1. Strategy Analysis & Implementation

2. About ZARA
• Founded in 1975 by Amancio Ortega and
Rosalía Mera
• It is the flagship chain store of
the Inditex group
• The fashion group also owns brands such
as Massimo Dutti, Pull and Bear.
•Total of 1659 stores, majority in Europe
•This Brand has different styles, from daily
clothes, to casuals up to formals, thereby
providing a complete one stop fashion
solution for women, men and children.

3. Strategy Analysis
ZARA focus uses on the Hybrid
Model of Strategy .
The brands product development
capabilities results in faster
deliveries.
Brands differentiation lies in the
fact it delivers products of high
quality at relatively low prices.

4. Strategy Analysis
Pressures for local responsiveness
Low High
Localization
Low International Strategy
strategy
Pressures for
cost
reductions Global
Transnational
High standardization
strategy
strategy
• ZARA reaps cost reduction benefit from Economies of Scale
• NO customization in marketing strategy, spends 0.3% of total revenues
• Low Cost & High Quality Strategy on Global Scale
• Zara did not follow any localization in the countries where it was present and
provided only standardized products.

5. Strategy Analysis
• Compete in existing market place
•Beat the competition
•Exploit existing demand
•Created Strategic Differentiation through
excellent delivery system and low cost

6. Strategies Implemented
Low priced lookalike products of more popular, high end
fashion brand at affordable prices.
How does ZARA achieve this ??
Fresh fashion: 3 pillars
- Short Lead time = More fashionable clothes
- Lower quantities= Scarce supply
- More styles = more choice, more chances of getting
it right
Amancio Gaona, regarded clothes as a
perishable commodity, just like vegetables.
“Rather than making products that can be stored
in Cupboards, I have build a retail business that
provides freshly baked clothes!!”

7. Strategies Implemented
3 pillars supported by certain other values
–
•Ownership and Control of Production
•Centralized Design and Production Centre
•“React rather than predict” Philosophy
•Information Technology Excellence
Core Competence: Supply
Chain Management

8. Short Lead Times: Keeping up with fashion
• By focusing on shorter response time the brand ensure that
stores have the products that the consumer want as that time
• Zara can move from identifying a trend to having clothes in
its stores in 30days.
• Other take 4 – 12 months and hence they try to forecast
trends rather than adopting a trend
• A large design team is dedicated towards identifying the
prevailing trends and designing styles to match those trends
Market research
Trend
identification • Basis for Competitive advantage
Sales reporting • Co ordination between sales
managers and design team
• Strong MIS system

9. Reducing Risk: Lower quantities
• Reducing the quantity manufactured in each style
• Reduces exposure to any single product and also creates
artificial scarcity
• With all things fashionable, the less its availability, the more
desirable it becomes
More Choice
• 12000 styles a years – once a style sells out, a new style is
ready to take up space
• Merchandise is delivered to store twice a week – new stock
every 3 – 4 days

10. Ownership and Control of Production
• 80% of Zara’s production is carried out in Europe, much
within a smaller radius from its HQ in Spain
• Gives control, however cost around 10 times more than that
of Asia
• Inditex is a vertically integrated group, with up to date
equipment for fabric dyeing, processing, cutting and garment
finishing
• The group has processing capacity available ‘on demand’ to
provide the correct fabric for new styles
• Does not own the stitching but controls it through a network
of subcontracted workshops in Spain and Portugal

11. Centralized Design and Production Centre
• The physical and organizational proximity of the three groups
increases both the speed and the quality of the design process
•The cross-functional teams can examine prototypes in the
hall, choose a design, and commit resources for its production
and introduction in a few hours, if necessary

12. Centralized Design and Production Centre
•Centre at HQ consists of three spacious halls—one each for
women's clothing lines, men's, and children‘s
•Zara makes a point of running three parallel, but operationally
distinct, product families.
• Accordingly, separate design, sales, and procurement and
production-planning staffs are dedicated to each clothing line.
•Though it's more expensive to operate three channels, the
information flow for each channel is fast, direct, and
unencumbered by problems in other channels—making the
overall supply chain more responsive

13. Supercharged Product Development
Designing
• Information from • Each style would
visiting give 200,000 of
colleges, discos to • Designing team retail sales (far less
observe what based in Spain – than other retailers)
people are wearing 1000 new styles/ • Cost realized by
• Daily feedback from month higher margins
stores and sales • Employ 200 people
report
• Each person to
Market produce 2 styles a Product
Research week Development

14. React rather than predict
• Built its business around reacting swiftly rather
than forecasting
•Market research helps it analyze the wants of the
customer
• Typically takes one month to make that products
• A traditional models takes around 9 – 12 months
to manufacture a new design
• Reduction in lead time is important for the
industry since fashion changes very quickly
• Forecasting is done on procuring the raw
material, which is a safer bet since it can be used
for all kind of clothes

