Strategic positioning and leadership

Citation

Ali, A.J. (2013), "Strategic positioning and leadership", International Journal of Commerce and Management, Vol. 23 No. 1. https://doi.org/10.1108/ijcoma.2013.34823aaa.002

Strategic positioning and leadership

Article Type: Editorial From: International Journal of Commerce and Management, Volume 23, Issue 1

In debating the rise and fall of corporations, practitioners and researchers alike have focused on the presence or absence of effective strategies. Indeed, the progress that corporations make is characteristically linked to the process of formulating and executing strategies. Any discourse on strategy, however, is futile without underscoring the role of leadership. Whether the subject is strategy formulation, execution, or both, leadership plays a pivotal role. This intertwined relationship between strategy and leadership has taken on additional urgency as intense and broad competition has made market survivability anything but certain.

Firms are driven by the desire to leap forward, achieving optimal organizational outcomes and realizing continuous growth. This, however, does not take place in a vacuum. Rather, it requires an ability to imagine the future, set up plans, and organize and deploy resources. Companies which have shaped competition in their industries and left their marks in the marketplace are usually led by competent executives.

It is impossible to imagine having a viable strategy without competency. Competency ensures that neither planning nor execution is left to chance. The escalating rivalry among firms to shape market competition and be responsive to changing market conditions makes cultivating new skills and nurturing qualities essential for effectively coping with the dynamics of altering expectations. This, along with the fact that the benchmark for success has shifted from just mere achievement of profit to creating value in the marketplace, accentuates the need for competent executives.

However, success in the marketplace is not a just aspiration but a tangible outcome of foresight, realistic planning, and purposeful and disciplined execution of strategy. In today’s business environment, a few companies have managed to compete effectively and assume leading roles in their respective industries. One of these companies is Spain-based Inditex, known by its oldest and biggest brand, Zara. This company, regardless of Europe’s current economic recession and Spain’s economic troubles, has maintained leadership in the fashion market and has outperformed many of its competitors. How Zara managed to be the largest fashion retailer is attributed to exceptional leadership and effectiveness in crafting and executing strategies.

The company was founded by Amancio Ortega Gaona who displayed a low public profile while being intimately involved in building an organizational culture that appreciates modesty and encourages high performance. The New York Times (Hansen, 2012) reported that both Ortega Gaona and Pablo Isla, the new CEO, do not give interviews and are not obsessed with public appearance.

For years, Ortega Gaona quietly built a foundation and generated resources for embarking on activities that uniquely positioned and differentiated his company from competitors. Early on, he placed emphasis on responsiveness to market change, while delivering quality products at reasonable prices. His successor, Isla, benefited from Ortega Gaona’s business foresight and his management style. Both leaders understand that strategy is about making choices (Porter, 1996), including tradeoffs between or among various activities and ventures and prioritization of operations and goals in a way that positions the company competitively. Their foresight and alertness to changing market signals and competitors’ practices manifest an understanding that in a dynamic world the essence of strategy is to “exploit and create new and different opportunities for tomorrow” (David et al., 2011).

Though a local operation, begun in 1963, the company’s strategy started to take root in 1975 when the first retail store was established. Since then, the founder of the company has carefully crafted various strategies to position his company, compete effectively, and differentiate it from other rivals. In recent years, the following strategies (Hansen, 2012) have been instrumental in moving Zara from being a local actor to the largest global fashion retailer:

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  Seizing on contemporary trends. Zara is famous for having trendy and decently made but inexpensive products which are sold in high-end-looking stores.

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  Expanding globally. In recent years, Inditex has expanded globally opening more than one store a day and operating in 85 countries. Though its primary market was Europe, it has aggressively expanded to the USA and Asia.

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  Learning from customers. In espousing a rapid expansion, Inditex closely monitors customer demand and act accordingly. It has built an effective system of communicating with customers not only in terms of their purchasing preferences and aspirations but also their demands and spending expectations. As one of its employees puts it, opening new stores:

  […] depends on the customer and how big the demand is. We must have the dialogue with the customers and learn from them. It’s not us saying you must have this. It’s you saying it (quoted in Hansen, 2012).

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  Manufacturing close to home. From the early days, Ortega sought to maintain his own manufacturing business in La Coruña, Spain. As demand has increased, the company has set up its own manufacturing facilities within proximity to its headquarters in Europe and North Africa. In recent years, it has made the trendiest items close to home so that the production process, from start to finish, takes only two to three weeks. Though Inditex has relatively high labor costs, this is offset by greater flexibility – eliminating the need to have extra inventory while ensuring speedy delivery.

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  Keeping stock fresh. Inditex’s customers do not find the same item again a few weeks after their last visit. Its merchandise turnaround is remarkably high and Inditex stores receive deliveries of new items about twice a week. During each visit, customers are accustomed to finding completely new merchandise. Masoud Golsorkhi, the editor of Tank, a London fashion magazine, was quoted saying:

  When you went to Gucci or Chanel in October, you knew the chances were good that clothes would still be there in February. With Zara, you know that if you don’t buy it, right then and there, within 11 days the entire stock will change. You buy it now or never. And because the prices are so low, you buy it now (quoted in Hansen, 2012).

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  Having a unique business model. Zara’s model is based on three elements: the fashion trend is global, it stays close to luxury brands, and products are shipped to its more than 5,600 stores on five continents twice a week. While the retail strategy for luxury brands is to locate far away from the likes of Zara, Zara’s strategy is “to get as close to them as possible”. Furthermore, Zara recognizes that maintaining quality demands intimate familiarity with fashion trends on a global basis. It is driven by the belief that in cosmopolitan cities, high-end market areas share fashion trends more than countries do. In both cases, this model allows Zara to focus on process innovation, capture the trends, and offer a product that is fashionable, but inexpensive. Likewise, Zara designers and marketing managers are housed in their headquarters where they meet frequently, get input from buyers and observe fashion trends. Teams “diagnose the overall market situation, see how their work fits into the big picture, and spot opportunities that might otherwise fall between the cracks of organizational silos” (Sull, 2009).

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  Utilizing information technology to ensure effective operations and increase demand. Inditex not only launched Zara online to reach customers in various areas and draw more customers to physical stores, but also tracks data on consumer tastes from all its stores (Bjork and Roman, 2012).

Zara has maintained a remarkable flexibility in responding to market changes, meeting customer needs, and controlling its costs. Its efficient logistical hub and its speed in seizing emerging opportunities, while continuously improving innovation processes, demonstrates that leadership in a rapidly changing and highly competitive industry does make a difference. However, as Zara expands globally, including in places like China, success may not be a given. Rapid expansion has its own risk and the leadership at Zara has to imagine the future and where the company should be in the years to come. Venturing into different markets necessitates designing a different strategy. This is the test for Zara’s leadership, especially as a new CEO takes the lead.

Abbas J. Ali