Deck 14: Competing on Marketing and Supply Chain Management

Question 1

What marketing risks are associated with outsourcing How would you minimize those risks

Answer 1

Outsourcing refers to contracting the outside vendors for doing a job by an organization instead of doing it by itself. Many bigger organizations such as Apple outsource their manufacturing as well and then market the product under their brand. Outsourcing has gained more importance now a day. However, it also has certain risks associated with it.
Outsourcing can led to imitation and direct competition by the contract manufacturer as, the parent organization transfer the technology and also share know how with an aim to produce the best expected products which these suppliers can use against them and become direct competitors.
Organizations that are outsourcing can minimize these risks by being careful about which processes to be outsourced and should also work on building customer's loyalty towards their brand which will help to fend of these contract manufacturers.

Question 2

In supply chain management, what are the differences between agility and adaptability

Answer 2

Agility refers to ability of a firm to react to expect shifts in demand and supply as today things are very uncertain thus it becomes very important that supply chains should have agility. Companies now a day uses just in time and lean approaches which requires agile supply chain. To manage this various firms use trucks, ships and planes of the suppliers and carriers like warehouses.
In uncertain conditions an agile supply chain can rise to the challenge while a static one pulls a firm down. Agility focuses on being flexible to overcome short term fluctuation in supply chain.
Adaptability refers to ability of an organization to change supply chain configuration in response to long term changes in environment and technology. It is associated with decisions on whether to produce in house or to outsource. It requires a continuous monitoring of geopolitical, social and technological trends and accordingly reconfiguring the supply chain. It has long term impact.

Question 3

In aligning the interests of various players in the supply chain, what is the role of power and trust

Answer 3

Alignment is the integration of interest of various players involved in the supply chain. Each of the players involved is a profit maximizing stand alone firm and thus conflicts arise. To achieve alignment the two key elements are power and trust.
In a supply chain each player has different levels of power and accordingly exercises bargaining power. A more powerful player in supply chain will exercise greater bargaining power for e.g. DB in diamonds facilitates legitimacy and efficiency of whole supply chain. Trust arises from perceived fairness and justice from all players of supply chain. Modern approaches like JIT or low inventory and more geographic dispersion of production has also created a need for all the players to invest in trust building mechanism so as to foster more collaboration.
Both power and trust are vital in alignment of interest of various players in supply chain for e.g. if there will be no particular player having more power in supply chain the result will be excessive bargaining among various players of equal or more standing. Thus power creates efficiency in whole supply chain similarly trust creates collaboration which is necessary for alignment of supply chain.

Question 4

Zara Excels in Marketing and Supply Chain Management
Zara is one of the hottest fashion chains. Founded in 1975, Zara's parent, Inditex, has become a leading global apparel retailer. Since its initial public offering (IPO) in 2001, Inditex quadrupled its profits and its sales (to US$19.1 billion or €13.8 billion). It doubled the number of its stores of eight brands, of which Zara contributes two-thirds of total sales. In this intensely competitive industry, Zara excels in both marketing and supply chain management. Zara succeeds by first breaking and then rewriting industry rules- also known as industry norms. Rule number one: The origin of a fashion house usually carries some cachet. However, Zara does not hail from Italy or