BY:SARAH SUHAIB 4TH SEMESTER (B.COM HONS.)A3104613161UNDER THE SUPERVISION OFMS.LALITHAIn The Partial Fulfillment Of The Requirements For The Degree Of Bachelor of commerce AMITY COLLEGE OF COMMERCE AND FINANCE

\

TOPIC:BRANDS AND THEIR DISTRIBUTION CHANNELS ACROSS INTERNATIONAL BORDERS NIKE PEPSICO LOREAL ZARA

NIKECompany ProfileNike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany's domination of the domestic industry. Today in 2000, Nike Inc. not only manufactures and distributes athletic shoes at every marketable price point to a global market, but over 40% of our sales come from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas (not including the United States). We utilize over 20,000 retailers, Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites to sell our sports and leisure products. We dominate sales in the athletic footwear industry with a 33% global market share. Nike Inc. has been able to attain this premier position through "quality production, innovative products, and aggressive marketing." ProductsOur primary product focus is athletic footwear designed for specific-sport and/or leisure use(s). We also sell athletic apparel carrying the same trademarks and brand names as many of our footwear lines. Among our newer product offerings, we sell a line of performance equipment under the Nike brand name that includes sport balls, timepieces, eyewear, skates, bats, and other equipment designed for sports activities. In addition, we utilize the following wholly-owned subsidiaries to sell additional sports-related merchandise and raw materials: Cole Haan Holdings Inc., Nike Team Sports, Inc., Nike IHM, Inc., and Bauer Nike Hockey Inc. Our most popular product categories include the following: Running Basketball Cross-Training Outdoor Activities Tennis Golf Soccer Baseball Football Bicycling

Why NIKE is the #1 sports brand in the worldThe sportswear equipment and apparel industry is highly competitive and includesmany prominent players. NIKE, Inc. (NKE) is the largest seller of athletic footwear and apparel in the world. It has a footprint in 190 countries. NIKE has sustained its competitive edge by applying some effective strategies: Focusingon innovation and the introduction of proprietary products NIKE AIR, Lunar, Shox, Free, Flywire, Dri-Fit, FlyKnit, NIKE+, and NIKE Fuel Building upa portfolio of globally recognized brands Using targeted high-impact marketing at high-profile sporting events such asthe soccer World Cup, the Rio Olympic Games, and the NFL Super Bowl Makingendorsement deals with high-profile athletes like Neymar, LeBron James, and Roger Federer

PROFILE OF THE INDUSTRYIndustry Size In 2008, Americans spent approximately $38 billion to purchase more than 1.1 billion pairs of shoes. The wholesale value of athletic shoes for the US market totaled $8.7 billion in 2008 down 8.5% from the year before. According to the Sporting Goods Manufacturers Association, athletic footwear accounts for almost 35% of all footwear purchases. In general, consumers are spending less worldwide for athletic footwear. The current domestic industry focus is on casual and comfortable shoes. Although athletic footwear sales appear to be recovering, demand is still leaning toward the "brown shoe" casual footwear with a comfortable and rugged design. This switch is due to the increasing number of workplaces adopting casual dress codes.Industry Profitability The athletic footwear industry is a challenging and saturated market. Intense competition, fashion trends, and price conscious consumers have slowed growth in this industry. Manufacturers are combating sluggish sales with radical new styles, along with offering more styles at lower price points. Companies are looking for new ways to boost sales by capitalizing on direct Internet sales to consumers. Many companies are also increasing profitability by transferring production to cheaper offshore facilities. This segment has reached a point of maturity in the domestic market and can look forward to only modest sales growth for the long term. However, sales are improving slightly, especially in areas of running shoes, cross-trainers and basketball shoes. Therefore, companies with strong brands will increasingly turn to international markets for growthrunning shoes, cross-trainers and basketball shoes. Therefore, companies with strong brands will increasingly turn to international markets for growth.

