-SANDHI KUKRETI

MFM SEM-III

Introduction
Zarais a Spanish clothing
and accessories retailer based inGalicia.
Zara: - headquarters in Arteixo, Spain
Founded in 1975 byAmancio Ortega.
It is theflagshipchain storeof
theInditexgroup, the world's largest
apparel retailer.

Zarahas over 2,100 stores

strategically located in leading cities
across 88countries.

Position: medium quality fashion

Characteristics

A brilliant, cheap,
short supply chain
that delivers similar to
luxury brands fashion
at a much lower price.

The pioneer in fast

fashion industry & the
third largest brand in
the garment industry.

For Zara speed and

responsiveness are
more important than
cost.

Competitive Advantage
Responsiven
ess

Inventory
Management

Distribution
Network

Zaras competitive
advantage is the
ability to respond in
a fast way to the
demands of
consumers.

The company
determines the
quantity that should
be delivered to
every single one of
its retail stores.

Due to its effective

value system, Zara
has managed, over
time to reduce the
manufacturing and
transportation costs
to minimum, taking
advantage of the
economies of scale
due to its size which
ultimately benefited
the final consumer
by reduced pricing.

The stock delivered

is limited. This
allows Zara to ship
more often and in
smaller batches and
theres not a ton of
unsold inventory to
get rid of.

Enables the
company to deliver
goods to its
European stores
within 24 hours,
and to its American
and Asian outlets in
less than 40 hours.
Zara can get a
product out from
concept to store in
just 15 days, while
the whole fashion
industry average
standard is 6
months and it is
about 10-12 times
quicker than its
nearest competitor
GAP and H & M.
Responsiveness
Inventory

Competitive
Comparative Advantage
competitive advantage Competitive advantage
is defined as:
a performance feature, which is silhouetted against
other competitors
has to be tenable and economic
is able to reach dimensions like price, time and quality,
e.g. cost advantage or differentation advantage

Competitive Comparative
Advantage
ZARA

H&M

Vertical integration

all production
outsourced Long lead

Short lead times

engages many
designersOriginate
designs in a few weeks

one distribution
center low costs
expand very fast
stores in 86 countries

has

times

60 % fewer designers
a distribution center in
each country High costs
expand very slow has
stores in 62 countries

Competitive Comparative
Advantage
ZARA

GAP

- three different modes for

expansion:

1.Franchise
2.Company owned stores
3.Joint Ventures

one main mode for

expansion:
1. Licensees

ZARA

Benetton

vertical integration Short

lead times
expand very fast

outsourced all production

Long lead times
slow expansion

Sustainability of Zaras apparent competitive advantage

The following factors contribute to the sustainability of

competitive advantage:

EPRG FRAMEWORK
Polycentric marketingis a type
ofglobal marketing in which
companies attempt to spread out
the appeal of their products or
services among multiple
countries.

It occurs when a business

decides to broaden its operations
and focus on sales outside of its
home country.

ZARA & India

Tata-owned Trent and Zara set up the joint
venture in February 2009 and today they
run 18 stores all over india.
Inditex Trent Retail India Private Limited is
a Private incorporated on 27 October 2009.
It is classified as Subsidiary of Foreign
Company and is registered at Registrar of
Companies, Delhi. Its authorized share
capital is Rs. 1,080,000,000 and its paid up
capital is Rs. 648,000,000.It is inolved in
Business activities n.e.c.
Trent has 49 per cent stake in the JV Inditex Trent Retail India. Inditex, which
owns Zara, the rest.

Zaras Product
Life Cycle

Zaras Product Life Cycle Curve is in a high fashion

industry and its product offering are the latest trends and
designs with a life of maximum 2 weeks so its Product
Life Cycle Curve becomes like the one given in the right
diagram.

Vertically integrated supply chain where design, production,

distribution, and retailing are integrated.
- Zara The vertical integration of our production system
allows us to place a garment in any store around the world in a
period between two to three weeks.

