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Strategic Management: Inditex Group (focus
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Strategic Management Project for Alexander Daval subject at ISC and Mod'Art International. Conducted by Juliana Gruber, Lu Wang and Alba Romero Villa.

Strategic Management Project for Alexander Daval subject at ISC and Mod'Art International. Conducted by Juliana Gruber, Lu Wang and Alba Romero Villa.

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  • 1. STRATEGIC MANAGEMENT Prof. Alexandre Daval (ISC & Mod’Art International) Lu WANG Juliana GRUBER Alba ROMERO VILLA 1
  • 4. COMPETITIVE FORCES - FAST FASHION Threat of New Entrants! Bargaining Power of ! Buyers! Bargaining Power of ! Suppliers! •  Ability to quick replace suppliers" •  Dependence on economies of scale lead suppliers to narrow margins." •  Difficulty of suppliers to replace big fashion groups." •  Lack of long-term contracts or the limited action of labor unions reduces switching costs to companies." •  Suppliers exclusivity contracts make them more dependable on the fast fashion conglomerates. " Threat of Substitutes! ! •  Elastic demand and difficulty to achieve costumer loyalty." •  Reliance on distribution channels, resulting on low buyer switching costs (competitors share locations.." •  High competitiveness, efficiency to quickly adapt to new business trends." •  Significant demand of consumers unable to identify genuine products since they’re looking for similar looking apparels from higher brands (fast-fashion copying)." •  Suppliers are obligated by contract to exclusively produce for a specific groups, then no equal products. " Rivalry among ! Existing Competitors! •  Decentralized market." •  Existence of equally sized competitors." •  Overcapacity of industry make competitors to cut prices." •  Poor product differentiation. " •  Geographic factors limit competition." •  Until recently was a growing industry, then competitive become higher. Nowadays, mature industry. New online competitors." •  Relevant bargain power from buyers due to several ways that facilitate price comparisons." •  Poor product differentiation." •  Costumer sensibility to price." •  In order to overcome the power of suppliers: false scarcity, continuous novelties. " •  Latest trends for fashion addicts. Keep up with fashion. " •  Competitive industry with significant number of players" •  Attractive profitability & high fixed costs requires economies of scale (Large Size)" •  Requires know how (high technology and supply chain management)" •  Vertical & centralized models require large investments" •  Brand equity valuable to consumers" Barrier Levels! Low! Moderate! High!
  • 5. OVERALL ANALYSIS - SWOT S W O T STRENGTHS WEAKNESSES OPPORTUNITIES THREATS INTERNALORIGIN attributesoftheorganization EXTERNALORIGIN attributesoftheenvironment HELPFUL to achieving the objective HARMFUL to achieving the objective 1. About 6.340 (Zara: 1.296) stores all over the world;! 2. A worldwide renown brand without advertising (brand awareness);! 3. Highly regarded designs: keen on delivering latest trends;! 4. Supply chain management is low cost and most of their processes are all vertically integrated;! 5. Handling all the processes by their strong IT system; ! 6. Clothes are produced at a low cost with the innovative and fashionable designs;! 7. Ownership of lots of the spaces where their stores are. They’re strong investors in real estate market;! 8. Liquidity - Cash flow. 1. Weak brand identity;
 2. Target segment is not extremely consumer loyal and might go for better quality and newer brands;! 3. Lack of marketing.! 1. Improving ethics production in terms of the raw material and production workers;! 2. They can also enter into segments and expand those areas where they haven’t;! 3. Online marketing and e-commerce is gaining importance;! 4. Plenty financial external support;! 5. Development of new product lines;! 6. R&D investment into new fabrics.! 1.! The high end fashion merchandisers can be a major threat to them;! 2.! Fast fashion retail industry has reached maturity; ! 3.! Economic downturn can also be a threat to their target segment;! 4.! Loyalty very low, high competition and large number of players;! 5. There is a large amount of consumer switching taking place.!