NIKEs Distribution Channels: How Products Reach Customers Analyzing NIKEs distribution channels and retail modelNIKE distributes its products through three major channels: By selling products to wholesalers in the US and international markets By direct-to-consumer (or DTC) sales, which include in line and factory retail outlets (seegraph below) and e-commerce sales through www.nike.com Sales to global brand divisions

The Rationale Behind NIKEs Retail Focus NIKEs retail click-meets-bricks marketplace strategyNIKEs DTC (or direct-to-customer) approach is three-pronged: NIKE brand and category experience stores Online sales through its online portal www.nike.com NIKE factory stores

DISTRIBUTUION CHANNELS

Retail partnershipsNIKE, Inc. (NKE) has also tried to create category-specific retail destinations by partnering with footwear retailers such asFoot Locker, Inc. (FL), JD Sports, and Intersport. NIKEs sales mix and retail slantSales to wholesalers are the largest revenue category. However, this categorys contribution in the sales mix contractedfrom 83.3% in fiscal year 2012 to 79.2% of revenues in fiscal year 2014. DTC sales, on the other hand, increased from 16.2% to 20.3% over the same period. This is significantly lower than the ratio of DTC revenues for NIKEs rivals in the space. In the most recent quarter, the respective ratios of DTC revenue to total revenue for Under Armour Inc. (UA), VF Corporation (VFC), and Adidas AG (ADDYY)were 25.3%, 23%, and 25.4%.NIKE isfocusing on direct selling to the consumer withits DTC initiative. ComparingNIKEs distribution channels,direct sales to the consumer provide higher marginsthan dosales to wholesalers. In fiscal year 2014, DTC revenues accounted for ~20% of total NIKE Brand revenuesas comparedto18% in fiscal year 2013. On a currency neutral basis, DTC revenues grew 22% in fiscal year 2014 and 30% in 1Q15, year-over-year.The company is attempting to growthe DTC category to $8 billion in sales by fiscal year 2017, up from $5.3 billion in fiscal year 2014. Thats an annual growth rate of 14.7%, compounded. Pricing power through the NIKE brand experience storesThe NIKE brand experience stores provide customers with the full bricks-and-mortar retail proposition. Premium stores that offer the consumer the bestbrand experience, experience storesinclude NIKETOWNs, the largest stores in the fleet. Each NIKETOWN features six or seven NIKE brand categories, providing the very best innovative product and services those categories have to offer. This premium customer experience givesNIKE higher pricing latitude on the products offered.For example, the NIKE Running Storein New York City caters to the complete needs of the runner, from compete to train, to express, all in one place. Its a hub for both premium services and a premium experience.The second goal is creating category experiences. Along with its wholesale partners, NIKE aims tocreate unique experiences such asthe House of Hoops for Basketball with Foot Locker, Inc. (FL), or the NIKE Track Club for runners with Finish Line or the Field House with Dicks Sporting Goods Store, Inc. (DKS). These product differentiation strategies allow for premium pricing. They also benefit NIKEs wholesale partners by bringing them into the limelight. Factory stores offer a premium value proposition, broaden NIKEs customer baseNIKEs factory stores provide a premium productto consumers shopping for value. Due to the value proposition involved, they tend to attract higher shopper volumes. Online sales through www.nike.comOnline sales made up ~15% of total NIKE brand DTC revenues in fiscal year2014, compared to ~12% in fiscal year2013. Online selling isone of key future growth drivers of NIKEs retail strategies. The category grew by 42% in fiscal year 2014, and was up by 70% year-over-year in 1Q15.Well look at othergrowth drivers in the next part of this series.In comparison, Amazon.com, Inc. (AMZN), the worlds largest online retailer, grew sales by 20.4% year-over-year in its most recent quarter, ended September 30, 2015. Wal-Mart Stores, Inc. (WMT), the worlds largest retailer, grew global e-commerce sales by ~21% in the quarter ended October 31, 2014, on a constant currency basis.The SPDR Consumer Discretionary Select Sector ETF (XLY) and the SPDR S&P 500 ETF (SPY) provide exposure to Amazon and NIKE.

