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Case Study Zara, Inditex

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1. Inditex/Zara history (Explain)
Amancio Ortega Gaono began Inditex as a way to bring high fashion apparel to the market at an affordable price. After years working in the apparel retail industry in la Coruña, Spain, Ortega left his job in the early 1960’s to being manufacturing trendy designers pieces in cheaper materials and selling these items to local shops. In 1975, Ortega opened his first retail store, Zara, drawn by its inexpensive, fashionable merchandise, and Ortega expanded the Zara chain quickly.
1980’s Ortega joined with computer expert Jose Maria Castellano to design a highly responsive supply chin that could quickly produce the latest fashions. A team of designers would replicate popular items, nearby factories would produce them, and they would be shipped from a central warehouse to stores.
In 1985’s, Ortega restructure the company and named it Industria de Diseño Textil S.A., o Inditex. In 1990’s, Inditex expanded internationally and diversified its brand portfolio. Zara had added childrenswear, and four new brands had been added to the portfolio; Pull & Bear, Massimo Dutti, Bershka and Stradivarius. 2. How important is Zara for Inditex group internationalization process? Explain and make comments
Mainly, Zara is the first brand that Inditex had, it have been successfully accepted into the market in different countries and provide a huge opportunities to Inditex to grow up continuously.
The limited market growth opportunities at home was the main influence on Zara’s decision to expand internationally as recalled by Jose Maria Castellano, former CEO of Inditex: “Of course before opening the first store in the host market, we had the feeling and then we knew for certain that the Spanish fashion and design market was on the verge of saturation” (Martinez, 1997). In addition to the maturity of market, there was a change in Spanish consumer behaviour over this period, with increased spending in their spare time on travelling and education, and less on clothes.
Zara is one of the more important brands around the world about clothes and accessories at accessible price and good quality that provide of fashion to the customers, because of that, it is important that they became Zara in an international brand in order to achieve more customers and improve theirs sales and profit. it is the brand that provide the major benefits and income to Inditex. 3. Which ones are Zara international expansion phases?
At the end of 2001, Zara was by far the most internationalized as well as the largest of Inditex’s. * Market selection: market selection expansion began in 1988 with the opening of a store in Oporto, Portugal. In 1989, it opened its first store in New York and in 1990, its first store in Paris. About 1992 and 1997, it entered about one country per year. Inditex management sometimes describe this pattern of expansion as an “oil stain” in which Zara would first open a flagship store in a major city and, after developing some experience add store in adjoining areas. To study a specific entry opportunity, a commercial team from headquarters conducted both the macro and micro analysis. * Market entry: if the commercial team’s evaluation of a particular market was positive, the logical next step was to assess how to enter. Three different modes of market entry were used internationally: company- owned stores, joint ventures, and franchises. * Marketing: the first store opened in each market played a particularly critical role in refining the marketing mix by affording detailed insights into local demand. The marketing mix that emerged there was applied to other stores in the country as well. Pricing, market- based. Zara’s promotion policies and product offerings varied less internationally than did its prices or positioning. Advertising and other promotional efforts were generally avoided worldwide expect during the sales periods. And while products offerings catered to physical, cultural, or climate differences. * Management: Zara’s international activities were organized primarily under a holding company created in 1988, Zara Holding, B. V., of the Netherlands. Zara Holding’s transactions with international franchisees were denominated in euros. Sales in other currencies to subsidiaries in the Americas roughly offset dollar- denominated purchases from the Far East. * Growth options: the growth options for Zara with it home market Spain seemed somewhat limited. The rest of Europe as offering the brightest prospects for significant, sustained growth over the medium term. the expansion within Europe was only one of several regional options. Zara could conceivably also deep its commitment to a second region by investing significantly in distribution and even production there. North America and Asia seemed to be the two other obvious regional possibilities. South America was much smaller and subject to profitability pressures that were thought likely to persist; the Middle East was more profitable on average, but even smaller. 4. How does work Zara ́s distribution system? How important this system is for Zara international success?
Like each of Inditex’s chains, Zara had its own centralized distribution system. Zara’s system consisted of an approximately 400,000-square-meter facility located in Arteixo and much smaller satellite center in Argentina, Brazil, Mexico that consolidated shipments from Arteixo.
All Zara’s merchandise, from internal and external suppliers, passed thought the distribution center in Arteixo, which operated on a dual-shift basis and featured a mobile tracking system that docked hanging garments in the appropriate barcoded area on carousels capable of handling 45,000 folded garment per hour.
All the brands followed the same central distribution center model-delivering product to stores twice weekly, but each brand operated its own distribution center. Products were typically delivered within 24-36 hours to stores in Europe and within 24-48 hours to stores located outside Europe. Stores did not carry inventory, so the distribution centers managed all replenishments. Zara and the other chains located their warehoused in Arteixo or near to Barcelona.
This is important because the system that they have provide the market the vast majority of clothes and they can be there in only few hours than other competitors. 5. Which ones are Zara ́s main global competitors? Describe the Internationalization strategy for each one of them.
While Inditex competed with local retailers in most of its makets, analysts considered its three closets comparable competitors to be The Gap, H&M and Benetton. The Gap and H&M, which were the two largest specialist apparel retailers in the world, ahead of Inditex, owned most of their stores but outsourced all production. Benetton, in contrast had invested relatively heavily in production, but licensees ran its stores. The three competitors were also positioned differently in product space from Inditex’s chains.
Gap: the production of this chain was internationalized – more than 90% of it was outsourced from outside the United States- but its store operations were U.S. –centric. International expansion of the store network had been limited by difficulties finding locations in markets such as the United Kingdom, Germany, and Japan. Adapting to different customer sizes and preferences, and dealing with what were, in many cases, more severe pricing pressures than in the United States.
H&M: adopted a more focused approach, entering one country at time- with an emphasis on northern Europe- and building center in each one.
Benetton: actually invested relatively heavily n controlling other production activities. Where it had little investment was downstream: it sold its production through licensees, often entrepreneurs wit no more than 100,000 to invest I a small outlet that could sell only Benetton products. 6. Explain Zara business model? What are Zara main "competitive advantages" over its competitors?
Zara’s Business model is characterized by a high degree of Vertical integration compared to other models developed by their International competitors. It covers all phases of the fashion process: design, manufacture, logistics and distribution to its own managed stores. It has a flexible structure and a strong customer focus in all its business areas.