15. Keeping Costs Down
• None of Assembly workshops owned by company
•Average salary of a seamstress in the workshop less
than $ 500 a month
•Zara relies more on having prime location for stores
rather than advertising
•Zara spends 0.3% of sales revenue on advertising
compared to competitors , spending 3.5 %
•Strategy of low volume per style , & quick changing of
products reduces costs
•Two clearly time-limited sales during the year rather
than constant mark downs
•Strategy of following designer collections means low
spending on product development & design

16. Quick Bake recipe
• Beginning of Zara is responding to actual need
rather than forecasting for a distant future
•Based on store demand , designers conceptualize
new garments
•Since fabrics already at Zara warehouses , sampling
takes very little time
•Approvals taken quickly as entire team in same
place
•Cutting done in high tech automated cutting
facilities, assembly in small workshops in northern
Portugal, taking no more than a few days
•Garments shipped to stores within 48 hours

17. Information Technology Excellence

18. Information Technology Excellence
Advanced IT helps the
Designers access this information to be
Information collected
information in real accessed by all
and fed into the
time production
database
departments
State of art distribution management Products are
functions with minimal human stored in IT
intervention. Optical reading devices sort enabled
out and distribute more than 60,000 items Warehouses
in an hour

19. Increasing sales per unit

20. Inventory Management
• Production centers:
Location Production share
Spain 50%
Rest of Europe 24%
Asia 26%
• Each retail center is sourced from the near by production centre, there
by reducing the procurement time
• Each center is closely linked with the network of the Inditex group
thereby not compromising on the quality of the products

21. The Zara Supply Chain
• Shortened conventional supply chain from 5-7 months to 2.5 months
•Small and frequent shipments keep inventory fresh & scarce, thus
making customers come back again to see what's new
•Twice a week deliveries to replenish stock
•Lines that are not selling well are quickly removed & popular items
replenished
•A quick turn around on merchandise helps generate cash, reduces
inventories and eliminates the need for significant debt
•In house IT simple & effective
 Vendors and suppliers report that people are accessible and answers can
be obtained quickly.
Controlling Bottlenecks :
a large investor in a dye and finishing plant—a notorious bottleneck. Its
control allows them to oversee the dyeing process
Mostly uses contractors for sewing process

22. Global Level Strategy
• Exporting: Zara exported its products to a
few markets where opening up a
manufacturing facility would not have been
profitable
•Franchising: Zara also opens up stores in
various locations through franchised deals
avoiding development costs
•Wholly Owned Subsidiaries: To take
advantage of the controls that it could
exercise in those countries.
•Joint Ventures: Over a period of time Zara
entered various markets by forming Joint
Ventures to take advantage of the partner's
knowledge of the foreign country.

23. Peer Comparison: Customer Perception
-Benetton perceived to be high price
& does not deliver on fashion content
-Benetton is more known for its
controversial ad campaigns than
latest designs
-Zara is in tune with
Price +
customer. Latest
trends & tastes
-It is perceived as
high fashion at
Fashion - Fashion + affordable rates
Price -

24. Peer Comparison: Customer Perception
Zara Benetton
Price Lower- Middle Middle- High
Quality Middle – High Middle High
“Fashion” Content High Low
Target Age Group 10- 40 years 15- 40 years
Type of Clothing From Casual to formal Casual
Brand Recognition Under Development High & Global
Production 60% in house, 40 % In House
outsources
Production lead time Low High

25. Why did it work?
Zara gain competitive advantage by:
 Short Lead Time More fashionable & trendy clothes
 Lower Quantities - create artificial scarcity
- leaves not much to be disposed
at end of year sale
Vertical integration :
-Total on all activities from production, sourcing to
distribution to retail stores
-Focus on building of brand image & product image

26. Why did it work?
Information Technology –
-Collection of info in consumer needs
-Trend info flows daily & designers act accordingly
Distribution management:
-distribution facility functions with minimal human
intervention to ensure each order reaches its right
destination.
-Optical reading devices sort out and distribute more than
60000 items of clothing an hour.

27. So What do we learn From ZARA
Zara Strength lies in its Supply Chain Management
 dared to move away from the traditional model of
apparel brands : Adopt Prevailing trends rather then
Create
Brands philosophy helps it to generate revenue
from regular prices rather than discount prices
Strong MIS insures swift & effective
communication throughout all departments

28. Recommendations for the Brand
 Designer collaborations could help the
brand move into newer markets
 Different trends in the local markets
 Develop its e-commerce site Zara.com
further to enhance customer engagement &
shopping experience
 By leveraging on Social Media
platforms
Maintain its hold on the production &
distribution system. This is the base that
makes Zara as a brand effective & must not
be allowed to be diluted by way of increase
outsourcing.

29. Thank You !
Group 7 :
Akshat Jain
Kartikey Bhargava
Mahima Walia
Sidhansh Kakkar
Rishi Shah