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Zara:
The Largest Spanish Clothing
Company Owned by Inditex
Prepared by: Shaheen Sardar
SCM Lab. Department of Industrial ...
ZARA “Vision”
“ZARA is committed to
satisfying the desires of its customers.
As a result we promise
to continuously innova...
ZARA “Mission Statement”
“Through its business model,
Zara aims
to contribute to the sustainable development
of society an...
What we know about Zara and its
history?
• Zara’s founder is the first richest person in
Spain and the third richest perso...
What we know about Amancio Ortega?
Amancio began working as a tailor's assistant in his hometown
In 1963 he decided to sta...
THE CHAIN’S NAME:
In 1975, the first Zara store was founded
in La Coruna.
In 1988 Zara’s company
opened the first store
outside Spain.
In 20...
Perceptual Map
Fashion Value
Price
Everyday Low quality
X
X
prices
Zara
Armani
Hilfiger
Design
Feedback
Cut
Production
Sale
Promotion
Display
Shipment
Outsource
None
Outsource
Outsource
Out...
Head Office &
Design lab.
Manufacturing
Logistics
Europe Production Asian Production
Cost: $$$$$$$$$$
Fashion Value: ZZZZZZZZZZ
Cost: $$
Fashion Value: ZZZZZ
High fashion s...
Competitors Copying Zara Management
H&M Once a week shipments
Target Limited supply designers
Benetton Mid-season lineup a...
0
5
10
15
2003 2004 2005 2006 2007
Zara
Gap
H&M
Benetton
Sales in Billions of $
Profit in millions
0
1000
2000
2003 2004 2005 2006 2007
Zara
Gap
More about Zara
Zara’s company is owned by Inditex group.
Inditex group contains Zara and more
different brands.
Zara clothing offers quality trend to an audience:
female
male
adolescent
child.
From Zara derive other shops
like:
Zara h...
This chain of Spanish fashion stores has more
than 200 designers and a higher number of
models.
Zara’s collections are sma...
Zara has no advertising, the only trade
exhibition is based on trucks
,storefronts,catalog and in the zara bag.
ZARA STORES:
In Zara:
customer
first
ZARA
• In Spain Zara’s company has:
452 stores and 131 of them with Zara kids
(2013)
Zara Global expansion:
ZARA “Production Facilities”
60%
Spain
20%
Europe 20%
Asia
ZARA “Summary”
Owned by Inditex
• Based in La Coruna, Spain
• 1947 stores in 87 countries
• Fast fashion strategy
• 30,000...
Where are Zara stores in 2013?
• 1947 stores in 87 countries.
• 77% of stores are outside Spain.
• 166 Kiddy's Class store...
Where are Zara stores in 2013?
Where are Zara stores in 2013?
Where are Zara stores in 2013?
• Zara’s consumers are young, highly
sensitive to latest fashion trends .
• Zara sells apparel, footwear and
accessories f...
Inditex
• Founder: Amancio Ortega Gaona
• He Thought:
Consumer would regard clothes
as a perishable commodity just like yo...
Inditex Companies
Number of
Stores (2013)
Year of
Creation
1. Zara 1781 1975
2. Pull and Bear 825 1991
3. Massimo Dutti 63...
INDITEX
2012
Revenue 13.79 billion
Operating income 2.522 billion
Profit 1.932 billion
Total Assets 10.95 billion
Total eq...
INDITEX “Growth”
Fiscal Year 2012 2011 12/11
Net sales (millions of euros) 15,946 13,793 16%
Net profit (millions of euros...
INDITEX “Gross margin and Operating expenses”
% on sales 2013 2012 2011
Gross margin 58.6% 59.6% 58.4%
Gross profit growth...
INDITEX “Strong Growth”
INDITEX “Strong Growth”
(millions of euros)
INDITEX “Net profit”
(millions of euros)
INDITEX “Sales by geographical area”
(%age)
INDITEX “Employees by Geographical
area 2011-12”
Employees 2012
INDITEX “Employees by Gender
2011-12”
INDITEX “Employees by Gender 2012”
Waste Management
Garments released on the market VS
total industrial waste
INDITEX “Number of Employees”
INDITEX “Results”
(millions of euros)
INDITEX “Stores”
INDITEX “Markets”
INDITEX “Sales by Concept”
Concept Name 2013 13/12
CAGR
(2 year)
1. Zara 5,004 4% 11%
2. Pull & Bear 530 13% 13%
3. Massim...
INDITEX “Global Sales Platform”
Store sales (%) 2013 2012
Europe excluding-Spain 45% 44%
Asia & RoW (Rest of World) 22% 20...
