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UNIVERSIDAD DE JAÉN Facultad de Ciencias Sociales y Jurídicas
Trabajo Fin de Grado
Trabajo Fin de Grado CREATIVITY AND
INNOVATION IN
ORGANIZATIONS
CASE STUDY: INDITEX
Alumno: Sandra Mesa Pérez
Mayo, 2017
1
RESUMEN:
Sectores como el de la moda están expuestos a un entorno en continuo cambio. Ante este
entorno tan dinámico, tan solo las empresas innovadoras y creativas son capaces de sobrevivir
y ser líderes en el mercado. En el presente trabajo, para comprender como llegar a ser una de
esas empresas se estudia la cadena de valor de Porter (2008), pero aplicada a empresas
innovadoras y creativas. Las actividades primarias de la cadena se encuentran apoyadas por
las capacidades que ayudan a impulsar la creación de productos innovadores. Estas
capacidades son: una cultura flexible y abierta al cambio, un modelo de liderazgo
participativo, una estructura descentralizada y orgánica y un buen sistema de evaluación de
ideas. Este marco teórico es aplicado a la realidad a través del análisis empresarial de Inditex,
por ser esta empresa una de las más innovadoras en la industria de la moda. Finalmente, la
estrategia de Inditex será comparada con la de alguna de sus competidoras para descubrir qué
hace a unas empresas más innovadoras que a otras.
SUMMARY:
Some industries are exposed to ever-changing environments. In these dynamic
environments only innovative and creative companies are able to survive. A theoretical
framework is exposed by making use of Porter‟s value chain. This chain is adapted to
innovative and creative companies. In this way, primary activities are supported by capacities
that enable a company to produce innovative products. These capacities are: a developmental
culture, a participative leadership style, an organic and decentralized structure and a good
evaluation process. This theoretical framework is applied to reality by analysing the case of
Inditex, since this company is the most innovative organization in the fashion industry.
Finally, the Inditex‟s strategy will be compared with some of their competitors‟ strategies in
order to know what makes one company more innovative than other.
2
1. INTRODUCTION 3
2. EXTERNAL ANALYSIS 4
2.1.PESTEL analysis 4
2.2.Porter five‟s forces analysis 9
2.3.Opportunities and threats 12
3. INTERNAL ANALYSIS 15
3.1.Innovation Value Chain 15
3.2.Competences that add value 16
3.2.1. Developmental culture 16
3.2.2. Transformational leadership 20
3.2.3. Organic Structure 22
3.2.4. Good evaluation process 26
3.3.Strengths and weaknesses: Innovation Value Chain 28
4. STRATEGIES FOR INNOVATION IN THE FASHION INDUSTRY 29
4.1.Example of Inditex 29
4.2. Differences between Inditex and their competitors 38
4.2.1. H&M group 38
4.2.2. Cortefiel group 41
4.2.3. Mango group 44
5. CONCLUSIONS 47
REFERENCE LIST 50
3
1. INTRODUCTION:
Actualmente las empresas se encuentran sometidas a un entorno cambiante y dinámico
que hace que la clave del éxito empresarial no consista sólo en minimizar costes, sino en
adaptarse a las necesidades de los consumidores. Así, la orientación a corto plazo debe ser
sustituida por una orientación a largo plazo que busque ante todo la satisfacción del cliente y
la respuesta rápida ante los continuos cambios que se suceden en el mercado.
La innovación y la creatividad se han convertido en las claves del éxito empresarial. La
creatividad puede definirse como la combinación de ideas para producir algo nuevo y útil en
el mercado. Mientras que la creatividad es la idea abstracta, la innovación es la concreción y
aplicación de esa idea que se materializa en un producto. Sin embargo, no siempre es fácil
desarrollar estas dos capacidades en una empresa. Así, no son pocas las grandes empresas
que, habiendo sido tradicionalmente líderes en el mercado, ahora se ven desbancadas por
competidores que muestran una nueva ventaja competitiva.
La industria textil es uno de los sectores más expuestos a cambio. Así, lo que está de
moda hoy, mañana deja de estarlo. Tan sólo las compañías de moda más innovadoras y
creativas son capaces de captar y ofrecer lo que el cliente quiere en el momento en que lo
quiere. Inditex es un ejemplo de éxito empresarial, no sólo nacional, sino internacional. Lo
que empezó en 1963 siendo un austero local en A Coruña que vendía batas de guatiné,
terminaría en 2017 siendo una empresa con 7.292 tiendas distribuidas por 93 países de los
cinco continentes. Son muchas las empresas de moda que han intentado copiar y seguir la
evolución de Inditex, pero ninguna ha llegado a alcanzar el crecimiento que caracteriza al
grupo. Es por ello que resulta interesante conocer lo que diferencia a Inditex del resto de sus
competidores.
Con el presente trabajo se pretenden comprender las características que debe tener una
empresa para ser innovadora y creativa. Se tomará como caso de estudio la industria textil y
se comenzará realizando un análisis de su entorno, tanto del general como del específico. Este
análisis permitirá clasificar las oportunidades y amenazas a las que se exponen este tipo de
empresas.
Determinadas las oportunidades y amenazas, se procede al análisis interno empresarial,
estudiando las capacidades que han de desarrollar las empresas innovadoras y creativas. Este
análisis se realizará partiendo del concepto de cadena de valor de Porter, pero adaptado al
desarrollo de capacidades innovadoras. El diseño de esta nueva cadena de valor servirá para
4
analizar las características de las tres variables claves de la innovación: cultura, modelo de
liderazgo y estructura organizativa. Estas tres variables se encuentran íntimamente
relacionadas, pues derivan una de la otra. Asimismo, la cultura, estructura y modelo de
liderazgo son la manifestación de la estrategia de la empresa.
Finalmente, el marco teórico será contrastado con la realidad. Inditex será tomado como
modelo de innovación. Su cultura, estructura organizacional, modelo de liderazgo y estrategia
serán estudiados con el objeto de extraer las fortalezas y debilidades de esta empresa. Hecho
esto, se analizarán las mismas características empresariales de tres de sus competidores a fin
de conocer lo que les diferencia respecto a Inditex. Todo esto ayudará a alcanzar el fin último
de este trabajo, que no es otro que el de desvelar el secreto que se esconde tras una empresa
innovadora y creativa.
2. EXTERNAL ANALYSIS:
2.2PESTEL analysis:
Organizations pay attention to the external environment, since they need to adapt
themselves and react to it. Environment affects organizations in two ways: the need for
information and the need for resources. The external environment changes continually and
creates uncertainty for organizations (Daft, 2010a, p. 145).
Uncertainty can be defined as the lack of information about factors that affect an
organization (competitors, customers, suppliers, laws, economy etc.) and the difficulty in
predicting and reacting to changes in them (Daft, 2010a, p. 145). Therefore, the uncertainty to
which an organization is exposed depends on the number of factors affecting the organization
and the rate of change of those factors. Consequently, when the number of factors and their
rate of change are high, uncertainty in an organization is high too (Daft, 2010b, p.73). Taking
into consideration these two dimensions (number of factors affecting an organization and their
rate of change) an organization may have to deal with one of these kinds of environments:
5
Figure 1: Kinds of environments
Source: adapted from Daft (2010a, p.148) and Duncan (1972, pp.313-327).
Fashion and design businesses are in simple but unstable environments because the
number of factors that influence the industry is low and they are similar. However, these
factors change constantly, so it is difficult to predict them and react to them (Boddy, 2014,
p.96).
The external environment can be divided into two layers: the task environment and the
general environment. The general environment is made up of those factors that are beyond the
control of organizations and affect them equally. Although, this kind of environment does not
affect the day-to-day decisions, it is taking into consideration in the long term. The task
environment affects organizations directly and determines their day-to-day operations (Daft,
2010b, pp. 64-65). The PESTEL analysis focuses on general environment and studies its
components, which are: technological, international, natural, legal, political, economic and
sociocultural factors.
Technological advances have made it possible to improve production processes and to
make better and cheaper products. Moreover, they have led to new ways of communication,
which, in turns, ensures a constant flow of information within organizations. Technology has
also enabled customers to access to more information about products and competitors, which
makes them more sensitive to prices, quality and style. Technology has given rise to an
increase in costumers‟ requirements, since the flow of information through social-networking
NUMBER OF
FACTORS
RATE OF CHANGE
6
sites and websites contributes to spread new trends and brands. In addition, advances in
technology have improved communication among retailers, wholesalers, manufacturers,
suppliers and customers. All of this makes it possible, for example, to ship goods
automatically when stock falls below a certain threshold or to know and inform manufacturers
and designers about the new trends, styles or tastes of costumers (Nenni, Giustiniano and
Pirolo, 2013, p.2).
Globalization and the entry of Spain in the European Union have also put pressure on
local retailers, since they have had to face fierce competition from European and Asian
countries. Garments from Asian countries are cheaper because the labour cost in those
countries is lower than in Spain. As for the clothing industry in other European countries, it is
more competitive and mechanized and these countries are well adapted to international
markets and enjoy scale economies (Costa and Duch, 2004, p.264). On the contrary, in Spain,
industry is not so mechanized, but the labour cost is lower than in other European countries,
although higher than in Asia. Moreover, when Spain enters the European Union, the clothing
industry was mostly made up of small local retailers who were not oriented towards
international markets (Costa et. al., 2004, p.265).
Globalization has led to diversity, so it is necessary to understand the tastes of customers
from different countries. This is especially important in the fashion industry, since styles
change depending on the culture and country. Fashion industry has experienced a profound
change in the last decades, until 1980 this industry was characterised by mass production of
standardized garments which did not change frequently, since customers were not so sensitive
toward style (Brooks, 1979). However, globalization and changes in people‟s lifestyle have
increased demand for variety. In that way, instead of two seasons (Spring-Summer and
Autumn-Winter), fashion retailers have included up to six seasons (Vertica and Fairhurst,
2010, p.167).
Another impact of globalization has been the possibility of taking advantage of low
labour cost in other countries. Outsourcing has been the strategy applied by companies in
order to get competitive prices. However, outsourcing means delays, complicated supply
chains, inconsistencies, etc (Vertica et. al., 2010, pp.167-168).
The sociocultural dimension comprises demographic characteristics and customs. Age,
lifestyle, population density or levels of education are elements that need to be taken into
consideration in order to forecast the demand for products (Daft, 2010a, p.66). Population is
7
aging, which means that elderly people are exceeding young people. This is important, since
companies may prefer to orientate their products to older customers. Nowadays, there is also
an increase in the middle class, so social classes are progressively disappearing (Arribas, Josa,
Bravo, García and San Miguel, 2016, p.11.).
Fifteen of the 20 cities where clothing sales are growing are in Eastern markets, in places
like Chongquing and Guangzhou (Keller, Magnus, Hedrich, Nava, Tochtermann, 2014).
Demand for clothes is growing in developing markets, especially in Asia where consumers
are increasing their buying power and are becoming part of the middle class and consider
clothes an expression of their new lifestyle (Keller et al., 2014, online).
