Zara Journal

In: Business and Management

Submitted By anyancys
Words 15226
Pages 61
9-703-497
REV: DECEMBER 21, 2006

PANKAJ GHEMAWAT JOSÉ LUIS NUENO

ZARA: Fast Fashion
Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904) Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel retailing chains, continued a trajectory of rapid, profitable growth by posting net income of € 340 million on € revenues of € 3,250 million in its fiscal year 2001 (ending January 31, 2002). Inditex had had a heavily € oversubscribed Initial Public Offering in May 2001. Over the next 12 months, its stock price increased by nearly 50%—despite bearish stock market conditions—to push its market valuation to € 13.4 € billion. The high stock price made Inditex’s founder, Amancio Ortega, who had begun to work in the apparel trade as an errand boy half a century earlier, Spain’s richest man. However, it also implied a significant growth challenge. Based on one set of calculations, for example, 76% of the equity value implicit in Inditex’s stock price was based on expectations of future growth—higher than an estimated 69% for Wal-Mart or, for that matter, other high-performing retailers.1 The next section of this case briefly describes the structure of the global apparel chain, from producers to final customers. The section that follows profiles three of Inditex’s leading international competitors in apparel retailing: The Gap (U.S.), Hennes & Mauritz (Sweden), and Benetton (Italy). The rest of the case focuses on Inditex, particularly the business system and international expansion of the Zara chain that dominated its results.

The Global Apparel Chain
The global apparel chain had been characterized as a prototypical example of a buyer-driven…...

Similar Documents

Zara

...CIRCA 2008 ARTEIXO, Spain—Zara stores have set the pace for retailers around the world in making and shipping trendy clothing. Now Pablo Isla, chief executive of parent company Inditex SA, says Zara needs to speed up. As rivals catch up, Mr. Isla is attempting one of the fastest global expansions the fashion world has ever seen, opening hundreds of new stores and entering new markets. To do that, as an economic downturn threatens sales, Inditex is changing the systems that have driven its success at Zara and its other store brands, to save time and money. Among the innova- tions, it is introducing new methods to enable store managers to order and display merchandise faster and adding cargo routes for shipping goods. “There has been a clear change of mentality in the company,” Mr. Isla, a former tobacco executive who arrived at Inditex in 2005, said in an interview at the company’s head- quarters here. The world’s second largest clothing retailer by sales after Gap Inc., Inditex is responding to a predicament shared by other com- panies that come up with game-changing formulas: Eventually competitors catch up, forcing the pioneers to do even better to keep their edge. Low-cost carrier Southwest Airlines Co. is mak- ing big changes to fend off rivals that have copied its efficient op- erating model. Inventory-control methods at Walmart Stores Inc. are being mimicked around the world, and Google Inc. is updating its search engine to keep users loyal. The consumer slowdown is......

Words: 2670 - Pages: 11

Zara

...9-703-497 REV: DECEMBER 21, 2006 PANKAJ GHEMAWAT JOSÉ LUIS NUENO ZARA: Fast Fashion Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904) Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel retailing chains, continued a trajectory of rapid, profitable growth by posting net income of € 340 million on € revenues of € 3,250 million in its fiscal year 2001 (ending January 31, 2002). Inditex had had a heavily € oversubscribed Initial Public Offering in May 2001. Over the next 12 months, its stock price increased by nearly 50%—despite bearish stock market conditions—to push its market valuation to € 13.4 € billion. The high stock price made Inditex’s founder, Amancio Ortega, who had begun to work in the apparel trade as an errand boy half a century earlier, Spain’s richest man. However, it also implied a significant growth challenge. Based on one set of calculations, for example, 76% of the equity value implicit in Inditex’s stock price was based on expectations of future growth—higher than an estimated 69% for Wal-Mart or, for that matter, other high-performing retailers.1 The next section of this case briefly describes the structure of the global apparel chain, from producers to final customers. The section that follows profiles three of......