INDITEX “Zara Sales”
INDITEX “Global Online Sales”
• Europe
• US
• China
• Japan
• Russian Federation
• Canada
INDITEX “Supply Chain Management”
Clusters of suppliers
Morocco
Spain
Portugal
Argentina
Brazil
Turkey
Bangladesh
China
In...
INDITEX “Supply Chain Management”
“Geographical Distribution of
Suppliers to the Inditex Group” 2012
Inditex's Supply Chain in 2012-13
INDITEX “Principal Indicators”
Principal indicators
in 2012
ZARA
Pull &
Bear
Massimo
Dutti
Bershka Stradivarius Oysho
Zara...
INDITEX (Business Structure)
• Name: Industria de Diseno Textil, S.A.
(Inditex)
• Inditex Group: Inditex and its subsidiar...
INDITEX (Business Structure)
Head office: La Coruna (Spain)
• Sets Inditex strategy
• Co-ordinates brands
• Provides centr...
Textile Sourcing
Comditel S.A (La Coruna)
Tempe S.A. (Alicante)
Nikole S.A (La Coruna)
Zara Asia Ltd (Hong Kong)
ITX Tradi...
Traditional model
Design
Sourcing
Store
Customer
Inditex model
 Opposite of traditional clothing
cycles
 Pull type produ...
INDITEX'S “Waste Management”
ZNormativa: Set of rules
and regulations common
to all suppliers to optimize
• Packaging proc...
ZARA “Business Model”
1. Develop system that requires short lead
times
2. Decrease quantities produced to decrease
invento...
ZARA “Competitive Advantage”
Cost Leadership
Fashionable (quality) at reasonable price
1. Based on Product Positioning:
“Z...
ZARA “Objectives”
Maximize Profit:
• Maintain an ability to go further fashionable
(quality) at reasonable price
 ZARA po...
ZARA “Objectives”
Analysis map of Zara
Adapted from the Survey.
ZARA “Objectives”
• Continuous design, production and distribution
Creative Departments:
Staff = 200+
Sewing: Cut fabric i...
ZARA “Strategies”
Objectives
MIS
Marketing
Design
Production
&
distribution
ZARA “Strategies”
Production & distribution
• Maintain quality
• Cost leadership
• High bargaining power to suppliers
• Fa...
ZARA “Strategies”
MIS
• Product distribution system
• Improving inventory system
• Order information flow  stores orderin...
ZARA “Value Chain”
Production :
Factory & distributor
Store Store
Store Store
Store
Marketing :
Market Research
and Analys...
Strengths
• Ability to recreate fashion
• Owned 1947 stores and Active use of stores
• Cost leadership strategy
• Differen...
Weaknesses
• Centralized distribution system
• Doesn't spend much money on advertising
• Lack of online stores in many cou...
Opportunities
• Growth of fashion market
• Diverse cultural area
• Constant use of social media marketing
strategy
• Onlin...
Threats
• Emerging new comers
• Local and Global competitors
• Cheaper alternatives may be available in
economic downturn
...
ZARA “International Strategy”
• Combined Strategy:
1. Cost Leadership is usualy captured in mass production
(mass product,...
ZARA “International Strategy”
Market Selection
Marketing
Approach
Market
Entry
International
Strategy
Market Selection:
ZARA “International Strategy”
Market Selection:
ZARA “International Strategy”
Market Selection:
• Consideration
• Characteristic or behavior of Consumers
ZARA “International Strategy”
Country Characte...
Market Entry:
ZARA “International Strategy”
Barriers Factors
Market Entry
Consideration
Economics Factor
Market Entry Gove...
Market Entry:
• Consideration
• Economics
• Macroeconomics Factor :
• tax, political condition, export tariff
• Microecono...
ZARA “International Strategy”
Marketing Approach:
• Consideration
• 4 P consideration  Product, Price, Promotion
and Plac...
ZARA “Financial Position as
Compared with Competitors”
GAP H & M Benetton Inditex
Net Margin -0.06% 9.60% 7.05% 10.46%
Ass...
ZARA “Inventory Management”
• Focus on reducing
response time
• Approximately
11,000 new items
per year, compared
with 2,0...
