Zara Case Study

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June 6, 2007

Zara Case Study

Summary

Zara is a clothing retail store for women, men and children, concentrating sixty percent of their effort to the women clothing market. Besides retailing, Zara also designs, produces, and ships their lines of clothing to their Zara stores. Zara's corporate concept is to offer fashionable, trendy, designs at a reasonable price. The key to their corporate success is to offer the latest trends and fashions before their competitors. They believe that they are in the fashion business, not the clothing business. As part of this corporate concept, the stores try to hold very low levels of inventory, often having their entire inventory out on display, in order to sell out and make room for the next wave of fashion. Their stores are located across in the main commercial areas of cities across Europe, America, and Asia, with their base in La Coruna, Spain. The store locations are always located at prestigious, high-traffic locales. The stores are designed with wide open spaces and well defined layouts to insure customers enjoy their shopping experience at Zara.

Zara started out in 1979 with 6 stores and flourished to all major Spanish cities during the 1980's. Within the next decade, Zara's parent company, Inditex, expanded to 29 countries across Europe, the Americas, and Asia. Additionally, during this time Index acquired other big name fashion brands; each operating independently of each other. By 2002, Index had expanded to 1,284 stores in 39 countries. Zara represents 75% of Inditex sales, and by 2003 Zara had 565 stores in 33 countries.

Zara currently is experiencing a period of financial success. They are doing better than most of their competitors, have a strong share of the market, and have built a reputation of fashionable, quality products at a reasonable price. Their business is growing and expanding with more stores opening in more countries. They have maintained a competitive advantage through its employees and store mangers having the insight and experience to predict what products and styles are going to do well in the market and be able to predict when styles are changing and what will be the next style fashion to come. In addition, Zara has the ability to take this tacit knowledge and act on it quickly. The company is very agile to keep up with the ever changing fashion industry and to be able to meet that demand with new products and inventory levels. This tacit knowledge and agility has given Zara a competitive advantage over its competitors. Zara continues to make money and increase sales revenue at a time when most of its competitors are experiencing sales declines and losing customers.

The question that remains is will Zara that is experiencing such financial rewards now be able to sustain this success with the company growing and expanding to other countries? Will they be able to compete in a global market with big, long established companies? It is my opinion that Zara will not be able to sustain this success and its competitive advantage over its competitors as the company grows. Competitors will soon be able to copy the Zara style after it sees success the company is having and they will be able to copy it fashion strategies. In order for Zara to keep this competitive advantage of predicting fashion style before its competitors and the agility to act on these change styles it will need to introduce the technology to help them.

A portal solution could be the technology answer to help them with their growing pains. The fashion industry is very competitive and very sensitive to time constraints. As the saying goes, “He, who snoozes, looses.” A portal solution could make sure that Zara is not caught napping by their competitors. A portal solution will better allow Zara to exchange ideas and communication between store mangers and marketing specialist. It will also provide a way to better control inventory levels and help...
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