Títol : Zara and Benetton: Comparison of Two Business Models
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Títol : Zara and Benetton: Comparison of two business models Volum: I de I Alumne:Amalia Paola Palladino Director/Ponent:Jose M. Cabré Garcia Departament:Organización de Empresas (OE) Data: 28 Junio 2010 Data:28 June 2010 DADES DEL PROJECTE Títol del Projecte: Zara and Benetton : Comparison of two business models Nom de l'estudiant:Amalia Paola Palladino Titulació:Ingenieria Superior Infomatica Crèdits:37,5 Director/Ponent: Jose M. Cabré Garcia Departament:Organizazión de empresas (OE) MEMBRES DEL TRIBUNAL President:Ferran Sabate Garriga,Toma de decisiones y gestión de proyectos empresariales(PDGPE) Vocal:Francesc Tiñena Salvañà, Compresion de datos e imagen (CDI) Secretari:Jose M. Cabré Garcia, Empresa y Entorno Economico (EEE) QUALIFICACIÓ Qualificació numèrica: Qualificació descriptiva: Data: AKNOWLEDGEMENTS First of all, I would like to thank Spanish professor Jose Cabré Garcia and Italian professor Massimo Visconti, my supervisors during the dissertation, for their helpfulness. Their academic and personal help was precious throughout this difficult task; Next, I would like to take this opportunity to thank the people who generously spent time to enable me to complete successfully my dissertation with the best possible result: - My family, who has supported me amazingly all these years, both financially and psychologically. Their love and support kept me going in difficult times. - My boyfriend Tomasz for his patience and moral support during my hard times. - All my friends met in Barcelona who made my stay wonderful and unforgettable: Bigola, Paride, Fabri, Gabri, Peruzzo, Vinci, Mattew, Ale, Arvin, Philip,… At last, I would like to thank my favorite Spanish friends: Fernando and Leire, who helped me to learn Spanish. INDEX CHAPTER 1 : INTRODUCTION Pag. 8 CHAPTER 2 : PROJECT 2.1 DEFINITION 9 2.2 MOTIVATION 9 CHAPTER 3: COMPETITIVE ADVANTAGE IN THE FAST FASHION 10 3.1 SUPPLY CHAIN 11 3.1.1 DECISIONS ON THREE LEVELS 14 3.1.2 DRIVERS OF SUPPLY CHAIN 16 3.1.3 SCOR 19 3.1.3.1 METRICS 21 3.2 SOURCING AND MANUFACTURING 23 3.2.1 PUSH VS PULL 24 3.2.2 JIT 25 3.3 PRODUCT POSITIONING 25 3.4 CONSUMER FOCUS 26 3.4.1 QUICK RESPONSE 27 3.5 RETAILING 29 3.6 KEY INTERNATIONAL COMPETITORS 30 CHAPTER 4: ZARA CASE STUDY 36 4.1 ORIGINS 36 4.2 INTERNATIONAL EXPANSION 37 3 4.2.1 MARKET ENTRY 38 4.3 FINANCIAL DATA 41 4.4 BUSINESS MODEL 43 4 4.4.1 DESIGN 44 5 4.4.2 SOURCING AND MANUFACTURING 45 6 4.4.3 DISTRIBUTION 49 7 4.4.4 RETAILING 50 8 4.4.4.1 MERCHANDISING 51 9 4.4.4.2 STORES 52 2 10 4.5 THE REASONS FOR SUCCESS 53 11 4.5.1 VERTICAL INTEGRATION 53 12 4.5.2 SHORT LEAD TIME 55 13 4.5.3 INFORMATION TECHNOLOGIES 56 14 4.5.4 LOWER QUANTITIES