Words: 15226 - Pages: 61

Zara

...Zara – Rapid Fire Fulfillment Peggy Martin February 16, 2014 BUS/3022 Professor Matt Fok The first Zara store opened in La Coruna, Spain in 1975. Today, Zara has grown from one small shop to a major apparel company, having 4,700 stores in 76 countries globally. Zara’s great success can be attributed to its very unique supply chain strategy. (Chopra & Meindl, 2013) Zara’s very successful supply chain strategy is based on the five fingers touching the factory and five fingers touching the customer philosophy. Basically, this means to have full control over all the merchandise until it has been purchased by the customer. Instead of outsourcing or contracting with third-party logistics companies, Zara handles the designing, manufacturing, warehousing, and distribution of all its merchandise. In addition, all logistics functions is handled by Zara, and even put all the price tags on its products before they are shipped out to the stores. (Ferdows, Lewis, & Machuca, 2004) Zara has managed to achieve an excellent strategic fit for the company. All areas of the company, from design to distribution work together smoothly, having the same ultimate goal. Zara’s strategy has allowed them to cut the design to sale cycle time considerably. Generally, in the clothing industry, the design to sale cycle time is anywhere from four to six months. Zara is able to maintain a cycle time of four to six weeks. In addition, the information technology......

Words: 607 - Pages: 3

Zara

...CASE 3-4 Continued Growth for Zara and Inditex CIRCA 2008 ARTEIXO, Spain—Zara stores have set the pace for retailers around the world in making and shipping trendy clothing. Now Pablo Isla, chief executive of parent company Inditex SA, says Zara needs to speed up. As rivals catch up, Mr. Isla is attempting one of the fastest global expansions the fashion world has ever seen, opening hundreds of new stores and entering new markets. To do that, as an economic downturn threatens sales, Inditex is changing the systems that have driven its success at Zara and its other store brands, to save time and money. Among the innovations, it is introducing new methods to enable store managers to order and display merchandise faster and adding cargo routes for shipping goods. “There has been a clear change of mentality in the company,” Mr. Isla, a former tobacco executive who arrived at Inditex in 2005, said in an interview at the company’s headquarters here. The world’s second largest clothing retailer by sales after Gap Inc., Inditex is responding to a predicament shared by other companies that come up with game-changing formulas: Eventually competitors catch up, forcing the pioneers to do even better to keep their edge. Low-cost carrier Southwest Airlines Co. is making big changes to fend off rivals that have copied its efficient operating model. Inventory-control methods at Walmart Stores Inc. are being mimicked around the world, and Google Inc. is updating its search engine to keep......

Words: 2695 - Pages: 11

Zara

...CASE 34 Continued Growth for Zara and Inditex CIRCA 2008 ARTEIXO, Spain—Zara stores have set the pace for retailers around the world in making and shipping trendy clothing. Now Pablo Isla, chief executive of parent company Inditex SA, says Zara needs to speed up. As rivals catch up, Mr. Isla is attempting one of the fastest global expansions the fashion world has ever seen, opening hundreds of new stores and entering new markets. To do that, as an economic downturn threatens sales, Inditex is changing the systems that have driven its success at Zara and its other store brands, to save time and money. Among the innovations, it is introducing new methods to enable store managers to order and display merchandise faster and adding cargo routes for shipping goods. “There has been a clear change of mentality in the company,” Mr. Isla, a former tobacco executive who arrived at Inditex in 2005, said in an interview at the company’s headquarters here. The world’s second largest clothing retailer by sales after Gap Inc., Inditex is responding to a predicament shared by other companies that come up with game-changing formulas: Eventually competitors catch up, forcing the pioneers to do even better to keep their edge. Low-cost carrier Southwest Airlines Co. is making big changes to fend off rivals that have copied its efficient operating model. Inventory-control methods at Walmart Stores Inc. are being mimicked around the world, and Google Inc. is updating its search engine to keep......