NIKEs Growth Drivers In The US And Overseas North America: NIKEslargest growth driverDespite having operations in 190 countries across the world, North America continues to be the most important of NIKEs growth drivers. North American sales make up about 44% of itstotal revenues worldwide. And, NIKEs projecting high single digit top-line growth in North America through 2017.A combination of product innovation and pricing power spearhead the companys efforts tostay ahead of the pack. Theres also a large gap between NIKE, Inc. (NKE) and its nearest competitors, Under Armour Inc. (UA), VFC Corporation (VF), Lululemon Athletica Inc. (LULU) and Adidas-owned (ADDYY) Reebok. Emerging marketsNIKE believes Brazil and China (FXI), two key markets, are under-penetrated. Chinas growing middle class and the growing sporting environment areimportant revenue opportunities. The company wantsto improve its product mix and profitability in the Chinese market to take advantage of the changing landscape.Brazil already has a healthy sports culture, even apart from soccer. NIKE was a sponsor at the FIFA 2014 soccer World Cup and is also a sponsor at Rios Olympic Games, slated for 2016.The company wantsto use these opportunities to enhance its image not only in Brazil, but all over the world.PEPSICOCompany ProfilePepsiCo Inc. (PEP) is a leading food and beverage company that manufactures and distributes its products in more than 200 countries. Food products that PepsiCo manufactures include chips, flavored snacks, cereals, rice, pasta, and dairy-based products. The companys beverage product portfolio includes carbonated soft drinks, juices, ready-to-drink tea and coffee, sports drinks, and bottled water. Headquartered in Purchase, New York, the company employs around 274,000 people worldwide.According to Information Resources, Inc. (or IRI), a market research company, PepsiCo owns nine of the 40 largest packaged goods trademarks in the United States. The company owns several brands, and 22 of them, including Pepsi, Lays, and Gatorade, generate more than $1 billion each in revenues.

Understanding PepsiCos business model Diversified business modelPepsiCo Inc. (PEP) has a diversified business model with a strong presence in food and beverage products. In a scenario where carbonated soft drinks have been continually declining, PepsiCos significant presence in the snack food category gives it an edge over its closest rival, The Coca-Cola Company (KO), which is heavily dependent on sparkling or carbonated beverages. In 2013, PepsiCos food business accounted for 52% and its beverage business accounted for 48% of the companys $66.4 billion revenues.

Complementary productsPepsiCo benefits from its presence in two complementary categories: food and beverages. There is a high coincidence of purchase between these two categories. According to Information Resources, Inc. (or IRI), a market research company, 54% of US consumers who buy salty snacks also buy a beverage in the same basket. For instance, PepsiCo states that when Frito-Lay snacks are merchandised along with Pepsi carbonated soft drinks (or CSDs), it results in higher sales.Another interesting observation is that more than 60% of US households who buy Mountain Dew also buy Doritos tortilla chips.Leveraging category strengthThe presence of one category of business in a region makes PepsiCos entry easier into the complementary category. For instance, PepsiCo is able to leverage its beverage business in emerging markets to develop its snacks business.PepsiCos three-channel distribution network

Three distribution channelsPepsiCo Inc. (PEP) is a leading food and beverage company with an impressive global presence. The companys products reach the market through the following three channels: direct store delivery (or DSD), customer warehouse, and third-party distributor networks. PepsiCo chooses the relevant distribution channel based on customer needs, product characteristics, and local trade practices.

Direct store deliveryUnder the DSD system, PepsiCo delivers products directly to retail stores. Of the three channels, DSD enables PepsiCo to merchandise with maximum visibility. Its more suitable for products that are restocked often and are sensitive to promotions and marketing.Customer warehouseThe customer warehouse system is a less expensive distribution channel. Its ideal for products that are less fragile and perishable, have lower turnover, and are not purchased impulsively.Third-party distributor networksPepsiCo distributes food and beverage products to restaurants, businesses, schools, and stadiums through third-party food service and vending distributors and operators.Leveraging its dominant positionPepsiCo is the second-largest nonalcoholic beverage maker in the United States with a large scale of operations. The companys dominant position helps it enjoy favorable relationships with its retailers, who allow the company to have major shelf space. This helps PepsiCo influence consumer shopping patterns and increases the coincidence of purchase of its complementary food and beverage products.You can invest in PepsiCo through exchange-traded funds (or ETFs) such as the Consumer Staples Select Sector Standard & Poors depositary receipt (or SPDR) Fund (XLP) and the SPDR MSCI World Quality Mix exchange-traded fund (or ETF) (QWLD).PepsiCo also manufactures and distributes certain brands licensed from Dr Pepper Snapple Group, Inc. (DPS) such as Dr Pepper, Crush, and Schweppes, as well as certain juice brands licensed from Dole and Ocean Spray.The extensive distribution of PepsiCo and The Coca-Cola Company (KO) gives them a competitive edge against other nonalcoholic beverage makers.Understanding PepsiCos segments