Moreover, people are more and more interested in clothes, since in 2004, a survey,
conducted by the Association for the Investigation of Mass Media (AIMC), revealed that only
19,3% of interviewees considered clothes important, whereas in 2014, 35,6% of interviewees
gave importance to clothes. This study also shows that men pay more attention to quality and
brand, whereas women prefer to buy in sales and follow new trends. However, price is a key
factor independently of sex in 71,5% of cases. As for online shopping, women buy more over
the Internet (13,9%) than men (11,6%) especially if they are between 20 and 44 years old1. A
study of The Wall Street Journal points out that men are more and more interested in clothes
and they pay attention to their image almost as much as girls do (Smith, 2016).
The impact that industry may have on the natural environment is becoming more and
more important. Sustainability consists of promoting economic growth taking into
consideration social and natural impact (De Brito, Carbone and Blanquart, 2008, p.534). The
fashion industry may have a negative impact on the environment, since the production process
makes an intensive use of chemical products (dyes) and natural resources (water and land for
cotton production) (De Brito, et.al., 2008, p.538). It is sometimes difficult to implement
sustainable strategies in the fashion industry because price competition and the need for a
quick response lead to delocalisation, which makes it more difficult to control working
conditions in offshore production sites (De Brito, et.al., 2008, p.538).
1 AIMC (2014), Los hombres prefieren la calidad y las marcas y las mujeres la tendencia y las rebajas,
Asociación para la Investigación de Medios de Comunicación, available from http://www.aimc.es/Los-hombres-
prefieren-la-calidad-y.html, accessed 21 March 2017.
8
Moreover, the frequent and smaller size of deliveries means more transport and more
pollution (De Brito, et.al., 2008, p.539). That is why it is so difficult for the clothing industry
to get economic, social and environmental sustainability at the same time. Companies should
take into consideration sustainability issues and incorporate them into their strategies, since
nowadays there is a growing concern about the environmental and social impact of industry.
In fact, more often than not, customers prefer to pay a higher price in exchange of eco-
products (Shen, Wang, Lo and Shum, 2012, p. 237 and Shen, 2014, p. 6237).
In the case of Inditex, they have implemented a strategy consisting of keeping
domestic production by using computer techniques in design, cutting and finishing. In that
way, Inditex have trained their workers to be innovative and to develop added value activities.
The simplest activities and the tasks that do not require the use of technology are done by
offshore production centres in Asian countries (De Brito, et.al., 2008, p.538). This strategy
contributes to a high employment rate in Europe and to train more skilled workers.
Legal-political factors are government regulations and political activities (such as
taxes or political intervention in the economy), which influence company behaviour (Daft,
2010a, p.68). The entry of Spain in the European Union has meant more regulation in order to
preserve the environment and to improve quality and safety. Strict regulation (about reduction
of CO2 emissions, recycling targets, working conditions etc.) has increased delocalisation,
since companies prefer to make their products in countries where there are not so many rules
which increase the cost of production (De Brito et al., 2008, p.543).
On the other hand, there are other European laws that benefit the apparel industry,
such as the regulation that intends to unify the size of clothing and the information appearing
in labels. This benefits those companies who sell their products abroad, since it simplifies the
production process and reduces costs2. Moreover, the European Union also negotiate trading
agreements with other countries, which facilitates the entrance of European companies in
those foreign markets.
Economic dimension is also important, since it determines the spending power of
customers and the cost of production. The financial crisis in 2008 has reduced demand for
clothes and has made customers more sensitive to prices. However, there is expected to be
2La Voz de Galicia (2014), Bruselas estudia unificar los sistemas de tallas en toda la Unión Europea available
from http://www.lavozdegalicia.es/noticia/sociedad/2014/01/10/bruselas-estudia-unificar-sistemas-tallas-
ue/00031389376993258271813.htm, accessed 24 March 2017.
9
economic growth in the next years. For example, there will be an increase of 50 percent in the
women‟s apparel over the next 12 years (Remy, Schmidt, Werner and Lu, 2013, p.2). This
increase in demand is due to the economic growth of emerging markets (Remy et al., 2013,
p.2). This means that fashion companies need to become international and implement a
strategy of globalization.
2.2. Poter’s five forces analysis:
Task environment includes those factors that have a working relationship with the
organization, such as suppliers, competitors or customers (Daft, 2010a, p. 69). Porter‟s Five
Forces analysis will help to define the structure of the industry according to these factors.
Porter considers that a strategy has to be designed taking into consideration the threat of
potential entrants, the bargaining power of customers, the bargaining power of suppliers and
the threat of substitute (Porter, 2008).
As for entry barriers, the fashion industry is characterised by the loyalty of customers.
Brands are well established in the market, so it is difficult for new entrants to attract
customers who are usual buyers of those established brands3. Distribution channels are also
limited, since big companies are vertically-integrated and take advantage of scale economies.
Moreover, they benefit from advantageous contract conditions with suppliers and their
experience in the market enable them to reduce costs of production4. Conversely, the exit
barriers are low because assets are saleable and redundancy costs are low, given the fact that
many employees are temporary workers5.
The number of competitors has increased since 2005 due to the elimination of restrictions
to imports from China and the appreciation of euro, which has made imports from China
cheaper (Arribas et al., 2016, p.24). The financial crisis in 2008 has contributed to an
aggressive competition in prices, which has made the low cost fashion industry increase from
7, 3% in 2011 to 12, 2% in 2014 (Arribas et al., 2016, p. 24).
3 Study realized by Universidad de Granada, Dirección Estratégica (2015), Las 5 fuerzas de Porter en el sector
textil, available on line: http://direstrategaugr.wixsite.com/estrategica1/analisis-especifico, accessed 26 March
2017.
4 Study realized by Universidad de Granada, Dirección Estratégica, Las 5 fuerzas de Porter.
5 Study realized by the government, C.F.G.S Comercio Internacional, Ministerio de Educación, Grupo Cortefiel,
distribución textil con marca, available from
http://www.educacion.gob.es/exterior/centros/luisbunuel/es/departamentos/comercioint/CASO_MARK_2_T7.P
DF accessed 23 March 2017.
10
Internet is making it much easier to enter the industry by curtailing the need for buildings,
sales force, sales channels etc. (Daft, 2010b, p.196). More and more customers trust in online
payment methods and prefer to buy online. The result has been an increase in the market
share of online purchases, from 2,2% in 2014 to 4,2 % in 2016 and an increase of 45,8% in
the number of online buyers 6.
Porter (2008, p.30) considers that customers have bargaining power if they are
concentrated or their volume of purchases is high. If products are standardised or
undifferentiated and there are few switching costs in changing sellers, customers have more
power in the market (Porter, 2008, p.30). In the fashion industry, customers are fragmented
and their volume of purchase is insignificant7. On the other hand, customers are offered a
wide range of products and brands. They are well informed and have access to important
social networking sites where opinions spread quickly (Arribas et al., 2016, p.12). All of this
enables customers to compare prices and products easily, so they can change from one seller
or brand to another quickly.
Another characteristic of the fashion industry is the unpredictability of demand, which
may lead to high costs of stock out, markdown and increasing inventory carrying costs (De
Brito, et. al., 2008, p.545). This is the main challenge for the fast-fashion industry, since the
right garment must be in the shop window at the right time; otherwise companies are highly
likely to end up with large amounts of dead stock. Therefore, responsiveness is the key to
success in the clothing industry.
Supplier‟s power is higher if they are concentrated, if they do not depend heavily on
the industry for revenues or if their products are differentiated or irreplaceable (Porter, 2008,
pp.29-30). High switching costs also make it difficult to change from one supplier to another
and the threat of integration forward into the industry increases their bargaining power
(Porter, 2008, pp.29-30).
In the fashion industry the bargaining power of suppliers is low because their products
are not differentiated or irreplaceable and there are a wide range of small suppliers who
6 Kantar Worldpanel cited in Modaes.es (2016), Indicador de la Moda Online: las ventas por Internet suben un
38% en el segundo trimestre y copan ya el 4,2 % del total, available from
http://www.modaes.es/entorno/20160726/indicador-de-la-moda-online-las-ventas-por-internet-suben-un-38-en-
el-segundo-trimestre-y-copan-ya-el-42-del-total.html, accessed 24 March 2017.
7 C.F.G.S Comercio Internacional, Ministerio de Educación, Grupo Cortefiel.
11
compete and supply inputs to fashion companies8. Inditex can be taken as an example, since
their supply chain is made up of 1725 and they are located in over 50 countries. Near 60% of
suppliers are located in areas close to the headquarters and logistical centres of Inditex in
Spain. All of this makes Inditex‟s suppliers more dependable and it reduces their bargaining
power9.As for H&M, this company has up to 785 suppliers all over the world (43,3 % located
in the Far East, 30% in south-east Asia and 26% in Europe, Africa and Middle Eastern)
(Bravo, 2013).
In the fashion industry there are not substitute products for clothes, but there is a wide
range of brands. Moreover, the life cycle of a garment is very short and the number of
companies that offer good value for money is high. Consequently, fashion companies are
exposed to fierce competition10
. Counterfeiting is also a problem in the fashion industry, since
it is very common and difficult to detect and combat. As an example, according to a report by
Europe‟s Office for Harmonization in the Internal Market, counterfeits cost European fashion
industry 9,7% of their total sales every year (Bain, 2015).
Rivalry among competitors depends on the preceding four forces as well as on prices
and products differentiation (Daft, 2010b, p.197). The intensity of competition and the basis
on which companies compete also determines the rivalry among competitors (Porter, 2008,
p.32). In the fashion industry, the number of competitors is high and the market‟s rate of
growth is low because this market is in the maturity stage11
. Competition is based mostly on
price, quality and brand12
(Figure 2). In addition, mass media has contributed to the increase
in the low-cost industry and has improved its image, since magazines usually show famous
people wearing low-cost garments (Arribas et al, 2016, p. 25). Consequently, low-cost
industry sales have increased 45% from 2011 to 2015 in comparison to the increase of 12,2%
in the total industry.13
The fashion market is an example of monopolistic competition, since there are no
major barriers to entry or exit, products are differentiated and there are a large number of
8 Study realized by the University of Granada, department of Dirección Estratégica, Las 5 fuerzas de Porter.
9 Information available from Inditex website.
10 Study realized by the University of Granada, department of Dirección Estratégica, Las 5 fuerzas de Porter.
11 C.F.G.S Comercio Internacional, Ministerio de Educación, Grupo Cortefiel.
12 C.F.G.S Comercio Internacional, Ministerio de Educación, Grupo Cortefiel.
13 Study realized by Kantar Worldpanel cited in CESCE (2015), Informe sectorial de la economía española, p.36
available from https://www.granadaempresas.es/wp-
content/uploads/2017/01/a213252ff432a31a4cabc331a374ecd036c88719.pdf , accessed 29 March 2017.
12
companies competing in the market14
. Although there is three companies that have 25%
market share (Inditex have a 16,75% market share, Primark 3, 55%, H&M 2,85% and Mango
0,3%) they do not control the market as it happens in oligopolistic markets15
. The graphic
below illustrates the main fashion companies and the segment of the market in which they
compete. These companies try to differentiate their products by offering different styles,
quality and prices.
