Zara has achieved strong financial success compared to competitors like H&M due to its unique business strategies. Zara vertically integrates the design, manufacturing, and retail aspects of its business. This allows Zara to quickly design and produce small batches of fashionable clothing in response to the latest trends. Zara's rapid product turnover and limited inventory creates a sense of scarcity that drives more frequent customer visits and sales. Zara's internal communication systems and corporate culture also help it quickly translate customer preferences into new product designs within a season. These strategic advantages around vertical integration, rapid response, and scarcity marketing have enabled Zara to outperform traditional retailers.
Microsoft power point zara strategy caseTanya Boichun
Zara has been able to achieve competitive advantage and sustained profits above industry averages through its business model and vertical integration. It can design, produce, and deliver new fashion items to stores within 2-3 weeks, much faster than competitors. This speed and flexibility allows Zara to stay responsive to the latest trends. Its organizational structure with store manager autonomy and technological integration of feedback also enables rapid design adaptation. While imitable, Zara's full business model would be difficult for competitors to copy due to the costs and time required to develop comparable integration, culture, and processes.
Zara's value chain is highly integrated and controlled. It sources materials and produces about half of products in Spain and Europe to allow for quick design changes. Products are shipped to stores within 24 hours in Europe. Store managers have autonomy to make replenishment orders based on sales data. Zara uses minimal marketing and focuses on window displays. Its competitive advantage lies in its ability to design, produce, and deliver fashion trends rapidly and at scale through its vertically integrated system.
This document summarizes a journal article about the internationalization of the Spanish fashion brand Zara. It provides background on Zara and its business model, which focuses on quick production turnaround and receiving frequent small shipments to stores based on customer feedback. The summary discusses Zara's international expansion, including its motivations such as market saturation at home and opportunities abroad from trade liberalization. Key aspects of Zara's internationalization process are also covered, such as its selection of major fashion markets and use of different entry strategies in different countries.
This document provides information about the fashion brand Zara, including:
1) Zara is owned by Inditex, one of the largest fashion retailers in the world, which operates over 6,000 stores globally and several other brands.
2) Zara prides itself on having the latest fashion trends at affordable prices and short production cycles to constantly refresh stores.
3) Financial information is presented showing Inditex's increasing sales and profits from 2010-2014, with Zara being the leading brand.
- Zara is a major clothing brand owned by Spanish company Inditex that operates a unique fast fashion business model. Unlike other brands, Zara produces small quantities of clothing and replenishes stores frequently based on real-time customer feedback.
- Zara maintains control over its entire supply chain from design to manufacturing to distribution. This vertical integration allows it to produce and deliver new designs to stores within 2 weeks.
- For the US market, Zara should start with an aggressive online presence to test demand before opening physical stores focused on major coastal cities. An initial online-focused strategy allows it to learn customer preferences at lower cost and risk.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It launches around 10,000 new designs each year and needs just two weeks to develop and distribute new products, compared to the industry average of six months. Zara has over 1,700 stores worldwide and controls its entire supply chain, manufacturing most products in Spain to allow for quick design-to-store times. Its business model and focus on fast fashion has enabled it to outpace competitors and drive continued profitable growth.
Microsoft power point zara strategy caseTanya Boichun
Zara has been able to achieve competitive advantage and sustained profits above industry averages through its business model and vertical integration. It can design, produce, and deliver new fashion items to stores within 2-3 weeks, much faster than competitors. This speed and flexibility allows Zara to stay responsive to the latest trends. Its organizational structure with store manager autonomy and technological integration of feedback also enables rapid design adaptation. While imitable, Zara's full business model would be difficult for competitors to copy due to the costs and time required to develop comparable integration, culture, and processes.
Zara's value chain is highly integrated and controlled. It sources materials and produces about half of products in Spain and Europe to allow for quick design changes. Products are shipped to stores within 24 hours in Europe. Store managers have autonomy to make replenishment orders based on sales data. Zara uses minimal marketing and focuses on window displays. Its competitive advantage lies in its ability to design, produce, and deliver fashion trends rapidly and at scale through its vertically integrated system.
This document summarizes a journal article about the internationalization of the Spanish fashion brand Zara. It provides background on Zara and its business model, which focuses on quick production turnaround and receiving frequent small shipments to stores based on customer feedback. The summary discusses Zara's international expansion, including its motivations such as market saturation at home and opportunities abroad from trade liberalization. Key aspects of Zara's internationalization process are also covered, such as its selection of major fashion markets and use of different entry strategies in different countries.
This document provides information about the fashion brand Zara, including:
1) Zara is owned by Inditex, one of the largest fashion retailers in the world, which operates over 6,000 stores globally and several other brands.
2) Zara prides itself on having the latest fashion trends at affordable prices and short production cycles to constantly refresh stores.
3) Financial information is presented showing Inditex's increasing sales and profits from 2010-2014, with Zara being the leading brand.
- Zara is a major clothing brand owned by Spanish company Inditex that operates a unique fast fashion business model. Unlike other brands, Zara produces small quantities of clothing and replenishes stores frequently based on real-time customer feedback.
- Zara maintains control over its entire supply chain from design to manufacturing to distribution. This vertical integration allows it to produce and deliver new designs to stores within 2 weeks.
- For the US market, Zara should start with an aggressive online presence to test demand before opening physical stores focused on major coastal cities. An initial online-focused strategy allows it to learn customer preferences at lower cost and risk.
Zara is a Spanish clothing retailer known for its rapid response to fashion trends. It launches around 10,000 new designs each year and needs just two weeks to develop and distribute new products, compared to the industry average of six months. Zara has over 1,700 stores worldwide and controls its entire supply chain, manufacturing most products in Spain to allow for quick design-to-store times. Its business model and focus on fast fashion has enabled it to outpace competitors and drive continued profitable growth.
This document discusses how Zara, owned by Inditex Corporation, has achieved success in the fashion industry through its rapid product development process enabled by technology and vertical integration. Store managers provide customer feedback collected through PDAs to designers at "The Cube" headquarters, who can develop new items in as little as 15 days. Zara produces around 60% of its items in-house and nearshores most of the rest to achieve rapid replenishment of its stores with on-trend clothing. Its large distribution centers allow over 2.5 million items to be shipped to stores twice a week within 72 hours. This speed and responsiveness to fashion trends has given Zara an edge over competitors.
Zara has achieved strong financial success through its unique business model. It produces 60% of products in-house, allowing rapid design changes and limited inventory to create scarcity. Store staff quickly relay sales data to designers. Zara's vertical integration, rapid production cycles, and global real estate strategy give it advantages over retailers that outsource manufacturing. However, Zara relies heavily on its largest brand, faces challenges expanding in the US, and risks from a strengthening Euro or increased competition may threaten its future growth.
Zara is a Spanish clothing retailer known for its fast fashion model. It operates 1700 stores globally and launches around 12,000 new designs per year. Zara achieves fast inventory turnover through a vertically integrated supply chain that designs, manufactures, and distributes products to stores within 2-3 weeks. Fifty percent of products are made in Spain to facilitate rapid replenishment of stores with new designs twice per week. Zara's supply chain model allows it to stay on the cutting edge of fashion trends at affordable prices.