PepsiCos business segmentsPepsiCo derives its revenues from the following six segments:

Frito lay north America Quaker Foods North America Latin America Foods Americas Beverages Europe Asia, Middle East and AfricaThe first three business segments form the PepsiCo Americas foods business unit

2014 segment performance The PepsiCo Americas Beverages segment continues to account for the largest proportion of total revenues. Its been experiencing declining revenues over the past few years primarily due to lower carbonated soft drink volumes and challenging macro conditions. The segment derives its revenues from the sale of beverage concentrates, fountain syrups, and finished goods under brands such as Pepsi, Gatorade, and Tropicana.The Frito-Lay North America segment comprises branded snack foods such as Lays chips and Doritos tortilla chips. Net revenues for the segment grew 4%, driven by volume growth and favorable pricing. The Quaker Foods North America segment, which includes cereals, rice, pasta, and other branded products, witnessed a 1% decline in revenues as higher volumes were offset by an unfavorable product mix. The Latin America Foods segment revenues surged by 7%, reflecting the impact of favorable pricing.The Europe segments net revenues increased by 2% due to higher pricing.Despite favorable pricing and volume growth, revenues for the Asia, Middle East and Africa segment declined by 2% due to the sale of bottling operations to Tingyi and the Vietnam beverage refranchising.Investing for growthPepsiCo continues to invest in the expansion of its business in developing and emerging markets. For instance, PepsiCo plans to invest nearly $5.5 billion by 2020 in India, one of the companys key global markets.PepsiCo is also entering into key alliances and developing products that cater to local tastes and preferences. For instance, in 2012, the company entered into a strategic alliance with Tingyi Holding Corporation, a leading food and beverage company in China. Under the alliance, PepsiCo made Tingyis beverage subsidiary its franchise bottler in China. The strong network of Tingyi helped PepsiCo enhance its business in China.Exchange-traded funds (or ETFs) such as the SPDR MSCI World Quality Mix ETF (QWLD) and the Consumer Staples Select Sector Standard & Poors depositary receipt (or SPDR) Fund (XLP) provide investors means to have exposure to food and beverage stocks such as Coca-Cola and PepsiCo

LOREAL L'Oral is the second leading beauty and personal care manufacturer in the world, following Procter &Gamble at number one. Excluding shaving,L'Orals market ranking rises to number one globally. The company has a comparatively narrow focus, exclusively in beauty and personal care, as opposed to some of its key rivals Procter & Gamble and Unilever which are present in home care and beauty and personal care. L'Orals exclusive focus has enabled it to make more targeted investment in R&D and advertising, growing to be a formidable force in the industry. In colour cosmetics, L'Oral is the leading provider at over 19%, with Este Lauder a distant second at 8% market share. It has also made strong strides in skin care through a number of launches based on cutting edge technology. Despite its good market coverage, the companys market share dropped marginally. L'Oral has been affected by lower hair care sales in Western Europe. In addition, market growth was partly driven by commodities such as oral care and bath and shower in which L'Oral has limited presence.

L'Oral GroupeHeadquarters: FranceRegional involvement: GlobalCategory involvement:Skin care, colour cosmetics, hair care, fragrances, mens grooming, sun care World BPC share 2011: 9.7%World BPC value growth 2011: 4.8

Head office

CentreEugne Schueller, L'Oral head office, inClichy, FranceL'Oral Group has its head office in the CentreEugne SchuellerinClichy, Hauts-de-Seine, nearParis.[63]The building, constructed in the 1970s from brick and steel, replaced the former Monsavon factory, and employees moved into the facility in 1978. 1,400 employees work in the building.[64]In 2005, Nils Klawitter ofDer Spiegelsaid "the building, with its brown glazed faade of windows, is every bit as ugly as its neighbourhood." Klawitter added that the facility "gives the impression of a high-security zone" due to the CCTV cameras and security equipment. The world's largest hair salon is located inside the head office building. As of 2005, 90 hairdressers served 300 women, including retirees, students, and unemployed people, per day; the customers are used as test subjects for new hair colours.[65]L'Oral USA has its headquarters inNew York City;[66]its New Jersey headquarters is inBerkeley Heights.[67]