Figure 2: Fashion companies and their position in the clothing industry
Source: Entretextiles website (2014)
2.3 Opportunities and threats:
Threats are those factors and circumstances of the external environment that may deter
organizations from achieving their goals, whereas opportunities help organizations to achieve
their strategic objectives (Daft, 2010b, p. 193).
The opportunities and threats, to which companies in the apparel industry are exposed, are
shown below. Only those companies who pay attention to the external environment will
combat threats and will take advantage of opportunities
14
More information available from Economics online (2017), Monopolistic competition, available from
http://www.economicsonline.co.uk/Business_economics/Monopolistic_competition.html accessed 23 April
2017.
15 Fintonic cited in La Vanguardia (2016), Inditex (Inditex), Primark, H&M y Mango copan el 25 % del mercado
de moda España, available from :http://www.lavanguardia.com/vida/20160112/301355234993/inditex-Inditex-
primark-h-m-y-mango-copan-el-25-del-mercado-de-moda-espana.html accessed 26 April 2017.
13
OPPORTUNITIES THREATS
Technology:
-Technological advances improve the
efficiency of operations (flow of
information within the organization
and with external stakeholders).
-Make it possible the Just in Time.
-Expansion of e-commerce (reduction
of costs, accessibility etc.).
-Easy access to information which
enables organizations to adapt their
products to customer‟s requirements.
Globalization:
-Accessibility to international
markets.
-Accessibility to more information
and technological advances.
-Scale economies and risk
diversification.
-Possibility of outsourcing.
Sociocultural factors:
-Aging of populationniche markets
-Expansion of middle class.
-Growing demand in developing
Technology:
-Reduction of entry barriers.
-Expansion of online shops.
-Easy access to information which
empowers customers who can
compare prices and products easily.
-Need of being continually updated
and risk of obsolescence.
-Increase of investment.
Globalization:
-Fierce competition from European
and Asian countries.
-Strict regulations from European
Union.
-Diversity implies adaptation to
different cultures and tastes.
Production is no longer standardized,
which means more variety and high
costs of production.
-In comparison to other European
countries, traditionally Spain has had
a lack of orientation towards
international markets.
-Outsourcing may imply delays, lack
of coordination and complicated
supply chains, unethical behaviour...
Sociocultural factors:
-More migration and diversity from
mass production to batch production
(more complexity and costs).
14
countries.
-Men pay more and more attention to
their appearance and clothes.
Natural environment:
-Increase of demand for
environmentally friendly products.
-Possibility of improving
organization‟s image.
-Possibility of producing
environmentally friendly products
investing in I+D.
Legal and political factors:
-Access to new markets thanks to
trading agreements promoted by the
European Union.
-Unification of size clothing and
information in labels in the European
Union.
Economy:
-Financial crisis demand more
sensitive to prices.
-More competition in the middle class
segment. Competition based on price.
Natural environment:
-Growing concern about the
environmental and social impact of
fashion industry.
-Negative impact of fashion industry
(use of water, use of dyes, child
labour...).
-Difficult to achieve a sustainable
strategy without increasing prices.
Legal and political factors:
-Strict regulations in the European
Union (safety, quality, limits to CO2
emissions, labour conditions etc.)
Economy:
-Increase of demand in the foreseeable
future.
Competitors:
-Brands are well established in the
market.
-Distribution channels are limited.
-Scale economies.
Customers:
-Many customers and insignificant
purchasing volume.
Suppliers:
-Low bargaining power: there are a
large number of suppliers and they
Competitors:
-Competitors from China have low cost
of production.
-Internet is curtailing the entry barriers.
Consumers:
-Internet increases their bargaining
power.
-Unpredictable demand.
-Low switching costs
Suppliers:
-Importance of the supply chain in the
15
are small. Many of them depend on
big clothing companies.
Substitute products:
-Possibility of segmentation and of
taking advantage of niche markets.
fast-fashion industry.
Substitute products:
-Counterfeiting.
-Wide range of brands in the market.
-Short life cycle.
3. INTERNAL ANALYSIS
3.1. Innovation Value Chain
In 1985, Michael Porter described the concept of Value Chain as the amount of money
customers are willing to pay for what a company produce, so it is the combination of many
value added activities done within an organization what creates a competitive advantage
(Reddy, 2014, p.19).
The analysis of the Value Chain helps organizations to identify competitive advantages,
that is, factors that add more value to products. These factors may be found in primary
activities (inbound logistics, operations, outbound logistics, marketing and sales, service) or
in support activities (procurement, technological development, human resource management,
firm infrastructure) (Guerras and Navas, 2008, p.206). The aim of the Value Chain analysis is
to disassemble the value chain and to determine which activity creates value and which
activity does not add value and must be eliminated or changed as a consequence (Guerras et.
al., 2008, p.206).
The Innovation Value Chain is based on the idea designed by Porter (2008), but
instead of the process of transforming raw materials into finished products, this chine shows
the process of transforming ideas into new products as an integrated flow (Hansen and
Birkinshaw, 2007).
The first step in this chain is “idea generation” which consists of analysing how an
organization comes up with new ideas (Hansen et. al., 2007). However, generating a lot of
ideas is not enough, it is also necessary to implement those ideas, so the next step in the chain
is called “idea conversion”. If employees see their ideas do not get off the ground, they get
frustrated. Knowing how to screen the overflow of ideas is as important as generating them. It
is very important to know in which projects companies should invest money, time and effort;
otherwise, organizations are at risk of ending up with a lot of understaffed and underfunded
projects (Hansen et. al., 2007). “Idea diffusion” is the last step in the Innovation Value Chain
16
and it consists of spreading the new products or practices across geographic locations,
customers groups, employees and channels (Hansen et. al., 2007).
An organization must analyze the three steps of this chain and take into consideration
links between them. An organization may spend a lot of money, effort and time on developing
and diffusing mediocre ideas, which results in mediocre products and low returns. An
organization may have a competitive advantage in “idea conversion” and “idea diffusion”, but
a weakness in “idea generation”. Another organization may be very good at generating ideas
but it fails in getting them off the ground or in making them saleable, so it is “conversion-
poor” or “diffusion-poor” (Hansen et. al., 2007). Therefore, it is important to analyse the
Innovation Value Chain of an organization to know which competences add value to the “idea
generation”, “idea conversion” or “idea diffusion” steps.
3.2. Competences that add value
3.2.1. Developmental culture
Culture can be defined as the shared values and assumptions that determine how
things are done within an organization (Daft and Marcic, 2011, p.57). The culture of an
organization can foster or hinder creativity. The theory of Büschgens, Bausch and Balkin (2013,
p.768) called Competing Values Framework, helps to understand the characteristics that a
culture must have to promote innovation in an organization16
.
Büschgens et.al (2013, p.768) consider that the kind, of culture an organization can
adopt depends on two factors: their external or internal focus and the emphasis on flexibility
or control. Flexibility implies dynamism and adaptability to changes, whereas control makes
reference to stability and refusal to changes. The internal focus means that companies pay
attention to their procedures and human resources without taking into consideration the
external environment (Naranjo, Sanz and Jiménez, 2008, p.4). The external focus implies
attention towards customers, competitors and the external environment in general (Naranjo et.
al., 2008, p.4). The chart below shows four kinds of cultures according to these two factors.
16
This theory was developed originally by Quinn and Rohrbaugh (1983, cited in Büschgens, Bausch and Balkin,
2013, p.768).
17
Figure 3: Competing Values Framework
Source: adapted from Quinn and Roghrbaugh (1983); Quinn and Spreitzer (1991), cited in
Büschgens, Bauschand Balkin (2013), p.767.
Innovative strategies try to achieve the goals of growth and resource acquisition. An
external approach makes the retrieval of information possible (Büschgens et. al., 2013,
p.768)17
. That gives rise to the generation of ideas, the identification of opportunities and the
possibility of being updated with the latest technological advances (Büschgens et. al., 2013,
p.768). A flexible focus enables organizations to question the existing procedures and to
modify them according to the changing environment, so innovations can be easily
implemented (Büschgens et. al., 2013, p.768).
The study of the external environment has revealed that the apparel industry is in an
unstable market that changes continually and creates uncertainty. Büschgens et. al., (2013,
p.768) consider that companies need to be risk-takers in this kind of environment and they
must tolerate risk. For these authors, readiness and flexibility are two means that contribute to
the achieving of the two aforementioned goals (growth and resource acquisition). Conversely,
these authors are of the opinion that, companies who aim for stability and control are unlikely
to be innovative and creative. These kinds of companies adopt an internal and hierarchical
focus, they ignore environmental changes and refuse to modify their procedures (Büschgens
et. al., 2013, p.767).
That is why developmental cultures are highly likely to foster creativity, whereas
rational or hierarchical cultures inhibit it. In developmental cultures, it is essential to search
for ideas outside the organization in order to foster creativity. Customers, scientists,
17
Atuahene-Gima (1995) cited in Büschgens, Bausch, Balkin (2013, p.768).
18
universities, competitors or suppliers can give an organization a lot of information.
Conversely, if companies ignore their external environment, they are at risk of missing
opportunities (Hansen et. al., 2007, online). Companies adopting this culture promote changes
and take risks in order to seize the opportunities detected outside (Büschgens et. al., 2013,
p.768).
Robbins and Coulter (2012, p.168) point out the characteristics of a developmental
culture, which are the followings:
-Acceptance to ambiguity: objectivity and specificity hinder creativity.
-Tolerance to foolish or impractical ideas: each idea is welcome, no matter how
unfeasible it may seem. The most foolish ideas may become innovative products.
Organizations must implement informal ways of communication. Formal ways of
communication and bureaucracy deter employees from participating.
-Avoidance of control: rules and established procedures must be minimal.
-Tolerance to risk and tolerance to conflict: diversity of ideas must be encouraged.
-Focus on ends instead of means: it is important to communicate a compelling and
clear goal. The way employees meet that goals does not matter. Employees are
encouraged to find different ways to solve problems.
-Positive feedbacks: managers must give encouragement, support and attention to their
employees.
-Empowering leadership: managers must get the commitment of their employees by
encouraging them to participate in the decision-making process. They must make their
subordinates clear that their contribution is important. They must also delegate
responsibility in subordinates and trust in them.
Along with the aforementioned characteristics, Naranjo et. al., (2008, p.11) also
consider that freedom, autonomy, availability of resource, attention to customers and
emphasis on a continuous learning process are values of developmental cultures.
In order to get a developmental culture, a company must become a learning
organization. Garvin, Edmondson and Gino (2008) specify the characteristics of these
organizations where people are able to create, acquire and transfer knowledge. According to
19
these authors tolerance, open discussion and diversity of opinions enable an organization to
react to unpredictable changes.
Garvin et. al., (2008) consider that the first building block of a learning organization is
a supportive learning environment. These authors explain that this environment is
characterised by psychological safety, which means that employees are not afraid of being
belittled when they ask naive questions, have different points of view or make mistakes. On
the contrary, they must feel comfortable when they disagree or express their opinions.