Why Vertical?
Cost & Speed

Local sourcing of raw material

Cutting cost because they do not
outsource any channel

Japan
Fast time-to-customer Cutting
72
time, faster, effective, and efficient hours

Mass customization
Low process costs
Avoid conflicts emerge from
different channels

China
48
hours
ZARAs
Rate for the
Global
Distribution
from
Spain
U.S.
48
hours

Europ
e 24
hours

Porters Five Force Model

1. Rivalry : High
High exit barrier

2. Threat of new entry : High

High fixed cost
Long sales cycle

3. Supplier power : Low

Vertical intergradient

4. Threat of substitutes : Moderate

H&M, GAP, Foever21

Low buyers switching costs
Substantial customer loyalty

5. Buyer power : Moderate

Trendy Fashion
Price

PESTEL
P - Political
E - Environment
S - Social
T -Technology
E - Economy
L - legal

POLITICAL FACTORS
In 2007, Zara withdrew a handbag
from their shelves after a customer
noticed a swastika on the bag's
design.
In August 2014, Zara received
criticism for selling a toddler T-shirt
for closely resembling uniforms worn
by resembling uniforms worn by
Jewish concentration camp inmates.
Zara received heavy criticism for selling
the T-shirt in Israel because Israel does
not have sheriffs. Additionally, the word
"Sheriff" is outlined in transparent letters
on the bright yellow star

ECONOMICAL FACTORS
Recession: Inditex sales in
Spain in 2011 accounted for
25%, which was 6.8% less than
in 2009 .
However, thanks to its global
presence, the firm has been able to
offset the slow-down in Spain. The
Span-ish company is increasingly
aiming at the global market because of
stagnant results in its mother country
due to the heavy re-cession in Spain.

Difference in income per capita

across countries in which
Inditex operates.

SOCIAL FACTORS
People in Bangladesh do
not change their wardrobe too often and a
strong preference for
bright colors dominates,
as opposed to blacks
and whites, more worn
in Europe.
Difference in culture
and climate within the
same country. (Delhi
and Mumbai)

TECHNOLOGICAL FACTORS

Social media: Having a presence

in social networks such as Twitter
or Facebook allows access to live
information involv-ing the
consumer and making him/her
feel more connected to the
brand.

Online presence: Zara.com has

become one of the brands most
popular storefronts thanks to
their permanent sections such as
Lookbook.

New technologies: Information

and communications tech-nology
is at the heart of Zaras business.

ENVIORNMENT
In 2011,Greenpeacestarted a dialog with
Zara to ban harmful toxins from the
clothing production.
In November 2012, Greenpeace published
the "Toxic threads: the big fashion stitchup" report, in which Zara was identified as
the worst. In 6 of the 10 clothes that were
examined,nonylphenol ethoxylateswere
found, and in 2 casescancer-inducing
aminesfromazo dyeswere found
After 9 days of intense public pressure,
Zara decided to switch to a fully toxic-free
production.

Legal factors
On 16 August 2011, a
Brazil television show
calledA Ligaaccused the
company of running
sweatshops for their
outsourced production.
The following day, the
Regional Superintendence of
Labor and Employment of
So Paulo, Brazil, closed a
factory.

 On 21 March 2012, the

Swedishinvestigative journalismtelevision
programreported stories of 25 Zara
employees, both shop managers and staff,
that testified about severe abuse and
terror against Zara employees in Sweden
and Europe.
Zara's representative responded that the
company will investigate and solve these
problems. The union of shop workers,,
responded that Zara had promised
improvement and was breaking its legal
agreements andUnion, which
organizeswhite-collar workerssuch as shop
managers, called Zara's management style
"management by fear

 Many of the workers were

forced into paying their
wages to human traffickers
who had smuggled them into
the country.

In a statement, Zaras
representatives said that the
accusations ofslave labormade
against the retailer represent a
serious breach in accordance
with the Code of Conduct for
External Manufacturers and
Workshops of Inditex.

SWOT ANALYSIS
Strengths:
Vertically integrated
system
Fast Fashion/ Ability to
recreate fashion
Many stores around
the World
Strong supply chain and
distri- bution channels
Diversified product
range
Each store wants
customer comments
and opinions.
Opportunities
Designers
collaborations could
expand the company
into new markets
Zaras brand
awareness
Emerging markets
(BRICcountries)

Weaknesses:
Centralised
production
Tagged as imitators
Euro-centric model
Lack of advertising

Threats:
Manufacture based in
Spain isbecoming
expensive
Rivals may copy Zara
strategy
Potential
oversaturation in
Europe
Competitor H&M is
doing great with
designer
collaborations and a