The Zara’s business model is unique, comprising each and every stage of the fashion retail business: design, manufacture, distribution and sale of fashion in own-operated stores.
The key to this model is the ability to adapt the offer to customer desires in the shortest time possible. For Zara, time is the main factor to be considered, above and beyond production costs. This signifies there clear-cut policy of valuing time even more then money.
Vertical integration enables them to shorten turnaround times and achieve greater flexibility, reducing stock to a minimum and diminishing fashion risk to the greatest possible extent.
The availability of the factories owned by the company, together with a wide range of highly experienced external suppliers who have a solid commercial relationship with the format, allow Zara to manufacture a model and to have it for sale in its stores worldwide within the average term of approximately two weeks.
Garments, both the in-house manufactured and those purchased from external suppliers, arrive at the hubs Zara has in Spain, wherefrom they are dispatched to the stores worldwide. Clothes are dispatched twice a week, and this frequency allows a continual renewal of our fashion offer. Zara sells three lines of items, for women, men and children. Each of them has its own independent creative team who carries out the fashion proposals for each campaign.

Competitive Advantage. * While Zara controls its entire production chain, * Zara has a wider international presence in comparison to both Gap and H&M, having become a global company in a shorter period of time. * Zara has used franchising and joint ventures as entry strategies. * Advertising is a strong communication tool for both Gap Inc and H&M, while Zara hardly advertises. 7. How does it work the manufacturing process? Where the production take place?
Zara sourced fabric, other inputs, and finished products from external suppliers with the help of purchasing offices in Barcelona and Hong Kong, as well as the sourcing personnel at headquarters. While Europe ha historically dominated Zara’s sourcing patterns, the recent establishment of three companies in Hong Kong for purposes of purchasing as well as trend- spotting suggested that sourcing from the Far East, particularly China, might expand substantially.
Further down the value chain, about 40% of finished garments were manufactured internally, and of the remainder, approximately two thirds of the items were sourced from Europe and North Africa and one- third from Asia. The most fashionable items tended to be the riskiest and therefore were the ones that were produced in small lots internally or under contract by suppliers who were located close by, and reordered if they sold well.
Internal manufacture was the primary responsibility of 20 fully owned factories, 18 of them located in and around Zara’s headquarters in Arteixo. Room for growth was provided by vacant lots around the principal manufacturing complex an also north of La Coruña and in Barcelona. 8. Is product adaptation related to Inditex/Zara strategy? How does Zara extend the life of non- sold products? How does it happen in practice?
The process of adapting to trends and differences across markets was more evolutionary, ran thought most of the selling season, and placed greater reliance on high-frequency information. Several dozen items were designed each day, but only slightly more than one-third of them actually went into production. The team also continuously tracked customer preferences and used information about sales potential based, among other things, on a consumption information system that supported detailed analysis of product life cycles, to transmit repeat orders and new designs to internal and external suppliers.

