Sedna Case Study

7/31/2019 Sedna Case Study

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SEDNA, Fashionably You

Introduction

Wewere surprised aswe entered Sedna's offices: the surroundingswere different fromthetraditional facilities of an international company. Large spaces with no divisions,spaciouscorridorsdecoratedwithmannequinsdressedinthelatestfashionsand,aboveall,anomnipresenceofthecompanysvaluesintheformofpictureshungonthewallsofthewholebuilding. The environment seems to breathe fashion and glamour. The offices aremore like adesign center than the headquarters of a companywhere such awell-knownbrandsuchasSednaismanaged.ButasJohnCavelta,ManagingDirectorofthetextilefirmsaid,inordertosurvive,youhavetohaveanidentity,bedifferent,exclusiveandunique.However, this companys secret is not solely based on characteristics that can be seenthroughasimplevisit,butratherbehindthestorefront-incrucialareassuchasthelogisticssystem,stateof-the-arttechnologyandaculturefoundedonhumanrelationships.Thanksto

their businessmodel, Sedna has experienced rapid and sustainable growth over the lastdecade, but will thismodel be suitable for the future, especially at a time of significantconsumer crisis? Perhaps theirbusiness is now mature and the difficult situation of themarketwillshaketheirdominantpositioninthesector?JohnCavelta,ManagingDirectorofSedna and Jack Coleman,Communications Director, speak calmly of their companysposition, assuring us that thecompany is well organized and prepared internally for anysurprisethemarketcanthrowatthem.However,despitetheoptimism,theyrecognizethat,inturbulenttimes,theymaybesellingmorebutinrealitytheyareearningless.Theystatethat,todaymorethanever,theyneedasolidbusinessbaseand an innovativemanagementmodel inordertocontinue competing

successfullyonagloballevel.

Sednas History

Aimed at a young, modern audience, Sedna is the second most important company intheSpanish textilesector,withonlyEvaaheadofit.Theirhistorybegins in1972whentheyoung,entrepreneurial,MiloVentimiglia,thecurrentmainownerofSedna,startedworkinthefashionsector.MilowasborninIstanbultoafamilyofSephardicorigin,andat16yearsoldmovedtoBarcelona.DuringhisstudiesattheAmericanHighSchoolinBarcelonahehadtheideaofsellinghisfriendsshirtsimportedfromIndiaandotherAsiancountriessothathe

couldearnsomeextramoneytocoverhisexpenses.ThesuccessofthisventureencouragedhimtosetuphisownstandinthePalmesMarket.Duringthistime,hisprincipalactivitywasthe importationofwomen's clothing from different countries and then getting it on theshelvesofstoresacrossSpain.Inhisfirststore,whichhedidnotwhollyown,MiloVentimigliasoldclogsandblouses.Then,in1984,hedecidedtocreatehisowncompanySedna,anamethatcomesfromtheInuitgoddessofthesea,seaanimalsandtheunderworld.Thecompanynamesregistryrejectedtwoothernames,but acceptedthisone.The successofthissmallcompanyandhisexperienceallowedMiloVentimigliatocreatehisowncollectionandopen


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newstores,thistimehisown.Withthisstephestartedtosell,notonlyinhisownstores,butalsoinothermulti-brandstores,whichquicklybecameexclusiveSednaoutlets.Hetookthenextstepthesameyearwhenherealizedthat,althoughtheclotheswereofhighqualityandthedesignswerewidelyacceptedbySpanishwomen,theproductlackedaglobalconceptthatwouldmakeitattractiveenoughtowarrantfurtherdevelopmenttomedium-scale.This

concepthad tobecompleteandhad toallowtheunificationof commercialeffortson thesame front, encompassing tangible aswell as intangible characteristics: fashion, design,imageandagoodprice-to-qualityratio.Sednaopeneditsfirststorein1984inBarcelonaand,withinayear,hadfivepointsofsaleinthecity.Alittlelater,itbeganitsexpansionintotherestofSpainwiththeopeningofastoreinValencia.Whathadstartedoffasasmallgroupofcollaboratorsbegantogrowand,by1988,thecompanyhadthirteenpointsofsaleinSpain.In1992theytooktheirfirststepsoutside of the national market with the opening of two shops in Portugal. Thefollowingyear, Sedna opened their 100th store in Spain and, two years later, they

implemented thebusinessmanagementsystem thattheycontinueto usetoday,basedonspecializedworkinggroupscoordinatedwitheachother.Right from the beginning, Sednas goal was to dress a young, urban clientele in high-qualityclothes,atanaffordableprice,withoutgettingbehindonthelatesttrends.Currently,90countrieshavetheSednaconcept,fromthehardest,mostcompetitivemarketswherethecustomsarenothinglikethoseofSpain,tothemostopenones.Tobepresentinallthecities of the world isthe mission of the textile chain. At the end of 2008, Sedna hadmanagedtoopen1200pointsofsale(includingbothfranchisesandtheirownstores)aroundtheworld,atarateofthreeaweek.In2007thecompanyturnoverwas 1,020millionEuros(8,2%more thanthepreviousyear)