Appreciation of differences and openness to new ideas are values considered
important in a learning organization too (Garvin et. al., 2008). Employees must see different
ideas as a way to improve and they must avoid conformism and drift and must be encouraged
to explore the unknown. Likewise, a pause for thinking and time for reflection is necessary,
since overstressed people, who are worried about deadlines, results or schedules, become less
creative. That is why a thoughtful analysis of problems and experiments improve the learning
process within organizations (Garvin et. al., 2008).
Büschgens et. al. (2013, pp.769-770) also explain why rational and hierarchical
cultures are unlikely to foster creativity and experimentation within an organization18
.
Rational cultures put emphasis on productivity and efficiency. They have an external focus,
but are reluctant to changes and risk because they prefer to follow strict rules and procedures.
Hierarchical cultures prefer stability and control to ambiguity and change, so adherence to
rules and procedures is very important. Moreover, in this kind of culture information
gathering is limited and, more often than not, the external environment is ignored. Naranjo et.
al., (2008, p.12) explain that these kinds of cultures are characterised by the centralization of
the decision-making process, so initiative and participation are hindered.
The culture of an organization is determined by their mission and goals. Heckelman,
Garofano and Unger (2013, pp.31-32) say culture and goals must be adopted at three levels:
organizational, team and individual. However, it must not be seen as a top-down process,
culture must be created by taking into consideration inputs from all levels, so everybody
shared and accept the same vision for an organization (Heckelman et. al., 2013, pp.31-32).
Therefore, goals can be defined as the aggregation of the intentions of all the people working
in an organization in order to attain a specific state (Arad, Hanson, Schneider, 1997, p.49).
18
Theory developed by Quinn and Rohrbaugh (1983), cited in Büschgens, Bausch and Balkin (2013, pp.769-
770).
20
Sattayaraksa and Boon-itt (2016, p.742) state that learning cultures make the “idea
implementation and diffusion” stage more effective. An open focus enables the organization
to gain key information from customers and markets. Then, that information is interpreted by
members from different departments in such a way that the decision-making process, about
which ideas should be developed and which ones should be rejected, is more effective. In
conclusion, organizational learning helps organizations to gather, share and make use of
useful information to create new and marketable products.
3.2.2. Transformational leadership
Traditionally two models of leadership have been defined: transactional leadership and
transformational leadership. The first model is defined by Howell and Avolio (1993, p.891) as
a relationship between leaders and followers based on exchanges and bargains. Leaders
explain what is required to followers in exchange of compensation (Bass, 1990, pp.19-20).
Followers‟ work is monitored to avoid mistakes, and they are given rewards or recognition
when they achieve specific objectives (Howell et. al., 1993, p.891). Leaders can also wait
until the task is accomplished and check if there are mistakes and then, they make employees
aware of them (Howell et. al., 1993, p.891). If employees have done a good job, they are
given pay rises, promotions or appraisal, but if they have not met the requirements they are
penalized (Bass, 1990, p.20).
On the contrary, transformational leadership consists of inspiring and motivating
employees, that is to say, managers communicate values and beliefs to subordinates (Bass,
1990, p.21 and Yildiz, Basturk and Boz, 2014, p.787). Leaders also put emphasis on long-
term goals, they make followers aware of the organizational mission and they get the
employees‟ interest and commitment in achieving organizational vision (Bass, 1990, p.21 and
Yildiz et. al., 2014, p.787). At the same time, leaders make employees understand that their
contributions to achieve organization‟s goals are very important (Yildiz, et. al., 2014, p.786).
Bass (1990, p.22) analyses the characteristics of transformational leadership. Charisma
is one of them and it means that employees want to identify with leaders because leaders have
gained their respect and trust. Transformational leaders are also inspirational, since they
communicate high expectations and instil the vision of the company in all employees. Leaders
also stimulate followers by teaching them how to solve problems, how to think creatively and
how approach a problem from different perspectives. Finally, leaders pay attention to the
21
needs of each employee; they are like mentors and give advices to them and help them to
satisfy those needs.
Transactional leadership is associated with extrinsic motivation (rewards, pay rises,
promotions, bonus etc.), whereas transformational leadership is related to intrinsic motivation
(self-achievement, commitment, responsibility, freedom to make decision etc.). Amabile
(1988, p. 131) considers that intrinsic motivation foster creativity skills. Individual creativity
skills consist of understanding complexities and breaking mental set when solving problems
(Amabile, 1988, p.131). Leadership plays an important role in the development of these kinds
of skills, for example freedom gives employees the opportunity to decide what to do and how
to accomplish the task, so they can control their own work and they are not constrained by
rules or rigid supervision (Amabile, 1988, p.147).
However, lack of control may create disorientation and chaos, so a balance must be
stricken. Managers must set and communicate an overall mission in such a way that
everybody, within an organization, can direct their efforts towards the same aim. At the same
time, freedom must be given in the day-to-day work, so specific task must not be determined
by tight rules or procedures (Amabile, 1988, p.149).
Krause, Gebert and Kearney (2007, pp.17-18) analyse two styles of leadership:
delegative-participative leadership and consultative-advisory leadership. Delegative-
participative leadership consists of giving subordinates discretionary authority, in other
words, they are given freedom to decide how to do their task. This lack of control and
attribution of responsibility increases intrinsic motivation and employees are more committed
to the organization. Consultative-advisory leadership consists of giving advices and guidance
to subordinates, so prerequisites and procedures to do the task are set by leaders (Krause et.
al., 2007, pp.17-18).
Delegative-participative leadership fosters creativity, since employees are given
responsibility and freedom to experiment and take risk without constraints. However, this
freedom may be counterproductive because it can lead to misinterpretations and lack of
coordination. Consultative-advisory leadership compensates the disadvantages of delegative-
participative leadership, since guidance and advice reduce ambiguity, increase coordination
and facilitate the acceptance of goals and plans by everybody. Nevertheless, this style of
leadership may hinder creativity and reduce motivation because employees may feel they are
subject to control and patronizing attitudes towards them (Krause et. al., 2007, pp.17-18).
22
Therefore, during the “idea generation” process delegative-participative leadership should
take precedence, whereas consultative-advisory leadership should be implemented during the
“idea conversion” process.
3.2.3. Organic structure
Structure can be defined as the way managers coordinate, supervise and divide work
(Boddy, 2014, p.308). Burns and Stalker (1961, pp.119-122) distinguish two different
structures, the organic and the mechanistic. Mechanistic organizations are hierarchical.
Moreover, tasks are divided into specialized roles, and information and knowledge is retained
at the top levels of the organization. Subordinates depend on superordinates and they are
unable to make decisions or to take initiatives.
Conversely, organic structures are not hierarchical; they are a network where
information flows from one part of the organization to another. Information and knowledge
are shared by all members of the organization. Roles are not tightly defined, they are flexible
and workers assume responsibility and they can make decisions and take initiatives (Burns et.
al., 1961, pp.119-122).
Although organic structures are not hierarchical, they are stratified, which means that
positions are differentiated according to the level of expertise, knowledge or information that
a person have about the problem to solve (Burns et. al., 1962, p.122). Therefore, authority is
given to the person who is more capable and informed and this authority is given by
consensus (Burns et. al., 1961, p.122). The span of control, which determines the number of
employees each superior manages, must be large in order to: foster creativity, increase
flexibility, speed up the decision-making process, reduce costs and bring the organization
closer to customers (Robbins et. al., 2012, p.272). The larger the span of control the lower is
the number of hierarchical levels. In this way, employees are given more responsibilities and
freedom (Robbins et. al., 2012, p.272).
In organic structures decision-making process is decentralized. Decentralization means
that authority to makes decisions is pushed downward to lower levels of organizations (Daft,
2010b, p.250). Mechanistic structures are centralized, that is to say, decision are made at the
top of the organization (Daft, 2010b, p.250).
Donaldson (2001, p.37) explain that mechanistic structures are adequate when there is
a low rate of technological and market change, since managers at the top level have enough
23
information to define subordinates‟ roles.19
On the contrary, when there is a high rate of
technological and market change, managers have not enough knowledge and information, so
they must rely on subordinates, who are in touch with the market and have all the information
that is needed to make right decisions. That is why, organic structures consists of delegating
responsibility and power to make decision.
Robbins et. al. (2012, pp.166-167) are also of the opinion that organic structures foster
innovation and creativity, since they are low in formalization, centralization and task
specialization, which increase flexibility and the sharing of ideas. These authors also consider
that the availability of resources to develop ideas is essential as well as open channels of
communication between different departments.
Burns et. al., (1961, p.119-125) and Ronda (2001, p.4) point out the differences
between organic and mechanistic organizations.
Mechanistic organizations Organic organizations
Tightly defined functional tasks Individual tasks are continually redefined
through interaction with others.
Rigid chain of command. Working behaviour
and operations determined by rules and
orders.
Little emphasis on chain of command.
Delegation.
Functional division of work Divisional division of work
Vertical communication Lateral communication
Loyalty and obedience to the superiors.
Decision-making at the top of the
organization.
Employee commitment. All members of the
organizations take part in the decision-
making process
Communication based on instructions and
orders.
Communication based on advices,
information and knowledge.
Within an organization different models can exist, since one department can have a
mechanic structure (production department for example), and other departments an organic
structure (design department) (Rozman, 2015, p.45). Likewise, companies may develop
different models depending on the circumstances. March (1991, p.71) introduces two new
concepts in the innovation process, which are: exploitation and exploration.
19
This idea is also explained by Burns and Stalker (1961), cited in Donaldson (2001, p.37).
24
Exploration involves search, risk-taking, flexibility, creativity, experimentation,
diversity etc. Exploitation consists of selecting ideas and implementing those ideas efficiently
to produce and sell new products (March, 1991, p.71). Organizational ambidexterity consists
of striking a balance between these two activities in such a way that an organization can excel
at both of them despite having limited resources (Popadić, Černe and Milohnić, 2015, p.114).
Managers must differentiate exploratory units from exploitative units and give them different
structures, cultures and processes. A senior team ensures that all these units are linked and
their actions are coordinated (O‟Reilly III and Tushman, 2004).
The exploration level requires organic structures, whereas mechanistic structures are
applied in the exploitation level. During the exploration process, employees work in teams
and the structure is less formal and flexible to foster creativity. Conversely, when ideas have
to be implemented a hierarchical model is more suitable for the execution of these ideas
(Rozman, 2015, p. 45). Spender and Kessler (1995, p.47) divide the course of the innovation
project into three phases. These authors state that organic structures predominate during the
initiation and execution of a project, whereas the mechanistic model is more intense during
the implementation phase (see figure 4).
Figure 4: Organizational structures in each phase of the innovation process
Source: Spender and Kessler (1995, p.47)
Departmentalization is another important characteristic of organizational structures. It
consists of grouping employees into departments and departments into the total organization
(Daft, 2010b, p. 250). Daft (2010b, p.252) states that a functional approach hinders creativity,
since each department have employees who have similar skills or who do the same task or use
the same resources. Therefore, the communication across functional departments is poor, the
25
response to external changes is slow, decisions are concentrated at the top of the organization
and delays are created (Daft, 2010b, p.252). However, this kind of departmentalization makes
it possible: an efficient use of resources, scale economies, skill specialization, coordination
and control (Daft, 2010b, p.252).