9. What is Zara entry strategy for a new market? Is the store location weighted in the strategy? Explain.
If the commercial team’s evaluation of a particular market was positive, the logical next step was to assess how to enter. Three different modes of market entry were used internationally: company- owned stores, joint ventures, and franchises.
Zara had originally expanded internationally through company- owned stores, typically established company- managed stores in key, high –profile countries with growth prospects and low business risk.
Zara tended to use franchises in countries that were small, risky, or subject to significant cultural differences or administrative barriers that encouraged this mode of market participation (Andorra, Iceland, Poland, and the Middle East)
Zara used joint ventures in larger, more important markets where there were barriers to indirect entry, most often ones related to the difficulty of obtaining prime retail space in city centers. 10. Are after sales services important for Zara international strategy? How does the process work?
Its important because is the way in which the company can notice if the customer satisfaction, also because it prove to their clients a better experience inside the firm and in that way the demand of the product can be better because of a good client service. 11. How does Zara brand its products?
International retailing is regarded as the transfer of a retail brand with its associated image across national borders so branding has an important role to play in the internationalization of Zara. Zara has transformed itself from a local brand to a global brand in less than 30 years. Hence, the COO effect is played down to convey a broader image. The fact that the prices of Zara’s garments are higher in the international market affects its positioning in those countries and therefore, its brand image.
Zara’s products are labeled following a dualistic brand-name strategy. The company uses the name of the firm and a unique brand name for the same product group. Examples of these sub-brands are `Zara Woman ́, `Zara Basic ́. The company’s 1999 annual report states that the aim of Zara is to democratize fashion and to target a broad market, especially a young segment sensitive to fashion. In line with this objective, Zara filled a niche in the Spanish market that was neglected by the department stores by offering the latest fashion at medium quality and attractive prices. Zara’s positioning strategy is based upon design, quality and price. In order to communicate its benefits, in some cases Zara has had to educate the market and influence consumer shopping habits. 12. What is Zara entry strategy for the Chinese market? What are its main challenges?
February 24 2006, ZARA’s first flagship store in Shanghai of the Chinese Mainland, the most prosperous commercial center of Nanjing West Road was opened, this is also the first time that the authentic Spanish fashion entered the Chinese apparel market. By 2011, the number of ZARA Chinese market stores has reached 120, and further expansion in China’s second-tier cities market. ZARA adopted the marketing strategy what was known as “fast fashion” clothing brand in China and does not accept any form of joining venture, shops were directly opened by the Spanish headquarters premise directly through internal post system. This unique marketing strategy ensured ZARA’s rapid development and great success. This unique marketing strategy includes the following points: * Site location. ZARA will always open its shops in the area of the large urban centers and the most prosperous section of the city, next to the big brand, like New York’s Fifth Avenue, the Champs Elysees, Paris, Shanghai’s Nanjing Road. * Flexible supply chain system. Flexible supply chain system greatly improves ZARA lead time (the time elapse from design to display) to put the clothing from the design to be sold over the counter. China’s garment industry generally took 6-9 months, international brands generally took 120 days, but the ZARA required only seven days at the shortest with an average of usually 12 days. The advantage of the ZARA flexible supply chain beat the heck out of “factory of the world,” Chinese manufacturing industry. * “Multi-style, small batch.” is the motto that ZARA is pursuing. Each year ZARA launched about 12,000 kinds of fashion clothes, but each kind only supplies with limited number of sets. Even the best-selling styles, ZARA just supply a limited number and it is not replenished even it is sold out. This works similarly as limited edition stamps philatelic products enhance the value the ZARA. “Manufacturing shortage” cultivate a large number of loyal followers. * Closely follow fashion trends. ZARA has nearly 400 designers, they often fly in a variety of fashion show or access to a variety of stylish place. Typically, some of the top brands of the latest design and are just displayed on the counter, ZARA will promptly publish very similar designs. However the price is only less than one tenth of the big, this design approach can guarantee ZARA to follow main style trends. 13. How Zara online sales can help expand in China? How Alibaba can contribute in expanding its sales in the Chinese territory? Is this the best solution for Zara distribution strategy in China?
The alliance of the Spanish fashion brand Zara with Chinese e-commerce giant Alibaba, one of whose most popular portals began to operate with its own virtual store, will serve as a first step for a faster, cheaper and more effective expansion to the inside China.
Although Zara has not detailed its strategy behind this decision and estimates sales results waiting with her, while Alibaba, which is not giving data about their customers, is obliged to remain silent after its recent IPO.
Zara, the main banner of the Spanish textile multinational Inditex began operating its own space in the virtual mall TMall.com, the popular portal for e-commerce businesses to individuals (B2C) the Alibaba Group.
The Spanish company said it took the decision to "put the brand products readily available to the tens of millions of customers of the online platform" of Alibaba, housed in zara.tmall.com, in addition to its own portal Chinese, www.zara.cn, which became operational in September 2012. 14. Is Zara/Inditex International Strategy successful? Explain.
In my opinion and the way we live the brand it is a very successful strategy because they focused on provide to the markets a good product with a good quality and a affordable price with the last fashion; the time that they take to delivery to the store is short and it help to the company that the customers be happy with the chain. They have founded the way to expand the bran all over the world.
That kind of strategies helps the brand to achieve different markets around the world in a successful way and they can keep growing up if they keep doing it. It is important that they think about the differences in culture and the way the things work among the countries, they practically are in the whole markets but they still can achieve more their goals, increasing their sells and their income.…...