andexports accounted for 76% of total turnover. Sedna had 7,780 employees, 1,855 ofwhichworkedintheheadofficeinCerdanyoladelValls(seeExhibit1).Theactivityoftheorganizationiscarriedoutatanumberoftheirownfacilities,locatedintheheadquartersatCerdanyoladelVallsintheBarcelonaprovince(warehouseandoffices)andattwowarehouseslocatedneartheheadoffice:MontcadaiReixacandTerrassa,aswellasdifferentstoresbothownedand franchised.Theyalsousesixmore rentedwarehouseslocated inthe towns of Parets, Montorns and Sabadell (Barcelona), in the cities ofShenzhenandHongKong(China),andinNewJersey(USA).In2007,anewstate-of-the-art,totally automatedlogisticscenterwas opened inParetsdeValls(Barcelona). This centerhas a surface area of24,000m2, which allowed the company to triple the previous

distributioncapacity.A12,000m2designcentercalledTheHangar,locatedneartheheadoffice,hasbeenrunningsince2006.

Product and design made in SEDNA

The company handles the whole process from a products design to it reaching theendconsumer; the design, manufacturing subcontracting, distribution andcommercialization.ThematerialusedinmakingthegarmentsisdesignedbySedna,butthe


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company does notmanufacture its product. They only make samples and prototypesthemselves; all their designsare then subcontracted to suppliers who handle themanufacturing. Sednas collections aremainly produced in China (approximately 45%),Morocco(23%)andtherest inworkshops indifferentcountriessuchasTurkey,VietnamorIndia(seeExhibit2).Itisvitalforthecompanytohavethearticlesjustattherightmoment,

sothemanufacturersmustalwaysbereadytomaketheclotheswhenthecompanyasksforthem. Its worth noting that there are two seasons eachyear for the company, spring-summerandfall-winter,butthatitlaunchesatotalof4collectionsannually.Allthegarmentsandaccessoriesaredesignedtogotogether,sotheplanningofproductionanddistributionisfundamentalinthiswholeprocess.Although Sedna doesnt make the textiles, accessories or clothes, the company doesundertakequalitycontrol, ranging from factory inspections topointofsale.Thegarmentsand accessoriesareofamedium-highquality and stick to the same standards (consistentquality, samecharacteristics,etc.),whichiswhyalltheproductionofaparticularmodeliscarriedoutbythesamemanufacturer,exceptinspecificcaseswherelegislationlimitsthis

possibility due tooriginandquota issues.Amanufacturer cannot achieve amedium-highqualityinfifteendays.Wedontwanttobeatthebottomofthemarket,scrabblingaroundforaEuro,buthigherup,naturallywithpricesalittlebithighertoobut,atthesametime,offering a more developed,better finished product on all levels, from design tomanufacturecommentsJohnCavelta.Theperiodofdesign,productionanddistributionforSednasclothesisbetween3and4months,asopposedtoEvas4-5weeks(fortotallynewdesigns) or 2 weeks (for modifications to existingdesigns). Nevertheless, the ManagingDirectorofSednasaysthathisclothesaredifferentbecausehis companytries toofferacare-free,fresh,happyproduct.Sednahas awell-defined product,with its own design and style. Their objectives are to

dresswomeninthelatestfashiontrends,bothfortheirdailyactivitiesandspecialoccasions,and tocreate a coherent and unified brand image - for this reason the company designscollections,notseparategarments.Sednatriestoexhibittheirclothesincomfortablestoresthat appear to bemore like boutiques than part of an international chain. In fact thecompanyconsidersitselfachainwiththespiritofaboutique.Sednahastheirownteamofwindow-dressers, coordinatorsand supervisors who travel around to ensure that all thestores(boththosetheyownandthefranchises)sharethesameatmosphereandimage.Thecompanyworkshardtokeepup-to-datewithwhatsgoingoninthemarketplace,suchasknowingwhichcollectionsaresellingwellandwhatthenewneedsandtastesoftheircustomersare.JohnCaveltasaysthattheyareconstantlyaskingandtryingtofindoutwhya

clientwhotriessomethingondecidesnottobuythegarment.Togetthisfeedbackfromthemarketplace andhelp the company adapt to consumer expectations, Sedna created aProductDistributiondepartment,responsibleforcollectingtheresearchandquestionnairesdone in stores, analyzingthem, and then assigning and sending the most appropriateproductsforthelocationandprofileoftheclientsinthecatchmentareaofeachstore.Design is another key point, and covers everything from the clothes displayed in storewindowstothebagscustomerstakehomewiththem,fromtheproductionofthecatalogue

totheinteriordesignofthestoresandwindows.Itisoneofthepillarsofthecompanyanda


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magnetforbringinginthecustomers.Sednatriestotransmitasingleconceptthroughouttheworld;asimple imagethat isdynamic,youngandurban,which reflectsthevery latestfashiontrends.JohnCaveltapointsoutthattheyhavealwaysbeenfaithfultotheavant-gardecustomerwhostrying to be different, but at a reasonable price. Someone once told them, You

(Sedna)areacheaporiginal,othersareacheapcopy.Creativity is the raison dtre of the company behind which, as Cavelta and Colemanreiterate, arealways people. MasiOka, Director of Corporate Image, has worked in thecompanysinceitsinceptionandisthemanbehindallthedesignandimageinnovationthattransformedthecompanyintowhatitistoday.Being an international company, Sedna has adapted the design of its clothing to thecustomsofcountries thatareculturally very different(especiallyArabiccountries,suchasTurkey,SaudiArabia,Bahrain,UnitedArabEmirates,Kuwait,Libya,andsoon).Therestoftheworld(LatinAmerica,AsiaandEurope)receivesthesamecollectionsascanbefoundinSpain.