PRODUCTSLOral got its start in the hair-colour business, but the company soon branched out into other cleansing and beauty products. LOral currently markets over 500 brands and many thousands of individual products in all sectors of the beauty business: hair colour, permanents, hair styling, body and skin care, cleansers, makeup and fragrances. The company's products are found in a wide variety of distribution channels, from hair salons and perfumeries to hyper - and supermarkets, health/beauty outlets, pharmacies and direct mail.LOral has six worldwideresearch and developmentcentres: two in France:AulnayandChevilly; one in theU.S.:Clark,New Jersey; one inJapan:Kawasaki,Kanagawa Prefecture; in 2005 one was established inShanghai,China, and one inIndia. On 17 March 2006, L'Oral purchased cosmetics companyThe Body Shopfor562 million.L'Oral'sadvertising sloganis "Because I'm worth it". In the mid 2000s, this was replaced by "Because you're worth it". In late 2009, the slogan was changed again to "Because we're worth it" following motivation analysis and work into consumer psychology of Dr. Maxim Titorenko. The shift to "we" was made to create stronger consumer involvement in L'Oral philosophy and lifestyle and provide more consumer satisfaction with L'Oral products. L'Oral also owns a Hair and Body products line for kids calledL'Oral Kids, the slogan for which is "Because we're worth it too"

L'Oral falls below industry growthA: In 2008, the acquisition of Yves Saint Laurent helps the company beat the global growth rate.B: 2009 is a difficult year for the company with strong exposure to premium cosmetics, which are hard hit by the economic downturn. Consequently, the company's growth rate falls below that of the global beauty and personal care marketC: L'Orals global growth in beauty and personal care falls slightly below that of the industry in 2011, when industry growth is partly driven by commodities such as oral care and bath and shower. L'Oral has no presence in oral care and is a small player in bath and shower. In addition, its hair care share falls due to Western European weakness.L'Oral focuses on skin care In recent years L'Oral has been focusing on skin care, recording the highest growth rate in terms of CAGR between 2006 and 2011, making breakthrough launches such as Visionaire. L'Oral surpassed Procter & Gamble as the leading player in China skin care, projected to drive absolute value growth between 2011 and 2016. It is now venturing into skin care devices with Clarisonic. L'Oral ranks number one in colour cosmetics leading its immediate rival Este Lauder by 12 percentage points. L'Oral operates a number of brands across various pricing tiers catering to a wide range of target audiences. It is now pushing colour cosmetics beyond immediate BRIC markets, as indicated by its recent acquisition of Colombian colour cosmetics brand Vogue. In addition, it has also agreed to purchase Urban Decay, a US brand catering to a younger audience. While L'Oral made strong strides in skin care and colour cosmetics, hair care has been relatively less dynamic in developed markets although the company has announced exciting launches in the coming months.

Flexible portfolio helps drive year-on-year growth globally

L'Oral has a well-balanced regional portfolio with a good presence in both developed and emerging markets. In Western markets L'Oral has been driving growth through value addition including breakthrough launches across the wide pricing spectrum, lending it a degree of flexibility to cater to a wide range of consumers, thus helping the company to drive growth even in the face of economically challenging times. Despite lower growth prospects, L'Oral has been targeting the US given the significant market size. It has made a few acquisitions in the market including Clarisonic and more recently announced its plan to buy the US colour cosmetics brand Urban Decay to strengthen its position in beauty specialist retailers. In emerging markets, L'Orals strategy depends on market-specific conditions. In China, L'Oral has been driving sales growth for both premium and mass ranges, while in India the company is aiming to expand in the mass market through Garnier. It is also targeting markets beyond BRIC countries as indicated by its acquisition of Vogue in Colombia. It has also announced the completion of a manufacturing site in Indonesia, which is set to serve as the hub for Southeast Asia.SKIN CARE PLAYERS TARGET CHINA FOR GROWTHAsia Pacific is projected to contribute the most to skin care absolute value growth between 2011 and 2016 and this growth will be mainly driven by China. Consequently, China skin care is heating up. L'Oral has performed successfully in China skin care through a wide range of brands across the pricing tiers and retail channels to cater to varying consumer needs and affordability. To this end, it overtook Procter & Gamble as the number one player in skin care in 2008. Given the strong growth prospects for China skin care, other leading skin care manufacturers are targeting China for growth. Este Lauder has launched a skin care brand specifically designed for Chinese consumers while increasing the number of outlets in second- and third-tier cities. Coty has struck a deal with Chinas largest retailer to market its skin care brand Lancaster. In the face of growing threat, the question is how best L'Oral can defend its position in the market. It could follow Este Lauder and introduce a similar brand to Osiao, but this may not be prudent. It may make more strategic sense to introduce Clarisonic in China. L'Oral strong in colour cosmetics but long-term competition looms

