Business anchors with value creation in retail industry
In recent years, innovation and technology in textiles has become the responsibilities of the increasing number of organizations. This paper aims to review the aspects of value creation and the two anchors (customer and process) and also to describe how the technologies and innovations accompanied with each of these improvements or contribute to the value creating behaviours in the retail industry. In the first section, this paper introduces the key aspects of value creation in the retail industry. In addition, the second section presents the key aspects of two anchors. In the third section, this paper describes how each anchor enhances or creates value in retail industry. In the final section, this paper provides the conclusion of entire research.
1 value creation in the retail industry
A value chain of a firm is disaggregated into strategically relevant activities, which make the behavior of costs and the existing and potential sources of differentiation be easier to understand. The value chain consists of two important components: One is primary activity that is significant for leaders to look in those areas that are most valued by their customers. Another one is support activity that will assist firms in performing their primary activity duties.
Moreover, Retail as the largest industry in the world drives the rise and fall of different players in the industry. Value chain in the retail industry is varied at growing pace because of some factors including internationalization and consolidation of industry. In addition, the integration and convergence of value chain lead the increase and drop of distinct players in the retail industry. Impressive and best retail frames have an explicit value theme that is transferred by all customer contacts (the truth moments).
To describe the retail industry business model, this paper takes the Zara’s business model as an example. The model can be broken down into three basic components: customer, value drivers, and infrastructure as well. The relationship between Zara and customers is that Zara provides fashion information and cheap brand to customers. It aims at the massive markets which includes men, women and children. Value drivers for Zara are both tangible and intangible in making benefits that are returned to all stakeholders. On tangible aspect, the parent company of Zara has made a big number of profits on operations and market. On the other hand, customer loyalty and brand recognition as intangible value have provided significant value to Zara. Fundamental infrastructure of Zara is to maintain design, production, and distribution processes, which enable Zara to respond quickly to changes in consumer demands. It maintains tight control Headquarters. Zara brand takes a rigorous control on the production process by maintaining the design and producing in-house. The successful implementation of Zara’s business model provides great value to stakeholders and differentiates their business from their peers.
2 Key aspects of two business anchors
It is also necessary to understand the key aspects of business anchors. This paper aims to focus on two business anchors including customer and process. Firstly, the anchor of customers is the individual or organization that use or consume a company’s offerings to obtain particular demand. If a company want to innovate from this dimension, it has to find new customer fragment or unfunded or unsatisfied needs. In high street retailing area, it demands new approaches to innovation and strategy-making that emphasizes flying possible development, speedy exploring, persistent experiment and higher cooperation levels in value creating. Customer experience takes into account all matters that customers see, hear and feel and all moments that interacted with companies.
Through customer experience aspect, a company has to consider the interface between the organization and its customers. On the other hand, value capture points the movements that a company utilizes to recover the created value. For innovating through this dimension, a company could find unexploited income streams; expand new pricing mechanisms; enhance its capability to obtain value from cooperating with partners and consumers. Capturing value from advantages is the top concern of any innovator, and the major objective of firm or individuals and nations.
Secondly, Processes are the configurations of business activities used to conduct internal operations. Process has two categories including supply chain and organization. Again, innovating with this dimension require a company to redesign a greater efficient and highly qualified process and a bit speedy cycle time. These movements may entail rearranging a process or decoupling its directions.
Product innovation and process innovation are totally different concept and normally people put more focus on the product innovation rather than the process innovation. In order to entail products into the mart to gain huge economic benefits, companies must first invest in product innovation and the resources, especially in the case of lack of resources. However, it is also to care that too much emphasis on product innovation and process innovation may bring negative effects. As the result, market cycle will be shortened and the quality of the product will be fallen.
3 two business anchors with value creation
Customer innovation is not only an important perspective on value-creation but a whole new strategy discipline that organizations must embrace if they are to pursue growth successfully in the future. Specifically, Primark is a good example for this. It is well known that Primark sells clothing at the final budget in the market. Cheap supply stream, simply designed clothing, constrained most popular size and given stock in huge bulks and diversities are all fundamental basics for the success of Primark. But now, Primark is to set up shop in branches of department store Selfridges as the value retailer seeks to increase its hold on the high street. They reposition their market in order to attract more customers in different level.
Customer anchor influences two dimensions. For customer experience, it has emerged as the single most important aspect in achieving success for companies across all industries and is important to choose the area of customers and take feedback from them. For Value capture, companies focus on five basic things. Companies have to understand their situation and develop each customer-segment strategy. After they design and blueprint the business model and management system, they will decide upon and invest in the enablers of alignment. Finally, they will execute a value capture plan. Reversely, these two dimensions support customer as well. Without the innovation of customer experience and value capture, customer anchors will not be innovated. As shown in previous section, Versace for H&M is a good example in value capture. It makes customers get Versace with affordable price and discovers untapped revenue streams for firms. This is not the first time which H&M cooperates with luxury brands and they make great effort on it. The luxury brands and H&M become more popular in the middle range through strong advertising and media. Both of them kill two birds with one stone successfully.
Anchor of process also influence two dimensions such as customer experience and value capture. Customer experience involves all interactions with customers and affects customers’ consciousness, priority and preference to extra purchasing. There are two types to capture value from process innovation. It makes process innovation a unique occasion for significant restructuring and produce competent novel patterns from several different ways of completing these movements. Customer is the main driver. Firms give more focus and attention than the others. With the change of customers, customer experience, value capture and process innovation will be different as well.
One example of process innovation is Spanish fashion label Zara. As initially shown by this paper, Zara has the capacity to react quickly to movements of consumers’ demand with the design, production and distribution process. An impressive aspect of Zara is that they don’t do advertisement as they could disperse their brand image through verbal communication among customers. This company has the capacity to react to the demands of markets with its factory in La Coruna. With the innovative producing process, Zara could respond swiftly to the demand of market and send clothing to the shops and also re-design at the same time. Therefore, only about 15-25% of clothing is manufacture before the season while 50% to 60% of clothing is produced in the begging of the season. The rest of clothes are manufactured during the season to meet the customers’ wishes. Every year, Zara usually produce 12,000 distinct models and will withdraw some designs without good responds and will send novel design to shops in 3weeks.
To sum up, value chain has two critical components that are primary activity and support activity. Zara retail industry business model could offer a sufficient explanation of value creation. Zara business model is generally divided into three basic elements: infrastructure, customer, and value drivers. As discussed in previous section, two anchors each could enhances or creates value in textiles but sometimes they also influence with each other.
Bruce Temkin (2008). Customer Experience Innovation: As Simple As 1-3
Christos N. Pitelis. Value Capture from Organizational Advantage and Sustainable Value Creation.
Extreme Business- Models in the Clothing industry
A Case study of H&M and ZARA
— THE GLOBAL APPAREL VALUE CHAIN:
What Prospects for Upgrading by Developing Countries
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