France- it is from Spain. Even within Spain, Zara is not based in a cosmopolitan city like Barcelona or Madrid. It is headquartered in Arteixo, a town of only 25,000 people in a remote corner of northwestern Spain that a majority of this book's readers would have never heard of. Yet, Zara is active not only throughout Europe, but also in Asia and North America. Currently, the total number of stores is more than 2,000 in 88 countries. Zara stores occupy some of the priciest top locations: Champs-Elysees in Paris, Fifth Avenue in New York, Galleria in Dallas, Ginza in Tokyo, Queen's Road Central in Hong Kong, and Huaihai Road in Shanghai. Rule number two: Avoid stock-outs (a store running out of items in demand). Zara's answer Occasional shortages contribute to an urge to buy now. With new items arriving at stores twice a week, experienced Zara shoppers know that "If you see something and don't buy it, you can forget about coming back for it because it will be gone." The small batch of merchandise during a short window of opportunity for purchasing motivates shoppers to visit Zara stores more frequently. In London, shoppers visit the average store four times a year, but frequent Zara 17 times. There is a good reason to do so: Zara makes about 20,000 items per year, about triple what Gap does. "At Gap, everything is the same," according to a Zara fan, "and buying from Zara, you'll never end up looking like someone else." Rule number three: Bombarding shoppers with ads is a must. Gap and H M spend on average 3% to 4% of their sales on ads. Zara begs to differ: It devotes just 0.3% of its sales to ads. The high traffic in the stores alleviates some need for advertising in the media, most of which only serves as a reminder to visit the stores. Rule number four: Outsource. Gap and H M do not own any production facilities. However, outsourcing production (mostly to Asia) requires a long lead time, usually several months. Again, Zara has decisively deviated from the norm. By concentrating (more than half of) its production in-house (in Spain, Portugal, and Morocco), Zara has developed a super-responsive supply chain. It designs, produces, and delivers a new garment to its stores worldwide in a mere 15 days, a pace that is unheard of in the industry. The best speed the rivals can achieve is two months. Outsourcing may not necessarily be "low cost," because errors in prediction can easily lead to unsold inventory, forcing retailers to offer steep discounts. The industry average is to offer 40% discounts across all merchandise. In contrast, Zara sells more at full price and, when it discounts, it averages only 15%. Rule number five: Strive for efficiency through large batches. In contrast, Zara intentionally deals with small batches. Because of its flexibility, Zara does not worry about "missing the boat" for a season. When new trends emerge, Zara can react quickly. It runs its supply chain like clockwork with a fast but predictable rhythm: Every store places orders on Tuesday/Wednesday and Friday/Saturday. Trucks and cargo flights run on established schedules- like a bus service. From Spain, shipments reach most European stores in 24 hours, US stores in 48 hours, and Asian stores in 72 hours. Not only do store staff know exactly when shipments will arrive, but regular customers also know that too, thus motivating them to check out the new merchandise more frequently on those days, which are known as "Z days" in some cities. Zara has no shortage of competitors. Why has no one successfully copied its business model of "fast fashion" "I would love to organize our business like Inditex [Zara's parent]," noted an executive from Gap, "but I would have to knock my company down and rebuild it from scratch." This does not mean Gap and other rivals are not trying to copy Zara. The question is how long it takes for rivals to out-Zara Zara.
Sources: Based on (1) BusinessWeek, 2006, Fashion conquistador, September 4: 38-39; (2) Economist, 2012, Fashion forward, March 24: 63-64; (3) Inditex, 2014, Presencia internacional, www.inditex.com; (4) K. Ferdows, M. Lewis, J. Machuca, 2004, Rapid-fire fulfillment. Harvard Business
Review, November: 104-110; (5) www.zara.com.

