MBA-660CASE STUDYBy:Priya AmarnaniJareth ArnoldAbisai CervantesJoseph ErmoffRobert MonteroKarishma SadaranganiGilory UsherAngela Villanueva

ZARA

OUTLINE Introduction Timeline Marketing Strategy Objectives Information Technology Market Research Main Strategy Competitors SWOT Analysis Current Market Share Technological Advancements Operations Strategy Conclusion

It is group of over 700 stores located worldwide whose main aim was to deliver fashion apparel at reasonable cost to young fashion conscious city dwellers.

Zara identified clothes with low cost but high fashion.

There critical focus is to design and display an attractive setting in there stores presentations in order for the to entice customers.

TIMELINE 1975- the Opening of Zara first store was

opened in La Coruña, in Northwest Spain 1976- along with the operation of its first stores

in Spain, GOASAM was also founded by the owner of ZARA stores.

1985- INDITEX was established as the head of the corporate group

1988- In December of this year ZARA opened its first store outside of Spain in Oporto Portugal

1989- A new outlet was opened in New York (US) 1990- Another new outlet was opened in Paris

(France)

TIMELINE 1992- the entire capital share of MASSIMO

DUTTI was acquired by INDITEX 1993-1994 : A store was opened in Malta in

1993 and another in Cyrus in 1994 1997- INDITEX joined new market such as

Norway and Israel 1998- The young female market was the main

market of the BERSHIKA chain, also new stores was opened in 8 different countries.

1999- New stores were opened in 9 different countries, also they manage to acquire a fifth chain of the group which was known as STRADIVARIUS

2000- New stores were opened in Austria, Denmark, Qatar and Andorra.

MARKETING STRATEGY Only spends about 0.3% of their revenue on promotion.

Places much focus and emphasis on their product, place and pricing as opposed to promotion

Rarely advertises any store sales or have sales promotions other than sale items

Their innovative products and affordable pricing keeps customers returning to their stores

Their products seemingly advertise itself

MARKETING STRATEGY Has remarkable logistics which makes them able

to get a product from design to the shelf in just two weeks.

Due to their fast fashion, popular products may disappear from the shelf within days, forcing customers to constantly check for new items

Market their brand through rapid expansion

SPECIFIC OBJECTIVES Strategically segment the market Visualize the impact of the new line Integrate consumer input into

development Strategically plan the integration of new

lines within the existing business Model- use core competencies and re-

enforce brand values with a new list.

IT infrastructure was relatively simple and significantly lower than its competitors.

Stock is maintained minimal, drastically reducing the possibility of excess remaining goods

Production failure for new products is considered to be at 1% as compared to industry average of 10%.

Zara distribution center held optical reading devices that sorted out and distributed over 60,000 item per hour.

Zara was able to produce over12000 different items per year.

competitors. Zara spends less than 0.5% of total revenue on IT and IT employees account for only 0.5% of Zara’s total workforce

INFORMATION TECHNOLOGY

MARKET RESEARCH

Zara’s Success= unique approach to product development (fashionable clothing at affordable prices).

Source of information for Designs POS data Industry Publication TV Internet University Campuses This company has the ability to create a new

design, produce a finished product and have it in stores in 4 to 5 weeks.

MARKET RESEARCH They also have the ability to modify

existing items in as little as two weeks. Shortening the product life cycle which means greater success in meeting consumer preferences.

Zara’s ability to adopt to new trends, understanding differences b/w markets was highly relied on “High Frequency Information Systems.”

ZARA’S MAIN STRATEGY:React Rather Than Predict

Zara conducts business on reacting swiftly rather than forecasting.

Zara’s forecast is focus on the type of raw material it needs to purchase and the quantity of this material. This becomes hedging by Zara because a type of material can be used in multiple apparels and error with raw material are cheaper than with final product.

Zara produces garment is on demand in small quantities and thus has a high turnover rate and is always stocked with new fashion.

Zara, because of its flexibility, is able to secure partially processed or un-colored fabric with it is needed (similar to just-in-time inventory).

Because of this competitive edge and effective production process, Zara is able to fulfill the urge of clientele.