Production system

All the manufacturing activity is done through other companies that do not belong totheorganization,basedindifferentcountriesscatteredacrosstheglobe.Eachseason,newsuppliersarefoundtocovernewtechnicalrequirementsandtheincreaseinproduction.Thechoicealsodependsonthespecificcharacteristicsofthepotentialcollaborators,suchasthetimeframe forproduction, the price of the clothes, technology, capacity, quality,organization, professionalismand international experience. Sednas collaboration withsupplierstendstobelong-termandthecompanyengagesinconstantdialoguewiththem,workingtogetheronplanningandanalysis,aswellasonthequalitycontrolcheckscarriedoutin themanufacturing factoriesorworkshopswith thehelpofSednatechnicians. Fromtimetotime,thecompanyssuppliers(manufacturers,rawmaterialproviders,etc.)cometovisitSednasheadquarters.Theobjectiveofthisistoestablishmoredirect,personalcontactwiththeproductioncenterssothattheycanmorecloselyanalyzethedifferentaspectsofthe manufacturing and the business in general. The company hasa production control,monitoringandsupportprogramsothatallsuppliershaveaccesstotheinformationonthegeneralprocessesoftheseasonsplanningandthetechnicalspecificationsofthemodels.Itisaninteractiveandbidirectionaltoolthatallowssupplierstomakeallsortsofqueriesandcomments.Themanufacturingperiodtakes,onaverage,threetofourmonths,fromtheordertoreceipt

ofthemerchandise.Therearetwoproductionsystemsintheorganization,eachofwhichimpliesdifferentproceduresforthemanagementandcontroloftheanalysisofsubstancesusedinthemanufacturingprocess:a) Manufacturers (76% of total production): this system consists of Sedna designingtheproduct,commissioningitsmanufactureandacquiringitoncefinished.Inthiscase,itisthesupplierwho isin chargeofbuyingall the rawmaterialsnecessaryfor theproduction.Thesetypesofsuppliersareknowninternallyasmanufacturers.MostofthemarelocatedinSouthEast


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Asia,aswellas Indiawheretherawmaterials(thread,cloths,etc.)formanufacturecomefrom.b) Production workshops (24% of total production): This system similarly consists ofSednadesigningtheclothingbut,incontrasttothefirst,alltherawmaterialsthatmakeupthegarmentarepurchasedbytheDogalancompanyandthensenttothesesupplierstobe

made into theclothes. These types of suppliers are known internally as productionworkshops,mostofwhicharelocatedinNorthAfricaandEasternEurope.Againincontrasttothecaseofthemanufacturers,therawmaterialdoesnotcomefromthesecountriesbutisessentiallyofEuropeanorigin,sincethecompanybuysitdirectlyfrommarketscloseby,inthecountries/areasofitsproduction.Thesenamesareonlyinternaltitles,andthefactthatoneorothersystemisusedlargelydependsongeographic(proximity)andtechnical(specializationinproduction)factors.Thecontrol policyand production characteristics mean that manufacturers or productionworkshopsmaynotsubcontract the productionof the clothes. The companyunderstandssubcontractingtobethesupplierpassingpartoftheproductioncommissionedbySednato

athirdpartycompany,withoutSednasknowledgeorauthorization.Despitethefactthatallsuppliershavethemanufacturingprocessverticallyintegrated(cutting,production,ironing,packing,etc),attimestherearespecialprocessesthataprovidermanynotbeabletooffer(forexamplea specifictypeofembroidery).Whenthishappens,thework issenttootherspecialized companies and carriedout by them.Sednaknowsabout and authorizes thesetypesofproductions.Whenthemanufactureofaspecialelementthatstartstobecomemore important, thesesuppliersbecomepartof the control andmonitoring system. JohnCavelta adds that Sedna has no direct or indirectinvestment in any manufacturer orproductionworkshopofclothesoraccessories.Moreover,noneofthemworkexclusivelyforthecompany.Thevolumeofclothesandaccessoriesmadein2007reached85millionunits.Sednacurrentlyhas145suppliersworldwide.

Sednas Logistic System (MLS)

The logistics are managed from the central warehouse in Cerdanyola del Valls. Thecompany hasthree logistic centers globaly: Parets, for Europe; Hong Kong for Asiandistributionandanewcenter inNewJerseyfortheUnitedStates.However,JohnCaveltatellsusthatthecompanyslatestprojectisthecreationofaglobaldistributioncenter,tobelocatedintheamplelandsthatSednaownsinLliadAmunt(Barcelona).The key elements of their logistics system are speed (in the movement ofmerchandise),information(sharedbetweenthecenters)andtechnology(theintensiveuse

of it). Sednaslogistics system is based on one they came up with and have beenprogressivelydevelopingsincetheopeningoftheirfirststorein1984.Inordertoachievecompleteintegration,Sednaassignedthestocktofranchisersunderadepositregime.11.ThestockremainsSednaspropertyuntilthefranchisersellsit.