ZARA “Inventory Management”
• Stock outs: Common
• Short shelf life: More
customers
• Inventory holding:
• ZARA: 6 days
• ...
ZARA “Forecasting”
• Extensive market research
• Quick input and output response
• Frequent new styles
• Near-term forecas...
ZARA “Procurement”
• In-house production: Half
• Each clothing line: Separate staff
• Basic textiles: Global suppliers
• S...
ZARA “Production Planning”
• Design & Production Centre:
Centralized
• Supply chain: Constant data flow
• Retailers: Have ...
ZARA “Warehousing”
• High-velocity shipping: Rapid
information flows
• Stores: Electronically connected to
headquarters
• ...
ZARA “Transportation”
• Distribution: 2 weeks
• Supply chain: Quick response
• Transportation network:
Effective and effic...
Production Commitment and Markdown
6-month
Pre-season Start of season In-season
Sales%
Not at full
price
Traditional
Indus...
Recommendations to ZARA
KEY PROBLEMS:
Emphasize on high efficiency and fast
production processes
Demotivation of workers...
Recommendations to ZARA
• ZARA SEEMS TO:
 Go in the right direction
 Grow at a remarkable rate
 Show no signs of slowin...
Recommendations to ZARA
• CHANGE THE SYSTEM
CentralizedTransform Decentralized
Build decentralized distribution & Prod...
Recommendations to ZARA
INCREASE ADVERTISEMENT
• Part of marketing
• Bridge between customers and companies
INCREASE NETWO...
Recommendations to ZARA
Improve IT Infrastructure
• Efficient for past operations
• Insufficient to deal with modern techn...
References
1. Bureau of Labor Statistics (2011). International
comparisons of hourly compensation costs in
manufacturing, ...
ANY QUESTION?
Zara's Fast-Fashion Edge
Zara's Fast-Fashion Edge
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Zara's Fast-Fashion Edge

  1. 1. Zara: The Largest Spanish Clothing Company Owned by Inditex Prepared by: Shaheen Sardar SCM Lab. Department of Industrial and Management Engineering, Hanyang University, South Korea. Zara, global fast-fashion retailer and largest chain in Inditex group
  2. 2. ZARA “Vision” “ZARA is committed to satisfying the desires of its customers. As a result we promise to continuously innovate our business and to provide new designs made from quality materials that are affordable.”
  3. 3. ZARA “Mission Statement” “Through its business model, Zara aims to contribute to the sustainable development of society and that of the environment with which we interact.”
  4. 4. What we know about Zara and its history? • Zara’s founder is the first richest person in Spain and the third richest person in the world (2013). This person is Amancio Ortega (Born: March 28, 1936). His doughter: Marta Ortega Inditex founder
  5. 5. What we know about Amancio Ortega? Amancio began working as a tailor's assistant in his hometown In 1963 he decided to start a business and he thougt the clothing company Goa. This business began to progress and that in addition to selling began to distribute. Amancio Ortega was born in La Coruna.
  6. 6. THE CHAIN’S NAME:
  7. 7. In 1975, the first Zara store was founded in La Coruna. In 1988 Zara’s company opened the first store outside Spain. In 2010 Zara’s company opened his first online shop. p o r t u g a l
  8. 8. Perceptual Map Fashion Value Price Everyday Low quality X X prices
  9. 9. Zara Armani Hilfiger Design Feedback Cut Production Sale Promotion Display Shipment Outsource None Outsource Outsource Outsource Promotion Outsource Outsource Design Outsource Outsource Outsource Sale Outsource Display Co-OP CONTROL
  10. 10. Head Office & Design lab.
  11. 11. Manufacturing
  12. 12. Logistics
  13. 13. Europe Production Asian Production Cost: $$$$$$$$$$ Fashion Value: ZZZZZZZZZZ Cost: $$ Fashion Value: ZZZZZ High fashion suits & skirts Commoditized eyewear and plain shirts
  14. 14. Competitors Copying Zara Management H&M Once a week shipments Target Limited supply designers Benetton Mid-season lineup adjustments Patagonia Increased seasonal shipments
  15. 15. 0 5 10 15 2003 2004 2005 2006 2007 Zara Gap H&M Benetton Sales in Billions of $
  16. 16. Profit in millions 0 1000 2000 2003 2004 2005 2006 2007 Zara Gap
  17. 17. More about Zara Zara’s company is owned by Inditex group. Inditex group contains Zara and more different brands.