REDUCED RISKS Zara ‘s way to obtain and maintain profitability is

by eliminating all the risk factors. Zara tends to produce the quantity of each style

manufactured and keeps low inventory of one style and creates a scarcity of product.

Shoppers at Zara are well aware that “window shopping” today and returning for the item tomorrow does not work since styles tend to change on a weekly basis.

This “first come, first serve” basis has made Zara’s outlets to be some of the most profitable outlets.

MINIMAL OUTSOURCING Eighty percent (80%) of Zara's products are

manufactured in Europe. This gives Zara the competitive edge because

customers can depend on timely delivery and service.

Competitors outsource mostly from Asia. The workshops that provide finished goods for

Zara employ informal economy workers, that is to say, mothers, grandmothers and teenagers looking for income for their house hold.

As noted by the figures, Europe has the largest number of stores.

Europe is where their factories are located and it is where they started off.

The styles and fashion might be more oriented to the European culture and fashion, in comparison to the other countries.

It is also more cost efficient to have more stores in the same country where their base is for manufacturing and export purposes. Also, the standards and quality can be monitored easily and efficiently. The number of stores listed is according to March 2005. Now there are currently, 1,671 stores worldwide.

INDITEX and its COMPETITORS

On comparing Gap, H&M and Inditex; it is noted that Gap is the biggest company out of the three, with sales doubling those of Inditex and H&M.

Inditex had the lowest operating profit compared to its rivals in 2004. However, the company strived hard in the following year to attain a higher profit.

The company maintained its position in market although it held the least amount of asset and inventories.

Its stores outnumbered those of H&M in 2004 and were almost the same as Gap in 2005. With employees numbering up 47,046 it entered markets in 56 countries far beyond, 5 of Gap and 20 of H&M.

Even though it occupied less than half square meters of land compared to Gap, Inditex made its presence noticeable in the market.

INDITEX vs. H&M Although Inditex’s sales were lower than those of

H&M during this six year period, Inditex managed to attain a greater market share by creating a global presence.

In 2004, Sales for Inditex were 5,670 million Euros, compared to 6,029 million Euros of H&M.

However, Inditex had 2.244 stores throughout 56 countries compared to 1,068 stores in 20 countries for H&M. We must note that H&M had higher sales, but the profits of both were within the same range.

Zara’s production cycle consisted of 24 days. This was comprised of everything from style concepts and designs to final garment production.

SWOT ANALYSIS Strengths:

Brand loyalty Brand awareness Efficient distribution Technology integration Trend setters

SWOT ANALYSIS Weaknesses:

Higher costs from vertical integration and training personnel

Lack of e-commerce Limited advertising

SWOT ANALYSIS Opportunities:

Global Market Online market Brand image Boutique style stores

SWOT ANALYSIS Threats:

Exchange rates Barriers to entry in specific markets Design challenge Global competitors

CURRENT MARKET SHARE ZARA is today the Spanish retail group

with the most profitable brand, Indite X SA. According to 2011 statistics the group has held presence in five continents and has thus passed the 5,500 store mark, with shops in 82 markets. Zara has one of the worlds most successful business model which has put them above their competitors including GAP.

TECHNOLOGICAL ADVANCEMENTS DBMS: a set of software programs that controls the organization, storage,

management and retrieval of data in a database. e.g. MySQL , Orade

ERP: software applications to improve the performance of organizations’ resource planning, management control and operational control. E.g. SAP and People soft

Centralized Server: Managing and controlling of data and command from a single pint. E.g. Napster

Radio Frequency Identification (NFID): is a technology that uses communication via radio waves to exchange information via a reader and an electronic tag attached to an object for the purpose of identification and tacking. E.g. Barcode detector

OPERATING STRATEGY Achieving global expansion and making sure they understand and

sell to local customers according to customs

Careful execution of tailored retail strategies

Seek out prime real estate along established shopping corridors

Changed up its retail strategy to cater to the different seasons such

as including a line of custom weather appropriate collection

They went e-commerce: US, Europe and Japan customers can now

buy online

CONCLUSION The competitive advantage of Zara,

especially in the areas of product development, strategic partnerships and cost of production, advertising and marketing, and information technology infrastructure allowed the firm to significantly stand out from their competitors and gain additional value and profitability.