L'Orals global market share in colour cosmetics at over 19%, while its immediate rival Este Lauder in the same category at a distant 8%, reveals a strong market position for L'Oral. In 2011, L'Orals market share remained static, which is a good performance given the competitive nature of the market. Despite a strong market position and good performance, there are indications of weaknesses in its operations in certain markets. The key challenges are in the Russian market, where Coty is gaining share, while in China Este Lauder is increasing its outlets. Chanel is gaining ground in one of the most lucrative markets, Middle East and Africa, while Latin America is dominated by direct sellers. The problem is further compounded by its portfolio extending across a number of beauty and personal care categories diluting the company focus in terms of research and development. In addition, increasing cost of production with soaring commodity prices has been exerting pressure on operating margins in the industry, leaving less room for R&D investment. L'Orals strong market position in colour cosmetics lends it immunity from looming competition in the short to medium term, but it needs to address them to secure its position in the long run.

Losing ground in Russian colour cosmeticsRussia is L'Orals leading market in Eastern Europe, making up for nearly 55% of its regional colour cosmetics portfolio. L'Oral is the leading player in Russias colour cosmetics market at over 18% value share, while the immediate rival Oriflame is at nearly 14% value share. L'Oral lost 130 basis points in Russias colour cosmetics market in 2011 along with declines for the next three competitors. The difficult economic conditions have contributed to the loss of market share, but its next two competitors Oriflame and Avon are suffering from the slow growth in direct selling. As for Procter & Gamble, colour cosmetics is a relatively small part of its total portfolio. Procter & Gamble is currently trying to revive market share growth for its key category laundry.

Company Profile

In 1963, Amancio Ortega started a small company in Spain that manufactured womens pajamas and lingerie products for garment wholesalers. In 1975, after a German customer cancelled a sizable order, the firm opened its forts Zara retail shop. The original intent was simply to have an outlet for cancelled orders but the experience taught the firm the importance of a marriage between manufacturing and retailing a lesson that guided the evolution of the company ever since. The first Zara clothing store opened in 1975 in Spain as a small retailer selling mens and womens clothing.

Since then Zara chains have grown into retailing giants with almost 1000 stores worldwide and an impressive sales record. The success of Zara is partly to do with the appeal of its mens and womens and childrens fashions and accessories that display unique style but at real world prices. But it is also partly as a result of their collaborative, digital networks that link Zara with its suppliers and customers. These advances have enabled Zara to deliver tailored products quickly and reliably, creating what the company terms a value net for all the firms in the supply network. This value net is a key part of the operations strategy, allowing customer choices to be simultaneously transmitted to all supply partners who then deliver components as need by other partners.

Steps in Zaras Marketing Channel

In order to make sure that the marketing channel is streamlined for success and that Zara is able to produce quality products in just a short period of time, the management organized every business process and activities from design to retailing.

1. Design and Order Administration

In order to support the strategy of the company to have a strategic supply chain management, changes and improvements were introduced in the design and order administration process. In order to ensure product quality, the company designs its own products. There are more than 300 people who work in the order and administration department. These people produce designs that the company will make into clothing items. In order to make the supply chain more effective, the order and administration team works on designs for the current season as well as the next season, making the process more efficient and enabling the company to update and develop the current designs very quickly.

