Disruptive Business Models

A product, service, sector, or industry is intended to be created, improved, optimized, disintermediated, and re-engineered using disruptive business models. In order to provide a competitive value offer, successful businesses apply these models into every aspect of their management and commercial activities. These innovative businesses also establish themselves as leading sustainability brands. The characteristics of a chosen model determine the pricing structure, the partner's value proposition, the partners the business will work with, the supply chain structure, and the overall organizational structure. Therefore, a disruptive business model is a system of how the many aspects interact in intricate ways to increase a company's performance. Among the companies that have applied the disruptive business models include Wal-Mart, Apple, and Dell computers (Bala & Hou, 2017). Walmart, for instance, utilizes a differentiated disruptive strategy and also its foundation of operational excellence that ensure that the customer is placed in the priority. The success of the company shows that it is a good idea for an organization to embrace the focus of the customer first. With the improved store and in-stock conditions, the company can increase its penetration of the online market as the business grows. Also, there is also a spread in their spending on the offline retail options.

The disruptive business model that has been used by the Apple Company, on the other hand, involves transforming their products to affordable or simpler ones. This strategy was at the start not an obvious threat to the competitors and therefore could not face a head-on competition. For this treason, it successfully captured the mainstreams of the customers with time. On the side of the customer, the disruptive business model applied by Apple is the production of the Apple iPhone whose main focus was to meet the daily needs of the customer. These needs include web surfing, music, and apps. In the beginning, this product was seen to be inferior, but targeting the customers’ focus later shifted the market gradually (Vecchiato, 2017). The competitors did not realize that it was disruptive at the start, but Apple’s market performance increased exponentially afterward.

Dell Computers Company has also applied a disruptive business model that has enhanced its astonishing success in business. Its model is based on two simple concepts of direct sales and build-to-order. The company sells its product exclusively online or over the phone without any involvement in distribution, and product is manufactured when an order from a customer has been received. Direct sales build a strong relationship and reduce the cost of making sales while build-to-order reduces the inventory costs and enhances a customized service for the customers. Also, Dell has successfully become the only manufacturer worldwide to adopt the business model of low-cost and small-sized stores. Competitors such as IBM and HP tried but were not able to copy Dell’s activities effectively (Bala & Hou, 2017).

Gap’s approach to the apparel manufacturing and retail business

         Gap Inc. is among the largest specialty retailers in the world. It has stores in more than 5 countries: The United States, The United Kingdom, France, Canada, Japan, and Ireland. Its approach involves the conducting a comprehensive market research regarding consumers, competitors and potential markets worldwide. Secondly, the company conducts competitive analysis, quantitative research, and focus groups. Thirdly, there is that recommendation of apparel categories where the company could own the whole zone in the Japanese market. The fourth one is the development of specific strategies for market entry and expansion. Finally, the company took part in visiting high potential markets to know the competitor locations, consumer traffic as well as do a benchmark on the productivity of retail sales (White, Nielsen & Valentini, 2017).

Zara’s approach to the apparel manufacturing and retail business

       Zara was started as a small dressmaking firm, but the owner quickly realized that the industry was very competitive and devised ways of winning customers. He was driven by the principle that success in the industry resulted from linking designing, manufacturing, and distribution in a way that meets the changing customer needs. He also took advantage of the intelligence of his employees and allowed them to make decisions concerning the various processes. Manufacturing new clothes faster in response to the needs of the customers and the decentralized decision-making process was the combined approach that made the firm thrive well in the ultra-competitive industry (Ren, Chan, & Ram, 2016). The core capability of the firm to manufacture the clothes in small batches reduced the risks that arise during making the sales and quickened the movement of the products to the market, thus improving the firm’s performance.

Comparison of the two approaches

          Taking a close look at the two approaches, they have more differences than similarities. The similarities lie in the fact that both approaches are aimed at winning customers through the use of business models that increase the competitive advantage of the company. For the case of differences, Gap’s approach is mainly focused on the market. Even though the company does a comprehensive market research about its competitors and customers, its main aim is to gain a large share of the market. The company’s approach shows that it believes that a good understanding of the market is the best basis for understanding both the competitors and consumers to devise effective ways of doing things.

         Zara, on the other hand, uses an approach that focuses on design, production, and distribution of its products. For this reason, the aim of the company is to understand the various needs of the customers, especially in the presence of abrupt changes in fashion and tastes and preferences of the customers. The company believes that meeting the needs of the customers will attract them and make them loyal to the company. In this way, the company will successfully reduce the effects of its competitors in the fashion industry. This company also employs a strong vertically integrated process that enhances speed and flexibility since it does not involve the use of a middleman in the retail system.

             Zara efficiently copes with the core risks of the fashion industry much better than Gap Inc. through the business model of faster production and distribution. This feature is what made the company earn the name ‘‘fast fashion’’ industry. The risks associated with this industry include unsold products which are out of fashion and slow movement of the products in the market. Zara also set the prices of its products at 15 percent lower than that of its competitors (Doiron, 2015). Another thing is that it produces fashion of good quality. These attributes reduce the risks of the company having to stay with unsold stock for long.

Why Zara approach is disruptive

             The approach used by involves a growth strategy that focuses on speed to take advantage of trends and emerging opportunities and utilize the short runs. The approach works best for the firm and is a disruptive strategy since they can bring a new collection to the market in two weeks when their competitors do so in a whole year. The company was successful in this approach due to the decision to switch 100 percent from long-run production alone to a mix of both short run and long run (Doiron, 2015). This short run production does not make the company rely on distant manufacturers but uses the local and nearby ones to lower the percentage of its merchandise. The short run collections are great benefits to the company since they create a sense of scarcity, increases the frequency of customers’ visits to the store and all the stock sell out without a remainder.

              The fact that Zara does not advertise is what makes Gap Inc. unable to use its approach since Gap is used to advertising to get more customers. Zara’s approach also does not involve marketing, but only a focus on design and logistics. Additionally, the company locates its shops on high traffic streets and beautiful old buildings. All these features are what makes gap unable to use the approach that was used by Zara successfully.

What Business is Zara in?

       The business that Zara is in is a different business process, and it, therefore, needs to consider its popular flagship brand and its future. It is a successful ‘‘fast fashion’’ manufacturer and retailer. The company is currently facing the challenge of new competitors like Gap Inc. who are trying to establish their models to compete with it effectively.











References

Bala, R., & Hou, W. (2017, January). Toward A Typology of Incumbent Response to Disruptive Business Model Innovations. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 13830). Academy of Management.

Doiron D. (2015). What Business is Zara in? A Case Study. Richard Ivey School of Business Foundation.

Ren, S., Chan, H. L., & Ram, P. (2016). A Comparative Study on Fashion Demand Forecasting Models with Multiple Sources of Uncertainty. Annals of Operations Research, 1-21.

Vecchiato, R. (2017). Disruptive innovation, managerial cognition, and technology competition outcomes. Technological Forecasting and Social Change, 116, 116-128. APPLE

White, C. L., Nielsen, A. E., & Valentini, C. (2017). CSR research in the apparel industry: A quantitative and qualitative review of existing literature. Corporate Social Responsibility and Environmental Management.











Appendix

Zara’s Business Model



Design Retail Sales





Manufacture and supply Distribution and Logistics



Key Elements of Zara’s Business Model