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The textile chain has gone about acquiring andadapting the latest technologies in theirfacilities,makingitpossibletoclassifyanddistribute30,000itemsofclothingperhour.TheobjectiveoftheMLSistoensurethateachofthepointsofsale,locatedaroundtheworld,havetherightkindofstock,inlinewiththespeedofrotationandpredictedsalesatalltimes.

The company can, therefore, guarantee a constant replenishmentof merchandise andproduction at a rate defined by market demand, both in terms of volume andvariety.ProducingwhatsellsandnotproducingtoseeifitsellsJohnCaveltaadds.Applying this distribution model requires continuous monitoring of demand (achievedthroughcommunication between each point of sale, head office and the logisticsdepartment)andanabilitytoreacttochangesinthemarketplace.Thestockisreplenishedconstantly and isproduced according to the rate of demand in the market. In thisway,demand controlsproduction, necessitating shorter production runs and more frequentdeliveries.ThetimetomarketforanitemofSednaclothingis3to4months,whichisoneofthe shortest in the sector(Eva being the leader, since their design, manufacture and

distributionsystemsarefaster).Inthetraditionalmodelforthissector,thetimetomarketcouldbeaslongassixmonthsfordesignandthreemoreformanufacture.Anotherkey part of Sednas logistics system is the ability tomanage the inventory on agloballevel,inrealtime.Moreover,thisproductionplanningmeansthatcanaimtoholdzerostock.Ordersarenotmanagedbythefranchises,butbytheheadofficeinCerdanyoladelValls,whichatthebeginningofeachseasondecidesonthetypeandnumberofitemstobesenttoeach oftheir points of sale. This decision isbased on the inventory information that thestoressenddailytoSednasheadoffice.Ifastoredoesnothaveaspecificitem,usingtheirPST(Pointofsaleterminal)theycancheckiftheheadofficeinCerdanyoladelVallshasthearticleinquestionandorderitstraightawaythroughthecomputersystem.Theordereditem

willbedeliveredtothestore2or3dayslater.Withthissalesmanagementsystem,theGroupcan monitor and controltheir supply chain daily, to avoid over-production and surpluses.Manufacturingisalwayscommissionedinlinewiththeaveragesalesofeachpointtosale.Ifthereisanysurplusattheendoftheseason,thisissoldthroughdiscountsandpromotions.In January 2004, Sedna implemented a new direct delivery logistics system so that theproductsmadebythesupplierscouldbedistributeddirectlytothestoreswithouthavingtogothroughthedistributioncenterinBarcelona.Thetestrunwentsmoothlyin2003inHongKong fromwheretheysentmerchandise to43 shops, located inSingapore, Thailand, thePhilippines,HongKong,Malaysia, China and Indonesia. Direct sales through the cross-docking2 procedure, which

gostraight fromthesupplierstothestores,had increasedby 2007to30%ofproductionpracticallyallofthenewseasonsfirstdeliveriestostores.Sedna does not have its own transport fleet, but rather subcontracts to externallogisticscompanies.Bothdirectorssaythatinreality,"inSednawereallaboutlogistics".Itisnotonlythelogisticsdepartmentthatmustbeexpertinthisarea,butitalsodependsonthecoordinationof a numberof actions taken byother business areas (design,manufacture,distribution,etc.).Itsallaboutcreatingtheperfectmachinetokeepacompanyasbigas

Sednaworking.


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2 Cross-docking isa distribution system inwhich themerchandise received in the distribution center isnotstoredbutratherimmediatelypreparedtobedispatched.Thatis,thetransferofdeliveriesfromtheirpointofreception is done directly at the pointof delivery,with a very limited or non-existent storage period. Thissystemischaracterizedbytheuseofshorttimeframes,whichprecisesynchronizationiscrucialforthecorrect

distributionoftheitemsarrivingandleaving.

IT SystemNewtechnologyisattheheartoftheimprovementsinallthecompany'sprocesses.JackColeman says that the rapid growth and large scale of the company has only beenachievedthanks tothe Internetand theadoptionofnewtechnology.This iswhySedna isstronglycommittedtothedevelopmentofsystemsandnewtechnologyplatforms,avoiding

investment infacilities and warehouses - Sedna doesnt have offices anywhere butBarcelona.Thecompanybelievesthatitcanmanageandtakedecisionsfromtheheadofficeforthewholeworld,thankstothecommunicationssystemsandtheirdevelopmentinrecentyears.The real enginebehindSedna is the software,whichallowsthe companytomanage thewholecomplex process - design, supply, manufacture, sales and after sales - completelyautomatically.Stores are connected to Sedna through the Internet and special software which allowsthecompanytogetconstantinformationonthestockheldbyeachstore.Moreover,theheadofficecanadjustchangestotheirfranchisesthoughcomputerapplications,sincetheinformationneededisprocessedeverydayandstocktransfersorreplacementscanbemadebetweenstores.IT platforms are also used to bring various logistics operators together. Controlanddocumentation of deliveries, space reservation and transport management are allcarried outthrough this platform.This technology helpsSednato:1) reducedelivery timeandspeedupdistributionofproducts,2)reducetransportcosts,and3)reduceinfrastructurecosts inorder todealwith the ever-increasing amountofmerchandise resulting from thegrowthofthecompany.In addition, a short while ago an interactive IT system was put in place tofacilitatecommunicationbetween suppliers and thedesign, purchasingandqualityteams.