AND MORE STYLES 58 15 4.5.5 TARGET PRICING 58 16 4.5.6 TARGET MARKET 59 17 4.6 STRATEGIC DRAWBACKS 60 18 4.6.1 POSSIBILITIES FOR FAILURE 61 19 4.7 OPPORTUNITIES 62 20 CHAPTER 5: BENETTON CASE STUDY 64 21 5.1 HISTORY 64 22 5.2 FINANCIAL DATA 68 23 5.3 ITS BRANDS 71 24 5.3.1 UNITED COLORS OF BENETTON (UCB) 71 25 5.3.1.1 UCB KIDS 72 26 5.3.1.2 UNDERCOLORS OF BENETTON 72 27 5.3.2 SISLEY 73 28 5.3.2.1 SISLEY YOUNG 73 29 5.3.3 PLAYLIFE 73 30 5.4 BENETTON’S MODEL 73 31 5.4.1 DESIGN 74 32 5.4.1.1 COLLECTIONS 75 33 5.4.1.2 R&D 76 34 5.4.1.2.1 RECENT DEVELOPMENTS 77 35 5.4.2 PRODUCTION 78 36 5.4.2.1 OUTSOURCING 83 37 5.4.2.2 ITALIAN PRODUCTION 84 38 5.4.4.3 PRODUCTION IN EAST EUROPE AND IN TUNISIA 85 39 5.4.4.3.1 EAST EUROPE 86 40 5.4.4.3.2 TUNISIA 86 41 5.4.4.4 PRODUCTION IN ASIA 87 42 5.4.3 LOGISTIC AND DISTRIBUTION 87 43 5.4.4 SALES CHANNELS 88 44 5.4.4.1 WHOLESALE 90 45 5.4.4.2 RETAIL 90 3 46 5.4.4.2.1 STORES 91 5.5 SUCCESS FACTORS 91 47 5.5.1 PRODUCT INNOVATION 91 48 5.5.2 PROCESS INNOVATION 92 49 5.5.3 ORGANIZATIONAL INNOVATION 93 50 5.5.3.1 VERTICAL INTEGRATION 93 51 5.5.3.2 DUAL SUPPLY CHAIN 94 52 5.5.3.3 COMMUNICATION AND ADVERTISING 95 53 5.5.3.3.1 FABRICA 97 54 5.5.3.3.2 COLORS 98 55 5.5.3.4 RETAILING SYSTEM 98 56 5.6 RISK FACTORS 99 CHAPTER 6 : BUSINESS STRATEGIES 101 6.1 EFFICIENT CONSUMER RESPONSE (ECR) 101 6.1.1 ECR AS A COLLABORATIVE SOLUTION 103 6.1.1.1 STRATEGIES 105 6.1.1.1.1EFFICIENT STORE ASSORTMENT 105 6.1.1.1.2 EFFICIENT PROMOTION 105 6.1.1.1.3 EFFICIENT PRODUCT INTRODUCTION 106 6.1.1.1.4 EFFICIENT REPLENISHMENT 106 6.1.1.2 PROCESSES 107 6.1.1.2.1 CATEGORY MANAGEMENT 107 6.1.1.2.2 CONTINUOUS REPLENISHMENT PROGRAM 107 6.1.1.3 ENABLING TECHNOLOGIES 107 6.1.1.3.1 COMPUTER ASSISTED ORDERING 108 6.1.1.3.2 FLOW-THROUGH DISTRIBUTION 108 6.1.1.3.3 INTEGRATED ELECTRONIC DATA INTERCHANGE 108 6.1.1.3.4 ACTIVITY BASED COSTING 109 6.1.1.3.5 BARCODES/ SCANNERS 109 6.2 CONTINUOUS REPLENISHMENT PROGRAM AND INFORMATION SHARING 109 6.2.1 CRP 110 6.2.1.1 BENEFITS 114 6.2.1.2 DRAWBACKS 116 6.2.2 INFORMATION SHARING 116 6.2.2.1 EDI 117 6.3 ENTERPRISE RESOURCE PROGRAM (ERP) 120 4 57 6.3.1 INTEGRATION 121 58 6.3.2 IMPROVEMENTS 122 59 6.3.3 IMPLEMENTATION 122 60 6.3.4 ADVANTAGE 123 61 6.3.5 DISADVANTAGE 125 CHAPTER 7 : PROJECT MANAGEMENT 126 7.1 PLANNING TIME 126 7.1.1 INITIAL PLANNING 126 7.1.2 REAL PLANNING 127 7.2 ECONOMIC PLANNING 128 CHAPTER 8: CONCLUSIONS 130 CHAPTER 9: REFERENCIES 131 5 LIST OF FIGURES FIGURE 3.1: THE SOURCES OF COMPETITIVE ADVANTAGE Pag. 11 FIGURE 3.2: EXAMPLE OF SUPPLY CHAIN 12 FIGURE 3.3: HIERARCHY OF SUPPLY CHAIN DECISIONS 14 FIGURE 3.4: DECISION-MAKING LEVELS IN SUPPLY CHAINS 15 FIGURE 3.5: DRIVERS OF SUPPLY CHAIN 16 FIGURE 3.6: CONSIDERATIONS FOR SUPPLY CHAIN DRIVERS 18 FIGURE 3.7: SCORE PROCESS FRAMEWORK 19 