Zara: Fast Fashion Case Analysis
In 1975, a Spanish entrepreneur first opened Zara as a retail store in La Coruña, Spain. He then created the corporate group, Inditex. Inditex had become one of the world’s largest specialty retailers; it had six different chains, through which Inditex designed, manufactured, and sold apparel, footwear, and accessories for women, men, and kids around the world. Stability distinguished Inditex from other apparel retails. Although Inditex had become a public company with increasing stock price and high margins, Inditex always aimed to become a very sustainable company rather than most profitable one in the world. Zara was the largest and most internationalized chain for Inditex. Its headquarter was located in Arteixo, Spain. Zara was well known for its success in creating “fast-fashion” by selling fashion items at affordable prices and responding the market trend very quickly. Its business system and international expansion had become Inditex’s proudest decision. Inditex became increasingly international after 2001. It announced that Zara’s strategy in international expansion was the main reason for the group’s sales growing globally. Zara was no doubt the cash cow and key business for Inditex. However, Zara itself faced some difficulties when expanding internationally. The differences in cultures and regulations made the expansion much riskier. After its failure in Italy in 1998, and competitors’ failures in U.S. market, Zara and Inditex had to be more concerned and careful about entering into a foreign new market. Moreover, top management in Inditex started to think about further plans for the group. Managing six different chains, they planned to develop other chains (or new chains) into a star business as successful as Zara. This report will focus on solving Zara’s international expansion issue, as Zara was so far the largest business for Inditex, and its issue was relatively urgent. After Zara establishing a sustainable and more successful long-term international business, Inditex’s other chains could learn from its experiences. Inditex would be more capable and confident in managing and developing other chains into another large and international model like Zara.
Inditex had to allow Zara to expand and develop primarily, in order to grow into a stable and large organization rather than only focusing on home business (focusing in Spain). But International expansion was very expensive, and not that easy as different countries had different regulations, cultures, market demand and preferences. Large apparel firms like Zara, H&M and Benetton had met difficulties attempting to enter foreign markets. Meanwhile, Zara had almost covered the whole market in Spain; in order to grow, it demanded larger market outside the home country. Thus, the issue statement discussed in this report is the future geographic focus for Zara: Which foreign market should Zara focus in its international expansion, and what are the strategies to enter the market?
Zara’s Business System
Zara was the largest and most internationalized of Inditex’s chains, which are six independently operated chains and was responsible for their own strategy (Zara, 8). In 2001, Zara generated 85% of Inditex’s earnings and 76% of total sales. It generally targeted medium and high-income level and fashion sensitive consumers; while the income level of target market may be different in different countries. It was the leader in the fast fashion industry. The business system distinguished Zara from other retailers, and enabled it to have a quick response to the market and fashion trend. Zara’s success came from its highly vertical integration strategy. It owned different levels of supply chain, from design, sourcing and manufacturing, distribution and retail. This strategy allowed Zara to better control the performance and quality of product, be highly efficient in delivering...
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