Zara, the leading clothing and accessories brand based in Spain, is ruling the fashion market for more than 40 years now. Zara now has become synonymous to fast and affordable fashion items.
Zara, the leading clothing and accessories brand based in Spain, is ruling the fashion market for more than 40 years now. Zara now has become synonymous to fast and affordable fashion items.In this slide, we have explained in details the strengths of Zara, weakness of Zara, opportunities of Zara, threat of Zara. SWOT Analysis of Zara that can help you ace marketing assignments on Zara. The Zara Pestle analysis and the Zara Swot analysis dealt in the presentation provides a detailed picture of why Zara is a successful firm.
The Zara Swot Analysis also helps to understand further possibilities of increasing market share and penetration by Zara.
The textile and clothing industry has evolved significantly over time, from a cottage industry to a globalized, industrialized sector. Zara is a highly successful Spanish clothing company that has disrupted the industry through rapid product innovation and flexibility in its supply chain. It develops over 10,000 new designs annually and can move a design from concept to stores in less than three weeks. This allows Zara to respond quickly to fashion trends. The company achieves flexibility through a network of small workshops that cut and assemble clothing based on pre-cut materials and instructions. Through wireless technology, Zara also gains real-time sales data to inform new designs.
Zara is one of the world's most successful fashion retailers operating in over 90 countries. It is known for its ability to design and produce new fashion items in as little as two weeks and get them to stores. The presentation provides an overview of Zara's history, business model, products, manufacturing, distribution network, competitors, and factors for its continued success. It concludes that Zara has transformed from a local Spanish brand into a truly global brand through its integrated business model and supply chain that allows it to quickly adapt to shifting fashion trends and consumer demands.
Zara is a leading global fashion retailer known for its fast fashion model. It introduces about 10,000 new design styles each year, receiving new shipments to stores twice a week to showcase the latest trends. Zara achieves this through a vertically integrated supply chain and just-in-time manufacturing process that allows it to copy catwalk designs and get them to stores in 2-3 weeks. Key to its success is the effective communication between stores, designers, and manufacturers enabled by an advanced IT system. This allows Zara to understand emerging trends and quickly design and produce small batches of garments to meet consumer demand.
Zara is a Spanish clothing retailer known for its rapid production of new designs to match emerging fashion trends. It operates over 1,700 stores worldwide and launches around 10,000 new designs each year, getting products to stores in just two weeks compared to the industry average of six months. Zara's supply chain and production model allows it to be more responsive to trends and offer a wider variety of fashionable products at affordable prices. It has experienced rapid international expansion and growth over the past few decades to become one of the largest and most profitable clothing retailers globally.
Zara operates in 88 markets with over 2100 stores. It aims to encourage sustainable development through environmental and social criteria in its business model. Founded in 1975 in Portugal, Zara's international markets primarily target people aged 18-35 in countries like France, South America, and the Middle East. Zara uses a strategy of "glocalization" to think globally but act locally, entering new countries through gradual expansion or strategic alliances.
Zara is one of the fastest growing fashion chains in the world founded by Amancio Ortega. It focuses on turning around new designs within 3 weeks of them appearing on runways, producing clothes inspired by celebrity outfits. Zara is able to react incredibly quickly to the latest fashion trends, producing fashionable but inexpensive clothes and getting new lines into stores within 3 weeks, much faster than competitors. It introduces 20,000 new designs per year and refreshes stock weekly so customers regularly return to see new items that are only available for around a month before being replaced.
This case flyer, which is based on the article1 from The Economic Times, discusses Spanish fashion retailer Zara’s competitive advantage built on its deep-rooted innovative business model. Since the time it was established in 1975, Zara had a philosophy of centralized design, manufacture and distribution model. Though the company expanded globally, it never changed its centralized model. Moreover, Zara’s business model could not be duplicated by its competitors. What were the merits and demerits of a centralized business and supply chain model? Why could it not be duplicated? How does Zara achieve a competitive advantage out of this model and sustain it? What unique value proposition does Zara offer to its customers using a centralized model? This case flyer is suitable to teach concepts in the courses of Business Strategy, Business Model/Operating Model and Supply Chain Management. The case flyer also discusses Zara’s expansion in China and debates whether Zara should localize or stay centralized.
URL: http://www.etcases.com/zara-s-competitive-advantage.html
This document provides an overview and analysis of the Spanish fashion retailer Zara. It begins with an introduction to the company's history and operations. It then includes sections on a SWOT analysis, Porter's Five Forces analysis, a PESTLE analysis, and a conclusion. The PESTLE analysis examines political, economic, social, technological, legal, and environmental factors that affect Zara. It finds that factors like trade agreements, labor costs, brand perception, technology use, sustainability efforts, and fast fashion impacts all influence Zara's business environment. The document concludes that Zara's unique supply chain and efficient operations give it a competitive advantage in the market.
Zara is a Spanish clothing retailer founded in 1975 and known for developing new fashion products in just two weeks and launching 10,000 new designs annually. It operates over 1,700 stores worldwide and owns other clothing brands. Unlike competitors, Zara invests in new store openings rather than advertising and produces clothing domestically rather than outsourcing to low-cost countries.
Zara has developed a highly responsive supply chain that enables it to deliver new fashion items to stores within 2 weeks. This allows Zara to respond rapidly to emerging trends. Key aspects of Zara's supply chain include closing the communication loop between customers and designers, maintaining a consistent rhythm across the entire chain, and leveraging its production and distribution facilities for flexibility. While very effective for Zara, its model may not work for all retailers as it relies on Zara's expertise in fast fashion and ability to quickly change products based on customer feedback.
Zara is a Spanish clothing retailer founded in 1975 known for its rapid response to fashion trends. It has over 1,600 stores worldwide and is a flagship brand of the Inditex group. Zara's business strategy focuses on design, manufacturing, and logistics to produce trendy clothing in only 2-3 weeks. Zara's designers attend fashion shows to develop initial collections 9 months in advance and make constant adjustments based on sales data and customer feedback. Manufacturing is split between company-owned factories in Europe and outsourcing to factories globally to maximize flexibility and quick production turnaround.
This document contains the names of 5 people: Christian Deing, Simon Luyken, Julika Reusse, Sebastian Stratmann, and Anna Worster. No other information is provided.
The document discusses Zara's business model and IT systems. It identifies that Zara uses a just-in-time production and delivery model to bring new fashion items to stores twice weekly. Zara's IT systems currently use outdated technologies like DOS for point-of-sale systems. The document evaluates options to modernize Zara's IT infrastructure, including fully externalizing the project or having internal staff work with external partners. It recommends modernizing systems using a UNIX solution, as this provides the lowest annual fees over 5 years while meeting Zara's needs for improved in-store and headquarters connectivity.
Zara began as a clothing store in 1975 in A Coruña, Spain. It has since grown to over 2,000 stores worldwide through its unique business model of quick production and delivery of fashionable products based on customer demand. Zara links customer demand directly to manufacturing and distribution through the use of information technology across its facilities. This allows it to produce small batches of products and get them to stores within 2 weeks to meet constantly changing fashion trends. Zara's success is evidenced by its rapid international expansion and growth into new markets over the past decades.