FIGURE 3.8: THE LEVEL 1 METRICS 22 FIGURE 3.9: PULL AND PUSH STRATEGY 24 FIGURE 3.10: A PRODUCT MARKET POSITIONING MAP 31 FIGURE 3.11: COMPETITORS COMPARED 34 FIGURE 3.12: REVENUE 2008 35 FIGURE 3.13: NET INCOME 2008 35 FIGURE 4.1: N° STORES OF ZARA FROM 2003 TO 2009 39 FIGURE 4.2 ZARA’S INTERNATIONAL EXPANSION 2003 40 FIGURE 4.3: ZARA'S INTERNATIONAL EXPANSION 2009 41 FIGURE 4.4: REVENUES OF ZARA 41 FIGURE 4.5: REVENUES OF INDITEX 42 FIGURE 4.6: ZARA’S BUSINESS MODEL 43 FIGURE 4.7: CYCLE TIME COMPRESSION THROUGH QUICK RESPONSE. 47 FIGURE 4.8 PRODUCTION COMMITMENT AND MARKDOWN 48 FIGURE 4.9: PRODUCT PRECOMMITMENTS:ZARA VS. TRADITIONAL INDUSTRY 49 FIGURE 4.10: DISTRIBUTION’S SYSTEM 49 FIGURE 4.11: LOGISTICS PLATFORM 50 FIGURE 4.12: ZARA’S VERTICAL SUPPLY CHAIN 55 FIGURE 4.13: MAIN TYPES FO INFORMATION 57 FIGURE 4.14: ZARA’S POSITIONING ACCORDING TO THE PROCESS AND THE CUSTOMIZATION. 60 FIGURE 5.1: REVENUES (mln €) 68 FIGURE 5.2: REVENUES FROM THIRD PARTIES BY ACTIVITY (%) 69 FIGURE 5.3: SALES BY REGION 70 FIGURE 5.4: FINANCIAL RATIOS (%) 70 FIGURE 5.5: SALES OF CORE PRODUCTS BY BRAND 71 FIGURE 5.6: OPERATIONS BUSINESS MODEL 74 FIGURE 5.7: COLLECTIONS STRUCTURE 77 FIGURE 5.8: OPERATIONS REVERSAL AT BENETTON: SINGLE PRODUCT STYLE WITH FOUR COLORS CHOICES 78 FIGURE 5.9: INTRA-TRADE BETWEEN THE BENETTON’S COMPANY BEHIND AND ITS FOREIGN AFFILIATED COMPANIES IN 2007 ( IN MLN €) 80 FIGURE 5.10: PERCENTAGE DISTRIBUTION OF GARMENTS AND ACCESSORY ITEMS PRODUCTED BY BENETTON (N° OF ITEMS) 82 6 FIGURE 5.11: N° OF GARMENTS AND ACCESSORY ITEMS PRODUCED BY BENETTON 82 FIGURE 5.12: SUPPLY-GEOGRAFIC BREAKDOWN 83 FIGURE 5.13: THE GLOBAL VALUE CHAIN OF THE BENETTON GROUP 84 FIGURE 5.14: BENETTON’S ITALIAN SUBCONTRACTORS 84 FIGURE 5.15: BENETTON’S LOGISTIC PLATFROMS AND SUBCONTRACTING FIRMS IN EAST EUROPE AN D TUNISIA 86 FIGURE 5.16: SALES CHANNELS 90 FIGURE 5.17: POSTPONEMENT APPLICATION IN BENETTON 93 FIGURE 5.18: DUAL SUPPLY CHAIN 95 FIGURE 5.19: FIRST IMAGE ADVERTISING 97 FIGURE 6.1: ECR: WORKING TOGETHER TO OVERCOME BARRIERS 102 FIGURE 6.2: ECR 103 FIGURE 6.3: ECR FACTORS AND RELATIONSHIP 105 FIGURE 6.4: CRP’S SUCCESSFUL IMPLEMENTATION RESULTS 114 FIGURE 6.5: TANGIBLE BENEFITS FROM ERP PROGRAM 124 FIGURE 6.6: INTANGIBLE BENEFITS REALIZED FROM ERP PROGRAM 125 FIGURE 7.1: INITIAL PLANNING 126 FIGURE 7.2: REAL PLANNING 127 FIGURE 7.3: ECONOMIC PLANNING 129 7 CHAPTER 1 INTRODUCTION The aim of this study is to analyze how two companies, in this case Zara and Benetton, have achieved their success through various business strategies and how they influenced each other. In particular, the work will focus on gradual change and development of the relationship between suppliers and retailers in order to increase enterprise efficiency and customer satisfaction.