  • 6. EXTENDED SWOT: STRATEGIC MOVES STT WT SO S ✦ Stores presence over the world; ✦ A renown brand without advertising. ✦ Regarded designs: keen on delivering latest trends; ✦ Low cost supply chain management; processes are vertically integrated and handled by a strong IT system; ✦ Low cost production ✦ Real estate market; ✦ Liquidity - Cash flow. W O WO ✦ Ethics: raw materials production; ✦ Possibility of entering into new segments and expand ✦ Online marketing and e- commerce is gaining importance. ✦ Financial external support. ✦ Development of new product lines; ✦ R&D investment into new fabrics. ✦ Weak brand identity; ✦ Target segment is not extremely consumer loyal and might go for better quality and newer brands; ✦ Lack of marketing. ✦ The high end fashion merchandisers can be a major threat to them; ✦ Fast fashion retail industry has reached maturity; ✦ Economic downturn can also be a threat to their target segment; ✦ Loyalty very low, high competition and large number of players; ✦ There is a large amount of consumer switching taking place. ✦ Cash flow liquidity = permits larger investments to step in new industries and activities. ✦ Use their ‘know how’ in terms of identifying trends to transfer them into new fields of action. ✦ Use their adaptability capacity to evolve towards new habits of consumption focusing on ethical, sustain able and conscious values ✦ Reinforce online channels of distribution. ✦ Transform existing stores to the new activities. ✦ Re-think the company to be prepared for the coming years. ✦ Rebuild brand identity and offer a complete range of services in place to make the stores less standardized and boost consumer shopping experience. Follow the examples of concept stores and flagship stores. ✦ Strength e-commerce to build-up a more emotional communication; reinforce qualitative presence in lifestyle dedicated social media. ✦ Improve customer services in store to build up stronger relationship with customers and raise loyalty. ✦ Take advantage of the lack of marketing and brand codes: consumers avoiding logos, suitable for lager audiences. ✦ Difficulty for the products to be recognizable since there is no brand codes neither a recognizable brand identity. ✦ Difficult to build core loyal consumers due to lack of identity. ✦ Fast-fashion relation to reckless consumption, exhausting global resources.
  • 7. VALUE CHAIN Procurement! PROCUREMENT ! • Low cost, fast and effective procurement system. JUST IN TIME. ! • Low cost far fabrics with close automatic production facilities. ! • Their logistics are integrated in Spain (most of the goods the goods are send from Spain). ! FIRM INFRASTRUCTURE! • Headquarters in Spain. Centralized company to secure fast moving. Vertical process: Inditex control all the process from designing to selling. ! • Number of stores: around 6.249 and presence in 86 different countries. Sales in store in Spain (21%), rest of Europe (45%), América (14%), Asia and rest of the world (20%).! • Public stock Exchange market. 2012 results: $20.6 B sales, $ 3 B profits, $17,5 B assets and $83.3 B market value. Inditex ranks in first place in the apparel / Footwear retailers in the ‘The world’s biggest public companies’. ! INBOUND LOGISTICS! • More than 1.400 different suppliers, they aim to proximity to their suppliers but near half of them all them are located in Asia.! • EU: 446, Non-EU Europe: 136, Asia: 672, África: 112 and América 68. ! • With the large amount of suppliers spread all over the world raw materials, unfinished and finished items travel long distances making its inbound logistics less efficient and less sustainable.! • Categorization in Spain! ! HUMAN RESOURCE MANAGEMENT! • Number of employees: 120,314 (86% In stores) of 130 nationalities (strong presence of Spanish). ! • Necessary to start from the bottom – previous experience in the stores. Internal promotion. ! • Strong presence of Spanish people. ! TECHNOLOGY! • Technological integrated system through all the company: sales forecast and review, logistics, design preferences, reallocation of products, inventory control etc. ! • Eco-efficient stores.! OPERATIONS! • Autonomy & Capital intensive industry.! • Just in Time processes.! • Price based on demand, not margin. ! • Integrated retail, flexible production.! • Coordination from Spain. ! • Flexibility when globalizing: retailers, joint-venture, franchisee (reduce cultural distance).! • Few hours response to the market and quickly feedback. ! OUTBOUND LOGISTICS! • Zara owns and have centralized their entire logistics system. ! •  Deliver twice per week new products. ! •  At the end more than 11.000 new designs each year (Zara).! • False scarcity =product are quickly out of stocks.! • Own railway infrastructure and port. ! • 24 hours margin per Europe. Asia and America 40 hours.! MARKETING & SALE! •  Quickly respond thanks to live technologic follow-up.! • Produce the latest trends in very short time. It takes the company only 10 to 15 days to go from the design stage to the sales floor.! • Good relation price & quality.! • Stock management. Only 18% of unsold merchandising when starting discount periods. ! • Very few investment in advertisement and promotion. Brand awareness based on channel of distribution: retail stores (footstep traffic & importance of windows.! • Zara is the owner of the majority of their stores. ! ! SERVICE! ! • Poor quality.! • High rotation of sales people. ! •  Unloyal costumers due to the nature of the market. ! • Company prefers to bet in products rather than in service. Product focused.! • Standardized ! experience and same! products in store ! all around the world. ! ! Margin!Margin!