Words: 2662 - Pages: 11

Zara

...THE CASE OF ZARA: PLANNING AND STRATEGIC CONTROL Alexandra Iacob University of Huelva HUELVA, SPAIN 2015 Abstract Zara is a retail company belonging to the Spanish company Inditex Group. Currently, Zara has 1,808 stores in 86 countries. This paper will analyse Zara’s business model, based on innovation and flexibility, as well as logistics chain and the various tools used to recognize the continuous changes in fashion trends and turn them into a product marketable within a few weeks. Compared with the competition, Zara has three distinctions: vertical integration to achieve a faster turnaround time; rapid expansion; and use of the store as the main tool for promotion, with low spend on advertising. This company offered a product design and quality, low price. In addition, resources and competences have allowed develop a different business model, where all processes from product design, to manufacturing, distribution and sales are carried out within the same organization. Key words: Strategic Management, Strategy, External Environment, Michael Porter’s Generic Strategies, Vertical Integration, Balanced Scorecard, Globalization Culture Introduction Company Background Four letters that make up a fashion brand known around the world. Zara is a Spanish brand of clothing and accessories and the foundation of Inditex’s success as well as their first retail format. Inditex S.A. is a Spanish multinational group of textile manufacturing and distribution established in 1975 in...

Words: 4852 - Pages: 20

Zara

... Sunder       Elements  of  Dynamic   Capabilities  of   ZARA                                 Prepared  by,   Ashis  Lamba  (005EPGP2014)   Bhupender  Singh  (007EPGP2014)   Chandan  Singh  (008EPGP2014)   The   success   of   Zara   in   the   fast   changing   fashion   industry   relies   on   its   core   capability   in   responsiveness   to   customers,   which   in   turn   is   derived   from   a   bundle   of   capabilities   including   swift   copy   of   current   designs   in   fashion,   advanced   information   systems,   just-­‐in-­‐ time   production   and   shop-­‐floor   led   stock   control   that   combine   together   for   success.   Therefore,   the   emphasis   of   dynamic   capabilities   is   on   the   ‘integration’   of   resources   and   capabilities   in   light   of   a   firm’s   strategic   direction.     Here   in   this   article   we   try   to   analyze   elements  of  dynamic  capabilities  of  Zara  as  we  go  through  its  various  functions.   Zara  Business  Model     The  dynamic  capability ......

Words: 1696 - Pages: 7

Zara

...Title of the Report: Zara Case Study Report Name: SeJun Lee Executive Summary Zara is one of the largest international fashion companies in the world, and it belongs to Inditex, one of the world‟s largest distribution groups. This study reviews Zara`s external environment and analyses its internal organisation to make recommendations for improving its core competencies against competitors such as H&M and GAP. This study first reviews the Zara enterprise in terms of PEEST environmental factors, Porter‟s Five Forces and the fast fashion industry life cycle (ILC). The liberalisation of European Union import quotas has had a positive political impact on the fast fashion retail industry. However, rapid style changes generate waste. In addition, recent financial crises have made customers more sensitive to price and tending to buy lower priced goods. However, young people and new Asian customers are more attracted to fashionable clothes. Also, new technology is quickly adopted to survive in a fast-moving market. Using Porter‟s competitive analysis of five forces, the threats of new entrants and substitution are low, and customers‟ and suppliers‟ bargaining power are moderate. However, the intensity of competitive rivalry is quite high because similar fashion firms are competing. Fast fashion has a shorter life cycle for products than most industries. This spurs both creativity and product innovation but demands more efficiency and advanced technology......

Words: 6985 - Pages: 28

Zara

...……………………….…………..8 Competitor…………………………………………………….……………………………………….9 Porter Five Forces Analysis……………………………………………………………….……..……11 Product……………………………………………………………………..…………………………13 Swot Analysis…………………………………………………………………………………………………….14 Appendices……………………………………………………………………………………………………….17 References………………………………………………………………………………………………………..18 REASON FOR SELECTION Zara is the subsidiary of Spanish retailer Inditex. The reason for selecting Zara is that it is one of the world's largest fashion retailers and is one of the fastest growing companies in the fashion industry. It has an innovative resolution to both style and marketing problem. The reason for Zara’s success is its innovative design and style, quality, strategy, in time production, supply chain, etc. The company continues to change retailing trend through its rapid, vertically integrated supply chain. Zara has become the leader in the rapid growing and fast changing fashion industry. Although the world has recently faced a recession, but still in the fiscal year of 2014, the gross revenue of the company had reached around $20 billion. In 2014, the sales of Zara had increased to 8%, far more substantial than its rivals. The company has grown overall sales by nearly 50% in the last five years. In 2014, the annual revenue of its competitors such as like H&M was $20.2 billion, Fast Retailing (Unique) $16.6 billion, Primark $7.5 billion, Abercrombie & Fitch had $3.7 billion and Mango had $2.1 billion (Vlach,......

