Case Study

Topics: Inditex, Zara, Fashion Pages: 9 (2845 words) Published: June 24, 2013
Description

The Textile Empire: Inditex, Zara
Inditex, the parent company which owns Zara, one of the best known fashion brands in the world, is an apparel conglomerate, with 9 brands under its umbrella. Inditex made €1.932 billion profit with a revenue of €13.79 billion worldwide in 2011. As of 2012, there are 100,140 people working for Inditex Group across their headquarters and 6,009 stores around the world. [1][2] Among those major 9 brands of Inditex, Zara, one of their oldest brands which was created in 1975 by Amancio Ortega, is definitely the most important contributor to the empire. With 1,751 stores (not including Zara Home) around the world, Zara made a sales of €18.088 billion in 2010, which contributed 64.5% of Inditex the whole revenue for Inditex Group. [1][2] Within the apparel industry, where the market is huge but competition is intense, Inditex ranked #2 in the apparel industry of the world. [3] In 2000, retail spending on clothing or apparel reached approximately €900 billion worldwide. [9] With a clear vision and optimistic outlook of the future, Inditex is continuously expanding and growing their business.

The Globalization and a Constantly Changing World

Values of Fashion
Back in the late 1960s and 1970s, many of the currently developed countries, including Spain, were opening up their economies and growing rapidly. It was a time when television was getting popular and penetrating into the ordinary citizens’ home. With television, people increased their exposure to foreign sociocultural customs and lifestyles, including trends in fashion. Among those people, two sectors of society in particular were displaying changes in their behaviors. One was women, who had new needs and demands for clothing as they started to work in the cities, wanted independence and to distinguish themselves from traditional housewives. The other sector was the young, who also wanted to express their independence and to distinguish themselves from the elders. In other words, these two sectors wanted to feel unique and define themselves through fashion. [4] These changes enlarged the market of the fashion industry and the demand of customers.

IT, Internet and Logistic Revolution
In addition to the changes in sociocultural lifestyles and customer demand, the technology’s rapid development accelerated the globalization process. The evolution of the IT technology/system made the management of big and global firm possible and more efficient. The emergence of the Internet made information sharing easier, and it changed many industries profoundly. It even created new industries, for example e-commerce and online market. These changes also brought new challenges and threats to the current existing industries. With technologies’ development, logistic also improved tremendously. Many gigantic logistic centers appeared all over the world, and with the advanced package automatic classification system, logistic companies can handle and distribute amazingly huge amount of goods every day. Undoubtedly, under these changes, apparel industry is facing many challenges and cannot do business in the traditional way anymore. They need to think out of the box to evolve themselves or they will get overwhelmed by these changes.

The Secret
In order to adapt to these change drivers, Inditex focused and implemented the following, leading them to become positioned as the No.2 player in the industry.
The Agile Supply Chain System
Inditex created 1,000 new styles every month by their 200 in-house designers located in their headquarter in Spain. 80% of Zara’s production is carried out in Europe (Spain, Portugal and Morocco), even though competitors such as Hennes & Mauritz (H&M) and GAP outsourced their production to low cost countries, for example Asia. However, for each style, Zara only manufactures in a relatively small amount, and then distribute those products directly from their logistic center...

References: 1. Inditex Group Annual Report, 2011.
2. Inditex Group Stores Around the World, 1/31/2013, http://www.inditex.es/en/who_we_are/stores/
3. FAST RETAILING CO., LTD., Major Global Specialty Share Retailers of Private Label Apparel (SPA) Industry Ranking, http://www.fastretailing.com/eng/ir/direction/position.html
4. Zara and her Sisters, The Story of the World’s Largest Clothing Retailer, 2009, Enrique Badia
5. Design Manufacture & Engineering Management; Strathclyde University Glasgow
6. Agile Supply Chain: Zara’s case study analysis by Galin Zhelyazkov
7. CNN Money: Meet Amancio Ortega: The third-richest man in the world, http://management.fortune.cnn.com/2013/01/08/zara-amancio-ortega/
8. Case Study: Retail @ the Speed of Fashion, Devangshu Dutta, 2002
9. Zara: Fast Fashion, Pankaj Ghemawat, Jose Luis Nueno, December 21, 2006
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