Presentation.zara.case.of 2003

Group 01 // Presentation // prof. Grilli
ZARA Project Work // Business Industrial Economics
Yong Claudio Ke – 853051 Pierenrico Ferraro – 853693 Simone Ferrari - 851438
Alice Gilardetti – 853063 Carlo Faravelli - 854072 Roberta Guarino - 858889

INTRODUCTION
DESCRIPTION
Group 01 // Zara Presentation // prof. Grilli
Zara leads the international expansion of its
parent, Inditex group
Inditex is one of the world's
largest fashion retailers.
Inspired by a responsible
passion for fashion and care
of customers.
Founded in Spain in 1975, by Amancio Ortega

INTRODUCTION
DESCRIPTION
Founded in Spain in 1975, by Amancio Ortega
Zara leads the international expansion of its
parent, Inditex group
Fashionable and affordable clothing for every body
with short LT and low inventories

THE PERFORMANCES
INTRODUCTION
In the last year raised 2$ billions of revenues.
Growth of sales of 23% in 4 years.
Zara provided 78% of total revenues of the group.
Net profit still 10% of the weight of revenues.
The assets growth from 1997 about 85% and the
inventory weight kept 10%.
The percentage of stores abroad growth every year, the
international power of Zara increases.
1997 1998 1999 2000
From Income Statement
Reveneus net income
1997 1998 1999 2000
From Balance Sheet
assets current Assets inv

MARKET ANALYSIS

MACRO ANALYSIS
MARKET ANALYSIS
Increasing pressure on prices.
Big successful chains vs small independent ones.
Usually the players use Outsourcing due to low
transportation and labor cost.
Germany liberalization of blue laws.
UK most concentrate market.
In Spain, France and Netherlands are concentrated
markets.
In Italy the independent retails have more power.

MACRO ANALYSIS
THE ENVIRONMENT
Fashion industry, with a lot of independent firms
The majority of Market share is owned
by few players
The market is near to an Asymmetric
Oligopoly and Monopolistic competition
model

THE COMPETITION

THE COMPETITION
THE PLAYERS
High
Quality
High
Price
MID POSITIONING
HIGH COMPETITION
CHALLENGE

MAIN COMPETITORS: H&M
THE COMPETITION
Founded in Sweden in 1947, by Erling Persson.
3$ billions earned in 2000 from its 730 stores, 86% abroad, 21
countries served.
Casual fashion at a low price.
Production of goods between 6 and 8 months in advance, 900
suppliers (50% manufactured in EU)
Its range covers 12 categories from traditional collections to
more sophisticated ones.
Huge-dimensioned shops, strong advertisement.

MAIN COMPETITORS: GAP
THE COMPETITION
Founded in USA, 11,6 billions sales in 1999.
Basic casual wear, spends 5% of revenues in advertising
Gap kids (0-12), Baby Gap and Gap body are sub-brands that
differentiate its offer.
Banana Republic sub-brand more innovative and fashion
oriented, closer to Zara’s style with higher prices, covering a
complete fashion wardrobe.
Old navy division is a retailer owned by GAP too, offering basic
products of fair quality under an “everyday low price” policy.

MAIN COMPETITORS: BENETTON
THE COMPETITION
Founded in Italy in 1965, by Benetton Brothers.
Successful abroad campaign with an “Italian stylish fashion”
brand image.
Although 34% sales and 45% profits comes from Italy in 1999
Benetton kids (0-12 age), Sisley (more fashion oriented) are the
main sub-brands.
Full-integrated process, 7000 stores.

MAIN COMPETITORS: C&A
THE COMPETITION
Founded in Netherlands in 19th century, by Clemens Brothers.
Quality fashion at reasonable prices.
Lower volume growth and little price inflation outside South.
Europe pressed it to withdraw from the UK.

