keeps huge swaths of its production process in-
house, instead of outsourcing manufacturing)
GAP was very successful in the 1990s, but struggled with taste in the early 2000s
oAttempted and failed to attract a new customer base (teenagers), while also
alienating its core customers
oSaw same store sales decline, while profits dropped
Churn Rate: A measure of a company’s level of one-time customers
oA company with a high churn rate will eventually run out of customers and die
August 2008: Zara’s sales surpassed GAP’s, making Zara’s parent company (Inditex)
the largest retailer in the fashion industry
Contract Manufacturing
Contract Manufacturing: Outsourcing manufacturing to developing countries in order
to take advantage of lower production costs
oParticularly common in the apparel industry
Leveraging contract manufacturing can keep COGS low, but there’s a major downside
oGlobal competition among contract firms has led to heavy cost-based bidding,
which in turn has led to firms skimping on safety, ignoring environmental
concerns, employing child labor, etc.
oSafety concerns and resulting tragedies lead to consumer outrage
Big firms are big targets
oFirms that fail to ensure acceptable labor practices risk brand-damaging
backlash that can repel customers and employees
oManagerial Implications: Today’s managers must consider their own firm’s
ethical practices AND those of their suppliers/partners
Zara’s Strategies
Information Gathering: Store managers/employees take part in intelligence-gathering
efforts that directly impact in-store offerings
oGoal: To use data to enhance decision-making and stocking
oPDAs (handheld computing devices) are used by employees to gather customer
input/feedback
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Zara has blended it to create a unique technology-enabled strategy: shuns advertising and rarely runs sales, is highly vertically integrated (keeps huge swaths of its production process in- house, instead of outsourcing manufacturing) Churn rate: a measure of a company"s level of one-time customers: a company with a high churn rate will eventually run out of customers and die. August 2008: zara"s sales surpassed gap"s, making zara"s parent company (inditex) the largest retailer in the fashion industry. Contract manufacturing: outsourcing manufacturing to developing countries in order to take advantage of lower production costs: particularly common in the apparel industry. Product design: designers work to follow customer demand, instead of pushing trends. Big idea: zara constantly collects data, using it to impact all facets of business. Zara is successful by targeting technology investment at the points in its value chain where there will be the most significant impact: every dollar has an impact.