  18. 18. Zara clothing offers quality trend to an audience: female male adolescent child. From Zara derive other shops like: Zara home Zara shoes Zara accesories
  19. 19. This chain of Spanish fashion stores has more than 200 designers and a higher number of models. Zara’s collections are small and sell out quickly.
  20. 20. Zara has no advertising, the only trade exhibition is based on trucks ,storefronts,catalog and in the zara bag.
  21. 21. ZARA STORES: In Zara: customer first ZARA
  22. 22. • In Spain Zara’s company has: 452 stores and 131 of them with Zara kids (2013)
  23. 23. Zara Global expansion:
  24. 24. ZARA “Production Facilities” 60% Spain 20% Europe 20% Asia
  25. 25. ZARA “Summary” Owned by Inditex • Based in La Coruna, Spain • 1947 stores in 87 countries • Fast fashion strategy • 30,000 designs per year • 40% of designs produce in-house • Stock updated twice a week • Vertical Model – limited outsourcing • Zero advertisement
  26. 26. Where are Zara stores in 2013? • 1947 stores in 87 countries. • 77% of stores are outside Spain. • 166 Kiddy's Class stores out of 1947 stores.
  27. 27. Where are Zara stores in 2013?
  28. 28. Where are Zara stores in 2013?
  29. 29. Where are Zara stores in 2013?
  30. 30. • Zara’s consumers are young, highly sensitive to latest fashion trends . • Zara sells apparel, footwear and accessories for women, men and children . • Zara offers fashion at affordable price by following the most up to date fashion trends . Zara Target & price
  31. 31. Inditex • Founder: Amancio Ortega Gaona • He Thought: Consumer would regard clothes as a perishable commodity just like yoghurt, bread or fish to be consumed quickly, rather than stored in cupboards, and he has gone about building a retail business that provides “Freshly Baked Clothes.”
  32. 32. Inditex Companies Number of Stores (2013) Year of Creation 1. Zara 1781 1975 2. Pull and Bear 825 1991 3. Massimo Dutti 634 1995 4. Bershka 910 1998 5. Stradivarius 816 1999 6. Oysho 533 2001 7. Zara Kids (Kiddy's Class) 166 2001 8. Zara Home 363 2003 9. Uterque 87 2008 Total Stores (2013) 6115
  33. 33. INDITEX 2012 Revenue 13.79 billion Operating income 2.522 billion Profit 1.932 billion Total Assets 10.95 billion Total equity 7.455 billion Employees 120,000
  34. 34. INDITEX “Growth” Fiscal Year 2012 2011 12/11 Net sales (millions of euros) 15,946 13,793 16% Net profit (millions of euros) 2,361 1,932 22% No of stores 6,009 5,527 482 No of markets 86 82 4 Employees 120,314 109,512 10,802 Total Stores (2013) 6115 Fiscal Year 2013 2012 13/12 Net sales (millions of euros) 7,655 7,239 6% Gross profit (millions of euros) 4,486 4,313 4% Net income (millions of euros) 951 944 1%
  35. 35. INDITEX “Gross margin and Operating expenses” % on sales 2013 2012 2011 Gross margin 58.6% 59.6% 58.4% Gross profit growth of 4% or € 4.5 billion Millions of euros 2013 2012 13/12 Operating expenses 2,861 2,690 6%
  36. 36. INDITEX “Strong Growth”
  37. 37. INDITEX “Strong Growth” (millions of euros)
  38. 38. INDITEX “Net profit” (millions of euros)
  39. 39. INDITEX “Sales by geographical area” (%age)
  40. 40. INDITEX “Employees by Geographical area 2011-12” Employees 2012
  41. 41. INDITEX “Employees by Gender 2011-12”
  42. 42. INDITEX “Employees by Gender 2012”
  43. 43. Waste Management
  44. 44. Garments released on the market VS total industrial waste
  45. 45. INDITEX “Number of Employees”
  46. 46. INDITEX “Results” (millions of euros)
  47. 47. INDITEX “Stores”
  48. 48. INDITEX “Markets”
  49. 49. INDITEX “Sales by Concept” Concept Name 2013 13/12 CAGR (2 year) 1. Zara 5,004 4% 11% 2. Pull & Bear 530 13% 13% 3. Massimo Dutti 575 17% 12% 4. Bershka 702 5% 8% 5. Stradivarius 463 2% 8% 6. Oysho 152 6% 4% 7. Zara Home 196 30% 21% 8. Uterque 33 - 3% CAGR = Compound Annual Growth Rate
  50. 50. INDITEX “Global Sales Platform” Store sales (%) 2013 2012 Europe excluding-Spain 45% 44% Asia & RoW (Rest of World) 22% 20% Spain 19% 22% Americas 14% 14%
  51. 51. INDITEX “Zara Sales”
  52. 52. INDITEX “Global Online Sales” • Europe • US • China • Japan • Russian Federation • Canada
  53. 53. INDITEX “Supply Chain Management” Clusters of suppliers Morocco Spain Portugal Argentina Brazil Turkey Bangladesh China India 87% of Inditex's total production