Divisional departmentalization consists of grouping people not by similar skills, but by
the outputs they make (product, geographical areas, customer needs...). In this way, there are:
a good coordination across functional departments, more concern about costumer needs and
more flexibility and quickness to respond to changes (Daft, 2010b, p. 258). However, there
are: poor communication between divisional departments, duplication of resources and less
specialization (Daft, 2010b, p.258).
Robbins et. al. (2012, p.292) think that innovative organizations require other kinds of
structures, which are more suitable for learning organizations. These authors affirm that
learning organizations are those who are able to learn, adapt and change. That is why learning
organizations must enable flow of information between different departments and at different
levels. Physical barriers must be eliminated, so workers from different functional specialities
can learn from each other and communicate their ideas to solve problems.
Cross-functional team structures complement divisional and functional
departmentalization (Daft, 2010b, p.289). It consists of breaking vertical structures (Daft,
2010b, p.289). Teams are group of people from different functional areas who work together
(Daft, 2010b, p. 289). This horizontal structure leads to coordination between different
departments, but it also leads to duplication of services. Therefore, shared services need to be
in place in order to get scale economies (Hodgetts, 1996, p.78).
Katzenbach and Smith (1993, p.3) explain that cross-functional teams must have no
more than 25 people and members of the team must have complementary skills
(technical/functional knowledge, skills at making decisions or solving problems and skills at
interpersonal communication). Managers must empower these teams by giving them a
common purpose and by eliminating the line of authority from top to bottom, so decisions can
be made quickly (Robbins and Coulter, 2010, p.289). In this way, members will learn from
each other, they will participate in one another‟s achievement and they will hold themselves
mutually accountable (Katzenbach et. al., 1993, p.3). Moreover, moving the decision-making
downwards enables organizations to be closer to their customers and react quickly to changes
in the environment (Hodgetts, 1996, p.78).
26
A matrix-project structure consists of grouping people from different functional
departments in order to work in a specific project (Robbins et. al., 2012, p.289). This structure
is more complex, since there are two lines of command (workers report to the leader of the
functional department and to the leader of the project), but companies can respond to changes
quickly (Daft, 2010b, p.258).
Robbins et. al. (2010, p.291) define another type of contemporary organization, which
is the boundaryless organization. This organization consists of eliminating vertical (levels of
hierarchy), horizontal (departments) and external (customers, suppliers...) barriers. For these
authors, there are two types of boundaryless organizations: virtual organizations and network
organizations.
Network structures are those which are in charge of some activities and receive the
rest of products from a network of suppliers (Robbins et. al., 2010, p.291). They can have
many advantages, since companies save overall costs, inventory costs and avoid idle capacity
(Dess, Rasheed, McLaughlin and Priem, 1995, p.8). At the same time, companies can focus
their attention and resources on areas where they excel at and they can take advantage of
suppliers‟ specialization and competitive advantages (Dess et. al., 1995, p.8). However, these
structures have also disadvantages, since companies lose control and employee‟s loyalty
(Daft, 2010b, p.258).
Unlike network structures, virtual structures are made up of a group of companies who
decide to joint in an alliance to perform complementary activities and attain a common goal
and when that goal is achieved, the alliance disappear (Dess, et. al., 1995, p.10). Virtual
structures enable the sharing of costs and permit companies to penetrate in new markets. This
structure can also put together the competitive advantage of many companies. However,
virtual structures give rise to confusion and lack of control (Dess, et. al., 1995, p.11).
3.2.4 Good evaluation process:
Ideas must be developed to make new products, but organizations have limited
resources, time and efforts, so not all of the ideas can become products. That is why it is so
important to design a process that enables organizations to spot those ideas that can become
profitable products in the market. Cooper and Kleinschmidt (2007, pp.57-63) point out the
following factors that ensure a successful product development.
27
A technical and market assessment is essential before moving into the implementation
stage. Therefore, it is necessary to analyse costumer requirements, niche markets,
organization‟s capacities, risks, timing and resources.
A product definition is also necessary in such a way that its market target, benefits,
features and positioning can be determined. Defining the product will help
organizations to know which products they are capable of putting in place and which
ones they are not.
Designing of funnelling process with review points in order to compare the project
with criteria, so the most profitable projects move on the next phase.
A defined new product strategy for the business unit: objectives in terms of sales or
profits must be set and these objectives must be communicated to all members of the
organization, so everybody can conduct their efforts toward the same direction.
Bounds must also be defined (types of markets, products or technologies on which the
business unit is going to focus its attention). If bounds are not specified, business units
are at risk of ending up with a portfolio of unrelated and unprofitable products.
A long term orientation
Adequate resources: the characteristics of the project must match with the skills and
background of the people assigned to it. An adequate amount of resources (time,
money and people) must also nurture the project, otherwise the project will fail.
Resources are limited in organizations, therefore it is important to select those projects
which are highly likely to contribute to the achievement of organizational goals.
To sum up, the planning implementation phase requires three elements: information,
resources and support (Kanter, 1983). Resources are limited, so organizations must avoid
duplications and foster alliances with other companies in order to share costs (Kanter, 1983).
Once organizations have got information, resources and support, they need to check if the
new product fits into their mission and if it is possible and feasible to develop that product, in
other words, if the company has the capacities to turn an idea into a reality20
.
28
3.3. Strengths and weaknesses: Innovation Value Chain in the fashion
industry.
Source: Produced by the author
This figure shows the Innovation Value Chain of the fashion industry. It is made up of
primary activities (inbound logistic, design, production, outbound logistic, marketing, sales
and services). The support activities are: culture, leadership, structure and evaluation process.
20 This idea is developed by Kanter (1983) cited in Institute of Leadership and Institute of Leadership and
Management (2013), “Managing Creativity and Innovation in the Workplace”, 5th edition, Burlington Super
Series, Pergamon Flexible Learning Elsevier available from http://0-
proquestcombo.safaribooksonline.com.avalos.ujaen.es/book/management/9780080464411 accessed 15 April
2017.
INBOUND
LOGISTICS
DESIGN PRODUCTION OUTBOUND
LOGISTICS
MARKETING
AND SALES
SERVICES
-Developmental culture.
-Transformational
leadership/Delegative
participative leadership
- Organic and cross-
functional team
structure.
-Rational culture
-Consultative-
advisory leadership.
-Mechanistic and
functional structure
Evaluation process.
-Developmental
culture.
-Transformational
leadership/Delegative
participative
leadership
- Organic and
boundaryless
strucure.
Culture
Leadership
Structure
IDEA
GENERATION
IDEA
CONVERSION
IDEA
DIFFUSION
Evaluation process
29
In the fashion industry the “idea generation” stage starts in design activities. The “idea
conversion” phase is present, as a link, between design activities and production activities.
Fashion companies screen out the overflow of ideas that come from designers in order to
decide which ideas are going to turn into garments. Finally, “Idea diffusion” stage is present
in marketing and sales activities.
Each primary activity is supported by a different kind of culture, leadership style and
organizational structure. These support activities make it possible the development of
innovative products. Links between each phase and each primary activity also add value, for
example, the link between design activities and production activities is represented by a good
evaluation process. If organizations have enough information they can easily detect which
ideas are going to become saleable products and which ones must be rejected. After deciding
which idea is worth implementing, enough resources and support are necessary to develop
them.
The Innovation Value Chain also shows the strengths that enable organizations to have
a competitive advantage. For example, a company who is able to develop a developmental
culture, a transformational leadership and an organic and cross-functional team structure in
the “idea generation” stage is highly likely to be more innovative than their competitors. On
the contrary, having a hierarchical structure, rational culture and transactional leadership
constitute a weakness. Likewise, being incapable of knowing which ideas worth the effort,
time and investment, makes a company weak in comparison to their competitors.
4. STRATEGIES FOR INNOVATION IN THE FASHION INDUSTRY
4.1. The example of Inditex
1. Developmental culture:
Inditex have adopted an open approach, since information is the most valuable resource
for this company. The coordinators of Inditex in the USA explain that it is essential to know
what is fashionable and what is not. However, it is also important to take risks and try new
and revolutionary ideas. For these coordinators the most important thing is to listen to
customers. That is why salespeople go into the street and watch what people wear and which
kind of garments are exposed in shop windows (Serra and Ruiz, 2011). Ghemawat and Nueno
(2003, p.22), argue that Inditex‟s competitors try to predict 12 months ahead what customers
30
will want in the future, however, Inditex look at what customers want right now and produce
it in less than 4 weeks.
The manager of Inditex shop in Tokyo says that Tokyo is the world capital of fashion
trends, where fashion is born. Salespeople of Inditex stroll through the streets of Tokyo and
spot the fashion styles. In that way, Inditex can forecast demand and tastes before their
competitors have done. There are also salespeople in catwalks, fashion shows and designers
have plenty of magazines, cartoons, even garments from street markets on their desks. After
gathering such amount of information, designers and salespeople mix all that information and
they get ideas (Serra et. al., 2011, online).
A designer of Inditex explains that,
“We get our ideas from books, magazines, twitter and blogs but above all from feedback
from our shops. Our customers tell us what they like and don’t like. We attend shows and
talks about fashion to get ideas. It is a continuous process”21
.
Moreover, when the working day has finished, workers in the shop check which garments
remain unsold and which ones have been bought quickly. That information gives an idea of
what the company must produce and what they must not. In shops, sales assistants look at
what customers buy, at what they comment on clothes and at what they wear (Serra et. al.,
2011).
Inditex have understood that quality for their customers is defined by the design or look
rather than by the quality of the construction. These garments have a short life as they will be
changed by others when fashion changes (Boddy, 2014, p.585). Costumers buy at Inditex
shops because they want to buy cheap and fashionable clothes in luxurious places rather than
buying it in street markets (López, 2008, p.17).
Inditex also adopt a flexible approach thanks to the flow of information. Production
centres wait for information from shops. The Just in Time system enables Inditex to adapt
their production to what customers demand. Every decision depends on information from
shops, since sales assistants are closer to costumers and they have the best information to
make decisions (Serra et. al., 2011). Inditex provide their shops according to what shops‟
21
That statement is said by Loreto Garcia, a designer of Inditex, who is interviewed by Destination Innovation.
Destination innovation (2017), Innovation lessons from fashion leader Zara, available from
http://www.destination-innovation.com/innovation-lessons-from-fashion-leader-Inditex/ accessed 15 April 2017
31
sales assistant want. It does not matter if the order is in the planned product line or it is not,
product lines change continuously according to what clients demand (López, 2008, p.15).
Moreover, Inditex are not afraid of making wrong decisions or taking risks. If they
produce a garment that do not sell very well in the market, loses are insignificant, since they
produce small batches of every garment (Serra et. al., 2011). This strategy helps the company
to attract customers, since people know that clothes will be renewed every week in Inditex
shops, so they visit shops frequently (customers visit, on average, 4 times a year others
competitors shops and 17 times a year Inditex shops) (López, 2008, p.15-16). In addition,
thanks to the constant renewal of clothes, customers are sure that there will not be a lot of
people wearing the same garment they have bought.
