A premier design house presents a new line, and an affordable version of it appears on the racks almost simultaneously. Sounds like a fashion addict's dream come true, like stepping out in catwalk style with the change you saved still jingling in your pocket.
Compare this to a well-known, respectable brand of the highest quality that has a reputation for original styles, classic and sensible (which some might even call staid). Marks & Spencer (M&S) has undergone a century of existence and innovation after developing an extremely successful brand that became synonymous with high quality. This helped establish the stores formidable reputation.
Under capable leadership through the years M&S adapted and advanced. But when sales began to decline, why couldnt the mega super store regain its past glory? To help you answer this, Professors Ludo Van der Heyden (INSEADs Solvay Professor for Technological Innovation), Michael Pich (INSEAD Professor of Operations Management) and Nicholas Harlè (Boston Consulting Group MBA Fellow) present a case that provides an interesting juxtaposition between two business models, one used by M&S and the other by a relatively new but vastly successful entrant, Inditex SA. The ECCH 2005 overall case award deservedly went to this excellent INSEAD case study.
The value chain at M&S can best be described as a traditional textile apparel chain. Starting with a buying team (comprising stylists, selectors, merchandisers and technologists), the cloth specifications were defined one year before delivery. An extensive supplier network produced the merchandise. The process was long, drawn out and inflexible in terms of the necessary nimble responsiveness to sudden changes in consumer preferences. In addition it was still fixated on its age-old tradition of made to last for life.
Inditex SAs brand, Zara, followed a vertically integrated value-chain which permitted rapid reaction to fashion changes. A raw material team imported fabric, and also pre-booked unspecified production capacity with suppliers to ensure last minute flexibility. Its design policy was mix-and-match, and it created a library of designs guided by observing fashion trends. Small, but well managed, logistics operations ensured quick and effective delivery to 31 well-placed stores. They were able to achieve all this in two weeks. This case presents two angles of discussion: examining the two supply chains and the product-process linkage.
While it is evident that Zara was gaining from its extremely short process cycle, it also had mastered the art of mass-customization. This concept has been effectively used in the InfoTech industry in the past. Of particular significance, from a point of managerial applicability, is the interest shown in this concept by fairly traditional manufacturing players such as the automotive industry.
While Zara deals with the problem of having empty shelves, M&Ss Chairman and CEO Luc Vandevelde struggles with choices in the face of increasingly focused competitors. In conclusion, the authors explain that no matter how perfect a technology improvement may seem, a newer, better way will always emerge. In fact, the firms that come out on top in the end are those who can read the writing on the wall and then make the appropriate changes.
This case can be used effectively in both graduate management and executive education courses.