Zara Case

Topics: Fashion, Inditex, Fast fashion Pages: 15 (4855 words) Published: August 26, 2013



ZARA: The Quick Change Artist

Source: Forbes India Magazine of 30 July, 2010

Table of Contents
Executive Summary4
Fast-fashion Industry4
Profile of Zara5
Expansion and Growth6
Zara’s Major Competitors6
Competitive Advantage of Zara9
Supply Chain Management: Key Aspects/Reasons for Success13
Design Team13
Production Model14
Effective Pricing14
Store Operations16
An Unsuccessful Copycat17
Conclusion and Learning18
Exhibit 1: Porter’s Five Forces Model Applied to the Fast Fashion Industry19
Exhibit 2: Zara’s Revenues and Net Profit vis-à-vis it’s Competitors20
Exhibit 3: A Product Market Positioning Map21
Exhibit 4: Business Structure of Zara21
Exhibit 5: Cycle Time Compression through Quick Response22
Exhibit 6: Product Pre-commitments: Zara vs. Traditional Industry22
Exhibit 7: Zara’s Sustainable Competitive Advantage Model (VRIO Model)23
Exhibit 8: Zara’s Organizational Structure24

Executive Summary
The secret sauce of success in fast fashion industry is speed – the speed at which you meet the changing tastes of capricious customers. Among all the companies in the Fast Fashion industry, Zara stands out because it delivers its products in the shortest time - 4 to 6 weeks, whereas the industry standard is 4 to 6 months. Zara is able to deliver its products in such a short span of time as unlike others in the industry, it is vertically integrated. Zara manufactures a large part of its fabrics in-house, produces significant proportion of its products in-house, has its own distribution system, owns most of its retail stores and designs its products using an in-house team of designers. It integrates all these processes in such a seamless manner that if anyone wants to copy this business model it has to copy it in its entirety, not just a subset of the business model. Fast-fashion Industry

The fast-fashion industry focuses on getting “catwalk” designs to mass-market fast enough so as to capture the latest fashion trends and aspiration of a broader consumer segment. The firms within this industry focus on quickly getting their products out based on current design to mainstream consumers at affordable prices. The business model of these firms revolves around creating constantly churning products resulting in high number of consumer visits to their stores. This is achieved by using various combinations of technology, marketing and built-up hype. The consumer relishes constant turnover of product offerings and the frequent availability of new products. Exhibit 1 shows the Porter’s Five Forces model applied to the Fast Fashion industry. The largest player in the industry is Zara (an Inditex holding company with revenues of EUR 15.9 billion), followed by H&M (revenues of EUR 14 billion) and Gap (revenues of EUR 11.9 billion) respectively (see Exhibit 2). Profile of Zara

Established in 1975, Zara is the flagship brand of Inditex Group (IndustriadelDiseñoTextil, SA), a holding company located in Galicia (Northwest Spain). In addition to Zara, Inditex owns seven other clothing chains: 1) Kiddy's Class (children's fashion)

2) Pull and Bear (youth casual clothes)
3) Massimo Dutti (quality and conventional fashion)
4) Bershka (avant-garde clothing)
5) Stradivarius (trendy garments for young women)
6) Oysho (undergarment chain)
7) Zara Home (household textiles)
Zara is one of the world's largest fashion retailers with over 5,150 stores in 78 countries across all five continents. The first Zara store was opened in 1975, in Northwest Spain. During the 1980s, Zara expanded within the domestic market, opening stores in all Spanish cities with a population greater than 100,000 inhabitants. As of 2012, Zara was operating in 73 countries with 1763 stores:...

References: 5) Barbara Mihm, “Fast Fashion In A Flat World: Global Sourcing Strategies”, International Business & Economics Research Journal, Volume 9, Number 6, June 2010
6) Pankaj Ghemawat, José Luis Nueno, “ZARA: Fast Fashion”, HBR, Rev: December 21, 2006
11) Nirmalya Kumar, Sophia Linguri, “Fashion Sense”, Business Strategy Review, London Business School, 2006
12) PR Newswire US, “Zara Launches Online Shopping in the US”, 6th September 2011
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