zara group5
TRANSCRIPT
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ZARA: FAST FASHION(CASE STUDY)
Group 5 (Section B)
Anurag Nigam 12P072
Pankaj Gurbani 12P079
L R Krishnan 12P083
M Gireesh Babu 12P084
Saumil Parekh 12P091
Zain Zafar Khan 12P120
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INDITEX: TIMELINE OF EVENTS
1963-1974 Amancio Ortega Gaona founded Inditex
1975 The first Zara store Opens in Spain
1976-1984 Expansion of Zara stores in Spain
1985 Zara starts to enter the overseas market (inPortugal)
1989 Enters New York City, USA
1990 Enters Paris, France, Introduction of JIT
1991-2004 Acquisition of Massimo Dutti & Stradivarious,
Launch of Pull & Bear, Bershka and Oysho
2007 Enters R.O.Korea in 30, April at COEX Mall and
Lottte Young Plaza
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ZARA: BACKGROUND
Established in Galicia, Spain in 1975
A key subsidiary of its Spain-based parent company
Inditex
Most popular brand, contributes to 85% of totalEBIT and 76% of total sales
The brand provides an alternative outlook to the
fashion retail business model by:
Rejecting media advertising and blow-out sales Maintaining the bulk of its production process in-house
reducing the cycle times.
It has become one of the leading fashion retailers in
the world
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INDUSTRY ANALYSIS
Bargaining Power of Consumers
Consumers decide whether a fashion is hit or a miss
Consumer preferences vital and determined if a design
is retained or scrapped
Pricing power rests with the company due to perceived
brand image of high fashion
Bargaining Power of Suppliers
Suppliers highly fragmented
Apparel chains had multiple sources for cheap labour
Suppliers had no independent existence
Zara sole/majority buyer from suppliers hence enjoyed
greater bargaining power
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INDUSTRY ANALYSIS (CONTD)
Rivalry
Benetton: large international presence
GAP: significant presence in US
H&M: Inditexs closest competitor Inditex enjoyed greater stability than its competitors
Had lower lead times (6 weeks) and higher
operating margins 22% than competitors
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ZARA: BUSINESS MODEL
Design Sourcing and Manufacturing
Teams used information systems to
track customer preferences and sales
Zaras store managers lead the
intelligence gathering effort thatdetermines what ends up on each
stores racks
Digital assistants (PDAs) used to
gather customer input, staff regularly
chat up customers to gain customer
feedbackThe goal - to improve the frequency
and quality of information system
allows for the best design trends.
About 40% of finished garments
were manufactured internally
Of the remainder, two-thirds of the
items were sourced from Europeand North Africa and one-third from
Asia
Most fashionable items tended to
be the riskiest and were produced
in small lots
JIT implemented allowed lowinventory levels, shorter lead times
and improved quality
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ZARA: BUSINESS MODEL
Centralized distribution system in
Arteixo, Spain
Sources of InformationCentralized Distribution System
Mobile Tracking Systems
Zara known for its innovative supply
chain in retail
Believed in frequent shipment of small
lots Shipment made by 3PL twice a week
Products delivered within 24 48
hours
JIT applied to reduce costs and
Bullwhip effect
Distribution Retailing
About 3/4th of the merchandise on
display changed every three to four
weeks Average Zara shopper visited the
chain 17 times a year, compared with
an average figure of 3-4 times a year
for competing chains
Aggregated demand is ascertained
and the supply is allocated accordingto past performance of the various
garments at the stores
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PROSAND CONSOFZARAS MODEL
Most significant advantage: reduced cycle time due tothe implementation of the quick response system
Different product pre-commitment
Design:
Store managers gather information directly at point ofsale
Design department organized in flat structure
Zara has more staff employed although it is smaller thanH&M- higher labour costs, but lower risk of fashion miss(as H&M)
Continuous tracking of customer preferences, numerousvariations of items
Presentation of items in key stores
Reduced failure rates
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EXPANSION: KEY DECISIONS
Expansion
MarketSelection
MarketEntry
Marketing
Management
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HOWTO EXPAND : MARKETSELECTIONAND
ENTRY
MarketSelection
Open more stores in Spain and adjoining areas where Zara is largely
successful
Go for countries that are similar to Spain in terms of costs like salaries,legal cost and also demand/supply
Target the Asian countries as they offer a huge potential
MarketEntry
Focus on more company owned stores compared to franchising. Highinvestment required in terms of capital and human exp. Currently have225 stores in Spain, 231 in 18 other countries.
Franchising in countries that have legal and administrative issues. Goodfor expansion. Currently have 31 stores in 12 countries
Joint Ventures. Existing JV in Germany with Otto Versand and in Japanwith Bigi. JV with Benetton had failed though
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HOWTOEXPAND : MARKETING
Central Design team in La Caruna 90% range of products same in all storesProduct
Higher distance from distribution centres leads tohigher prices
Decide price based on disposable income of thepopulationPrice
Establish stronghold in Spain and all of Europe
Move towards Asian countries for expansionPlace
Each new collection i.e Winter and Springcollections are advertised
End of season sales marketed heavilyPromotion
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FUTURE STRATEGY
Zara should target the neighboring Europeancountries
Italy
Fashion Capital of the world
Apparel Industry is a big industry
Apparel sales are high due to high number of visits andhigh spending
Competition is stiff due to large number of existing and well-
established players
Germany
Huge potential as a successful market in the coming years
High growth rate of 142%
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FUTURE STRATEGY
Increasing disposable incomes
Market is huge in terms of absolute numbers
Highly fragmented and not a lot of competition,need to take first mover advantage
People becoming increasing fashion-conscious
South-East Asia, China and Middle-East
Open more centres in Asia, close to south-eastAsian countries and middle-east
Inditex to open 2nd distribution centre
Distribution Centres
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THANK YOU