Using the four Ps of marketing, explain what is behind Zara's marketing.

Question 5

What are examples of how formal institutions affect marketing and supply chain management-i.e., examples of government-imposed rules of the game

Question 6

ON CULTURE: Canada has an official animal: the beaver. In 2007, the Canadian prime minister suggested replacing it with the wolverine, and stirred up a national debate. Does your country have an official animal If you were hired as a marketing expert by the Government of Canada (or of whatever country), how would you best market the country using an animal

Question 7

How is the issue of the "value" of some traditional marketing resources being affected by changes in technology

Question 8

Your company has developed a dominant global supply network that has contact with nearly every country in the world. However, recent internal initiatives have encouraged managers to reconfigure your company's supply network to increase efficiency. As a part of this process, you must use established logistics performance metrics to identify the country that has the highest logistics competence on each continent (Africa, Asia, Europe, North America, and South America). Prepare a report that indicates your recommendations and rationale for each continent. What can explain the results of your analysis

Question 9

In your opinion, are manufacturing and service separate issues, and can one of the two be considered more important than the other Explain.

Question 10

ON CULTURE: What cultural issue could be involved product decisions in terms of localization versus standardization

Question 11

What is the difference between market orientation and relationship orientation

Question 12

Zara Excels in Marketing and Supply Chain Management
Zara is one of the hottest fashion chains. Founded in 1975, Zara's parent, Inditex, has become a leading global apparel retailer. Since its initial public offering (IPO) in 2001, Inditex quadrupled its profits and its sales (to US$19.1 billion or €13.8 billion). It doubled the number of its stores of eight brands, of which Zara contributes two-thirds of total sales. In this intensely competitive industry, Zara excels in both marketing and supply chain management. Zara succeeds by first breaking and then rewriting industry rules- also known as industry norms. Rule number one: The origin of a fashion house usually carries some cachet. However, Zara does not hail from Italy or France- it is from Spain. Even within Spain, Zara is not based in a cosmopolitan city like Barcelona or Madrid. It is headquartered in Arteixo, a town of only 25,000 people in a remote corner of northwestern Spain that a majority of this book's readers would have never heard of. Yet, Zara is active not only throughout Europe, but also in Asia and North America. Currently, the total number of stores is more than 2,000 in 88 countries. Zara stores occupy some of the priciest top locations: Champs-Elysees in Paris, Fifth Avenue in New York, Galleria in Dallas, Ginza in Tokyo, Queen's Road Central in Hong Kong, and Huaihai Road in Shanghai. Rule number two: Avoid stock-outs (a store running out of items in demand). Zara's answer Occasional shortages contribute to an urge to buy now. With new items arriving at stores twice a week, experienced Zara shoppers know that "If you see something and don't buy it, you can forget about coming back for it because it will be gone." The small batch of merchandise during a short window of opportunity for purchasing motivates shoppers to visit Zara stores more frequently. In London, shoppers visit the average store four times a year, but frequent Zara 17 times. There is a good reason to do so: Zara makes about 20,000 items per year, about triple what Gap does. "At Gap, everything is the same," according to a Zara fan, "and buying from Zara, you'll never end up looking like someone else." Rule number three: Bombarding shoppers with ads is a must. Gap and H M spend on average 3% to 4% of their sales on ads. Zara begs to differ: It devotes just 0.3% of its sales to ads. The high traffic in the stores alleviates some need for advertising in the media, most of which only serves as a reminder to visit the stores. Rule number four: Outsource. Gap and H M do not own any production facilities. However, outsourcing production (mostly to Asia) requires a long lead time, usually several months. Again, Zara has decisively deviated from the norm. By concentrating (more than half of) its production in-house (in Spain, Portugal, and Morocco), Zara has developed a super-responsive supply chain. It designs, produces, and delivers a new garment to its stores worldwide in a mere 15 days, a pace that is unheard of in the industry. The best speed the rivals can achieve is two months. Outsourcing may not necessarily be "low cost," because errors in prediction can easily lead to unsold inventory, forcing retailers to offer steep discounts. The industry average is to offer 40% discounts across all merchandise. In contrast, Zara sells more at full price and, when it discounts, it averages only 15%. Rule number five: Strive for efficiency through large batches. In contrast, Zara intentionally deals with small batches. Because of its flexibility, Zara does not worry about "missing the boat" for a season. When new trends emerge, Zara can react quickly. It runs its supply chain like clockwork with a fast but predictable rhythm: Every store places orders on Tuesday/Wednesday and Friday/Saturday. Trucks and cargo flights run on established schedules- like a bus service. From Spain, shipments reach most European stores in 24 hours, US stores in 48 hours, and Asian stores in 72 hours. Not only do store staff know exactly when shipments will arrive, but regular customers also know that too, thus motivating them to check out the new merchandise more frequently on those days, which are known as "Z days" in some cities. Zara has no shortage of competitors. Why has no one successfully copied its business model of "fast fashion" "I would love to organize our business like Inditex [Zara's parent]," noted an executive from Gap, "but I would have to knock my company down and rebuild it from scratch." This does not mean Gap and other rivals are not trying to copy Zara. The question is how long it takes for rivals to out-Zara Zara.
Sources: Based on (1) BusinessWeek, 2006, Fashion conquistador, September 4: 38-39; (2) Economist, 2012, Fashion forward, March 24: 63-64; (3) Inditex, 2014, Presencia internacional, www.inditex.com; (4) K. Ferdows, M. Lewis, J. Machuca, 2004, Rapid-fire fulfillment. Harvard Business
Review, November: 104-110; (5) www.zara.com.

From a VRIO standpoint, identify the features of Zara's supply chain management that contribute to its performance.

Question 13

Select one of the four Ps, and make the case that it is more important than the other three. Then make the case that all are equally important.

Question 14

ON ETHICS: In Hollywood movies, it is common to have product placement (having products from sponsored companies, such as cars, appear in movies without telling viewers that these are commercials). As a marketer, you are concerned about the ethical implications of product placement via Hollywood, yet you know the effectiveness of traditional advertising is declining. How do you proceed

Question 15

Select one of the Triple As, and make the case that it is more important than the other two. Then make the case that all are equally important.

Question 16

You are conducting an international survey concerning possible acceptance of a new leisure activity: space tourism. One issue that can influence whether individuals in a country find this new concept interesting is culture. Based on a data source that assesses culture around the world, identify the cultural trait that could measure general acceptance of space tourism by country. Then, determine which countries are ideal to target for commercialization. Be sure to support your position thoroughly in the report provided.

Question 17

If global warming persists, how would it affect shipping and transportation routes You can probably list some of the dangers of global warming, but how may it actually benefit the economies of some countries or regions