Thissystemhelpsmanagealltheinformationrelatedtothegeneralandspecificprocessesofthe season, aswell as all the individual aspects of each model commissioned (pricing,pattern,technicalfollowup,timings,etc.).Thecompanyalsorolledoutasystemaimedsolelyat allowing access toinformation, based on a B2E (Business to Employee) portal, whichhelped them to improve theirinternal business processes. Sedna also has an Intranet,designedasageneralpointofentryforinternalcommunicationandcollaboration.


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The company never subcontracts any services related to IT. They have a team of200telecommunications engineers, responsible for the continuous renovation of thesystemsthatthecompanyusesonadailybasis.Thetechnologychangesevery2to3monthsandimprovementideasareproposedbyboththetopexecutivesandtheITdepartment.

HR PoliciesThecultureofthecompanyisbasedonhumanrelationships.JohnCaveltanotesthat,nooneisalwaysrightand,inahighlycreative,technologicalcompany,bossingpeoplearounddoesntwork.Ifthepeopledontgetalong,iftheydonttalktoeachother,iftheydon'texplain things, ifthey prefertosit ona problemand hide it insteadof tellingpeopleandlooking for a solution,everything fails. "Growth is always thanks to the people", JackColemanadds.Thecompanyiscommittedtobuildingateamofpeoplewhoareprofessional,

motivated,flexibleandcapableofadaptingtochange,whocontributetheirideas,withthe

aimofgettingSednaascloseaspossibletothemaximumnumberofclients.Theaverageageofstaffofthewholeorganization(structuralandstorepersonnel)is29 (seeExhibit3).Thecompanycaresaboutpersonalservice.ForexamplethestoreassistantsarethefirsttowearSednasdesigns.Thestorepersonnelaremeticulously selected so that they are all in keeping with the image of the brand.However, JohnCavelta explains that, despite the companys best efforts in retainingpersonnel(internalpromotionandcontinuoustraining),thepointsofsalehaveahighstaffturnover causedby the employeeprofile (students, temporaryworkers, etc.). Incontrast,thestructuralpersonnelareverystableandstaffturnoverfiguresarealongwayfromthoseofthestores.The employees are in contactwith the shareholders and administrators, aswell as with

themanagementoftheorganizationthroughmeetingscalledIfIweretheChairman.Thisworksasfollows:themembersofeachdepartmentvoteforarepresentative,whomustnotbeateamleaderorthedirectorofthedepartment.Thentheelectedpersoncallsameetingfor all themembers of the department where he/she collects all the ideas, changes andimprovementssuggested,inordertopassonanddebateproposalsinthemeetingwiththemanagement,shareholders andadministrators. The conclusionsandchanges agreeduponarepublishedandcommunicated toallemployeesviathe companys internalnewsletters.Accordingto thecompanys information,95%of the proposalsdebated inthesemeetingsleadtospecificchanges,suchasmodificationsinworkinghours,increaseandimprovementof services, securityimprovements, etc. There arealso other channels of communication:

brainstormingandasuggestionsbox,throughwhichalltheemployeescancontributetheirideasandproposalstoimprovetherunningofthecompany.In terms of remuneration, for structural personnel (around 1,850 people) the salary isevaluatedand adjusted and bonuses set twice a year, in linewith how each employee iscarryingouthisworkandprofessionaldevelopment.Forthein-storesalesteams,thesystemisafixedsalaryplusavariablebasedontheturnoverofthestore.Onaverage,thesalaries

paidtoeverydifferentcategoryofSednaworkerareabovethosenormallyofferedinthe


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sector.ThestandardstartingsalaryestablishedbySednaisapproximately45%morethantheminimumwagedictatedbySpanishlaw.Thecompanyhasacontinuoustrainingpolicy.Thereisaspecificdepartmentthatanalyzesthetrainingneedsofalltheworkers,inbothfully-ownedstoresandfranchises.Thecoursesaremostly taught at the Head Office and focus on technical knowledge (languages,

IT,merchandising,etc.)andonmorespecializedareas(values,teammanagement,etc.).Thetrainingdepartment team works with the directors of different areas to handle theapplications toundertake studies at a professional level, at university, etc. In terms ofinternalpromotion,mostdirectorsarehiredfromwithintheorganization.In2007,28.22%ofhead office employees weremoved up to a higher professional category. For in-storepersonneltheinternalpromotionfigureishigherandreached77.98%,duetothecreationofnew professional categories throughout2007. Sedna employees also receive otherincentives,suchasdiscountsinSednastoresandotherservicesforwhichthecompanyhasagreements(carhire,travel,gymmembership,etc.),free-sharedtransport,subsidizedfoodand flexibleworking times.The company also helpswithrelocation and job vacancies for

thoseemployeeswhorequestit.An"errorculture"ispracticedinthecompany.Thatmeansthatmistakesareacceptedinordertolearnandtrytoavoidtheminthefuture.AsJohnCaveltahighlights,employeesareneverfired"straightoff",butarealwaysgivenasecondchance.Thecompanyencouragesinformalrelations(forexample,nobodyintheorganizationhastobeaddressedinthepoliteUstedforminSpanish)andpromotesnon-hierarchicaltreatment.