A salesman of Inditex in Middle East says that most of their garments are global and
are sold in all five continents, which makes it possible to get great economies of scale. Inditex
designers make very few adaptations for local markets (Serra et. al., 2011)22
. Not only
garments adapt to local markets, but also the way of selling is customized. For example, in the
Middle East shops are closed 5 times a day and the music is turned down in time of prayer
(Serra et. al., 2011).
This company is a good example of learning organization. Employees are trained
before working in the shop. They are taught how they must treat customers. For example,
when customers enter the shop workers must smile and look at customer‟s eyes, in the cashier
area they must facilitate contact with the clients etc. (Serra et. al., 2011). There are also
opportunities to go up the ladders, since store managers are chosen from trained sales
assistants (Serra et. al., 2011).
2. Delegative-participative and transformational leadership:
Employees in Inditex say that they work to change the world of fashion and to bring
fashion closer to customers (López, 2008). That ambitious mission makes Inditex‟s
employees feel proud and important. Leaders make it clear to their employees that they take
part in a successful team and that each member is valuable and must contribute with their
ideas and efforts to the company‟s success (López, 2008). At the same time, leaders
encourage workers to be independent and to make their own decisions.
22
Destination Innovation, Innovation lessons from fashion leader.
32
Inditex motivate their employees through internal promotion. High positions in the
company are assigned to people who have been sales assistant in the shop and who have
developed the ability to know what customers want. Employees are trained continuously, for
example, in 2014, more than 95% of employees took part in formation programs designed by
Inditex and other official institution. As for the selection and recruitment process, Inditex
keep in touch with universities and Design Schools to get the best students. Moreover, Inditex
take part in the design contest Talento & Co and they recruit the best participants and
contribute to the training and education of others23
. In fact, Inditex have got the first position
in the ranking that shows the 100 best companies at getting and retaining talent24
Peña-Acuña (2017, p.124) states that Inditex have a very good ascendant internal
communication, so when workers have any doubt, problem or necessity, they communicate it
to the person on whom the decision depends. Information flows quickly thanks to the flat
structure, so employees can receive feedbacks or communicate important information very
quickly. This fast information system is possible because store staff use wireless devices to
communicate with Spanish Head Quarters in Arteixo25
. Moreover, at the end of the day store
managers give feedbacks to the store staff about what they have down well and what they
have down wrong (Serra et. al., 2011)
Inditex leadership style is also characterised by delegation of decisions and empowerment
of employees. For example, designers are empowered to make quick decisions; they do not
have to ask for permission to senior managers26
. The store managers act as businessmen or
businesswomen, since they decide everything about how to manage their stores. They decide
who is going to be a member of their store staff and they choose the kind and quantity of
garments they will sell in their shops (Serra et. al., 2011). They have direct contact with the
managing director, so problems that may arise, are solved quickly (Serra et. al., 2011).
Therefore, each store manager is invested with great responsibility and the success of the shop
depends on them. Inditex trust in them and support them, so they are motivated and feel
responsible for the success of the organization.
23
Inditex, Annual report 2015, available from: http://static.inditex.com/annual_report_2015/en/our-
priorities/developing-everybodys-talent/employee-development-and-growth.php , accessed 20 April 2017. 24
Merco Report (2016), merco talento, ranking empresa, available from http://merco.info/es/ranking-merco-
talento?edicion=2016 , accessed 21 April 2017. 25
Destination Innovation, Innovation lessons from fashion leader. 26
Destination Innovation, Innovation lessons from fashion leader
33
In each country, Inditex have decided that each subsidiary is led by a manager from the
country in such a way that products can be adapted to local cultures. Managers from each
subsidiary meet every three months in order to coordinate their actions (Del Río and Varela,
2000, p.354). In this way, Inditex get coordination at the same time that they focus on local
demand.
3. Flat and decentralised structure:
Inditex adopt different structures depending on the stage of the production process.
Designing activities have organic structures, whereas production activities have mechanistic
structures.
Designers are organized in teams. Inditex design department consists of 350 people and
they come up with 18000 new product designs a year, that is, 360 a week and 70 every
working day27
. Designers, salespeople and market researchers are in the same room, so they
can easily communicate with each other and ask for opinions about how the different
garments could success in the market. In fact, designers require the favourable opinion of
salespeople to produce a new garment. The reason is that salespeople know customer tastes
better than designers do. Once designers have received positive feedback of salespeople, they
can give the production order without consulting senior managers (Serra et. al., 2011). In that
way, Inditex have developed a good evaluation process by screening out those ideas which
are more likely to become successful products.
Once the production order has been given, different functional departments start making
garments. The production process is shown below:
27
Destination Innovation (2017) Innovation lessons from fashion leader.
34
Figure 5: Production process in Inditex.
Source: Produced by the author on the basis of the information provided by Ferdows, Lewis
and Machuca (2004, p.108), Inditex web, Boyer and Verma (2010, p.453) and Ferdows,
Lewis and Machuca (2003, p.64).
Inditex have a flat and organic structure so the information can flow quickly. Moreover,
Inditex adopt a bottom-up strategy, since most of information is given by employees and
received by managers. The organization chart below shows the basic structure of Inditex.
Stores all over the world place their
orders. The centralized
production centre in La Coruña receives
these orders.
Design area: this area is made up of teams of designers, market researches
and salespeople
Sample making
room
Marcada area:Once garments have been
designed, the marcada area try to make the
most of a piece of fabric. They use
computer programs in order to know how
they must cut garments to avoid
waste of fabric.
Dying and cutting areaa. Inditex use the same
fabric for several kinds of garments and dye the
fabric. In that way, Inditex save time
(shorter setup times) and costs.
Sewing area. 50% of clothes are made in Spain, the simplest
products are outsourced.
Ironing areaPackaging and labelling area. Quality control
test.
35
Figure 6: Organizational chart of Inditex, taking Zara as an example.
Source: Prepared by the author on the basis of the information provided by Serra et. al.,
(2011) and Inditex website.
4. Strenghts and weaknesses:
The chart below intends to summarize the most important weaknesses and strengths of
Inditex. Each strength is linked to one opportunity, since Inditex have tried to take advantage
of all opportunities in the market. However, this company have weaknesses too; many of
them are the result of threats in the market.
Strenghts :
1. Inditex offer what customers
want. Fashionable clothes at
reasonable prices. Inditex
have combated unpredictable
and ever-changing demand
thanks to a flat structure, a
participative leadership and a
developmental culture.
2. Quick decision-making
process. Cost efficiently
vertical integration and rapid
supply chain.
3. Inditex have expanded into
developing countries and they
have adapted garments to new
tastes by recruiting managers
from those countries.
4. Inditex have developed a good
corporate social responsibility
Weaknesses:
1. Overdependence of European
markets.
2. Weak online presence and lack of
advertising.
3. Bad news about Inditex spread
quickly (child labour in their offshore
production sites, bad quality of their
garments, small sizes etc.).
4. Strategy can be easily copied by their
competitors.
Chairman and CEO of Inditex : PABLO ISLA
Design teams, researchers team, production etc.
Managing director of Zara: Oscar
Pérez
Country managers of
Zara
Store managers
Employees
Support departments
36
code: donations, control of
child labour etc.
Opportunities:
1. Inditex have taken advantage
of middle class expansion and
of economic crisis.
2. Inditex have taken advantage
of technological advances
which enable Just in Time
system, instant
communication etc.
3. Inditex have taken advantage
of globalization: outsourcing
and stores all over the world.
Moreover, Inditex have taken
advantage of increase of
demand in developing
countries.
4. Inditex try to attract customers
with environmentally friendly
attitudes.
Threats:
1. Demand will increase in Asian and
other developing countries.
2. Online channels are used by many
competitors and customers.
3. Opinions and information spread
quickly through Internet.
4. Fierce competition. The strategy of
Inditex is being copied by their
competitors.
5. The strategy of Inditex:
Inditex is the perfect example of innovative organization thanks to their strategy. In fact, if
some factors are taking into consideration such as, their revenues, number of shops and
countries where they are present, Inditex are the most important company in the Spanish
fashion industry (see figure 5). That is why the organizational characteristics of Inditex have
been analysed as a prototype, and they will be compared with their competitors‟. It is
interesting to know why other fashion companies, such as Cortefiel group, have not achieved
the success of Inditex.
37
Figure 7: The biggest fashion companies in Spain are arranged according to their revenues,
the number of shops and the number of countries where they are present.
Source: modaes.es (2013)
As we have seen in Inditex‟s culture and leadership style, this company follow a
strategy oriented towards customers. Customers are the most important thing for the
organization. Inditex produced what customers want and this company has the ability to do it
quicker than their competitors do. This organization tries to eliminate any hassle for
customers. Every detail is taking into consideration in order to facilitate shopping. For
example in their shops every garment is arranged according to colours and styles, so people
know which pieces of clothing make a good combination (Serra et. al., 2011). Another
example is the absence of pins in shirts. Pins have been replaced with plastic (Serra et. al.,
2011)
The strategy of Inditex (with the exception of Uterqüe) consists of offering fashionable
clothes at reasonable prices, so middle class can buy their garments. Traditionally, fashion
companies, such as Chanel, Dior, Gucci and Armani followed a differentiation strategy, since
they sold the most fashionable clothes, but at higher prices, so not everybody could afford it.
In 2000s these luxury designers were put under pressure, since Inditex could overcome entry
barriers by developing an innovative strategy (Hill and Jones, 2012, p.179). Inditex could
lower prices, offer fashionable clothes and reduce time to market by making use of, IT,
innovative information and materials management systems (Hill et. al., 2012, p.179).
Whereas their competitors could take 6 or more months to design their clothes and 3-6 to
make them available in markets, Inditex only take 5 weeks to design a new collection and 1
38
week to make it available in their shops (Hill et. al., 2012, p.179). This strategy has made
Inditex successful, since in the rapidly changing fashion market, where customers‟ tastes
change quickly, a flexible and open approach makes it all the difference (Hill et al., 2012,
p.179).
Inditex have developed a cost leadership strategy by incorporating the latest
information, materials, management and manufacturing technology into their operations and,
in doing so, they have reduced costs and increased responsiveness to customers (Hill et. al.,
2012, p.178). In other words, they have aligned their strategy with changing environmental
opportunities and threats (Hill et. al., 2012, p.178).
Inditex has developed a strategy that enables them to take advantage of environmental
opportunities by exploiting their strengths. At the same time, this company have faced up
threats by correcting their weaknesses.
4.2. Differences between Inditex and their competitors
4.2.1. H&M
1. Developmental-Rational culture and transactional leadership:
Persson (2014, p.2), the CEO of H&M, says that their values are: trust in people,
teamwork, entrepreneurial spirit, cost consciousness, openness, simplicity, striving for
constant improvements and diversity (people from different backgrounds and nationalities).