  54. 54. INDITEX “Supply Chain Management”
  55. 55. “Geographical Distribution of Suppliers to the Inditex Group” 2012
  56. 56. Inditex's Supply Chain in 2012-13
  57. 57. INDITEX “Principal Indicators” Principal indicators in 2012 ZARA Pull & Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque Net sales (in millions of euros) 10,541 1,086 1,134 1,485 961 314 350 74 Number of stores 1,925 816 630 885 780 524 357 92 Net openings 120 69 57 74 96 41 47 3 Markets 86 59 60 62 52 35 35 18 New markets in 2012 5 11 10 6 7 4 5 1 ZARA “Sales” • Zara sales increased by 18% in 2012, up to €10,541 million
  58. 58. INDITEX (Business Structure) • Name: Industria de Diseno Textil, S.A. (Inditex) • Inditex Group: Inditex and its subsidiaries • Centralized management: Applying policies and strategies at group level
  59. 59. INDITEX (Business Structure) Head office: La Coruna (Spain) • Sets Inditex strategy • Co-ordinates brands • Provides centralized IT, HR, Logistics, design and real estate functions
  60. 60. Textile Sourcing Comditel S.A (La Coruna) Tempe S.A. (Alicante) Nikole S.A (La Coruna) Zara Asia Ltd (Hong Kong) ITX Trading S.A (Freiburg, CH) Uterque S.A (La Coruna) Lefties Espana (La Coruna) E-commerce ITX Fashions Ltd 100% (Ireland) Manufacturing Internal Choolet SA, Confecciones Fios, Gonfecciones Goa, Denlio, Hampston, Jema Creacione Infantiles, Samlor, Stear, Trisko, Zintura, Glencare, Indipunt (all based in La Coruna) External Inditex works with around 1,500 external suppliers around the world. Logistics (Zara) Zara Logistica SA (La Coruna, Spain) - 50% of Zara women and menswear, serving Iberia, Americas and Middle East Plataforma Europa SA (Zaragoza, Spain) - 50% of Zara women and menswear, serving non-Iberian Europe, Russia and Asia Plataforma Logistica Leon SA (Leon, Spain) Zara Home and Zara distribution Plataforma Logistica Meco SA (Madrid, Spain) manages Zara childrenswear Tempe, Inditex’s footwear company is only 50% consolidated at corporate level, but is solely responsible for sourcing, manufacturing and distributing footwear for the group. Brand Divisions Zara Oysho Stradivarius Pull & Bear Bershka Massimo Dutti Zara Home Uterque Each Inditex brand is managed independently with its own logistics and production facilities. INDITEX (Business Structure)
  61. 61. Traditional model Design Sourcing Store Customer Inditex model  Opposite of traditional clothing cycles  Pull type production process  Quick response  Real-time sales information from its stores  Small batch quantities allow the retailer to see what items are working with shopper  A central distribution centre in Arteixo, with strong IT systems developed by Inditex and third parties, supports its supply chain model  All items are shipped back to Spain where they are then shipped out to stores around the world Sourcing Design Store Customer INDITEX (Business Structure)
  62. 62. INDITEX'S “Waste Management” ZNormativa: Set of rules and regulations common to all suppliers to optimize • Packaging process • Waste management • Distribution and logistics Good Waste Management Practices: Methodology of work used to manage waste to • Reduce content of packaging material • Improve waste separation and storage • Facilitate recycling
  63. 63. ZARA “Business Model” 1. Develop system that requires short lead times 2. Decrease quantities produced to decrease inventory risk 3. Increase the number of available styles and/or choice
  64. 64. ZARA “Competitive Advantage” Cost Leadership Fashionable (quality) at reasonable price 1. Based on Product Positioning: “ZARA is cheaper price than Benetton and GAP, and still being fashionable” Fast Production 1. Ability to Design and get finish goods in stores within 4 to 5 weeks 2. Very quick to get designer-influenced products into their stores Product Variation 1. Ability of ZARA to launch new trends, design and variation of product 2. Low Level of Inventory 3. Efficient Distribution System 4. Turnover of Product is High
  65. 65. ZARA “Objectives” Maximize Profit: • Maintain an ability to go further fashionable (quality) at reasonable price  ZARA positioning ZARA fashion Price Fashion ZARA (New) - + -- + - Before Transform Objective/Expectation + Price +
  66. 66. ZARA “Objectives” Analysis map of Zara Adapted from the Survey.