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... Case study Zara 1. 1.  ZARA is a Spanish clothing and accessories retailer based in Arteixo, Galicia.  Founded in 24 May ,1975 by Amancio Ortega and Rosalía Mera.  Zara needs just two weeks to develop a new product and get it to stores, compared to the six-month industry average, and launches around 10,000 new designs each year.  Zara was described by Louis Vuitton Fashion Director Daniel Piette as "possibly the most innovative and devastating retailer in the world.  1763 stores , 78 countries worldwide.  Zara has continually maintain its mission to provide fast and affordable fashionable items .  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.  Zara welcomes shoppers in 86 countries to its network of 1.763 stores in upscale locations in the world's largest cities.  Zara's approach to design is closely linked to their customers. 2. 2. Around the world Zara 1.763 Zara Kids 171 Pull & Bear 817 Massimo Dutti 630 Bershka 899 Stradivarius 794 Oysho 529 Zara Home 364 Uterqüe 91 TOTAL 6.058 Inditex is a global specialty retailer that designs, manufactures, and sells apparel, footwear, and accessories for women, men and children through its chains around the world. Zara is the largest and most internationalized of the six retailers that Inditex owns. By the......

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Zara Case Study

...ZARA Case Study By Chander Shekhar Sibal (WMP 6015) A Case Study submitted in fulfillment of the assignments for MIS WMP 2013 [pic] Indian Institute of Management, Lucknow Noida Campus 2011 Zara Case Study Q. 1. Zara is successful in managing IT. Using your learning’s from the case, explain how Zara is able to get productivity benefits from IT The firm tripled in size between 1996 and 2000, then skyrocketed from $2.43 billion in 2001 to $13.6 billion in 2007. By August 2008, sales edged ahead of Gap, making Inditex the world’s largest fashion retailer1. While the firm supports eight brands, Zara is unquestionably the firm’s crown jewel and growth engine, accounting for roughly two-thirds of sales2.The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. a) Efficiency in Design teams Rather than create trends by pushing new lines via catwalk fashion shows, Zara prefers to follow with designs where there’s evidence of customer demand. Data on what sells and what customers want to see goes directly to “The Cube” in La Coruña, where teams of some 300 designers crank out an astonishing 30,000 items a year. b) Speed of execution in bringing a new product idea to store & response to change In the fickle world of fashion, even seemingly well-targeted designs could go out of favor in the months it takes to get plans to contract manufacturers, tool up......

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Premium Essay

Zara Case Study

...ZARA: History and Background Inditex is a global specialty retailer that designs, manufactures, and sells apparel, footwear, and accessories for women, men and children through its chains around the world. Zara is the largest and most internationalized of the six retailers that Inditex owns: (Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho). By the end of 2001, Zara operated 507 stores around the world, including Spain. Of Inditex’s total employees, over 80% of them are part of the retail sales force and 8.5% are in manufacturing, design, logistics, and distribution. The remaining 11.5% are part of the corporate headquarters of Inditex, which is located in the region of Spain called Galicia. The role of the corporate center at Inditex’s headquarters is that of a “strategic controller” only, and is involved in setting the corporate strategy, approving the business strategies of the individual chains, and controlling their overall performance rather than as an “operator” functionally involved in running the chains. This gives Zara autonomy to operate independently and be responsible for its own strategy, product design, sourcing & manufacturing, distribution, image, personnel and financial results. With this freedom, Zara was able to make major investments in manufacturing, logistics, and IT, including establishment of a just-in-time manufacturing system and a 130,000 square meter warehouse close to its corporate headquarters. Zara......

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