Reference no: EM131225786

Zara: Planning not to plan

The first of four functions in the management process is planning, which involves setting goals and deciding how to achieve them. An organization should adopt planning and strategic management to provide direction and momentum, encourage new ideas, develop a competitive advantage, etc. you are asked to apply your knowledge of planning to the analysis of this case.

Planning is defined as setting goals and deciding how to achieve them. Alternatively, it can also be defined as coping with uncertainty by formulating future courses of action to achieve specified results. Planning takes place at different levels of management, and each level will utilize different types of gals in their planning process. For goals to be effective, they should have the characteristics of being specific, measurable, attainable, results-oriented, and having target dates. This case will highlight the planning process at Zara.

Read the case below and answer the questions that follow.

Zara is a large global clothing and accessories retailer that has continually appeared in lists of the top 50 global brands. By implementing a specific vision statement in a unique and thoughtful way, Zara has become one of the biggest success stories in fashion history. Zara's vision statement is as follows: "Zara is committed to satisfying the desires of our customers. As a result we pledge to continuously innovate our business to improve your experience. We promise to provide new designs made from quality materials that are affordable"

As a luxury fashion company can reasonably expect, Zara's customers desire a quickly changing selection of items. Customers are only interested in this season's styles and therefore, items leftover from the last season become obsolete with every new product introduced. Because of the rapid and changing nature of the fashion market Zara has implemented a plan to plan less.

Most apparel retailers commit to designs for up to 90% of their seasonal lines six months in advance. This strategy guarantees that new products are available by the start of each season and costs stay low because companies can choose to outsource production if necessary. But, as stated above, the fashion market is highly volatile and constantly changing. Once a retailer commits to a design, the only thing they can do is sit and hope with fingers crossed that the designs they have chosen are the designs that people will want in six months.

Zara, on the other hand, only commits to 50-60% of its designs six months in advance. As a result, Zara responds to demand as it develops and changes during each season rather than forecasting demand in advance. Not only does Zara keep its initial design production low, but the company also stocks extremely limited amounts of each design in stores. These scarce inventories are a result of small and frequent shipments that continually deliver new designs. As a result, customers are compelled to visit stores frequently and buy items immediately because they are in short supply and may not be available at any other time.

Zara's retail managers provide valuable information about customer wants and preferences and continually change out poorly selling designs with new options. This quick response system reflects the market's quickly changing demand and results in happy and stylish Zara customers.

1. Zara's identification of customer needs can be categorized as which planning and strategic management step?

• Maintain strategic control
• Establish the mission and vision
• Implement the strategy
• Formulate the grand strategy & strategic, tactical, & operational plans
• Assess the current reality

2. Why did Zara choose to take a chance and pre-order much less of the coming season's designs than its competitors?

• It was a new idea.
• It corresponded with the company's mission statement.
• It is what the customers wanted.
• It allowed the company to save money.
• It provided opportunities for the company to develop a competitive advantage.

3. Decisions that retail managers make on which products to pull from the floor and which products to order more inventory are considered as _________.

• operational planning
• bargaining planning
• tactical planning
• task planning
• strategic planning

4. Zara's goals should have all of the following characteristics except __________.

• being attainable
• being measurable
• being specific
• being differentiated
• including target dates

5. Making periodic deliveries of products to each Zara store is an example of ________.

• controlling the direction by improving future plans
• controlling the direction by comparing the results with the plan
• controlling the direction by correcting deviation in the plan
• making the plan
• carrying out the plan