  67. 67. ZARA “Objectives” • Continuous design, production and distribution Creative Departments: Staff = 200+ Sewing: Cut fabric is shipped to workshops to be stitched Samples: Prototypes made in-house and by suppliers Spreading: Material for garments laid out in layers and marked Cutting: A machine cuts the fabric according to the patterns Finishing: Garments are pressed, dressed and quality checked Shipping: From Logistics centres to stores, road and air Delivery: Garments arrive in store within 48 hours of ordering Design, Product and market Cycle; 1. Final design : 1 day 2. Manufacture : 3-8 days 3. Transport : 1 day 4. Selling : 17-20 days TOTAL : 22-30 days
  68. 68. ZARA “Strategies” Objectives MIS Marketing Design Production & distribution
  69. 69. ZARA “Strategies” Production & distribution • Maintain quality • Cost leadership • High bargaining power to suppliers • Fast distribution system Design • Coordinate with R & D and stores to get the new trends • Ability to produce new trends
  70. 70. ZARA “Strategies” MIS • Product distribution system • Improving inventory system • Order information flow  stores ordering system Marketing • R & D • Market penetration • Market , location of stores , consumer behavior analysis
  71. 71. ZARA “Value Chain” Production : Factory & distributor Store Store Store Store Store Marketing : Market Research and Analysis Design Inventory Check the Material availability then deciding How much this product will be Produce MIS MIS MIS Close watch On trend and Buying Behaviors MIS Commercial Team & designer
  72. 72. Strengths • Ability to recreate fashion • Owned 1947 stores and Active use of stores • Cost leadership strategy • Differentiated in high price fast fashion industry • Dedicated supply chain process • Vertical systematization of production process • Efficient distribution and High turnover.
  73. 73. Weaknesses • Centralized distribution system • Doesn't spend much money on advertising • Lack of online stores in many countries • Repeated sales of out-of-stocks • Low quality
  74. 74. Opportunities • Growth of fashion market • Diverse cultural area • Constant use of social media marketing strategy • Online marketing strategy • Global market penetration • Distribution center in US • Expanding into potential new market e.g. China, Australia
  75. 75. Threats • Emerging new comers • Local and Global competitors • Cheaper alternatives may be available in economic downturn • Zara based in Spain and has a great no of stores in Europe will dent in revenues • Limitation of design copies • Product Cannibalism
  76. 76. ZARA “International Strategy” • Combined Strategy: 1. Cost Leadership is usualy captured in mass production (mass product, less differentiation)  Standardization 2. Differentiation Strategy is ussualy captured to produce goods that are more value added  fashionable, fast delivery  customization • Good Consideration: 1. Market selection 2. Marketing approach 3. Market entry
  77. 77. ZARA “International Strategy” Market Selection Marketing Approach Market Entry International Strategy
  78. 78. Market Selection: ZARA “International Strategy”
  79. 79. Market Selection: ZARA “International Strategy”
  80. 80. Market Selection: • Consideration • Characteristic or behavior of Consumers ZARA “International Strategy” Country Character of Consumers French More Fashionable (Quality Oriented) German Price Sensitive Italian More Fashionable USA Less Trend Japan More Trendy British Stores Based on Social Affinity
  81. 81. Market Entry: ZARA “International Strategy” Barriers Factors Market Entry Consideration Economics Factor Market Entry Government
  82. 82. Market Entry: • Consideration • Economics • Macroeconomics Factor : • tax, political condition, export tariff • Microeconomics Factor : • Local Competitors • Demand • Location of Store • Government • Regulation from Government • Barriers • Local producers protection issues ZARA “International Strategy”
  83. 83. ZARA “International Strategy” Marketing Approach: • Consideration • 4 P consideration  Product, Price, Promotion and Placement. Each Country has different marketing approach. • Product  local preferences, design, trends • Price  different pricing strategy for each country. For example: Italy and Paris has no problem for price but quality-oriented, but German has sensitive price. • Promotion  different promotion strategy for each country • Placement  efficient distribution, location of stores
  84. 84. ZARA “Financial Position as Compared with Competitors” GAP H & M Benetton Inditex Net Margin -0.06% 9.60% 7.05% 10.46% Asset Turnover 1.82 1.96 0.74 1.25 ROA -0.11% 18.78% 5.25% 13.05% ROE -0.27% 24.85% 11.93% 22.88%
  85. 85. ZARA “Inventory Management” • Focus on reducing response time • Approximately 11,000 new items per year, compared with 2,000-4,000 for H&M and Gap.