Global brand: Internationalization though the franchise

The growth strategy on an international level is based on the franchise system. ThecompanyofferstheirfranchisesystemforthewholeoftheEuropeanUnionandthemaincapitalsandcitiesoftherestoftheworld (seeExhibit4).Bytheendof2007,thetextilechainhad713-franchisedstores3.Withoutdoubt,franchisesareafastwayofopeningstores,of increasingbrand awareness, finding good locations and increasing production. Thissystemisusedaboveallincountrieswheretheculturalandadministrativecharacteristicsareverydifferentanditisthereforebetterthatthemanagementbeundertakenbypeoplefromthatcountry.Thismanagementsystemisalsoappliedwhere itbringsagood locationandwherethecharacteristicsofthemarketmakeitmoresuitable (seeExhibit5).

3ThepercentagesofSednaownedstoresandfranchisesare35%and65%,respectively.


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TheEuropeanmarketisSednasnaturaltargetanditiswherethecompanyhasachievedthemost success. Other markets where their collections (adapted to the cultural habitsoridiosyncrasiesofeacharea)havegainedanimportantfootholdaretheArabiccountries,aswellas China and Japan. In China, specifically, the group nowhas 41 stores under thefranchiseregime.InLatinAmerica,theproblemistheescalatingcostofthegarments-since

theproductisimported,itissubjecttohightariffsandredtape,whichmakesitsomethingonlyfortheelite.This factgoes against the concept of the product and the companys strategy,basedongainingapresenceinasmanymedium-sizedcitiesaspossible.Infact,thecompanyonlyhastwostoresinBrazil.In2007thetextilechainopened99newpointsofsaleintheworld,ofwhich15werelocated in6new countries: United States,Libya,Montenegro, Syria,SouthAfricaandUzbekistan.Intermsoftheadministrationofthestoresonaninternationallevel,thecompanyregardsallpointsofsaleasinternalmanagement,whethertheyaretheirownorfranchises,sincethesystems,materialsandoperationalcharacteristicsarethesame.Thecompanymaintains

strongrelationships with the franchisees, who are always able to participate in differentaspects of themanagement of the company. The company has three departmentsspecialized in supportingfranchises in all aspects ofmanagement. One team, comprisingsupervisorsand coordinators,visits the storesconstantly, helping them inall the requiredareas.Inaddition,thecompanyandthefranchisesworktogetheronthetrendsandspecificsoftheircountryorarea,withtheaimofimprovingtheserviceineachpointofsale.ForeachnewseasonthecompanyorganizesworkinggroupsheldatSednasfacilities,toanalyzeandcollectivelydecidewhichclothesoraccessoriesaremostappropriatefortheirstore,givenitscharacteristics and location. Other fundamentalelements of Sednas relationship withfranchiseesaretheguaranteeofspecificmarginsfortheirbusiness,theownershipofthestock remainingwithSedna until the franchiseesells the item inquestion, the transferof

goodsbetweenstores,andmanagementsupport(merchandising,windowdressing,etc).At the beginning of 2009, the status of themarkets is uncertain and all businesses areaffected, toa greater or lesser degree, by the considerable drop in consumption. Thecustomerskeepbuying,buttheyarelookingforoffers,andsomeevenwaitforthesales.The countries where we reallyfeel the crisis above all are Turkey, the UK, the US andIreland,JohnCaveltaexplains.Intherestofthemarkets,weredoingok.Althoughwerealizethatrightnowwehavetooffermorepromotionsorspecialdiscountsto stimulatepurchases,headds.Thecompanyhasanestablishedprotocolforstoreclosureintheeventthattheyfail toachievetheminimumlevelofsalesnecessary,althoughtheyalways try toavoid this typeof situation. In fact they never closetheir own stores, only the franchised

premises that,duetotheirlocationorthetypeofcustomertheyattract,dontmanagetopenetratethemarket.However,closureisanexceptionduetofactorsthatoftencannotbecontrolledbythecompanyitselfandtheirobjective-toopen3,000stores-isstillinplacedespitetheturbulenteconomictimes.


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Marketing and communicationTheCommunicationDepartment isresponsible for the renovationof the corporateimageeachseason, as well as worldwide media planning, adapting Sedna's global strategy tothecharacteristicsofeach countrywitha focusonincreasing customer loyalty.Sednahas

alwaysbeencommitted to connecting their brand topersonalities linked to the world ofdesign,suchasMeganFoxorCatherineZetaZones.Someoftheirmodelsevenbecomethedesigners of partof a collection: as happened, for example, with MarijaVujovicand LisaFonssagrives. The reasonSedna invites famousactressesandmodels to take part in theirmarketingcampaignsistooffertheircustomersanintangibleextra;glamour,beautyandaconnectionwiththecelebrities.In terms of publicity costs, both Sedna and the franchisees invest 4% of their turnoverinmarketingcampaigns,ahigheramountthanothercompaniesinthesector(forexampleEvaonly spends 0.3% of total turnover on marketing). Sedna publicity tries to ensure all