The H&M web emphasizes that they are a team and they stand up for one another. As it can
be seen the culture of H&M is quite similar to the Inditex‟s one. However, Inditex„s culture is
much more open and flexible, since they based their designs on what they have seen in the
street. Conversely, H&M pay less attention to what people are wearing at the moment and
give more importance to cost-saving strategies. The H&M‟s culture is between a
developmental culture and a rational culture.
H&M leadership style is based on inspiration, delegation, feedback and motivation.
Leaders are role models who lead by examples and they delegate great responsibility on
workers. The open door policy enables employees to discuss any problem with managers.
Moreover, H&M have a creative, fun and dynamic workplace (Persson, 2014, p.6-7).
Employees are motivated thanks to the internal recruitment and work rotation. H&M
consider that people are the most important value, so they invest in the future by taking care
39
of people. The incentive program of H&M consists of sharing the benefits of the company
with their employees. The longer an employee has worked in the company, the more they will
receive. Moreover, employees are entitled to receive a payout when they are 62 years old and
when they have stayed more than ten years working at H&M (Persson, 2014, p.11). H&M
base their motivation program on extrinsic incentives (economic compensations), whereas
Inditex prefer to motivate their employee intrinsically. That is why, H&M‟s leadership style is
a mixture between transactional and transformational leadership.
2. Matrix structure:
The organizational structure of H&M is different from Inditex‟s one. H&M has a
matrix structure. The Spanish boss of H&M coordinates all H&M shops in Spain and the
production boss coordinates the manufacturing of garments all over the world. Therefore,
store managers of H&M in Spain report to two superiors, both the country boss and the
functional department boss (Daft, 2010b, p.255).
This structure enables H&M to achieve economies of scale. Moreover, coordination
across departments is possible thanks to the horizontal structure. As a consequence, expertise
is available to all departments and flexibility is ensured (Daft, 2010b, p.255). However, two
chains of command mean confusion and the need for negotiation. A lot of departments must
come to an agreement, which implies many meetings and discussions, so it takes longer for
managers to reach a decision (Daft, 2010b, p.258).
Figure 8: Organizational chart of H&M group
Accounting Expansion Human
Resources
Sustainability IT Legal Comunication Production Logistics
Spain
H&M
Spain
Weekday
China
H&M
Source: Prepared by the author based on the information supplied by H&M website.
40
3. Differences between the strategy of H&M and the strategy of Inditex:
As it has been seen, H&M and Inditex have similar cultures and leadership styles,
however what make them different are their structure and their supply chain. While Inditex
produce more than 50% of their garments in Europe, H&M imports them from Asia
(Villaécija, 2017). Moreover, H&M do not have factories; all garments are made by their 800
suppliers (Villaécija, 2017). Consequently, H&M have less control of their supply chain,
what makes it more difficult to take actions quickly.
On the contrary, Inditex produce the basic garments (40% of their production), that is to
say, clothes that never become unfashionable, in Asian countries, whereas new designs and
fashionable clothes (60% of their total production) are produced in their closest factories, so
actions can be taken quickly when costumers‟ tastes change (Villaécija, 2017). Vertical
integration and the proximity of their factories make Inditex more flexible than H&M. H&M
forecast demand several months ahead, while Inditex produce what customers want when
they want.
H&M strategy is based on offering “fashion and quality at the best price” (Persson,
2014, p.2). Therefore, H&M and Inditex have a similar cost-leadership strategy, but Inditex
clothes are considered more expensive, of better quality and more fashionable than H&M
clothes. Their internationalization strategies are different. Inditex are expanding into South-
East Asia through joint-ventures with local companies. Then, when they know the market,
they buy the local company‟s participation and start opening shops of different brands in the
country quickly. On the contrary, H&M expansion is slower and more concentrated on their
main brand. In that way, whereas Inditex have 5527 shops, H&M only have 247228
.
H&M attract their customers through advertising campaigns and occasional
collections designed by well-known designers, such as Versace. Inditex do not collaborate
with other companies and they do not use advertising, they prefer to invest on the location and
image of their shops29
.
28
Eleconomista (2012), Lo que hace la diferencia entre Inditex y H&M, available from
http://eleconomista.com.mx/industria-global/2012/04/04/zara, accessed 20 April 2017. 29
Eleconomista, Lo que hace la diferencia.
41
4.2.2 Cortefiel group
1. Developmental culture:
The mission of Cortefiel consists of being an international leader in the fashion
industry who is oriented towards their customers, their employees and the overall society. The
values that support that mission are: personal and professional development of the employees,
constant improvement, respect, trust and diversity30
. Cortefiel group encourage employees to
participate and to give their opinions. However, the participation system of Cortefiel is more
formal and bureaucratic than the Inditex‟s one. Moreover, Inditex keep in touch with much
more institutions (universities, designs schools) and associations than Cortefiel.
2. Consultative-advisory and transactional leadership:
Employees work in multidisciplinary teams. Each team is made up of people with
different backgrounds, age, skills or cultures (employees from 24 different nationalities work
at Cortefiel group). Employees are given promotions and they are continually trained.
However, employees seem to be less satisfied in Cortefiel than in Inditex, since Cortefiel do
not appear in the ranking about the best companies to work. Conversely, Inditex occupy the
first position in this ranking. Moreover, Inditex encourage employees to participate without
following an established procedure, whereas Cortefiel let their employees participate through
intranet and other formal channels of communication31
. Therefore, Cortefiel group have a
consultative-advisory leadership, while Inditex implement a delegative-participative style.
The incentive program of Cortefiel group is based basically on productivity and
performance. This company can control through an online platform the productivity of each
employee and of each shop. Then, salaries are adapted to the results shown at this platform32
.
Cortefiel‟s incentive system is based basically on extrinsic motivation. That is why Cortefiel
have a transactional leadership. On the contrary, Inditex focus their attention on intrinsic
motivation (internal promotions, personal achievements, more responsibility and freedom to
make decisions etc.). 30
Grupocortefiel (2012), Código de Conducta, available from:
http://www.grupocortefiel.com/files/assets/0001/3609/CC_Codigo_Interno_GrupoCortefiel_Agosto2012.pdf
accessed 25 March 2017. 31
Entretextiles (2014), Identificación de la posición competitiva de las empresas del sector textil (grupos
estratégicos), available from http://entretextiles.weebly.com/entorno-especiacutefico-sector-textil.html accessed
28 April 2017, Grupocortefiel, Código de Conducta and Grupocortefiel website 32
Equipo y talento.com (2007), Cortefiel implanta un programa de incentivos para aumentar la motivación,
available from http://www.equiposytalento.com/noticias/2010/03/22/cortefiel-implanta-un-programa-de-
incentivos-para-aumentar-la-motivacion, accessed 18 April 2017.
42
3. Multidivisional structure:
Cortefiel‟s structure is characterised by centralisation of strategic decisions and
decentralization of operative decisions (Galán, 2014, p.258). Conversely, in Inditex, strategic
decisions are made each year according to the proposals put forward by each subsidiary. Each
proposal consists of a strategic plan about new products, investment opportunities etc. Once
the proposals have been gathered, the committee of subsidiaries decides which proposals are
going to be discussed in the annual meeting. Finally, in the annual meeting all subsidiaries‟
managers decide which proposal applies to all subsidiaries and which one applies to a specific
subsidiary (Del Río et. al., 2000, p.354).
Cortefiel have a multidivisional structure, so each brand has its own design team and
sales and management structure. However, all brands share the administration, finance,
technology, expansion and human resources divisions33
. In this way, strategic decisions are
centralised at the central offices, whereas operative decisions are made by managers from
each division. This structure means: a duplication of resources, isolation from wider
professional and technical developments, focus on local, not corporate, needs and conflict
between divisions (Boddy, 2014, p.316). At the same time, this structure fosters flexibility,
fast response and concern for customers needs (Daft, 2010b, p.258).
33
Information available from Cortefielgroup website http://begrupocortefiel.com/es/index.html
43
Figure 9: Organizational chart of Cortefiel group
Source: Prepared by the author on the basis of the information provided by Cortefiel group
website.
The organizational structure of Inditex is much flatter than the organizational structure
of Cortefiel. For example, in Inditex only 1% of employees are at high positions while in
Cortefiel 10% of staff is at high positions. Inditex are more worried about flow of information
and communication among business units than about keeping a formal structure (Del Río et.
al., 2000, p.353). In Inditex any employee can get in touch with the senior manager in order to
solve a problem.
4. Differences between the strategy of Cortefiel group and the strategy of Inditex:
The strategy of Cortefiel is similar to the strategy of Inditex. Some of Cortefiel
group‟s characteristics are as follows34
.
-They focus their attention on customers and they have encouraged the impulse
purchases, since they renew garments constantly, so customers know that if they do
not buy something now, they will never buy it. Cortefiel apply the strategy consisting
34
Entretextiles, Identificación de la posición competitiva. Grupocortefiel, Código de Conducta and
Grupocortefiel website.
Headquarters:
Chairman
President
Sprinfield
Design teams, production, dying,
sales...
Store managers
Employees
Pedro del Hierro
Design teams, production, dying,
sales...
Store managers
Employees
Cortefiel
Design teams, production, dying,
sales...
Store managers
Employees
Women'secret
Design teams, dying, sales, production...
Store managers
Employees
Support departments:
Human resources, finance...
44
of anticipating sales period with considerable discounts. Conversely, Inditex do not
offer discounts.
-They have tried to increase customer‟s loyalty through the distribution of cards. This
card enables customers to get discounts or payment deferments.
-They offer fashionable garments at low prices. They have adopted a strategy based on
low costs. In order to get this, Cortefiel is vertically integrated and has implemented
the Just in Time system, so they have adapted their inventory to real demand.
Cortefiel‟s clothes are more classic and of better quality than Inditex‟s. Nevertheless,
lately, Cortefiel group are orienting their offer towards a younger segment and they are
cutting their prices in an attempt to imitate Inditex‟s strategy.35
-Cortefiel shops are located near to Inditex‟s ones, that is to say, they are located in
central streets. Cortefiel invest on publicity and logistic, while Inditex invest on their
supply chain, their logistic capacity and the location of their shops.
-Cortefiel owe a huge debt, while Inditex enjoy high liquidity. Consequently, Inditex
can invest in technology, for example, they have invested in devices, which make it
easier to trace garments through their supply chain, or in applications, which transmit
information quickly.
- The main weakness of Cortefiel is their wide network of franchises. This means a
lack of control and less coordination. The distribution strategy of Inditex is based
basically on direct channels, that is to say, on their own shops. In that way, Inditex can
get more control and flexibility of their supply chain and can react quicker to changes
in customers‟ demands.
4.2.3 Mango
1. Developmental culture and transactional and consultative-advisory leadership:
Mango‟s culture is based on three pillars: people (teams made up of high human
quality and solid, open and flexible mentality), concept (well-defined and high quality
products) and technology (based on logistic and information systems) (Rodríguez, 2008,
35
Delgado, C. (2015), Cortefiel baja los precios el 25% y se rejuvenece para competir con Zara, El País, 4
November, available from
http://economia.elpais.com/economia/2015/11/04/actualidad/1446648472_110447.html accessed 28 April 2017.