ZARA is a Spanish clothing brand owned by Inditex that pioneered fast fashion. ZARA's business model emphasizes vertical integration, producing clothing in small batches close to stores to facilitate quick response to trends. Stores provide frequent feedback to help designers continuously adapt products. About half of materials and 40% of products are manufactured internally. Distribution centers use advanced tracking to deliver to stores within 1-2 days in Europe and 2-4 days outside Europe. ZARA's approach reduces risks from unsold inventory compared to competitors. Its international growth follows an "oil stain" pattern entering culturally similar markets with company-owned stores.
The project is a study on how Vertical Integration as a supply chain strategy has worked for Zara in emerging as a fast fashion system. It also focuses on analyzing the competitive advantages and the challenges of implementing Vertical Integration for Zara.
This document discusses how Zara, owned by Inditex Corporation, has achieved success in the fashion industry through its rapid product development process enabled by technology and vertical integration. Store managers provide customer feedback collected through PDAs to designers at "The Cube" headquarters, who can develop new items in as little as 15 days. Zara produces around 60% of its items in-house and nearshores most of the rest to achieve rapid replenishment of its stores with on-trend clothing. Its large distribution centers allow over 2.5 million items to be shipped to stores twice a week within 72 hours. This speed and responsiveness to fashion trends has given Zara an edge over competitors.
Zara has achieved strong financial success through its unique business model. It produces 60% of products in-house, allowing rapid design changes and limited inventory to create scarcity. Store staff quickly relay sales data to designers. Zara's vertical integration, rapid production cycles, and global real estate strategy give it advantages over retailers that outsource manufacturing. However, Zara relies heavily on its largest brand, faces challenges expanding in the US, and risks from a strengthening Euro or increased competition may threaten its future growth.
Zara is a Spanish clothing retailer known for its fast fashion model. It operates 1700 stores globally and launches around 12,000 new designs per year. Zara achieves fast inventory turnover through a vertically integrated supply chain that designs, manufactures, and distributes products to stores within 2-3 weeks. Fifty percent of products are made in Spain to facilitate rapid replenishment of stores with new designs twice per week. Zara's supply chain model allows it to stay on the cutting edge of fashion trends at affordable prices.
Zara, the leading clothing and accessories brand based in Spain, is ruling the fashion market for more than 40 years now. Zara now has become synonymous to fast and affordable fashion items.
Zara, the leading clothing and accessories brand based in Spain, is ruling the fashion market for more than 40 years now. Zara now has become synonymous to fast and affordable fashion items.In this slide, we have explained in details the strengths of Zara, weakness of Zara, opportunities of Zara, threat of Zara. SWOT Analysis of Zara that can help you ace marketing assignments on Zara. The Zara Pestle analysis and the Zara Swot analysis dealt in the presentation provides a detailed picture of why Zara is a successful firm.
The Zara Swot Analysis also helps to understand further possibilities of increasing market share and penetration by Zara.
The textile and clothing industry has evolved significantly over time, from a cottage industry to a globalized, industrialized sector. Zara is a highly successful Spanish clothing company that has disrupted the industry through rapid product innovation and flexibility in its supply chain. It develops over 10,000 new designs annually and can move a design from concept to stores in less than three weeks. This allows Zara to respond quickly to fashion trends. The company achieves flexibility through a network of small workshops that cut and assemble clothing based on pre-cut materials and instructions. Through wireless technology, Zara also gains real-time sales data to inform new designs.
Zara is one of the world's most successful fashion retailers operating in over 90 countries. It is known for its ability to design and produce new fashion items in as little as two weeks and get them to stores. The presentation provides an overview of Zara's history, business model, products, manufacturing, distribution network, competitors, and factors for its continued success. It concludes that Zara has transformed from a local Spanish brand into a truly global brand through its integrated business model and supply chain that allows it to quickly adapt to shifting fashion trends and consumer demands.
Zara is a leading global fashion retailer known for its fast fashion model. It introduces about 10,000 new design styles each year, receiving new shipments to stores twice a week to showcase the latest trends. Zara achieves this through a vertically integrated supply chain and just-in-time manufacturing process that allows it to copy catwalk designs and get them to stores in 2-3 weeks. Key to its success is the effective communication between stores, designers, and manufacturers enabled by an advanced IT system. This allows Zara to understand emerging trends and quickly design and produce small batches of garments to meet consumer demand.
Zara is a Spanish clothing retailer known for its rapid production of new designs to match emerging fashion trends. It operates over 1,700 stores worldwide and launches around 10,000 new designs each year, getting products to stores in just two weeks compared to the industry average of six months. Zara's supply chain and production model allows it to be more responsive to trends and offer a wider variety of fashionable products at affordable prices. It has experienced rapid international expansion and growth over the past few decades to become one of the largest and most profitable clothing retailers globally.
Zara operates in 88 markets with over 2100 stores. It aims to encourage sustainable development through environmental and social criteria in its business model. Founded in 1975 in Portugal, Zara's international markets primarily target people aged 18-35 in countries like France, South America, and the Middle East. Zara uses a strategy of "glocalization" to think globally but act locally, entering new countries through gradual expansion or strategic alliances.
Zara is one of the fastest growing fashion chains in the world founded by Amancio Ortega. It focuses on turning around new designs within 3 weeks of them appearing on runways, producing clothes inspired by celebrity outfits. Zara is able to react incredibly quickly to the latest fashion trends, producing fashionable but inexpensive clothes and getting new lines into stores within 3 weeks, much faster than competitors. It introduces 20,000 new designs per year and refreshes stock weekly so customers regularly return to see new items that are only available for around a month before being replaced.
This case flyer, which is based on the article1 from The Economic Times, discusses Spanish fashion retailer Zara’s competitive advantage built on its deep-rooted innovative business model. Since the time it was established in 1975, Zara had a philosophy of centralized design, manufacture and distribution model. Though the company expanded globally, it never changed its centralized model. Moreover, Zara’s business model could not be duplicated by its competitors. What were the merits and demerits of a centralized business and supply chain model? Why could it not be duplicated? How does Zara achieve a competitive advantage out of this model and sustain it? What unique value proposition does Zara offer to its customers using a centralized model? This case flyer is suitable to teach concepts in the courses of Business Strategy, Business Model/Operating Model and Supply Chain Management. The case flyer also discusses Zara’s expansion in China and debates whether Zara should localize or stay centralized.
URL: http://www.etcases.com/zara-s-competitive-advantage.html
This document provides an overview and analysis of the Spanish fashion retailer Zara. It begins with an introduction to the company's history and operations. It then includes sections on a SWOT analysis, Porter's Five Forces analysis, a PESTLE analysis, and a conclusion. The PESTLE analysis examines political, economic, social, technological, legal, and environmental factors that affect Zara. It finds that factors like trade agreements, labor costs, brand perception, technology use, sustainability efforts, and fast fashion impacts all influence Zara's business environment. The document concludes that Zara's unique supply chain and efficient operations give it a competitive advantage in the market.
Zara is a Spanish clothing retailer founded in 1975 and known for developing new fashion products in just two weeks and launching 10,000 new designs annually. It operates over 1,700 stores worldwide and owns other clothing brands. Unlike competitors, Zara invests in new store openings rather than advertising and produces clothing domestically rather than outsourcing to low-cost countries.