theircustomersacrosstheworldidentifywiththesame Sedna,thesamebrandimage.Apart

fromtraditionaladvertising,Sednasetsupfashionshowstwiceayear.Theyhavealsorunacompetitionforyoungclothingdesignersaroundtheworld.Thechosencandidateshavethechancetowinaprizeof300,000EurosandtheprestigeoftheircollectionbeingsoldinSednasstores.Inthefashionsector,thecharacteristicsofthepointofsaleandtheproductpresentationareveryimportant.Thestoresroleisasbothapointofsaleandabillboard,sofactorssuchas lighting,space, decoration and window-dressing are vital for the management of thebusiness.Sednashopsreflectthespiritofthecompanyspeopleandcustomers.Theproductisexhibitedinsmallcollectionsandsetssothatitiseasiertochooseandtryon.Thepremiseshave to be comfortable,spacious and light to project spirit of a boutique rather than aclotheschain.Theirstoresarelocatedonthemainshoppingstreetsofthemostimportant

cities in the world, orwhere theircompetitors are. The size of the premises reflects thespatialrequirementsinordertocreateasuitabledisplayofthecollectionandthecapacityperm2.Bearinginmindthattheirproductsarenotaimedatthepublicatlarge,butratherapartof it, the company cannot open asmanystoresin thesamecity as otherbrandsdo.Instead,theymustfindthebestlocationswithaminimumof300m2inordertomakeroomforthewholecollection.Thissizeofstoreismoredifficulttofindinsmallercitiesand,assuch,theirobjectiveistosettleinareaswithmorethan80,000inhabitants.Franchisedstoresallowthecompanytoexpandrapidlyonaninternationallevel,aswellastogainapresenceincountrieswithdifferenttrendsandcustoms.However,inrecentyearsSednahasdecidedtointensifytheircommitmenttoopeningtheirownstores,especiallyin

countriesthataregeographicallyclose(seeExhibit6).One of the companys priorities is customer service, in order to gain their opinions onproductsandbeabletoadaptinaccordancetotheirtastesandneeds.Thiscustomerserviceiscarriedoutin-storethroughspecially-trainedstaff.Thistheoreticalandpracticaltrainingisfocusedoncustomerservicepolicy,theproduct,merchandising,trendsandthephilosophyof the company,etc. Sedna also offers an additional hotline service in order to resolve

customerqueriesandissues.


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E-business

The brand has also shown a commitment to Internet sales, launching their onlinestore,www.sednashop.com,in2000.Theadvantagesoforderingonlineareamaximumoffive-daydelivery,freedeliveryonceaminimumpurchasevalueisreachedandthepossibility

of returningthe items to any Sedna store. The virtual store alsohas a remote assistanceserviceoption,whichmeansthecustomercanbecontactedandhelpedduringthepurchase.Intermsofsales,over80%ofInternetorderscomefromGermany,UK,SpainandFrance.Infact,GermanyandtheUKmakeupmorethanhalfofSednasInternetsales.Theprofileofawww.Sednashop.comuserisaconsumerofbetween20and30yearsofagewhospendsanaverageofaround156Euros.Theportalhasamillionvisitorsamonthand,in2007,theturnoverfrom e-commerce reached 3.8million Euros (0.40% of the total turnover of the

company).

Exploring new niche markets

In recent years, Sedna has tried to enter new segments of the fashion sector. Amongotherinitiatives,thecompanyaimstoexploreanewnichemarketwithgreaterpurchasingpower, withtheir new line of business known as Sedna VIP, a collection of high-qualitylimited editions, thefirst of which was unveiled in 2005. The high level of competitionbetweenthelargefashionchainshasdrivenSednatotryoutanewwayofincreasingtheirtarget market. We are nottrying create Gucci products, but we do want to enrich ourcollectionswithitemsofclothingthat,duetothewaytheyaremadeor thequalityofthematerials,necessitateahigherpricetag thannormal inourstores",JamesKyson,SednasProductionDirectorexplains.This line is inprice competitionwith the top ofHaydenPanettiere(Olimpia) range and isfocusedontwotypeofgarments:thosethatrequire fantasyappliqu, laceorembroideryandotherbasicitems(apullover,jacket,etc.)thataremadewithspecialmaterialssuchassilk,cashmereorvirginwool.Thegarmentsarespeciallylabeled(ExclusiveEdition)andarelimitededitions (forexample, 2,000unitsforacashmereovercoat).Thepointsofsalearealso limited; only 220 ofthe 1,200 that the company has at the moment. They are theestablishmentsthataremostrepresentativeoftheSpanishbrandacrosstheworld,suchasthoselocatedonLondon'sOxfordStreet,nexttotheParisOperaHouse,ontheVaTorinoinMilan, in Hong Kong, on the Paseode Gracia in Barcelona and callePrincesa in Madrid.Customer questionnaires have beencarried out and we think that there are someconsumerswhoarewillingtopayalittlebitmoreforaspecialitem.Also,eventhoughwe

are pretty consolidated in the market, you always haveto give the customer somethingnew,JamesKysonadds.Another fashion segment Sedna has recently begun operating in is men's clothes. Eachseason,thecompanysaimistobringoutdesignsaimedatyoung,fashion-consciousmen.