Words: 5983 - Pages: 24

Zara

...STRATEGIC MANAGEMENT PAPER ZARA Created By: Anggita Sulisetiasih 1006718706 Kenji Wibawa Junardy 1006718990 Patricia M. A. Adam 1006805694 International Undergraduate Program Faculty of Economics University of Indonesia Depok 2013 TABLE OF CONTENTS Chapter 1 4 INTRODUCTION 4 1.1. Company Background 4 1.2. Vision and Mission 4 1.3. Long-term Objectives 5 Chapter 2 6 VISION – MISSION ANALYSIS 6 2.1. Importance (Benefits) of Vision and Mission Statements 6 2.2. Characteristic of a Mission Statement 7 2.3. Mission Statement Components 8 2.4. Vision and Mission Relation: Is It Achievable? 10 Chapter 3 11 EXTERNAL ASSESSMENT 11 3.1 Michael Porter’s Five-Forces Model 11 3.2 External Factor Evaluation (EFE) Matrix 13 3.3 Competitive Profile Matrix 15 Chapter 4 19 INTERNAL ASSESSMENT 19 4.1 Resource-Based View Analysis 19 4.2 The Internal Factor Evaluation (IFE) Matrix 22 4.3 Financial Analysis 27 Chapter 5 33 STRATEGIES IN ACTION 33 5.1 The Strategies 33 5.2 Michael Porter’s Five Generic Strategies 34 Chapter 6 36 STRATEGY ANALYSIS AND CHOICE 36 6.1 The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix 36 6.2 The Strategic Position and Action Evaluation (SPACE) Matrix 37 6.3 The Boston Consulting Group (BCG) Matrix 39 6.4 The Internal-External (IE) Matrix 40 6.5 The Grand Strategy Matrix 41 6.6 The Quantitative Strategic Planning Matrix (QSPM) 44 Chapter......

Words: 14830 - Pages: 60

Zara

...The purpose of this paper is to assess and document the key aspects in Zara's success by identifing current gaps, and to provide direction for future research efforts. Design/methodology/approach – Zara's case studies and literature published from 2001 to 2010 was reviewed. Findings – The review summarizes significant aspects of Zara success, many of which at least partially addressed in previous research. Research limitations/implications – This effort is not an exhaustive review of all research published for Zara. This review does not consider unpublished papers, papers in non-academic journals, or papers presented at conferences. Practical implications – This review is a useful resource for supply chain researchers interested in agile supply chain and retailers willing to learn the key aspects of Zara's success in agile supply chain. Originality/value – This paper uses the findings of other researchers as a measure of the achievements of Zara against academic theory. The gaps identified and challenges made will serve as a foundation upon which future researchers can build. Keywords Supply chain management, Agile supply chain, Zara case study analysis Paper type Case Study Analysis Introduction It is becoming clear that the changed conditions in the global marketplace demand a much more agile response from the organizations and their partners in the supply chain. The period when production was moved overseas, so business can take advantage of cheap......

Words: 4023 - Pages: 17

Zara

...world's largest fashion retailers by owning eight brands - Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque. There are over 6,700 stores worldwide. It is started as textiles maker by Amancio Ortega Gaona in a small workshop back in 1963. After 12 years, Inditex is official a dressmaker when the first Zara store is established in 1975, located in La Coruña, Spain. The main goal of Inditex is to offer highest quality products to all its customers. All Inditex processes are following their code of conduct where 4 main principle is applied. There are clear to wear and safe to wear, tested to wear, green to wear and right to wear. These are the foundations of the Group's environmental and sustainable strategy. To ensure the stability of the global operation, Inditex has 11 logistics centre for each of the brands to make sure the merchandise are distributed twice a week. There are new designs are coming out once a fortnight in Inditex. It is also one of the company that practicing fast fashion. In 2014, the net profit of Inditex had grown 5 percent to 2.5 billion euro (Spain. Inditex S.A.,2014). Inditex is maintaining the aggressive strategy in 2015. Alexander's (2015) article indicates that, Ortega's net worth hit $80 billion as stock in his holding company Industria de Diseno Textil (Inditex) reached an all-time high of 33.99 Euros per share. As mentioned above, the first Zara store is opened in La Coruña in 1975. In 2014, 64% of......

