ZARA: Fashion Follower Industry Leader

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ZARA Fashion Follower Industry Leader

• Business of Fashion Case Study Competition
• Amanda Craig, Charlese Jones, Martha Nieto
• Philadelphia University
• April 17, 2004

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Agenda

• Zara has a Sustainable Competitive Advantage
• Strategic Advantages
• Financial Analysis and Comparison
• Strategic Drawbacks
• Possibilities for Failure
• Opportunities and Recommendations

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Strategic Advantages
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Strategic Advantages
Zaras Business System through the Value Chain

• 1. Vertical Integration
• Merchandising strategy
• Scarcity and Opportunity
• Buy now, not later
• Fast Fashion
• Up-to-date designs

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Strategic Advantages

• 2. Unique Quick Response Strategy
• Purpose to provide information to designers
  quickly
• Team Strategy
• Manufacturing environment
• Retail environment

Teams
Zaras work environment
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Strategic Advantages

• 3. Centralized Distribution Center
• Place to move merchandise
• Minimizes lead time
• Shipped by time zones

Factories in Arteixo
Distribution center in La Coruna
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Strategic Advantages

• 4. Economical International Expansion
• Low advertising
• 5. Prestigious Image
• Real estate department
• Window display department

Chanel vs. Zara Wall Street Journal
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Strategic Advantages

• 6. Broad Market
• A young educated market that likes fashion and
  is sensitive to fashion (ZARA VIDEO)

Zaras Spring 2004 Collection
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Strategic Advantages
Beirut Front
Tokyo Front
New York Front
Globalization Standardization of fashion
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Financial Analysis and Comparison
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Comparison

• Why compare and analyze?
• HM is Zaras biggest competitor
• Differences
• Similarities

Inside Zara
Inside HM
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Financial Analysis
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Financial Analysis

• Inditex is more efficient in generating profits
• How does Inditex keep costs in line?

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Financial Analysis
What is the reason for a lower profit per store?
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Strategic Drawbacks
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Strategic Drawbacks

• 1. Inability to penetrate U.S. market
• Poor supply chain strategy
• Diseconomies of scale
• 2.Vertical integration
• Lack of economies of scale
• Higher costs
• Technology
• Research Development

Inside Zaras Manufacturing Facility
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Possibilities for Failure
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Possibilities for Failure

• 1. Euro changeover
• Increased production costs
• Higher prices for consumers
• Decreased sales
• 2. Prices of competition
• Quota elimination of 2005

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Possibilities for Failure

• 3. Direct competition
• Department stores
• HM
• Quick to internationalize
• Broad merchandise assortment

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Possibilities for Failure

• 4. Cannibalization
• Location strategy
• Spain example

• Zaras store locations in Madrid, Spain

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Opportunities and Recommendations
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Opportunities and Recommendations

• 1. Specialized Products
• 2. Internet Retailing
• www.zara.com
• 3. Second Distribution Center in the Americas
• Expansion in Brazil, Argentina or Mexico

Zaras website
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Conclusion

• Potential for sustainable growth
• High operating income
• Unique and strong business model
• Ability to face weaknesses and challenges
• Various opportunities of expansion
• Establishing new standards for retailers

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Thank You