2. Production

The companys production process supports the companys strategic supply chain management. Zara manufactures approximately 50 percent of its products in its own network of 22 Spanish factories but use subcontractors for all sewing operations. This enables Zara to focus on the processes that adds to organizational capabilities. Many of Zaras suppliers are based in Spain and Portugal and Zara exploits this geographical proximity in order to ensure quick response to orders which is critical for fashion products.

3. Distribution

All products pass through Zaras major distribution center in La Corua. The 5-storey, 50,000 square meter distribution center employs some of the most sophisticated and up-to-date automated systems. With a workforce of 1200, the distribution center normally operates four days per week with the precise number of shifts depending on the volume of products that have to be distributed. Orders for each store are packed into separate boxes and racks (for hanging items) and are typically ready for shipment 8 hours after they have been received.

In 2001, the distribution center shipped 130 million pieces. 75 percent of these shipments were to stores in Europe. Fashion garments represent around 80 percent of Zaras products and the rest are more basic items. Contractors using trucks bearing Zaras name pick up the merchandize at La Corua and deliver it directly to Zaras stores in Europe. The trucks run to published schedules. Products shipped by air are flown from either airport in La Corua or the larger airport in Santiago. Typically, stores in Europe receive their orders in 24 hours, the United Sates in 48 hours and Japan in 48 to 72 hours. Compared to similar companies in the industry, shipments at Zara are almost flawless 98.9 percent accurate with less than 0.5% shrinkage.

4. Retailing

Stores usually place their orders and receive shipments twice per week. Orders have to be placed at pre-designated times.

The store plays an important role in the Inditex business model that ranges from production up to end distribution. The overall experience of the customer in the store in considered. Apart form the fashion supply, the interior design of the store, coordination of collections, maximum care over window displays and customer care are some of the elements that guarantee this experience. The stores where Zara concentrates the majority of its investment are the essence of the groups chains, for which reason the location in the main commercial areas of cities and care over interior design take on vital importance for the company. The store is Zaras main image vehicle.

Apart from its location, its window designs and interior design, customer care is one of the elements that Inditex takes most care of: its relationship with consumers. Personnel receive specific c training on customer care as one of the main intangible values of the store. Inditex establishments are thought out so that the encounter between the customer and fashion can take place in a pleasant environment. Store personnel with supervisors as the main drivers of quality of service, encourage freedom and comfort of the visitor by taking an active role in the shopping process exclusively when the customer requests this (Inditex 2007).

Marketing Plan Mix

Zara Marketing Mix

Promotion of the Online Shop

Zara has a unique marketing policy of Zero investment in marketing. Instead, the company uses the money it would have used to advertise in opening new stores. The striking thing about Zara is that it has found differences that matter to the consumers and used that to differentiate itself from the rest of the competition. In other words, its key marketing strategy is based on exclusivity, experience, differentiation and affordability.In essence, the company relies heavily on the word of mouth advertising more than anything else does. The products target population in age group 18-40 that live in the cities. This is because; this group is the most fashion conscious, more than any other group. Specifically, the market segment comprises of women (65%), men (25%) and children (15%) all of them being fashion conscious, educated and fall in the middle class category.Their commitment is clearly visible in the attention they pay to each and every detail of their showrooms. The elegance with which the windows are laid out and the way the shop attendants are groomed, everything is worked out according to a plan that is very precise. Every store manager has free access to talk to their counterparts at Spain regarding the marketing and improvement strategies.Small and regular product shipments are designed to keep the inventory scarce and fresh; compelling customers to buy urgently and frequently visit the store to check what is new. Bar coding, online shopping and computer, aided purchases are all measures designed to increase sales and make it a global brand.PriceBecause the concept of Zara is to provide its products at a reasonable price to its customers, it follows that customers find its prices quite affordable. However, we have to know that we are referring to the cream customers who would compare Zara with Hugo Boss or others. Some Zara stores might be very premium whereas others will be very much affordable. But mostlyZara has a premiumpricing strategy. The pricing is made possible by optimizing development and training costs.