Zara has developed a highly responsive supply chain that enables it to deliver new fashion items to stores within 2 weeks. This allows Zara to respond rapidly to emerging trends. Key aspects of Zara's supply chain include closing the communication loop between customers and designers, maintaining a consistent rhythm across the entire chain, and leveraging its production and distribution facilities for flexibility. While very effective for Zara, its model may not work for all retailers as it relies on Zara's expertise in fast fashion and ability to quickly change products based on customer feedback.
Zara is a Spanish clothing retailer founded in 1975 known for its rapid response to fashion trends. It has over 1,600 stores worldwide and is a flagship brand of the Inditex group. Zara's business strategy focuses on design, manufacturing, and logistics to produce trendy clothing in only 2-3 weeks. Zara's designers attend fashion shows to develop initial collections 9 months in advance and make constant adjustments based on sales data and customer feedback. Manufacturing is split between company-owned factories in Europe and outsourcing to factories globally to maximize flexibility and quick production turnaround.
This document contains the names of 5 people: Christian Deing, Simon Luyken, Julika Reusse, Sebastian Stratmann, and Anna Worster. No other information is provided.
The document discusses Zara's business model and IT systems. It identifies that Zara uses a just-in-time production and delivery model to bring new fashion items to stores twice weekly. Zara's IT systems currently use outdated technologies like DOS for point-of-sale systems. The document evaluates options to modernize Zara's IT infrastructure, including fully externalizing the project or having internal staff work with external partners. It recommends modernizing systems using a UNIX solution, as this provides the lowest annual fees over 5 years while meeting Zara's needs for improved in-store and headquarters connectivity.
Zara began as a clothing store in 1975 in A Coruña, Spain. It has since grown to over 2,000 stores worldwide through its unique business model of quick production and delivery of fashionable products based on customer demand. Zara links customer demand directly to manufacturing and distribution through the use of information technology across its facilities. This allows it to produce small batches of products and get them to stores within 2 weeks to meet constantly changing fashion trends. Zara's success is evidenced by its rapid international expansion and growth into new markets over the past decades.
ZARA is a Spanish clothing brand owned by Inditex that pioneered fast fashion. ZARA's business model emphasizes vertical integration, producing clothing in small batches close to stores to facilitate quick response to trends. Stores provide frequent feedback to help designers continuously adapt products. About half of materials and 40% of products are manufactured internally. Distribution centers use advanced tracking to deliver to stores within 1-2 days in Europe and 2-4 days outside Europe. ZARA's approach reduces risks from unsold inventory compared to competitors. Its international growth follows an "oil stain" pattern entering culturally similar markets with company-owned stores.
The project is a study on how Vertical Integration as a supply chain strategy has worked for Zara in emerging as a fast fashion system. It also focuses on analyzing the competitive advantages and the challenges of implementing Vertical Integration for Zara.
This document discusses the case of Zara, a large international clothing retailer known for its rapid response to fashion trends. It describes Zara's business model, which relies on vertical integration, in-house production, quick response times, centralized distribution, and low advertising costs. The document also discusses Zara's use of information systems across various parts of its business to gather customer data, track sales, coordinate design and production, manage logistics and distribution, and engage in other activities. Some challenges of implementing and maintaining such information systems are also outlined.
The document outlines Zara's fast fashion business model and supply chain operations, which focuses on rapid design, production, and distribution of new fashion items to stores within weeks in order to stay on top of constantly changing trends, allowing Zara to maintain its competitive advantage over rivals with shorter inventory turnovers and product lifecycles. Zara's centralized operations and extensive use of data and technology allows it to quickly respond to demand changes through flexible procurement, production planning, and high-velocity logistics. This responsive supply chain model has supported Zara's global expansion to over 1700 stores in 78 countries while continually renewing its inventory with around 11,
Ratio analysis involves calculating relationships between financial statement items to interpret a firm's financial condition and performance. Ratios can be classified into liquidity, capital structure, profitability, and activity ratios. Liquidity ratios measure short-term solvency, capital structure ratios measure long-term solvency, profitability ratios measure operating efficiency and returns, and activity ratios measure asset utilization and efficiency. Ratios are compared over time, against industry standards, or between firms to identify strengths, weaknesses, and trends.
A project report on comparative analysis of marketing strategies of vodafone ...Projects Kart
The document provides information about a project report on the comparative analysis of marketing strategies of Bharti Airtel and Vodafone. It includes an introduction to the topic, background details on the telecom sector in India and profiles of Airtel and Vodafone. It also describes the objectives of the study, research methodology used and the contents that will be covered in the report such as the marketing strategies, SWOT analysis, suggestions and conclusions.
This document provides an overview of the Spanish fashion retailer Zara. It discusses Zara's business model, which involves designing clothing in-house and manufacturing most products in Spain. This allows Zara to get new designs from concept to stores in just 3 weeks, much faster than competitors. Zara is able to quickly respond to the latest fashion trends and customer demands. The document also notes Zara's culture of teamwork and technology use to facilitate communication between stores and headquarters. Some legal issues regarding factory conditions that Zara has faced are also summarized.
Financial ratios analysis project at Nestle and Engro Foodsraboz
Nestle and Engro Foods are analyzed in the document. Nestle has been operating in Pakistan since 1988 and has a wide range of food products. It aims to be the leading nutrition, health and wellness company in Pakistan. Engro Foods also offers various food products and was the first company to use bactofuge technology. Through financial analysis, it is found that while Nestle has been in business longer, Engro has grown efficiently and increased its share price significantly despite being newer. The document examines the companies' financial statements and ratios to compare their financial performance and positions.
The global apparel industry is buyer-driven, with fragmented upstream production and concentrated downstream retailers and brands. Production is located primarily in developing countries for lower costs. Retailing is increasingly concentrated to improve speed and flexibility. Customer spending on apparel decreases as income increases.
Zara uses a business model of quick response and frequent deliveries of on-trend fashion. It targets middle-income, fashion-conscious customers with affordable prices. Key competitive advantages include a strong real estate network, internal manufacturing allowing quick response, engaged human resources, and integrated IT infrastructure.
The recommendations are to aggressively expand Zara in Europe and the Middle East in the short-term. Expansion in North America is not recommended currently due to
Name
College
Course
Tutor
Date
introduction
Companies can effectively compete within an industry through innovative models.
Zara is an example, and its competitors are such as Gap, Southwest airlines, Wal-Mart and Dell among others.
Business model and key disruptive elements
Model Innovation disrupted market
-Deliver styles while still hot -marketing to convince buyers
-Reduce marketing cost and increase- -Increase marketing cost
layout cost.
-Hasten shift to customer demand -clearing the stock
Disruptive business model
The disruptive business model reduces the performance of the competitors by introducing new technologies that disrupt the normal activities in the industry.
4
most demanding use 1 2 3 4 3 4 5 6 30 1 2 3 4 2 3 4 5 low qu ality use 1 2 3 4 1 2 3 4
Ordering- orders are made on time and regulation made to ensure that the order is not late.
