Zara Fast Fashion

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Inditex - Zara: Fast fashion
Case analysis

Company Structure and Goals Overview
Zara’s vision on growth and global strategy
-Building up fixed assets
-Vertical integration
-No advertising, creating premium stores
-Fashion follower – QR to fashion trends
-Strongly customer oriented
-Stable growth
-Markdowns half the average (15% as supposed to 30% )
-Pricing market based
Business model:
-Vertical operations and downstream activities
-Multi-chain concept
-Creative design team
-Competitive advantage – Sustainable growth
(As attachment: Porter’s Five forces; Company structure; Financials)

Problem Statement
Growth challenge – 20% per annum expected, 76% of equity value implicit on Inditex’s stock price was based on expectations on future growth. Failure to deliver expected growth results might cause a serious offset in company’s market capitalization. Room for non-local growth – in average a retailer was present in 10 countries while e.g. a pharmaceutical company averaged operations in 125 countries. Problem statement is: In what geographical area(s) should further Zara expansion follow? Should there be another logistics-distribution centre created as increase of operations might cause dis-economies of scale? Should it acquire additional chains given the complexity of managing those and the risk of own-product-replacements? Preserve the margins; (visible threat to the sustainability of Index’s competitive advantage)

Evaluation of the alternative solutions

1.Growth challenge:
Notes:
-not much potential on the local market;
-different markets require different positioning
-though costs grow as distance grows, prices also change (margins are kept) -50% of all export is to developing countries
-Zara shopper visits the store 17 times a year, average is 2-4 times -Creating a climate of scarcity and opportunity in stores

Evaluate growth options in different markets:
Spain
Europe str4
- production in North...
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