45
p.187). Mango have an open approach, since the creation process is based on information
collected from magazines, trade fairs, fashion shows, customers etc. However, their approach
towards the environment is not as flexible as Inditex‟s, since they only offer four collections a
year, and once the design department has established the guidelines they are rarely changed36
.
Human resources policy is explained by Rodríguez (2009, pp. 32-33). In Mango,
leaders let employees participate. However, the participation system is too formal (annual
meetings, suggestion box etc.). Salaries are higher than industry average and they are updated
twice a year according to responsibilities, professional development, productivity etc.
Employees are also given other incentives such as, flexible timetables, discounts, presents etc.
Despite of that, staff rotation ratio is high.
The proportion of employees that benefit from internal promotion is low (8,54% on
average per year of employees working in shops and 21,82% on average per year of
employees working in the headquarters)37
.
Mango tries to work in teams and each team is made up of people from different
countries and fields of expertise. For example, in the headquarters in Palau de Plegamans
people from 32 different countries work together (Rodríguez, 2008, p.186).
2.Multidivisional and hierarchical structure:
Mango have a mixed structure, each vice president is in charge of one business area.
There are good communication and coordination within each area, but the flow of information
may not be so good among different areas. The structure is more hierarchical and centralized
than the Inditex‟s structure. Moreover, the structure is quite complex and horizontal
communication and coordination is difficult.
36
Information available from Mango website
https://www.mango.com/oi/servicios/company/it_in/trabajar/organizacion.htm 37
Mango (2008), Memoria de sostenibilidad, available from
http://www.mango.com/oi/servicios/company/es/empresa/rsc/memoria2008.pdf, accessed 17 April 2017. Mango
(2015), Memoria de sostenibilidad available from
http://st.mngbcn.com/web/oi/servicios/rsc/pdf/ES/mem/mem2015.pdf, accessed 18 April 2017.
46
Figure 10: Organizational chart of Mango
Source: Prepared by the author on the basis of the information provided by Lamelas, (2014)
and Mango website.
3. Differences between the strategy of Mango and the strategy of Inditex:
Mango, as opposed to Inditex, design garments but they outsource their production.
Mango sell their clothes through their own shops and through franchises .Their products are
of medium to high quality. Enric Casi (the managing director) states that: “a medium to high
quality cannot be produced in 15 days. We do not want to be at the bottom of market, but at
the high position. Obviously, it is necessary to charge a high price, but we offer better
products” (Rodríguez, 2009, p.26, 30). This statement makes it clear that Mango follow a
different strategy. Instead of offering fashionable clothes of medium quality at reasonable
prices, they offer high quality at higher prices. In fact their shops are more exclusive than
Inditex‟s ones, they are like boutiques.
Each supplier is specialised in each kind of garment. Suppliers are all over the world,
for example, 45% of production is made in China, 23% in Morocco and the rest of production
is made in India, Turkey or Vietnam (Rodríguez, 2009, p.28). Mango coordinate and control
their production through IT systems and periodic meeting with suppliers (Rodríguez , 2008,
p.188). Moreover, Mango make use of franchising in order to expand into other countries
ISAK ANDIC: PRESIDEN
JONATHAN ANDIC: VICE PRESIDENT
DESIGN
PURI CAMPOS: MANGO KIDS
VIOLETA ANDIC: VIOLETA BY MANGO
LUIS CASACUBIERT:H.E
BY MANGO
EVA RELLO: PRODUCTION
SERGIO ODRIOZOLA: WOMAN CLOTHES
AND UNDERCLOTHING
SERGIO ODRIOZOLA: SPORT CLOTHES
DANIEL LÓPEZ: VICE PRESIDENT
EXPANSION
FRANCHISING
ARIF ZURNAC:ICOUNTRY MANAGER TURQUIA
ENRIC CASI: MANAGING DIRECTOR
FINANCE: MIGUEL DE LA CAPILLA
COUNTRY MANAGER CHINA: DAVID
SANCHO
CARLOS COSTA: CHIEF OPERATIONS
AND STRATEGY OFFICER
IMPORT EXPORT
LOGISTIC: LOZANO
H.R: MARIA JESÚS GARCÍA
IT : JORGE CORBELLA
ISAK HALFON: EXPANSION
47
(50% of their shops are franchises), while Inditex keep the control by selling through their
own shops (only 15% of their shops are franchises)38
.
It takes Mango between 3 and 4 months to design, produce and distribute each kind of
garment. Each season, Mango‟s headquarters decide which kind of clothes they are going to
give to each shop and shops give information about stock, so Mango can plan production
months ahead (Rodríguez, 2009, p.28-32) .
5. CONCLSIONS:
Para la mayoría de las organizaciones la supervivencia en el mercado se hace difícil,
pues el entorno que las rodea es cada día más dinámico y complejo. Las empresas deben
adaptarse a los cambios que se suceden en el mercado si quieren liderarlo. Cada día surgen
nuevos problemas y necesidades y las empresas deben dar una solución más rápido que sus
competidores. La innovación y la creatividad son dos desafíos que retan a las empresas
españolas desde finales del siglo XX.
España, a diferencia del resto de Europa, durante gran parte del siglo XX estuvo
dormida bajo un régimen autárquico que la mantuvo aislada de todo progreso tecnológico.
Esta desventaja que mantenía España con respecto del resto de países europeos se dejo notar
con la entrada de nuestro país en la Unión Europea. El clima hostil, al que fue sometida la
industria española como consecuencia de la fuerte competencia tanto europea como extra
europea, dio el impulso a las pequeñas empresas domésticas para que se reinventaran. El
resultado ha sido una industria que ha pasado de ser doméstica a internacional.
Ha sido con la crisis financiera de 2008 cuando una nueva revolución industrial ha
terminado de poner sobre el mapa a la industria española. El ejemplo más claro es el de la
industria textil que tiene como su principal exponente al grupo Inditex. Inditex, ha
revolucionado la industria de la moda y ha desbancado ampliamente a todos sus
competidores.
Muchas han sido las universidades que han estudiado el secreto del éxito de Inditex.
Sin embargo, la clave del triunfo es más simple de lo que parece. La estrategia de Inditex ha
38
Information available from Rodríguez, R. and Alegret, X. (2017), Inditex versus Mango, las seis grandes
diferencias, EconomíaDigital Galicia, 12 february, available from http://galicia.economiadigital.es/directivos-y-
empresas/inditex-versus-mango-las-seis-grandes-diferencias_378244_102.html accessed 10 May 2017.
48
sido simplemente la de mirar y escuchar. Esto ha permitido a la empresa saber qué es lo que
les gusta a sus consumidores y así poder ofrecerles lo que realmente quieren.
Estas habilidades de mirar y escuchar implican adoptar una forma organizativa
radicalmente distinta a la tradicional. Las empresas tradicionalmente se han caracterizado por
tener estructuras organizativas muy jerarquizadas y formales que permitían mantener un orden
y disciplina para alcanzar eficiencia tanto en tiempo como en costes. Este modelo
organizativo resulta adecuado para sectores expuestos a pocos cambios, pero para la mayoría
de sectores queda ya anacrónico.
La sociedad actual demanda continuamente novedad y variedad, especialmente en
sectores como el de la moda o el tecnológico. Así, la innovación y la creatividad son los dos
ingredientes básicos para fabricar productos que se vendan. Dominar estas dos capacidades no
es fácil, pues no basta con crear un departamento de I+D. Una empresa innovadora y creativa
lo es en su conjunto; desde su cultura hasta su estructura.
Sólo aquellas organizaciones que transmiten una cultura tolerante al riego y abierta a
la diversidad y al debate se inundan de ideas originales. Sólo aquellos modelos de liderazgo
basados en la confianza, la igualdad y la participación consiguen empleados motivados,
comprometidos y autónomos. Finalmente, todo ello se deja ver en el organigrama de la
empresa, carente de barreras tanto horizontales como verticales, donde la comunicación fluye
con rapidez desde el dependiente de la tienda hasta el director general. El diseño de la
estrategia empresarial debe ser un proceso ascendente y no descendente. Las decisiones
adoptadas han de ser fruto del consenso de todos los empleados que de manera informal
participan en el destino de su empresa.
Este modelo organizativo ha sido el adoptado por Inditex que escucha al cliente a
través de los dependientes de cada tienda. Esta empresa sabe que la mejor información está en
manos de los empleados que día a día observan y escuchan al cliente. Inditex es consciente de
que sólo ellos serán capaces de adoptar las mejores decisiones para la empresa. Esta
delegación de confianza y responsabilidad hace que los empleados se comprometan y se
sienta parte tanto del éxito como del fracaso empresarial.
A pesar de que los competidores de Inditex están copiando su modelo y estrategia,
ninguno ha llegado a adelantar al gigante de la moda. La razón es simple, ninguno ha
49
comprendido que quien decide es el cliente y que toda traba interpuesta para escucharlo hace
que la información no llegue con la rapidez que debería.
Casi todos los competidores de Inditex, a pesar de enunciar en sus Códigos de
Conducta y Planes Estratégicos que son empresas que fomentan la participación y que su
valor más importante es el humano, la realidad resulta muy distinta. La participación de los
empleados en estas empresas se basa en un buzón de sugerencias o una reunión anual donde
un representante de los trabajadores da ideas y los directivos acogen las que les resultan más
atractivas y las moldean según su criterio. De modo contrario, en Inditex, el encargado de
cada tienda se comunica diariamente con los directivos y da la información que se necesita.
La mayoría de los competidores de Inditex basan su sistema de incentivos en
compensaciones económicas, mientras que Inditex hace uso de un modelo de motivación
intrínseca basado fundamentalmente en la formación profesional, la promoción interna, la
libertad para tomar decisiones y el aumento de responsabilidad.
Finalmente la estructura de Inditex es muy diferente a la adoptada por las otras
compañías de moda. Realmente, Inditex carece de organigrama, pues las cadenas de mando
prácticamente desaparecen. Las decisiones son tomadas y las responsabilidades asumidas por
cada uno de los empleados. Sus competidores, a pesar de tener estructuras organizativas
bastante flexibles, ninguno llega a difuminar las barreras internas del modo en que Inditex lo
ha hecho.
Del análisis realizado en este trabajo se desprende que una organización abierta y creativa
es aquella capaz de dejar de mirar hacia sí misma y de comenzar a mirar hacia el mercado. Es
también una organización dispuesta al caos y al desorden, preparada para asumir cambios y
lidiar con conflictos.
Creatividad e innovación son las dos claves que impregnan de éxito toda actividad
económica en la actualidad. Cualquiera que pretenda mirar hacia otro lado estará destinado al
fracaso. Innovación y creatividad no es ni un departamento empresarial, ni una declaración de
buenas intenciones en el plan estratégico una empresa. Innovación y creatividad es el nuevo
estilo de vida que caracteriza a la sociedad actual, donde el desorden, el espíritu crítico, la
diversidad de ideas, el inconformismo y la tolerancia hacia lo desconocido se convierten en el
estandarte del progreso económico y social.
50
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