Fulfillment-the order is fulfilled by the La Coruna team.
Design and manufacturing- Design is made so as to meet the customers taste and ever changing desires.
Operations
The disruptive models change the way the operations are done. It introduces new operation models such as Zara’s the process of ordering, fulfillment and design.
5
Approaches and organization-consistent with the preference for speed and decentralized decision making.
Application development and other IT activities were the responsibility of an Is department of approximately 50 people
Information Technology(IT)
In side the factories,, relatively simple applications were used to plan production.
Most sophisticated ones were large computer controlled equipment that cut cloth into patterns.
Factories
Automated distribution centres e.g miles of automated conveyer belts facilitated the ongoing task of receiving bulk quantities of each garment from factories then recombining the garments into shipment for each store.
Distribution centres
Personal digital assistants(PDAs) and POS systems. Allows redundancy and division of labor.
Constantly upgrades PDAs to meet technological advancement.
POS terminals remained unchanged since they are remarkably stable, effective and easy to roll out and maintain over time.
stores
Zara leads in the profit margins and growth rate due to unique business model within the industry.
conclusion
Work sheet 4
What business is Zara in?
Worksheet#4
Core Competencies & Competitive Advantages
Learning Task#8
Zara Competencies
There are essentially business results and primary business measures which are reflective of Zara’s competitive advantages and core competencies. These are financial and operational. Write them down in the space provided on Worksheet #4
Zara’s core Competencies and how Zara has built them to execute the behavior drivers.
· To create a timely and accurate “one-number plan” that drives all the business functions and enables planning initial assortment at the store level.
· To develop a synchronized supply chain.
1) Porter's five forces analysis finds the global apparel industry has medium threat of new entrants due to modest growth and low capital requirements, but high bargaining power of customers and suppliers who face few switching costs. Rivalry is also high due to frequent price changes and ease of switching brands.
2) Zara's value chain emphasizes rapid design, production, and distribution through internal suppliers and owned factories. New collections are delivered to stores every two weeks to quickly reflect changing fashion trends. Marketing relies on brand reputation and store displays rather than advertising.
3) Zara's infrastructure allows for fast global coordination between managers, designers, and suppliers. Over half of its 60,000 young, female workforce is based
Zara is a major fashion retailer known for its "fast fashion" business model. The document discusses Zara's current business state, which relies heavily on manual processes and limited information technology. Store managers have autonomy to select products for their stores. It is recommended that Zara implement a central inventory database and upgrade point-of-sale systems to provide employees with up-to-date inventory information across stores. This would increase productivity and allow Zara to enter the online retail space. The IT changes would empower employees while preserving Zara's decentralized decision-making structure.
Zara has become very successful in the fashion industry due to its highly integrated supply chain that can design and produce new products in just two weeks. Zara relies on frequent information sharing between stores and designers, cross-functional collaboration, local manufacturing partners, and efficient distribution. As a result, Zara is able to keep inventory turnover high and quickly provide customers with the latest fashion trends, leading to strong financial performance for its parent company Inditex.
Zara has built a highly efficient supply chain and logistics system that allows it to bring new fashion designs from concept to stores in just 2 weeks. It uses a vertically integrated model where designs are created based on data from stores. Approved designs are quickly manufactured in nearby factories before being shipped to stores twice per week. Zara is proposing to expand this efficient model to the US by opening local distribution centers to manufacture and distribute to North American stores within 24 hours, reducing shipping costs and improving fashionability for American customers. While outsourcing logistics could improve efficiency, it risks losing control over their specialized system which is key to Zara's success.
The document provides background information on Documentum, an enterprise content management software company founded in 1990. It discusses Documentum's opportunities in targeted markets where its software had been tested, such as aircraft maintenance and pharmaceuticals. It also notes threats such as the revolutionary nature of the technology potentially limiting early adoption. The document examines Documentum's challenges in explaining its value proposition to potential clients unfamiliar with their needs. It focuses on Documentum's challenges in selecting an appropriate target market and sales strategy, either focusing vertically on industries or horizontally on functions.
This document provides a case study on the supply chain management of Zara, a global clothing retailer. It discusses Zara's vertically integrated supply chain model that allows it to design, manufacture, and distribute new clothing collections within 2 weeks. This rapid replenishment model has contributed greatly to Zara's success. The document also compares Zara's supply chain to those of other retailers like Myer, Dell, and Toyota, noting differences in their approaches to areas like production, inventory management, and responsiveness to customer demands.
Zara is a major international fast fashion retailer owned by Inditex. It was founded in 1975 in La Coruña, Spain and has since expanded to over 2,000 stores across 88 countries. Zara commits to continuously innovating and providing new, quality designs at affordable prices faster than competitors. It aims to contribute to sustainable development through practices like using ecological fabrics and organic cotton. Zara's success is attributed to its ability to rapidly translate fashion trends into new collections available in stores through an integrated supply chain model.
The presentation has been prepared by the students of MFM(Master of Fashion Management), NIFT, Delhi as a part of the study on the Inventory Management of ZARA.
Zara is a Spanish clothing retailer known for its rapid 2-week production cycle and frequent new designs. It operates integrated supply chains to develop 10,000 new products annually. Zara designs most products in-house and manufactures half itself using nearby factories, with the rest outsourced to European and some Asian suppliers. Zara's design, production, distribution and store teams work closely together to quickly translate sales data into new production runs, allowing frequent updates to match changing fashion trends.
Zara is by far the largest, most profitable and most internationalized fashion retail chain. Zara's success is based on a business system that depends on vertical integration, in-house production, quick response, one centralized distribution centre and low advertising cost. Zara's information system allows it to gather customer feedback and sales data in real-time to quickly design, produce, and distribute new fashion items to stores every few weeks. This rapid inventory turnover and frequent product refreshment is key to Zara maintaining its competitive edge over rivals in the fast fashion industry.
- Inditex is one of the largest fashion retailers in the world with over 6,700 stores globally. It has strong brand recognition for its Zara brand but lacks awareness in some markets like Asia and America.
- While Inditex has many strengths like its rapid fashion business model and strong financial performance, it faces threats from changing consumer preferences towards cheaper fashion and declining fast fashion trends. It is also over-reliant on European markets.
- The recommendations suggest Inditex focus on expanding its online presence, increase advertising, and further penetrate markets in Asia and America to drive future growth.
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1) Zara has developed a super-responsive supply chain that can design, produce, and deliver new garments to stores worldwide in just 15 days.
2) Zara's supply chain success is built on three principles - closing the communication loop between all parts of the chain, sticking to a regular rhythm across design, production, and distribution, and leveraging owned capital assets to increase flexibility.
3) These principles reinforce each other to optimize the entire supply chain and allow Zara to sustain a fast fashion model that keeps customers engaged with frequent new deliveries to stores.
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Over 1
Kaan Over
James K. Lill, Adriana Gil-Matos
Introduction to Engineering Management
October 30, 2016
Zara International: Fashion at the Speed of Light
This study analyzes the status of Zara International taking a broader look at the apparel industry where it operates and the competitive factors, its current operational performance, its market competiveness and its response to the new trends such market globalization. The study also stretches to find out whether Inditex is still providing worthy management benchmarks that firms such as Zara could follow.
