CASE STUDY 2 – ZARA – THE WORLD’S LARGEST FASHION RETAILER
Using theoretical concepts from the module assess Zara’s operations strategy and
the relative importance of the 5 Performance Objectives in this organisation.
Comment on how these may be different from other clothing retailers.
Zara’s operational strategy is assessed using the five basic operations performance objectives
which allow the organisation to measure its operations performance Slack et al. (2007). As a
result of the vertical integration, Zara is able to meet all the operational performance
objectives such as speed in response to the customers order, flexibility, dependability, high
quality of product and reasonable price. In undertaking the assessment, a comparison with
other industry players is discussed.
In fashion industry, the cost driver is a potential tool to be competitive, because lower cost
attracts more customers and enhance the potential target to improve the organization structure
(Slack, Chambers and Johnston 2010). Unlike other competitors who outsource their
production to Asia, Zara produces most of its products in Europe. Even though the cost of
production in Europe is more expensive than Asia, Zara does have a competitive advantage
over its competitors in regards to operations. Zara sustains reasonable costs within the
operation process due to the in-house system, which allowed achieving high quality of
They produce a substantial proportion of their products in their own factories,
production stages that are more capital-intensive and value-added-intensive (purchase raw
materials, design, cut, dye, quality control, iron, packaging, labelling, distribution and
logistics); and they outsource the production stages that are more labour-intensive and less
value-added-intensive (sewing). Also, inventory costs are higher for competitors because
orders are placed for a whole season well in advance and then held in distribution facilities
until periodic shipment to stores. However, Zara is able to set in the market a reasonable price
due to the competitive supply chain design, which allows quick response to customer
demands and gain high margin profit (Ferdows, Lewis, Machuda 2004).Lower inventory cost
is a key sustainable advantage as it enables Zara to manufacture and sell its products at
Quality covers both the quality of the product or services itself and the quality of the
processes that delivers the product or services. The advantage pf good quality on
competitiveness include increase dependability, reduced dependability and improved
customer satisfaction (Porter, 2011).
The quality objective implies that an organisation
produces goods or services through a specific approach that leads to both external customer
satisfaction as well as efficient organization of the internal operation process (Slack,
Chambers and Johnston 2010). It is observed from the case study that Zara has high quality
performance between all its operations areas due to the developed supply chain system,
which leads to the satisfaction of the final customer, at a less unit cost (Lopez and Fan 2009).