  • 8. CORPORATE STRATEGY MARKETING & SALES Revenues objective: (+ 17% in five years in the given market – around 7% thanks to the new strategy).! Evolve towards a more conscious company thanks to new directions and activities within the group in order to attract new audiences and generations of consumers.! Rely on real people as brand ambassadors but also in terms of business development. Engage with early adopters to reshape the company.! Communicate to customers the importance of responsible buying (3Rs principles - reduction, reuse and recycle + Cradle to Cradle).! Raise the brand value focusing on design, sustainability, R&D, CSR service, quality. Position the brand in a higher level price than competitors, such H&M or Topshop.! Implement CRM programs to build a stronger relationship with clients. ! PRODUCTION! Promote the reduction, reuse & recycle of textile products and materials used in the manufacture and distribution by offering collaborative initiatives that involve consumers.! Produce better quality products with a longer usage life and a larger selection of ‘real’ sizes.! Invest R&D to develop more sustainable and healthier fabrics. ! Focus on fair trade. ! Promote internal market by moving suppliers to proximity countries struggling because of the economic downturn. Due to recession, salaries have decreased and is a key moment to move the production back = a quicker response to demand. Set a tangible objective: 60% of suppliers. ! OPERATIONS (management, logistics, legal, finance)! Moving back the production to closer suppliers will build a more environmental, sustainable and efficient supply chain management. Because the products will have to travel shorter distances the company will reduce their pollution impact. Goal: decrease the pollution by 20% by 2020. ! Commitment of Zara with energy saving: all new stores or stores being remodeled must be eco-efficient. ! Rethink the retirement strategy taken when Amancio Ortega abandoned the first line = Reshape the notion of flat hierarchy of the company and change it from a CEO centralized structure (Pablo Isla) to a more open team decision oriented. ! Further investments in the real estate market since prices are down. ! - Net result objective: (+12 % in the given market) Evolve towards a more ethical, sustainable and conscious group in mature markets.! ?
  • 9. BRAND POSITIONING STATEMENT VISION 1. Competitive Environment! Fast-fashion in ready-to-wear, shoes, accessories, underwear and home decoration.! ! 2. Target! Mass market, but focusing in style-driven, urban, dynamic and versatile yet practical individuals. The company segments brands / in shop lines according to sex, age, fashion sensitivity and level of income. ! ! 3. Consumer Insight! Fashion lovers that want to follow an ephemera style but do not want to pay a premium price for it.! ! 4. Benefits! Delivering latest fashion style for everyday life at prices that consumers are willing to pay.! ! 5. Values & Personality! Fashion reactive, energetic brand keen on delivering what public is demanding at the price they are willing to pay in record time. Effort to offer recognizable trends at the best possible deal considering price, style & quality ratios. ! ! 6. Reasons to Believe (Company core competences)! Vertical integration, in depth sales analysis and market & consumer intelligence researches to offer a competitive response to latest trends.! ! 7. Consumer Discriminator! Best deal combining style, quality & price factors. The world's biggest & more renewed offer (new products are delivered to stores twice a week and monthly visual merchandising re-planning) displayed in a minimal context, highlighting products. Therefore, visiting the store to meet novelties (a weekly section dedicated to last products in all e-shops) has become a hobby for fashion 'addicts'. ! ! ! 8. Essence! Latest daily fashion style at affordable prices. Creation: 1974 Revenues: $16.7 B Brand value: $9.4 B *Source:www.forbes.com/Inditexannualreport2013
  • 11. WHAT’S NEXT ? “Let's not pretend that things will change if we keep doing the same things”! “Try not to become a man of success. Rather become a man of value.”