  86. 86. ZARA “Inventory Management” • Stock outs: Common • Short shelf life: More customers • Inventory holding: • ZARA: 6 days • H&M: 52 days • Cortefiel (Spain): 94 days
  87. 87. ZARA “Forecasting” • Extensive market research • Quick input and output response • Frequent new styles • Near-term forecasts • Customer feedback • Short product life cycles  Reduce errors  Improve current products
  88. 88. ZARA “Procurement” • In-house production: Half • Each clothing line: Separate staff • Basic textiles: Global suppliers • Simple items: Outsourced to China. • Difficult items: Zara factories and domestic outsourcing • Most suppliers: Close to distribution centers
  89. 89. ZARA “Production Planning” • Design & Production Centre: Centralized • Supply chain: Constant data flow • Retailers: Have authority to change 40%-50% orders • Factories:  Single-shift  Change quickly according to demands
  90. 90. ZARA “Warehousing” • High-velocity shipping: Rapid information flows • Stores: Electronically connected to headquarters • Logistics system: Speed and flexibility • Products:  Selected  Sorted  Routed  Delivered  Local distribution centers  Retail store stockrooms
  91. 91. ZARA “Transportation” • Distribution: 2 weeks • Supply chain: Quick response • Transportation network: Effective and efficient • Zara Promotes: Service quality • Zara Coordinates: All aspects of logistics
  92. 92. Production Commitment and Markdown 6-month Pre-season Start of season In-season Sales% Not at full price Traditional Industry Model 45-60% 80-100% 0-20% 30-40% Advertisement Advertisement + Markdowns Zara 15-25% 50-60% 40-50% 15-20% Fresh items
  93. 93. Recommendations to ZARA KEY PROBLEMS: Emphasize on high efficiency and fast production processes Demotivation of workers Quality drops Lack of inventory tracking Inability to check inventory within stores Real time counts and scan must be done.
  94. 94. Recommendations to ZARA • ZARA SEEMS TO:  Go in the right direction  Grow at a remarkable rate  Show no signs of slowing down • ZARA SHOULD:  Expand in each district/region  Expand into North American and Asian markets  Continue growth throughout Europe  Increase its production and reduce costs by outsourcing to Asian countries
  95. 95. Recommendations to ZARA • CHANGE THE SYSTEM CentralizedTransform Decentralized Build decentralized distribution & Production in each region (Asia, Europe & America, more is better) to Penetrate new market & trend Decrease the complexity of process
  96. 96. Recommendations to ZARA INCREASE ADVERTISEMENT • Part of marketing • Bridge between customers and companies INCREASE NETWORKING CAPABILITIES: Ineffective communication between its stores and the home office.  Currently used POS terminals are not connected to other store POS terminals or to corporate headquarters.
  97. 97. Recommendations to ZARA Improve IT Infrastructure • Efficient for past operations • Insufficient to deal with modern technology • Ineffective in future as company continues to grow and expand internationally
  98. 98. References 1. Bureau of Labor Statistics (2011). International comparisons of hourly compensation costs in manufacturing, 2010. http://www.bls.gov/news.release/pdf/ichcc.pdf 2. Werner International management consultants (2012). Comparison of the hourly labor cost in the primary textile industry winter 2011. 3. Verlina N. Whatley (2011). Case Analysis of Zara: IT for Fast Fashion http://www2.uhv.edu/luj/MGT6352/ Samples/Student%20Sample%202.pdf 4. http://en.wikipedia.org/wiki/Zara_(retailer) 5. http://en.wikipedia.org/wiki/Inditex 6. http://www.inditex.com
  99. 99. ANY QUESTION?

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