Words: 2462 - Pages: 10

Zara

...Running Head: Zara Case Study Zara – IT for Fast Fashion MGN 562 Team: The Change Agents Drejer Simon ID 315273004 Sharnjeet Kaur ID 315271003 Bilal Khalid ID 315276006 JR Rattaporn Srinok ID 315373001 Zertab Quaderi ID 315276001 Stamford International University, Bangkok February 2016 Table of Contents Abstract 3 Company Overview 4 Current Situation 5 Process Performance Analysis 5 Capacity 7 Efficiency 8 Flexibility 11 Quality 11 Operations Strategy Analysis 15 Root Cause Analysis 16 Cost Benefit Analysis 17 Multi Criteria Decision Making 20 Implementation Strategy 20 Recommendations 22 Conclusions 24 List of references 25 Appendix 26 Team Charter 26 Abstract The case study on Zara is set in August 2003 when the head of IT and the technical lead for the POS system are arguing about whether or not to upgrade the operating system of the POS terminals from DOS. The paper examines the operations management of Zara to see whether an updated IT system should be in place or not. It analyses the operations design and strategy of Zara in detail to justify an upgradation of their IT system. It also examines the areas where an updated IT can add value to the operations and ultimately, to the consumers. Several tools and methods have been applied to arrive at a decision. Recommendations and implementation strategy are outlined for better management decision making. Company Overview Inditex, the holding company of Zara, was......

Words: 5896 - Pages: 24

Zara

...Zara Case: Fast Fashion from Savvy Systems a gallaugher.com case provided free to faculty & students for non-commercial use © Copyright 1997-2008, John M. Gallaugher, Ph.D. – for more info see: http://www.gallaugher.com/chapters Last modified: Sept. 13, 2008  Note: this is an earlier version of the case. All cases updated after July 2009 are now hosted (and still free) at http://www.flatworldknowledge.com. For details see the ‘Courseware’ section of http://gallaugher.com INTRODUCTION The poor, ship-building town of La Coruña in northern Spain seems an unlikely home to a techcharged innovator in the decidedly ungeeky fashion industry, but that’s where you’ll find “The Cube”, the gleaming, futuristic central command of the Inditex Corporation (Industrias de Diseno Textil), parent of game-changing clothes giant, Zara. The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. The firm shuns advertising, rarely runs sales, and in an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly vertically integrated, keeping huge swaths of its production process in-house. These counterintuitive moves are part of a recipe for success that’s beating the pants off the competition, and it has turned the founder of Inditex, Amancio Ortega, into Spain’s wealthiest man and the world’s richest fashion executive. Zara’s operations are concentrated in La Coruña and Zaragoza,......

Words: 5358 - Pages: 22

Zara

...CASE 34 Continued Growth for Zara and Inditex CIRCA 2008 ARTEIXO, Spain—Zara stores have set the pace for retailers around the world in making and shipping trendy clothing. Now Pablo Isla, chief executive of parent company Inditex SA, says Zara needs to speed up. As rivals catch up, Mr. Isla is attempting one of the fastest global expansions the fashion world has ever seen, opening hundreds of new stores and entering new markets. To do that, as an economic downturn threatens sales, Inditex is changing the systems that have driven its success at Zara and its other store brands, to save time and money. Among the innovations, it is introducing new methods to enable store managers to order and display merchandise faster and adding cargo routes for shipping goods. “There has been a clear change of mentality in the company,” Mr. Isla, a former tobacco executive who arrived at Inditex in 2005, said in an interview at the company’s headquarters here. The world’s second largest clothing retailer by sales after Gap Inc., Inditex is responding to a predicament shared by other companies that come up with game-changing formulas: Eventually competitors catch up, forcing the pioneers to do even better to keep their edge. Low-cost carrier Southwest Airlines Co. is making big changes to fend off rivals that have copied its efficient operating model. Inventory-control methods at Walmart Stores Inc. are being mimicked around the world, and Google Inc. is updating its search......

Words: 2701 - Pages: 11