MICRO ANALYSIS

MICRO ANALYSIS
THE INDITEX GROUP

MICRO ANALYSIS
PORTER’S VALUE CHAIN
Inbound
logistics
Operations
Outbound
logistics
Marketing
& Sales
Service
Firm infrastructure
HR Management
Technology
Procurement
VALUE
PrimaryactivitiesSupportactivities

MICRO ANALYSIS
Zara is working through the supply
chain as a Vertical Integrated
Company, but capital intensive.
Only the inbound and outbound
logistics are externalized.
Zara is producing the most of his
goods in house, to better perform in
flexibility, variety and frequency of
their new styles (Efficiency).
VERTICAL INTEGRATION
Limited
Run &
inventory
Efficiency
&
Control

MICRO ANALYSIS
ZARA DIVISIONS
• Men’s Line
• MEN Basic
• 100ZARA
• ZARA
sport ZARA kids
• ZARA Woman
• ZARA Basic
• Trafaluc

MICRO ANALYSIS
THE DIVERSIFICATION
Prices among different countries & Brands with different targets.
Several products based on local preferences, to better satisfy consumer’s needs.

OPERATIONS
MICRO ANALYSIS
80% of the production is made in
Europe.
The labelling and the quality control
before the shipping is made in Arteixo
(headquarter). (10-15 later the
product’s design).
In Arteixo there’s the distribution
center, whose process the garments to
the store (60000 clothes/hour).

LOGISTICS
MICRO ANALYSIS
Raw material supplier, fabrics coming from Spain, Italy, Turkey,
India, China, or the Far East were cut and colored, and sent to 400
small special shop in Galicia and northern Portugal (multiple
sourcing, offshoring).
Transportation & delivery to the stores twice a week.

MARKETING & SALES
MICRO ANALYSIS
Stores: the product stay here no more than one
month (short lifecycle).
Real time feedbacks according to request by
customers.
NO advertising as company’s policy.
Only twice a year to announce each of biannual sales
in major newspapers.
With the season’s-end sales, Zara empties the stores.

THE STORES
MICRO ANALYSIS
Only way to purchase.
Minimal design, that changes each 2 years.
Leasehold arrangement is preferred, but only the
principals are acquired.
Large windows.
Elegant atmosphere with Crystal elevator.

SERVICES
MICRO ANALYSIS
Customers could bring merchandise back to any store.
Credit was given for returned items according to the prices.

HUMAN RESOURCES
MICRO ANALYSIS
As things move so fast, there’s no one to teach you in
a formal way. You need to be proactive and make
yourself useful, keep a young mindset, and be open
to change.
Building the all-important confidence in the company.
Before open a new store all the personnel has to be
trained.
Compensation: fix part (15,6% of cost), variable part
according to the performance.

R&D // Technology
MICRO ANALYSIS
ZARA’s motto is to keep it SIMPLE. The key is not in
the software, but rather in managing the information
effectively. The software should be simple and easy to
use.
They use a team of Trend spotters.
Design of a core collection according to the forecast
of 50% of the whole production, while 50% according
to the demand.

BUSINESS MODEL

Stores
Allow customer to
return product• Low cost and
medium quality
• Latest fashion
garments
• Continuously
new design
Clothes sales
• Design
• Logistic
• Forecast of
trends
• Distribution
• IT
• Production
• Logistics
• Stores
• Fabric
companies
• Fashion
magazine
• Logistic
companies
Zara’s main target
is young, price-
conscious and
highly sensitive to
the latest fashion
trends

INTERNATIONALIZATION
BUSINESS MODEL

BUSINESS MODEL
SWOT
STRENGTHS WEAKNESSES
THREATSOPPORTUNITIES
-Design-on-demand retailing
-Brand awareness
-Good quality at reasonable
price
-High number of stores in
strategic point of main metropolis
-New markets’ conquest
-Internet advent
-Franchising
-Promotion of other Inditex formats
-Internet boom, new environment
-Efficiency problem acting in 2
hemispheres
-New Entrants and local suppliers
-High production costs
-Few time for forecasting
costumer demand
-High labor costs

NEW CHALLENGES

NEW CHALLENGES
EXTERNAL CHALLENGES
Different
Cultures
Opposite
Season
Effect
USA
Market
South
America
Market

NEW CHALLENGES
INTERNAL CHALLENGES
Sustainability
of the concept
Design
On
Demand
Retail
Franchise
Dilemma
Expansion
formats

THANK YOU

Presentation.zara.case.of 2003

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