Question 18

Zara Excels in Marketing and Supply Chain Management
Zara is one of the hottest fashion chains. Founded in 1975, Zara's parent, Inditex, has become a leading global apparel retailer. Since its initial public offering (IPO) in 2001, Inditex quadrupled its profits and its sales (to US$19.1 billion or €13.8 billion). It doubled the number of its stores of eight brands, of which Zara contributes two-thirds of total sales. In this intensely competitive industry, Zara excels in both marketing and supply chain management. Zara succeeds by first breaking and then rewriting industry rules- also known as industry norms. Rule number one: The origin of a fashion house usually carries some cachet. However, Zara does not hail from Italy or France- it is from Spain. Even within Spain, Zara is not based in a cosmopolitan city like Barcelona or Madrid. It is headquartered in Arteixo, a town of only 25,000 people in a remote corner of northwestern Spain that a majority of this book's readers would have never heard of. Yet, Zara is active not only throughout Europe, but also in Asia and North America. Currently, the total number of stores is more than 2,000 in 88 countries. Zara stores occupy some of the priciest top locations: Champs-Elysees in Paris, Fifth Avenue in New York, Galleria in Dallas, Ginza in Tokyo, Queen's Road Central in Hong Kong, and Huaihai Road in Shanghai. Rule number two: Avoid stock-outs (a store running out of items in demand). Zara's answer Occasional shortages contribute to an urge to buy now. With new items arriving at stores twice a week, experienced Zara shoppers know that "If you see something and don't buy it, you can forget about coming back for it because it will be gone." The small batch of merchandise during a short window of opportunity for purchasing motivates shoppers to visit Zara stores more frequently. In London, shoppers visit the average store four times a year, but frequent Zara 17 times. There is a good reason to do so: Zara makes about 20,000 items per year, about triple what Gap does. "At Gap, everything is the same," according to a Zara fan, "and buying from Zara, you'll never end up looking like someone else." Rule number three: Bombarding shoppers with ads is a must. Gap and H M spend on average 3% to 4% of their sales on ads. Zara begs to differ: It devotes just 0.3% of its sales to ads. The high traffic in the stores alleviates some need for advertising in the media, most of which only serves as a reminder to visit the stores. Rule number four: Outsource. Gap and H M do not own any production facilities. However, outsourcing production (mostly to Asia) requires a long lead time, usually several months. Again, Zara has decisively deviated from the norm. By concentrating (more than half of) its production in-house (in Spain, Portugal, and Morocco), Zara has developed a super-responsive supply chain. It designs, produces, and delivers a new garment to its stores worldwide in a mere 15 days, a pace that is unheard of in the industry. The best speed the rivals can achieve is two months. Outsourcing may not necessarily be "low cost," because errors in prediction can easily lead to unsold inventory, forcing retailers to offer steep discounts. The industry average is to offer 40% discounts across all merchandise. In contrast, Zara sells more at full price and, when it discounts, it averages only 15%. Rule number five: Strive for efficiency through large batches. In contrast, Zara intentionally deals with small batches. Because of its flexibility, Zara does not worry about "missing the boat" for a season. When new trends emerge, Zara can react quickly. It runs its supply chain like clockwork with a fast but predictable rhythm: Every store places orders on Tuesday/Wednesday and Friday/Saturday. Trucks and cargo flights run on established schedules- like a bus service. From Spain, shipments reach most European stores in 24 hours, US stores in 48 hours, and Asian stores in 72 hours. Not only do store staff know exactly when shipments will arrive, but regular customers also know that too, thus motivating them to check out the new merchandise more frequently on those days, which are known as "Z days" in some cities. Zara has no shortage of competitors. Why has no one successfully copied its business model of "fast fashion" "I would love to organize our business like Inditex [Zara's parent]," noted an executive from Gap, "but I would have to knock my company down and rebuild it from scratch." This does not mean Gap and other rivals are not trying to copy Zara. The question is how long it takes for rivals to out-Zara Zara.
Sources: Based on (1) BusinessWeek, 2006, Fashion conquistador, September 4: 38-39; (2) Economist, 2012, Fashion forward, March 24: 63-64; (3) Inditex, 2014, Presencia internacional, www.inditex.com; (4) K. Ferdows, M. Lewis, J. Machuca, 2004, Rapid-fire fulfillment. Harvard Business
Review, November: 104-110; (5) www.zara.com.

Visit a Zara store in (or near) your city. Does it meet your expectations for a successful firm

Question 19

ON ETHICS: You are a supply chain manager at a UK firm. In 2014, Ebola broke out in Africa and the United States, potentially affecting your suppliers in these regions. On the one hand, you are considering switching to a new supplier in Asia. On the other hand, at this difficult moment you feel bad about abandoning your African and American suppliers, with whom you have built a pleasant personal and business relationship. Yet, your tightly coordinated production cannot afford to miss one supply shipment. How do you proceed

Question 20

Refer to PengAtlas Map 4.2 (World Labor Force) and to Maps 2.1 and 2.2 that cover the top exporters and importers. To what extent is the size of the labor force an indicator of the size of markets, and to what extent is it not Why

Question 21

If marketing efforts could help produce an inelastic demand for a product, a firm would have much more upward pricing flexibility. Explain why that is true.

Question 22

Which of the four P's has come to be known by a new term Why the change