Place / DistributionZara is very unique and one of the things that make it a stand out brand is the fact that it is a vertically integrated retailer. What this means is that it designs, manufactures and distributes the products itself. This approach seems to be working for it because it has managed to establish itself as one of the leading Spanish fashion stores globally. Zara is present in over 30 different countries including India and its expansion is ongoing. Therefore, you will soon be seeing more Zara stores in more countries.In fact, 90% of Zara stores are owned by the company and the rest are joint ventures of franchises. This means that customers experience the same environment when entering one of the Zara stores be it they are in London, New York, Paris, Rio de Janeiro, New Delhi etc.: the stores are spacious, well-lit, modern and predominantly whiter and walled with mirrors.Most people say Zaras real strength lies in its culture, something that can never be replaced for anything. One of the things it does is that it hires young designers and trains them to make quick decisions. In other words, while good decisions are encouraged, bad decisions are not severely punished.Facing several problems related to rent space, every mall owner in India is ready to provide free space to Zara, which speaks volumes about the popularity of this brand in urban areas and the long way it has traveled.It is unbelievable but the fact is Zara comes out with at least 500 or morenew designs per month. This, coupled with the brand name Zara enjoys, helps to price their products according to their will and wish, as new trends tend to be a bit costly. However, the people at Zara are sensible enough as pricing is quite competitive with the brands like Pantaloons, and Phoenix etc in India as well as other parts of the worldProductZara is known as the Coca Cola of fashion. Such is the craze of this brand among the fashion enthusiasts. One of the major strength of the company is that it is able to respond very quickly to the changing needs of the customers. The company does not source its manufacturing process, making it fully in control of the products it produces. Its unique selling preposition is to imitate or create the latest trends. In most cases, new styles are normally available on the sales stores within two weeks, four weeks maximum. If a product is not selling in the stores, it is immediately pulled from the stores.However, when it comes to India, it has a few problems to sort out, prominent among those being the lack of seasonal variations in their range. Secondly, it needs to tackle and cope up with the cultural needs of the local people which is a big challenge and Zara is working to reach out local people by coming up with designs that integrate modernism with local traditions.Marketing Channel Structure What sets Zara apart from other companies is its well-designed supply chain network. Zara started its operation in the 1970s. It was opened by Amancio Ortega in Spain. From then on, Zara continued to grow and how has nearly 900 stores around the world. One of the elements of Zaras success as a fashion empire is its highly effective supply chain system that enables the company to control the entire marketing channel and its processes and steps from textile manufacturing to retail.

Zara also has an extremely effective global network which is consist of buyers and trend-spotters. The responsibility of these people is to find inspiration by walking around the metro in different locations, navigate the world-wide web and to scan newspapers and magazines, and visit fashion shows in search for new trends for men, women, and children clothing. From the information and inspiration that they gather, they create clothing pieces that have the catwalk look but at the same time affordable. Zaras clothing products are very attractive to people of all ages and all walks of life.

The success of this fashion brand can be attributed to its marketing channel and supply chain management. Supply chain or value chain management is composed of the operational or tactical activities and can be defined as managing the entire chain of raw material supply, manufacture, assembly and distribution to the end consumer (Jones 1989 cited in Lowson 20002). Christopher (1998) defines supply chain management as the management of upstream and downstream relationships with the suppliers and customers to deliver superior consumers value at less cost to the supply chain as a whole.

Summary of Zara current market situation

Zara is a publicly listed company and belongs to the Inditex Group, founded byAmancio Ortega in 1975 in Spain. Zara always continues to bring excitement tofashion and fulfils customer demands. Currently Zara has 1,600 stores in 77countries and continues to force its logistics system to complete stock rotationevery 15 days. Zara needs 14 days to develop a new product and deliver it tostores and launches around 10000 new designs each year.Zara is moving forward with its successful entry into the digital world andcontinues to expand and manage its online presence: over a million daily website visits and more than 14 million Facebook fans. The online expandingstrategy in international key markets as the U.S. and China is one of the hottopics.

Zaras online shops feature all major functions, although does not correspondwith Zaras local presentation (prestige image), even more a bit disappointing,especially compared with H&Ms creative way to convey fashion online with thedress room function, moreover, by saving outfits or share on Facebook, Twitter,send a link or e-mail. Online expenditure in sales not only increases theeconomical profit, it boosts the online ranking worldwide and creates an addedvalue of the brand.