Can Zara Successful Business strategy be replicated?

Zara had just overtaken microsoft to become world richest man as reported by Forbes recently.

Zara, a global fashion company that is based in Arteizo Galicia and founded in 1975 by Amancio Ortega and Rosalia Mera, is a flagship chain store of the Inditex group. Zara is being described as a “Spanish success story” by CNN due to its successful business strategy which is completely different among its competitors such as Uniqlo and United Colors of Benetton which tend to maximize profits by maintaining a long supply chain strategy and manufacturing their products in developing countries with cheap labor costs. In contrast, Zara is applying a relatively short supply chain business strategy that controls most of the steps on the supply-chain, from designing, manufacturing to distributing its products. Zara is being called as the “fashion imitator” because it tends to meet consumer preferences and react to new trends in a quicker way instead of creating a trend and recommends products to customers. Due to its short supply chain strategy, Zara produces about 11,000 distinct items annually compared with 2,000 to 4,000 items for its key competitors. The company can design a new product and have the finished goods for sell in its stores in four to five weeks. If the design does not sell well within a week, it is withdrawn from shops and further orders are canceled and a different design is then pursued. Although the short supply chain business model was implemented successfully by Zara, this business strategy is however not easily replicated by others as there are several limitations when compared to the traditional long supply chain business model. The properties and advantages of these two business models would be discussed and compared thoroughly in the following paragraphs.


The fashion industry, with trends changing frequently is an ideal business for the short supply chain strategy. This is because it allows changes of design almost instantly when the fashion trend switches. As described above, the product development process of Zara, including design, sourcing materials, manufacture, product completion and distribution to stores worldwide could only take as short as just a few days. Thus, the short supply chain model is best for industries that are sensitive to market movements and businesses where demand changes rapidly. Other than that, as most of the production process is under control and closely monitored, the quality of the product produced would be superior when compared to products produced by long supply chain models. Less resource is needed for quality assurance check before the product is announced. Furthermore, the short supply chain models would minimize the delivery cost as the products are made and sold in a close area. Companies would also experience less risk on delivery as the climate and transportation conditions could be easily projected. As the production pipeline is short and manufacturing is done locally, companies would bear less foreign exchange risks. Especially during the period of global financial crisis, the fluctuation in different currencies could potentially harm the company profits.


There are certainly industries that are suitable to replicate the success of Zara in the short term business models. For an example, the food and beverage industry that sells fresh fruits and vegetables could be one of the many. As freshness is the key factor for this industries, the farming, manufacturing, packaging and distribution to stores has to be quick and fast. The fewer processes it has been through, the faster it reaches its consumers. Moreover, quality control is also a crucial factor in the fruit and vegetable industries as consumers are paying more attention on food quality and more regulations has been set up for stricter product control. The shorter supply chain could assure that the fruits or vegetables being delivered are fresh and clean.


Conversely, the long supply chain model are sometimes more cost effective when compared to the short supply chain model. The long supply chain model is suitable for businesses that require massive labor works, product cycle that is long and with consistent demand. As cheap labors could be found in developing markets such as China and India, the cost of production is sufficiently reduced. Other than that, businesses where production materials are easy to source would have an advantage of applying the long supply chain model. This is because the product could be directly assembled in remote countries instead of shipping materials around the world. However, there are also downsides with the long supply chain model. Firstly, it is difficult to control the quality of the products as the manufacturing is done remotely. It is harder to achieve sustainability as the pipeline is long and problems may arise between different production processes. Secondly, as labor is a crucial factor during manufacturing products, any political issues and scandals arise in the developing markets could affect the production process and sales of the businesses. For an example, the Foxconn factory scandal in China has impacted the sales of the leading smart phones makers - Apple. Other than that, the longer supply chain may also create larger exposures on delivery risks and foreign exchange risks.


For an example, Nikon, the leading Japanese camera manufacturer is applying the long supply chain model in their businesses. Their camera and lens production processes are initially based in Japan. However, as wages and energy prices continue to hike, their production factories were migrated to Thailand to reduce labor costs and assembly costs. Their business turned out to be very successful. This is because the camera industry has a long product cycle. DSLR – digital single-lens reflex camera lineups would normally be updated only once in a few years time and consumers’ expectations are consistent. The camera manufacturers could spend more time on the design stage locally whereas keeping the manufacturing process in remote factories. Hence, perfecting product designs and reducing costs at the same time. Dreams can still be attained if focused and consistent to life pursuits.