  • 12. INSPIRATIONAL VIDEO https://www.youtube.com/watch?v=nmwXdGm89Tk
  • 13. INSPIRATIONAL VIDEO https://vimeo.com/16731757
  • 14. SELECTED BRAND CODES video: https://www.youtube.com/watch?v=qPdBdahGJ6U&list=PLKKYyqiDzoOgl4Ix1ASveNB_r58nu5Pfj
  • 15. INNOVATIVE CONCEPT Brand linkage : 4/5 Target focus : 4/5 Innovation : 3/5
  • 16. SELECTED BRAND CODES Source:devilwearszara.vogue.es
  • 17. INNOVATION PLATFORM 1 - EDUCATION The aim is to create a Design Academy to teach and learn from future designers. A school of this characteristics will enrich their culture and will fight the idea that Zara succeed is based on copying other top designers work. An academy will bring freshness to the company as well a respect for other people’s creations. It will allow the brand to attract creative talent that will be trained in house to become part of the company in the future. ! Thanks to this initiative, the group will be seen as a more ethical company that embraces imagination and is open to visionary reformers. ! This education system will be a private initiative that will challenge existing design schools since it’s linked to a specific group. At the same time, the participation of professionals as mentors and their interaction with students will be positive in all levels. Brand linkage : 4/5 Target focus : 4/5 Innovation : 3/5
  • 18. INNOVATION PLATFORM 2 - FOUNDATION With the objective of transforming and placing creativity and Art into the brand core essence, the company will create a Foundation dedicated to visual arts. The range of activities shall include installations and exhibitions that will travel all around the world through Zara’s flagship stores. The Foundation would also include patronage and will dedicate a special area to growing Spanish artists to whom Inditex would promote their work internationally. The principle is think local, act global.! Once again, with this initiative, Zara will modify customers´perception as regards its lack of creativity. Beyond commercial aspects, the Foundation would become a strong asset in terms of communication reinforcing the new positioning of the brand, creating value to the company. A focus on design and creation will interest new audiences that will appreciate the artistic approach of a group seeking for authenticity. ! Seeing as an innovation, Zara Foundation will impact the Art industry. Culture is often seen as elitist and reserved to a minority; while thanks to the wide store network, Zara shall transform this principle by bringing access to culture to everyone. Brand linkage : 4/5 Target focus : 4/5 Innovation : 2/5
  • 19. SELECTED BRAND CODES video: https://www.youtube.com/watch?v=O_OKpl6u5P4 IMAGES
  • 20. INNOVATION PLATFORM 3 - FURNITURE Even though developing a furniture brand could be perceived as the logical step following the creation of Zara Home, the way it would be implemented will definitively mark a rupture with the present. Since it is the most disruptive one, it should be the first to be implemented. The concept refers to offering a personalized service rather than a standardize product. ! Customers will bring their own furnitures (or partner with antique dealers) to be transformed and actualized. Such process is aiming at engaging emotionally with clients by providing products full of trajectory.! This initiative fits perfectly with the new strategy based on ethics and sustainability. Furthermore, it represents a new ground for the brand and shakes the mindset within the company while keeping a strong relation with its core competences (self- actualization & style). Brand linkage : 4/5 Target focus : 4/5 Innovation : 4/5
  • 21. PLATFORM OF INNOVATION: FURNITURE (I) Brand linkage : 4/5 Target focus : 4/5 Innovation : 4/5
  • 22. INNOVATION PLATFORM 4 - RESEARCH LABORATORY Inditex will use its financial resources to develop a Research laboratory to boost in-house R&D. The main objective of this project is to investigate the effects of the existing fabrics in our organisms / environment. At the same time, it will develop new materials that are good for the health and sustainable for the planet. ! This innovation will improve the brand since Inditex constantly mix different kind of fabrics and textiles to assemble clothes. A research lab adds value to the group and sets up a relation with future demands and sustainability expectations by reinserting trashed products into the market (Cradle to Cradle principle).! A research lab of these characteristics will shake the textile industry supplying fast-fashion companies, often focusing in developing on purpose short lasting fabrics lacking quality but extremely cheap. Brand linkage : 4/5 Target focus : 4/5 Innovation : 3/5
  • 23. INNOVATION PLATFORM 5 - READY TO EAT Inditex shall diversify in the food industry by exporting their core competencies in ready-to-wear into a chain of cafés. The concept is specially designed for busy urban professionals seeking to disconnect while eating. This company will be distributing organic snack, food and menus in an alternative and charming environment. The group will take advantage of its strategic position in big cities as well as its competencies in terms of quick distribution. ! The concept is based on the principle of the ‘slow movement’ -run when you have to, stop when you can-. The brand will be dedicated to individuals that live a frenetic life but seek for authenticity and disconnection.! Due to the financial support available from the group, the company could benefit from a strategic advantage in its approach to the market, becoming a key player rapidly. Furthermore, no competitors have implemented a service that fulfills the above mentioned characteristics (Prêt à Manger ; Starbucks etc…) Brand linkage : 5/5 Target focus : 4/5 Innovation : 2/5
