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Critically Evaluate the Comparative Transnational Effectiveness of Benetton and Zara

Autor:   •  September 30, 2017  •  2,360 Words (10 Pages)  •  228 Views

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core capabilities and resources, and made decisions at home, while regarded the subsidiaries as the delivery pipelines to the global market. For example, the factories in Europe produced more complex and fast fashion products, leaving standard products produced in Asia (Lopez and Fan, 2009). One reason is that Zara considered that European consumers were more enthusiastic about fashion and shared the same taste. For another reason, Zara aimed to retain its competitive advantages, such as cost leadership, quality assurance and quick response to fashion trend, all of which required the company to have a tight control over operation and decision making (Jose, 2010). To achieve this, Zara established the integrated supply chain and maintained its key business elements, namely design, manufacture, logistics and distribution around headquarter in Spain.

To conform to the evolving Transnational Strategy, Zara is transforming to the integrated network structure, in which each subsidiary is regarded as a source of knowledge, ideas, resources and capabilities. Therefore, Zara’s global stores are responsible for sensing the dynamic local customer demands and sending the information directly to headquarter in Spain (Hume, 2011). Furthermore, this

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structure is facilitated by Zara’s advanced information system, which transfers the customer and inventory information among all the business units and contributes to the design and production decisions of the company.

Unlike Zara, in the 1990s, Benetton started to adopt coordinated federation structure so that it could implement international strategy more efficiently. During this period, Benetton’s leading position in fashion market was challenged by emerging rivals such as Zara, H&M and Gap, and its resources and capabilities were no longer competitive (Jose, 2010). Accordingly, it was forced to leverage its manufacturing capabilities and transfer parent technology and expertise to local subsidiaries. Although the overall coordination was controlled by headquarter, Benetton delegated part of its responsibilities and gave autonomy to local subsidiaries to adapt local differences. To alleviate cost reduction pressure resulting from the fiercer competition, Benetton transforms to Global Strategy and Centralized Hub Structure. The significant concepts of design and production are kept in the centre and the job for the subsidiaries is just producing the standardized products.

Worldwide Learning and Resulting Effective Innovation

Generally, Zara has been transferring from the traditional innovation model of centre- for-global to the transnational one of locally leveraged. In regard to the central innovations, the design teams of Zara gather sufficient inspiration from the world’s ‘big-four-fashion-week’ and then design new styles within in a few days in headquarter. New styles are produced in-house and then distributed uniformly across Zara stores all over the world. Zara makes such central innovation effective through its advanced hybrid information and communication system. In terms of gaining subsidiary input and responding to national needs, Zara gives store managers significant autonomy in product display and inventory management within their stores and relies on store managers to feed back market research and store trends to design teams in headquarter (Tan, 2010). Such information transfer process allows Zara to keep pace with the ever-changing fashion trend and continuously launch new products to meet customer demand.

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Zara’s central innovation has also been supplemented by the evolving locally leveraged innovations. Zara has brought the Asian fashion trends to the British high street. For example, the Kurta kind blouse was initially designed specially for the Middle East and South Asian markets. Following its popularity and success in these markets, Zara launched this kind of clothes in the United Kingdom. Finally, Asian fashion became the mainstream fashion this season on the British high street thanks to Zara (Khan, 2014).

In contrast, Benetton is still striving to make the central innovations effective. Every year, Benetton’s design centre in Italy selects innovative ideas from Fabrica, a communication research centre, and combines them with market trends to create new seasonal collections for its franchisers around the world. Recent years, to better manage this centre-for-global process, Benetton has established directly operated stores to strengthens the retail network and transmit feedbacks on sales and consumer preference from retailers directly to headquarter (Jose, 2010). This action helps Benetton gain subsidiary input into centralized activities and greatly improves the effectiveness of the central innovation.

An Evolving Global Role

To enable their own transnational enterprises to sustain effectiveness, Zara and Benetton take into account their roles and responsibilities in the global context with the expansion penetrating. Zara is more like an exploitive MNE that leveraged low- cost factors of production to capture competitive advantage regardless of its responsibility for negative impact on emerging countries. Zara created more eco- friendly products and made a commitment to Greenpeace to eliminate release of hazardous chemicals into environment (Greenpeace, 2012). Nevertheless, it was more notorious of using sweatshops in many countries such as Argentina and Brazil in which the wages were significantly lower than those in developed countries, so were the working conditions, the safety standards, and even the human rights of the workers. Therefore, consumers worldwide boycotted Zara products. To cope with this situation, Zara seeks to collaborate with NGOs, unions and business associations to train labors and also improve pay level and working conditions to make itself more responsive (Alexander, 2013).

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Nevertheless, Benetton is more like a transformative MNE that takes a larger role in developing countries to mitigate the massive issues that their population and government face. Although Benetton had been involved in sweatshop scandals, they demonstrated that they improved working conditions and worked on Corporate Social Responsibility policy (The Guardian, 2011). Furthermore, Benetton concentrates on public awareness of social and global issues such as AIDS, war and poverty. An illustration is that in 1993, Benetton initiated a special project to distribute second- hand clothing to the poor, cooperating with the International Federation of the Red Cross and other NGOs (Bryan and David, 2011). Benetton also launched a campaign working together with Senegal’s musician to promote

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