Apparel Industry and Its Competitive Factors
The global apparel industry continues to grow healthily into the future. This is attributed to the absence of switching costs for consumers and great product differentiation which has resulted into moderate competition rate. Apparel industry is important to all the economies across the globe as it contribute immensely to trade, employment, investment and revenue all over the world. The industry has vast product differentiation, short product life cycles, and is characterized by great pace of demand change that is coupled with rather long and fixed supply processes.
According to statista.com, the US Apparel industry is estimated to be around $225billion with the women accounting for the largest sales volume at $110,826 million. As of 2015, the market was valued at approximately 343 billion U.S. dollars. Price per apparel article in US was estimated to be about $19. The clothing stores sales in the industry was also estimated to about $183.01bn. The U.S. Apparel Manufacturing was reported to have employed about 89,588 people as of 2014. At the retail level clothing store sales in U.S. was estimated at $183.01bn while the U.S. apparel and accessories retail e-commerce revenue was reported to be about $63.5 Major retail and discount stores are the likes of Target, Wal-Mart, and Kohl's; these firms operate by keeping profit margins thin at stores which sell moderately priced apparel.
As seen in the figure below, the market value of the apparel industry in the United States has been on the increase since 2011. In 2011 the market was valued at $309.98 billion, in 2012, this increased to $316.92 and in 2013 it reached $323.75 billion. In 2014, the market again recorded an increase standing at $331.49 billion. In 2015 it increased to $342.94 billion and currently it stands at $358.88 billion.
Fig1: Market value of apparel and footwear in the United States from 2011 to 2016 (In $billion)
The major competitive factors in the apparel industry include the cost of labor, cost of raw materials and the shipping costs (Lu 32). Besides these, in order to remain competitive within the apparel industry, firms must updated on the latest trends in the market. As such, firms must ensure tha.
This summarizes a research report about the clothing retailer Zara. It begins with an introduction and background on Zara. It then conducts an environmental analysis using a SWOT analysis and Porter's Five Forces model. From this, it determines that an appropriate strategy for Zara would be to outsource some design operations to China in order to better understand consumer preferences in the growing Chinese market. The report discusses how outsourcing design operations to China aligns with industry-based, resource-based, and institution-based strategic views. It analyzes the risks and benefits and provides recommendations for implementing the strategy.
International strategy at Zara is defined by the combined generic strategy of cost leadership and differentiation strategy. There are considerations, however, such as when selecting the Lebanese market, labor cost and productivity, distribution cost and shipment cost of raw materials are considered. Other considerations are characteristics or behavior of consumers and income per capita. In terms of marketing approach, the considerations include the 4Ps inherent to the Lebanese consumers and business environment. Market entry considerations include economics, both macroeconomic factors which include tax, political condition and export tariff and microeconomic factors including local competitors, demand and location of store. Regulation from government and local producers protection issues are other considerations.
Zara is a major international fashion retailer known for its rapid response to new fashion trends through effective use of information systems. Zara collects sales data from its stores daily and uses this to quickly modify existing designs or design new products. The information systems allow Zara to manufacture and distribute new products to its stores within 4-5 weeks. This rapid replenishment keeps stores stocked with the most current styles and allows Zara to change about three-quarters of products on display every 3-4 weeks. Through its efficient supply chain and information systems, Zara is able to offer frequently changing fashions at affordable prices while keeping inventory levels low.
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The report *State of D2C in India: A Logistics Update* talks about the evolving dynamics of the d2C landscape with a particular focus on how brands navigate the complexities of logistics. Third Party Logistics enablers emerge indispensable partners in facilitating the growth journey of D2C brands, offering cost-effective solutions tailored to their specific needs. As D2C brands continue to expand, they encounter heightened operational complexities with logistics standing out as a significant challenge. Logistics not only represents a substantial cost component for the brands but also directly influences the customer experience. Establishing efficient logistics operations while keeping costs low is therefore a crucial objective for brands. The report highlights how 3PLs are meeting the rising demands of D2C brands, supporting their expansion both online and offline, and paving the way for sustainable, scalable growth in this fast-paced market.
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1. ZARA: Fashion Follower, Industry Leader
Business of Fashion Case Study Competition
Amanda Craig, Charlese Jones and Martha Nieto
Philadelphia University
April 2, 2004
2. ZARA: Fashion Follower, Industry Leader
Table of Contents
Introduction………………………………………………………………….1
Financial Analysis and
Comparison…………………………………………………….…………....1
Strategic
Advantages………………………………………………………………...2-3
Strategic
Drawbacks…………………………………………………………….….. 3-4
Possibilities for
Failure…………………………………………………………………....…..4
Recommendations/Conclusion………………………………………………5
Calculations and Financial
Statements……………………………………….……………….Appendix A
Articles: The Recent Status of
ZARA.……………………………………….…………………...Appendix B
Works Cited
Works Referenced
3. The global apparel market is a consumer-driven industry. Also, globalization and new
technologies have allowed consumers to have more access to fashion. As a result, consumers are
changing, competition is fierce, and companies are evolving to meet these demands. Zara, a
Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry.
With their unique strategy, Zara has the competitive advantage to be sustainable. In order to
maintain that advantage and growth they must confront certain challenges that face traditional
retailers in the apparel industry.
Financial Analysis and Comparison
To prove Zara has the prospect of sustainable growth in the international apparel market,
it is important to understand and compare the financial differences of Inditex, its parent company,
and its major competitor. The most interesting of Zara’s competitors for comparison is Hennes
and Mauritz (H&M), who as the case study states, “was considered Inditex’s closest competitor,
[with] a number of key differences” (Ghemawat 5). H&M differs from Zara because they
outsource all of their production, spend more money on advertising, and is price-oriented. The
key similarities for comparison between Zara and H&M are that they are European based
companies, are fashion forward at lower price retailers, and have a strong international expansion
strategy (1; 5).
Just looking at Exhibit 6 from the case it is easy to see that their financial status is are
comparable (24). Their net operating revenues are closer to each other than that of Benneton or
the Gap, as is their net income. The best way of comparing Inditex and H&M’s financials is by
using ratios and not merely a visual assessment of the financial statements given. The current
ratio1 shows that for every euro in short-term debt, Inditex has 1.02 million euros in current
assets. H&M however, has 3.40 million euros in current assets for every euro in short-term debt.
From this we can infer that Inditex is less liquid, possibly because they have more fixed assets
and turn their inventory over quickly. To support this inference, the inventory turnover ratio2 was
calculated that Inditex turns over its inventory 4.42 times per year. This does not mean, however,
that H&M is more efficient due to its liquidity. H&M is not making good use of the cash that
they have because cash not invested does not generate a return. H&M’s excessive inventories
may be the main contributor to its high current ratio because they do not own manufacturing
facilities and have to store products in a warehouse.
