Introduction
Business models offer the organizational framework that various firms use to accomplish their objectives. Similar to how a disruptive innovation refers to a change in an organization's model that produces a new market and a value network framework while causing significant disruptions to the established market and value network framework. According to Foss and Saebi (2015), disruptive business models create new market segments by luring new customers in addition to stealing clients from established companies and markets. In the light of this, the shift of the market and the creation of new market targets provide adequate support for the invading organization to grow more rapidly. Such models often disrupt complex systems and create new business competition.
Disruptive Business Models Implemented by Organizations
In the current times, various organizations have applied various kinds of disruptive business models to develop new markets for their products and services by giving different kinds of values that overtake an existing market. For instance, Wal-Mart and Apple are some of the familiar organizations that have experienced immense growth over time as a result of applying disruptive business models. According to Aziz (2015), Wal-Mart was founded as a discount retailer and its growth over the years has been linked to the use of a business model that is structured to maintain low prices for the firm's products, and reduce the costs of production and thereby capture value through increased sales and higher profitability. As well, the organization has recently employed the use of information technology to promote its operations. Unlike the traditional retailers, Wal-Mart values its consumers and suppliers, and therefore, it maintains strong relationships with its customers while being extensively close to its suppliers.Also, Apple is a giant tech-company that has applied disruptive business models enabling it to overtake the market and be a global leader in the production of software and technology devices. Einhorn and Vali (2012) argue that Apple's tremendous growth in the recent years is attributed to its ability to produce new products, sustain its competitive strategies and maintain its disruptive paths. The tech-company focuses on outperforming other software, communication, and content firms by incorporating value addition throughout its distribution channels. As well, the firm leverages on the quality of its products and maintains an efficient cost structure to eliminate possible low-end strategies from potential competitors. Besides, it disrupts its competitors' products through innovation to enhance immediate profit optimization while promoting long-term monopolistic tendencies, (Einhorn & Vali, 2012).
Gap's Approach to the Apparel Manufacturing and Retail Business
A description of Gap's approach to the apparel manufacturing and retail business. Gap, in this case, is a proxy for the industry business model.
The gap is a global retailer dealing with the manufacture and sale of clothing, personal care products, and other accessories. Understandably, the organization uses a business model that focuses on applying strategies that often indicate a lag throughout its business processes. In this case, the company's approach to the apparel manufacturing and retail business is a representation of the traditional industry's business model. As such, most of its significant introductions of new clothing occur twice a year. As a result, it makes timing mistakes in the sense that the manufacturing, distribution and marketing processes often delay since its products reach the market when other competitors have already taken advantage of the high demand for new fashion, (Doiron, 2015). Also, the period between the manufacture and the sale of new line items is unusually long due to the extended distribution networks, the creation of the point of sale strategies, and late advertising activities, which are some of the factors that prevent the company from competing with firms such as Zara among others. As a result, Gap's profit margins of 35% are an indication of the industry standard profit levels that reveal the general industry business model, which has been overtaken by innovation and competition.
Zara's Approach to the Apparel Manufacturing and Retail Business
A description of Zara's approach to the apparel manufacturing and retail business.
Zara's approach to the apparel manufacturing and retail business indicates a variation of the traditional business model that guarantees industry level profits. In essence, Zara applies a "fast fashion" business model that is unique in the sense that it enhances a quick manufacturing and sales process, (Doiron, 2015). The company is highly vertically integrated and manufactures most of its products without delegating such tasks to third-party organizations. Besides, it applies a business model that allows it to produce, market and deliver its fashion products in the time since it can comprehend its consumers' needs with accuracy. As well, the firm conducts most of its marketing through its stores and also maintains a centralized distribution management system that promotes quick delivery. Therefore, Zara's approach to the apparel manufacturing and retail business is a unique feature in the current manufacturing and retail business for fashionable products owing to the adoption of exclusive business models that enhance rapid growth and expansion.
Comparison of Gap and Zara's Approaches
Compare these two approaches and describe how Zara effectively manages the core risks inherent in this industry much better than Gap.
Both Gap and Zara companies employ distinct approaches to the apparel manufacturing and retail business. Notably, Gap's approach is a presentation of the traditional business model while Zara's approach reveals a unique business model that seeks to enhance the company's business in a highly competitive environment. Fundamentally, Gap's approach indicates instances of timing errors, producing out-of-date fashion accessories, and improper management of the manufacturing and retail processes. On the other hand, Zara's approach applies a unique business approach that is highly adaptive to risks such as changes in consumer behavior and variations in tastes and preferences. As opposed to Gap's strategy, Zara's strategy focuses on quick manufacturing, producing up-to-date fashion products, and maintaining a vertically integrated management system.Like other industries, the fashion industry faces various risks. In the context of the clothing industry, the highest risk is the threat of 'a fashion miss' that could be caused by the change in consumer behavior, which is often hard to predict or influence, (Doiron, 2015). As well, other risks associated with mass customizations, changing tastes, and the time required to market. To manage the risk of 'a fashion miss' and the changing tastes of the customers, Zara introduces new fashions frequently and conducts rigorous advertising activities in all its stores and outlets. As opposed to Gap, Zara controls its manufacturing processes, and the fact that it can manufacture in small batches allows it to avoid risks that result from mass customization and delays in distribution and marketing. Thus, Zara manages the core risks that are inherent in the industry more efficiently as compared to Gap.
Disruptiveness of Zara's Approach
Discuss why Zara's approach is disruptive to the other industry competitors, like Gap.
Zara's approach disrupts the other industrial competitors like Gap because it runs a "fast fashion" business model as opposed to having an industry-based model. While its competitors prepare and design their collections for extended periods, Zara takes a maximum of four weeks to introduce the latest trends in fashion and at reasonably low prices, (Closa, 2015). As well, unlike Gap and other competitors, Zara does not spend much time and resources advertising its fashion products but instead generates sales excitement by maintaining strategic premium stores, renovating its products, and maintaining a culture of distributing new merchandise regularly. In addition, the firm uses cross-functional design teams that work together to reduce design and manufacture lead times, thereby saving time while providing quality products for its target consumer population, (Closa, 2015). As a result, the company can increase its market reach and disrupt the fashion industry by snatching some of its competitors' customers while developing new markets for its products.
Business of Zara
What Business is Zara In?
Zara is in the business of manufacturing, distributing, and selling clothing and accessories to its customers across the world.
Appendix
Zara's Business Model
References
Aziz. (2015). Wal-Mart: Every Day Low Prices Business Model. Rctom.hbs.org. Retrieved 19 October 2017, from https://rctom.hbs.org/submission/wal-mart-every-day-low-prices-business-model/
Closa, S. (2015). Zara: disrupting the fashion industry. Rctom.hbs.org. Retrieved 19 October 2017, from https://rctom.hbs.org/submission/zara-disrupting-the-fashion-industry/
Doiron, D. (2015). What Business is Zara in? (pp. 1-8).
Einhorn, D., & Vali, E. (2012). Apple Inc. – Solving the Innovator’s Dilemma (p. 3). Retrieved from http://studenttheses.cbs.dk/bitstream/handle/10417/3623/david_einhorn.pdf?sequence=1
Foss, N., & Saebi, T. (2015). Business Model Innovation: The Organizational Dimension (pp. 123-124). Oxford: Oxford University Press. Retrieved from https://books.google.co.ke/books?id=T-1xBgAAQBAJ&pg=PA123&dq=disruptive+business+models&hl=en&sa=X&redir_esc=y#v=onepage&q=disruptive%20business%20models&f=false