  • 24. Key activities Sustainable personalized & actualized furniture made of refurbished materials and Zara production fabrics. Revival and treatment of old pieces to make them contemporary and unique. BUSINESS MODEL - SELECTED PLATFORM www.businessmodelgeneration.com http://vimeo.com/5270530 Value propositions ! High design performance products with reasonable prices Unique & customize pieces, made with furniture that have some added value for the customer (sentimental, emotional value, beauty, trajectory, heritage, etc.) however, have an overpass design. Actualization in terms of style. ! Customer relationships ! Emotional attach to the product since their are customized and unique. ! Every piece will have a serial number hidden with the artist signature that modified it and a note with some history facts about it.! Customer segments ! ! • People that appreciates art and encourages new artists • People that cares about the sustainability and the impact of their consumption in the planet. • People that likes fashion & style, however, search for differentiation and is looking to communicate their personality by the consumption of specific products and brands. Cost structure ! (++) Irregular costs due to the fact that we’re providing rather a service than a product. In addition, customers will be charged in terms of materials used and the amount of hours that our professional spent working in their pieces. (+) Usual cost of operating a business (rent, salaries, raw material, machines, maintenance, etc). Store / Ateliers costs. (-) Partners that gives destination to the exceeding material Revenues streams! ! Sale of products full of added value to customers: the final product is unique and creative, have high quality, is innovative & represents an emotional and personal relation to the individuals; and all maintaining the principle of reasonable price. ! Paying a higher price due to the offer of expert ‘know how’, artisanal worn and environmental sustainability of products. ! The concept presented represent new ground for Zara and will shake the brand perception for setting a new path for the whole group. ! http://vimeo.com/5270530 Key partners Artists in the starting of their carrier,! NGO focus on environmental causes! Antique dealers & flea markets (supplying directly for clients)! ! ! ! Channels ! Brand retail stores in main cities: starting by historic markets in Spain such Barcelona / Madrid and alter stages in Milan and London. Mature Markets firsts. Pop-up stores. Special events. Key resources Good designers able to understand the customer taste & artistic / creative. ! Sales & market team that transmit the added value proposition !
  • 25. BRAND POSITIONING STATEMENT EXTENDED 1. Competitive Environment! Social Responsible fast-fashion in ready-to-wear, shoes, accessories, underwear, home decoration & furniture and fast-food. ! ! 2. Target! Mass market, but focusing in style-driven, urban, artistic sensitive, dynamic and versatile but practical individuals. Our public considers the impact of the companies they consume in our planet. The company divides brands / in shop lines according to psychographics and behavioral segmentation. The aim is to attract key audiences to assure the future of the group. ! ! 3. Consumer Insight! Within a creative framework, our core consumers are fashion lovers expressing themselves through a longer lasting style and looking for an emotional relation to product / services. ! ! 4. Benefits! Delivering latest lifestyle in line with our consumers affinities for everyday life at prices that consumers believe are reasonable. ! ! 5. Values & Personality! Social (consumer insights) reactive, energetic brand keen on delivering what public is demanding at the price they are willing to pay in time record. Effort to offer recognizable trends with a higher level of customization and more long-lasting (more than a season) at the best possible deal considering style, quality, sustainability (for the person and the planet) & price ratios.! ! 6. Reasons to Believe (Company core competences)! Vertical integration, R&D investments and in depth sales analysis and market & consumer intelligence researches (qualitative* - consumer insights and quantitative studies) to offer a competitive response to latest trends.! ! 7. Consumer Discriminator! Best deal combining style, quality, sustainability & price factors. Deeper and more complete proposal than generic fast-fashion competitors in terms of company values & principles (more ethical, conscious and sustainable) and emotional engagement with products / services (customization / affinity).! ! ! 8. Essence! Latest sustainable lifestyle at fair prices. Creation: 1974 Revenues: $19.5 B Brand value: $10.8 B
  • 27. THANK YOU
  • 28. EXECUTIVE COMMITTEE 10' PRESENTATION Objectives! Convince the board committee of the importance of transforming the company for the future.! Re-Think together the company! Inspire the board committee & motivate a positive response to disruptive innovation! ! ! Synopsis! What’s Zara / Inditex TODAY?! Present Challenges and Opportunities - Why a change is mandatory for succeeding in the future. ! What’s NEXT:! Present next 5 years strategy (Framework).! Present 5 different platforms of innovation.! Go further in the most disruptive of all (FURNITURE).