The operating profit margin3 was calculated to measure the efficiency of the companies’
profit per euro of sales. Inditex’s operating profit margin is 21.6% and H&M’s is 13.1%. Inditex
is more efficient in generating a greater profit per euro of sales than H&M. Inditex’s higher
operating income4 is a result of keeping their costs of goods sold and operating expenses much
lower than H&M’s. Inditex’s decreased costs are made possible by in-house production, lower
advertising expenses and keeping a cost-effective number of employees per store. H&M only has
771 stores to Inditex’s 1,284, but has a higher number of employees per store5, 29.7 to Inditex’s
20.8. H&M’s high employee to store ratio is partially to blame for their high cost of goods sold.
There is a disparity between the working capital6 of Inditex and H&M, which is the
money available to meet current obligations. Inditex only has 20 million euros of working capital
as compared to H&M's 1035 million euros. This is because Inditex invests more than H&M in
fixed assets7, Inditex owns 1228 million euros in property, plant, and equipment and H&M only
owns 661 million euros. Having a small amount of working capital could potentially hurt Inditex
because it could affect their ability to meet any liability obligations that may arise.
Inditex is efficient in its operating economics, as compared to H&M, due to the
fact that they have higher margins. Their operating profit margin is approximately 1.5
times higher than that of H&M. Their relative capital efficiency is lower due to the fact
that their working capital and their profits per store are much less than H&M’s. Inditex’s
operating profits per store8 is 54.8% as compared to 76.4% of H&M. This is because
Inditex is building more stores based on projections and anticipated future value. As long
4. as Inditex’s profit margins are high, they will be able to have sustainable growth because
they will have the money to invest and pay expenses.
Strategic Advantages
Zara has been able to achieve excellent financial status due to its core competencies that
provide the chain with a competitive advantage over traditional retailers in the industry. Zara is an
apparel chain that works differently from traditional retailers. Generally, a traditional retailer such
as Express owned by Limited Brands (a top U.S. specialty retailer group), outsources all of its
production while focusing on distributing and retailing those goods. This is due to the fact that the
global apparel industry is “highly-labor intensive” rather than capital intensive (2). Fashion
retailers and apparel manufactures are always seeking to lower costs by outsourcing production to
developing countries where the lowest labor rates are found. In contrast, Zara is a chain that has
developed a successful diverse method of doing business in the fashion industry. Zara by working
through the whole value chain is very vertically integrated and highly capital intensive.
Vertical integration, a distinctive feature of Zara’s business model, has allowed the
company to successfully develop a strong merchandising strategy (Herreros). This strategy has
led Zara to create a climate of scarcity and opportunity as well as a fast-fashion system. Zara
manufactures 60% of its own products. By owning its in-house production, Zara is able to be
flexible in the variety, amount, and frequency of the new styles they produce. Also, 85% of this
production is done through the season, which allows the chain to constantly provide its costumer
with very updated products (Ghemawat 9). Traditional retailers lack this flexibility. Traditional
retailers are obligated to place production orders to manufacturers overseas at least 6 months in
advance of the season.
Zara’s in-house production purposely creates a rapid product turnover since its “runs are
limited and inventories are strictly controlled” (12). This rapid product turnover creates a climate
of scarcity and opportunity in Zara’s retail stores. The climate also increases the frequency and
rapidity with which consumers visit the stores and buy the products. Regular customers know that
new products are introduced every two weeks and most likely would not be available tomorrow.
Therefore, Zara’s scarcity climate allows the company to sell more items at full price. This
strategy minimizes Zara’s total cost because it reduces 15-20% of markdown merchandise
compare to a traditional retailer.
Furthermore, Zara’s unique quick response system, composed of human resources as well
as information technology, allows Zara to respond to the demand of its consumer better than the
competition. Zara, who focuses on the ultimate consumer, places “more emphasis on using
backward vertical integration to be a very quick fashion follower than to achieve manufacturing
efficiencies” (12). It is extremely important for Zara to speed the information flow of consumer
desires to their apparel designers. For that reason, Zara has human resource teams in the retail
and manufacturing environment that work exclusively toward this goal.
In the manufacturing environment, Zara’s product development teams are responsible for
attending high-fashion fairs and exhibitions to translate the latest trends of the season into their
designs. Also throughout the season, Zara’s product development teams are constantly
researching the market by traveling to universities, and clubs around the world to track customer
preferences. Additionally, the young, fashionable, and international staff helps to interpret the
desire of the moment (Zara).
In the retail environment, Zara’s managers and sales associates are in charge of
transmitting the sales analysis, the product life cycles, and the store trends to the designers. This
allows the designers in Spain to develop the right products within the season to meet consumer
demand (Ghemawat 10). The transfer of this communication is also accelerated by IT software
that is specifically designed for Zara’s diverse business (Zara).
Zara’s quick response communication strategy is effective due to its management and
corporate culture. Amancio Ortega, the founder of Inditex, still owns 60% of Zara’s shares. Mr.
Ortega has effectively transmitted the values of the company, which are: freedom, perfectionism,
5. responsibility, rapidness, flexibility and respect to others, to his management team (Zara). This
has created a very autonomous and flexible corporate culture for Zara. Also, this has allowed the
company to work horizontally with an open communication environment rather than a hierarchal
one. Due to this, Zara’s managers work in teams in the countries where the chain is located.
These divisional headquarter teams are composed of a head country manager who is constantly
communicating with local managers and reporting to top management (Ghemawat 18). The
constant flow of information between managers allows the company to keep its customers happy,
which results in increased sales.
Moreover, Zara’s centralized distribution facility gives the chain a competitive advantage
by minimizing the lead-time of their goods. Zara’s internally or externally produced merchandise
goes to the distribution center. This is cost-effective due to the close proximities of the
distribution center in Arteixo and their factories in Coruña. In the distribution center, products are
inspected and immediately shipped, since Zara’s distribution center is a place where merchandise
is moved rather than stored (12). Then, to increase delivery speed, the shipments are scheduled by
time zones and shipped by way of air, and land. The typical delivery time within and outside
Europe is between 24 to 48 hours (11).
Zara also has an advantage over its competitors due to its low advertising costs. Zara’s
advertising investment is 0-.3% as compared to traditional retailers who expends 3 – 4% (13).
Zara’s cuts in advertising investments reduce total expenses, which make the international
expansion more economical (16). This also signifies that Zara relies mainly on its stores to project
their image. For that reason, Zara has a department, which exclusively works in acquiring global
prime real estate locations. In addition, this department is responsible for the frequent
refurbishing of store layouts, as well as the creation of a common window display for Zara’s
global stores. The display positions Zara in the industry with a prestigious and elegant image
(Zara).
By targeting a broad market Zara has an international advantage over its competitors.
Zara’s target market is very broad because they do not define their target by segmenting ages and
lifestyles as traditional retailers do. Zara’s target market is a young, educated one that likes
fashion and is sensitive to fashion. Today, people around the world through various
communication devices have more access to information about fashion. Therefore, fashion has
become more globally standardized and Zara uses this to their advantage by offering the latest in
apparel. For that reason, 80- 85% of the products that Zara offers globally are relative
standardized fashionable products. This is due to the fact that Zara’s marketing teams believe that
a product that sells well in a fashion capital such as New York will most likely sell well in
another such as Milan, Sao Paulo or Madrid since fashion has become more globally accessible
(Zara).
