Globalisation and Technology (HSC SSCE Business Studies): Revision Notes

Worked Example: Apple's Global Operations Strategy

Apple demonstrates the global web model in practice:

• Design: Electronic products designed in the United States, leveraging American design expertise
• Manufacturing: Products manufactured in China, taking advantage of low-cost production facilities
• Distribution: Efficient distribution networks reach worldwide markets
• Result: This approach allows Apple to optimise each stage of the value chain across different locations

Case Study: AON – Global Insurance Operations

AON provides a strong example of service globalisation. As a niche provider of business insurance, human resources solutions and outsourcing services, AON operates in $120$ countries and employs over $50,000$ workers worldwide. Despite being primarily a business-to-business insurer, AON has built significant brand recognition through strategic sponsorships, such as its partnership with Manchester United Football Club.

Operational Strategy:

AON's operational strategy demonstrates effective globalisation. Whilst operating in $120$ different markets, the company standardises a large proportion of its products and then makes slight variations to meet specific local market needs. This approach allows many "back-end" business processes to remain consistent across markets, creating reliability and predictability for global business clients operating in multiple jurisdictions.

Success Factors:

The company's focus on standardised protocols, high internal standards and quality management has enabled it to maintain consistent growth. This consistency makes AON an attractive business partner for multinational corporations that require insurance services across multiple countries.

Case Study: Zara – Fast Fashion and Global Operations

Zara, owned by Industria de Diseño Textil (Inditex), provides an interesting contrast to traditional global manufacturing approaches. Founded in $1974$, Zara has grown to operate $2,249$ stores across $96$ markets, generating approximately $20$ billion dollars in sales in $2019$.

Business Model Comparison:

The fast fashion industry typically divides into two business models: companies that manufacture their own clothes and those that source and brand clothes produced by other manufacturers. Competitors like H&M and GAP follow the second model, but Zara has built its success on localised production in Spain, Morocco, Portugal and Turkey. More than $65\%$ of Zara's clothing is manufactured in Europe or Morocco, even though some offshore production has been introduced recently.

Logistics Strategy:

Zara's founder, Amancio Ortega, believes that production proximity and quick logistics are crucial contributors to global success. All Zara stock, regardless of production location, passes through the company's main Spanish production and distribution facility. This central hub employs over $6,000$ staff and uses sophisticated logistics to distribute clothes globally within $48$ hours, eliminating the need for local warehousing in the $96$ markets where Zara operates.

Global Sourcing:

Zara's global sourcing strategy includes obtaining fabrics from Vietnam, Bangladesh, Morocco, China and Thailand. The company manages approximately $1,985$ suppliers and $8,155$ factories through highly centralised production control. This global sourcing reduces costs, as does the strategy of moving stock quickly rather than storing it in warehouses.

Competitive Advantage:

Unlike competitors who seek maximum economies of scale through mass production, Zara keeps production volumes relatively low and moves products quickly to market. The company has transformed the traditional seasonal production cycle by designing over $1,000$ new garments per month. These designs respond to current market trends, as Zara employs over $200$ designers who interact with consumers globally. New products launch in Zara's global stores every two months.

Customer Loyalty:

This approach creates exceptional customer loyalty. Surveys indicate that Zara customers visit stores an average of $17$ times per year – significantly higher than visit frequencies for competing businesses. Zara's success demonstrates how global proximity to markets and well-designed logistics can create competitive advantage even without maximising economies of scale.

Case Study: Zazzle – Technology-Enabled Customisation

Zazzle demonstrates how technology enables entirely new business models. Launched in $2005$ as a web-based company with a private legal structure, Zazzle helps consumers create customised products. The company operates from its California head office with a European base in Ireland.

Business Model:

Zazzle's business model centres on made-to-order manufacturing. Customers order customised products online, and Zazzle manufactures these products within $24$ hours of receiving the order. This requires hiring people based on design capabilities across three manufacturing plants, with thousands of employees hired annually.

Product Range:

The company offers customisation across numerous product categories: invitations and cards, homewares, clothing, accessories, home and living items, office supplies, baby and children's products, art, wedding items and gifts. Within each category, extensive subcategories exist. For clothing, options include t-shirts, underwear, shoes, tank tops, hoodies, activewear, jackets, dresses, maternity wear, sweatshirts, jerseys, leggings and polos. The accessories category includes bags, watches, keychains, jewellery, hats, buttons, wallets, sunglasses, compact mirrors, scarves, athletic headbands, luggage tags, ties, tie bars, lapel pins, cufflinks, button covers, belt buckles, luggage handle wraps, hair ties, money clips, nail art, passport holders, temporary tattoos and belts.

Technology Integration:

Zazzle's technology integration spans the entire operations process. Design options are pre-set to streamline production – for example, customers designing a custom frisbee choose from five colour options and upload their own images and text. Alternatively, customers can browse individually designed items created by other users.

The business model relies on strategic partnerships and innovative design strategies utilising technology throughout the process: from ordering and design through to product customisation and despatch. Key technological elements include:

• Shopping cart systems: Managing customer selections and facilitating easy purchasing
• Adaptive databases: Matching customers' previous purchasing choices with suggested options to enhance the shopping experience
• Secure payment systems: Processing financial transactions safely
• Distribution technologies: Coordinating rapid delivery of made-to-order products

Strategic Partnerships:

Zazzle holds numerous licences with companies and trademarked brands including Disney, Harry Potter, Sesame Street and Looney Tunes, allowing customers to incorporate popular characters and designs into their customised products.

Key Success Factors:

The company's success demonstrates that customisation requires both innovative technology and a flexible, creative workforce. Zazzle has invested millions of dollars in enabling technologies that help customers design almost any imaginable consumer good, from custom-made chocolate to customised jewellery. This investment in technology has transformed the operations function, making rapid, affordable customisation commercially viable.