Strategic Drawbacks
Although Zara has a successful business model that differs from that of traditional
retailers, it also has disadvantages that can affect its sustainable growth. Due its model, Zara’s
weaknesses also differ from the traditional retailer. Zara holds around 86% of Inditex’s total
international sales-a significantly high number for an organization that has 7 other chains
(Ghemawat 15). With that, Inditex is putting all of their eggs into one basket by sinking a great
deal of capital into Zara. Inditex has contributed their extensive international sales to Zara and
said “Zara was the principal reason Inditex’s sales were increasingly international” (15). If Zara
fails in the future, Inditex will have to totally re-formulate their firm’s strategies and may possibly
face an internal meltdown.
Zara also has an inability to penetrate the American apparel market. This may be due to
American tastes that differ from European preferences. More importantly, however, Zara has not
been able to develop a strong supply chain strategy in the U.S. like they have in Europe. Their
European strategy includes, having a strong production and distribution facility in their home
country in order to have short production and lead times. Zara has not invested in distribution
6. facilities in the Americas, which is a threat to their U.S. selling abilities since the U.S. makes up
29% of the total apparel market (19; 4). This may make them “subject to diseconomies of scale”,
which means that though are aware of how to quickly supply 1,000 stores, they may not be able
to supply more retail locations due to their “centralized logistics model” (12).
Zara’s strategy also creates some weaknesses. Their vertical integration has more
advantages than drawbacks but it is important to recognize its limitations. Vertical
integration often leads to the inability to acquire economies of scale, which means they
cannot gain the advantages of producing large quantities of goods for a discounted rate.
Higher costs are then incurred for the Inditex Corporation. Inditex also has to support
their own high capital investments for their chains and be able to financially back their
“technology and skills beyond those currently available within the organization” (David
145). Zara’s speedy and recurrent introduction of new products incurs increased costs as
well. They have higher research and development costs. They also have elevated costs
due to the constant changeover of production techniques to create their different apparel
lines. That also means that employees must be trained in order to use the new
manufacturing techniques, which again leads to increased costs. Traditional retailers do
not experience higher costs in all of these areas.
Possibilities for Failure
Like traditional retailers, Zara has a threat of failure that can harm its sustainable growth.
The European switchover to the common currency called the euro has created the potential threat
for the Spanish Zara chain. In July 2002 the euro was the only currency accepted for all
transactions in member countries of the European Union (“Euro”). If the euro becomes stronger
against the American dollar, than production costs will increase for European producers. The
euro switchover will increase Zara’s cost of production. That cost increase will be carried over to
the consumer with higher prices. This threat of the euro may also create a threat of decreased
sales because apparel prices will be too high for the traditional Zara shopper. Another threat lies
with the quota elimination under the World Trade Organization agreement on textiles and
clothing expiring in 2005. Traditional retailers who outsource goods can benefit from greater
access to less expensive manufacturing. Zara will suffer from a high euro and the threat of its
competition offering more inexpensive products.
Zara’s direct competition may be their largest threat, especially when expanding into new
geographic territory. Almost any retailer can be a threat to Zara due to their wide range of
merchandise categories. Zara offers clothing and accessories for men, women, maternity,
children, and baby. Many other retailers also offer goods to one or all of those merchandise
groupings. The Gap is one of these competitors because they are also international and sell the
same range of merchandise with a less trendy style. H&M (Hennes and Mauritz) is probably
Zara’s most similar and threatening competitor. They too have been quick to “internationalize”,
which allows them to gain sales in countries outside their native Sweden (Ghemawat 5). H&M
also is more attentive when entering new markets and tends to enter one country at a time, as
opposed to Zara who multitasks globally (5). H&M builds distribution centers in their
international locations in order to cut down lead times and potential logistical costs. Another
threat to Zara is that H&M carries trendy clothing choices that they have designed based on the
melding of international apparel tastes. However, H&M offers these styles at a cheaper rate than
Zara (5). H&M also uses more advertising than Zara, but not as much as the Gap, which may aid
them in entering new markets successfully because the local customer is aware of H&M’s
merchandise mix.
A final threat to Zara is the issue of cannibalization. Zara’s extensive location strategy
involves putting multiple Zara stores that carry the same merchandise in the same cities. That
means Zara is trying to sell the same exact merchandise to the same people that reside in that city.
For example, the two hundred and twenty-five Zara stores in Spain can cannibalize sales from
7. each other especially if multiple locations are within the same city. Also, the other 544 Inditex
stores located in Spain can cannibalize Zara’s sales since the majority of the chains have a similar
target market to Zara. This is similar to the challenges faced by the Gap versus Old Navy: Gap’s
sales were cannibalized by Old Navy’s lower prices (Lee).
Recommendations
The best way for Zara to maintain their sustainable growth is to seek new opportunities in
the apparel market. With changing consumer behaviors as a result of globalization, and U.S.
department stores suffering, there are growth options available for specialty retailers like Zara.
Zara has the opportunity to be one of the trendiest/low priced retailers that America has seen
recently. Zara should most likely develop a second central distribution center in the Americas to
decrease logistics in order to deliver fashionable goods in a faster manner. Their second central
distribution facility should be an expansion of one of their smaller distribution centers located in
Argentina, Brazil or Mexico. The close proximity of the distribution center to the American
market will allow them to effectively interpret the particular American fashion. The distribution
center will also allow them to have additional funds to spend in other areas of business such as
advertisements: a necessary feature to penetrate the American market.
Another market opportunity for Zara is to invest in Internet retailing especially directed
toward the U.S. market. Though Zara is wary of overexposure, Americans like to be able to
purchase all goods including apparel from the comfort of their own homes at any time they chose.
Therefore, since Zara is looking to expand in the U.S. market they could realize the potential for a
direct Internet selling strategy. That form of direct marketing will reach more consumers faster
and easier. Though it may be difficult to display all of Zara’s ever-changing fashions online, it
may prove profitable for shoppers to purchase a moderate selection of trendy Zara pieces along
with some of their staple basics.
A final recommendation for Zara is to offer specialized products for different geographic
locations within the same city. Zara already does this to an extent for different international
preferences but more specialization will increase consumer demand and will motivate them to
visit more Zara locations within their own region. In some cities the company is possibly
experiencing cannibalization because there are too many Zara stores that carry the same product
within one city. Zara could differentiate its product from location to location to increase shopper
traffic. This would work because shoppers would hear about new/different products (possibly
from word of mouth or increased advertising) that another Zara store is carrying across the city
and they would be intrigued to pay a visit. That way sales wouldn’t be stolen from their own
Zara stores, decreasing cannibalization for the chain.
In conclusion, Zara has the potential for sustainable growth due to its competitive
advantage and its ability to face the challenges of the apparel industry. The company keeps its
operating income elevated, has a strong and unique business model, and has various opportunities
for expansion in the retail industry. To many Europeans, Zara is a familiar face with consistently
trendy, well-priced new apparel every week. To Americans, it is a company that is just getting its
feet wet in the American market. Though, the Inditex branch is researching and developing new
methods for expansion, the company must continue to re-invent and innovate themselves in order
to stay fresh in the apparel industry. Today, many companies are looking to Zara as the new
industry standard for how to run a retail business, which shows that Zara’s business model is
becoming the wave of the future.
1
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2
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3
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4
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5
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6
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7
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8
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