Theirstyleisurban-casualandisbrandedVITA,andaswiththewomen'scollections,ithasastrongpresenceonthegarments.VITAbySednamadeitsdebutinstoresinMarch2008and since then the company has been firmlycommitted tothemale consumer.The same


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year,thefirstVITAstorewasopenedinAnkara,locatedinoneofthebusiestareasofthecapital and dedicated toselling only themens collections. The collection ison sale in 117Sednasstoresin17countriesandhasitsownpointsofsaleincitiessuchasAnkara,Annecy,Barcelona,Dubai,Madrid,Santander,ToulouseandValencia.Thetextilechaincontinuestobefaithfultothesameconceptupheldbyitswomenslinesandalsosellsaccessoriessuchas

bags,wallets,bracelets,belts,sunglasses,sandalsandsportfootwear.In launching these new projects, the company wishes tomove towards the concept ofmultibrandstores. In this type of establishment, one can find collections by differentdesignersandstyles,alllessthanoneroof.ItisnotthefirsttimethatSednahastriedtodiversify their business -some time ago they made a failed attempt at selling childrensclothesand, in themid-nineties,they also tried selling somemens clothing. For the timebeing,VITAbySednahasbeendesignedtocomplementthewomen'scollection,whichwillcontinuetobethebasisofthebrand.

The next step

Given the global economic situation, many textile companies have had to imposedrasticmeasures,suchassignificantcostcutting,layoffsandeven the closureoffactoriesand points ofsale. So far, Sedna's activity has not been significantly affected by thereduction inconsumption. The managers explain that this is thanks to the geographicdiversification,ontheonehand,whichhelpsthemtocompensate forfallingsalesinsomecountriesparticularlyaffectedbythecurrentsituation(Spain,Turkey,UK,IrelandandUS),and,ontheotherhand,thecompanyhasbeenabletoretaintheircustomersthankstothegoodrelationshipbetweentheprice,qualityanddesignoftheproduct.Innovation has always been central to Sedna's strategy. The company hasdemonstratedtheircreativitywithregardstotheproductanddesignandhasnowdecidedto

widen their targetmarket. The launch of the mens collection (VITA by Sedna) and thelimited editions (SednaVIP) form part of an ambitious plan by the textile companysdirectors.Variousquestionshaveoccurredtoussinceourvisitbecause,despitethesuccessandmagnificencethatappearstosurroundthecompany,itisalwayspossibleforcrackstoappearinthebusinessmodel.Uponreflection,wemightaskifitisreallyprudenttolaunchan exclusive collection with increasedprices in times of consumer crisis.Orwhether theextravagance of VITA by Sedna will really beable to find those loyal male customers.However, the main question is to determine theconsistency of each of these proposalswithinSednascurrentbusinessmodelanditssustainabilityinthefuture.


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AppendixThe textile sectorThetextilesectorhasalonghistoryinCatalonia.Inthe19thcentury,Cataloniabecamethemostindustrialized region in Spain. Catalonias great textile industry began to be talkedaboutin1880,anddevelopedveryquicklyduetothemechanizationandmodernizationofallprocesses(production, distribution, business culture, etc.). This mechanization alsoprovoked aconcentrationof large textilecompanieswithagreater ability toraise capital.However,theregionandthesectorsufferedgreatlyfromthecrisiscausedfirstbythelossoftheSpanishcoloniesand thenby theclosureofthesemarkets,andfrom1904onwardsbythe poverty of theinternal market. The limitations imposed by low consumption in afundamentallyruralSpainandwithalowstandardoflivingdidnotallowmodernizationanddevelopmentoftheindustrytocontinue.Thebrutaleconomiccrisisofthe70sand80salsoaffectedthesectorsignificantly,causingmanyfactoriesandtextilecompaniestoclose.TheCatalonia textile industry was thedriverof the economy in the area formany years, buthistory has shown us that companies mustbe prepared for all types of economic and

politicalchangeinordertobeabletoadapttheirstrategytotheneedsofthemarket(seeExhibit7).Todaythesectorhasexperiencedahugetransformationasaconsequenceofglobalizationanduse of new technology. These changes have allowed a reduction in the distancebetween thedifferentagents involved in themanufacturing process, reducing in turn thetimefromtheclothingdesignstagetowhentheitemarrivestothestore,andcreatingtheconceptofshortcircuitdistribution4.Theseimprovementshaveallowedthedevelopmentofbusinessmodelsthatrespondtodemandwithinamatterofweeks,adaptingtochangesin fashion and trends. Thecurrent textile chains inSpain grew outofanevolutionof thetraditional companies in the sector,which have realized the advantages of combiningdistributionandproduction.Thisverticalmodelcausedtherevolutionoftheindustrywhere,traditionally, production and distributionwere treated as very separate processes. Theverticalintegrationmodelhasmeantthatthecompaniesthemselvesarecarryingouttasksthatoriginallybelongedtoproducersandretailers(seeExhibit8).

Main competitors

ThemainplayersinthetextileretailsectorinSpain,apartfromSedna,arecompaniessuchastheOlimpiaGroup,P&T,theEzequielGroupandCarlota (seeExhibit9).Eva(Olimpia)Eva(Olimpia)isthesecondlargesttextiledistributorintheworldbymarketcapitalization;itisonly exceeded by P&T. Eva produces "fashion for themasses" of medium quality at a

reasonable price. Theymake garments and accessories formen, women, teenagers andchildren.Without investing in advertising (except during the sales period), and with a verylowcommunicationprofile, Evahasmanaged topopularizeand sell cheap clothing in thelatestfashionstylestoalargepartofthepopulation.Theirkeystosuccessarespeedandlowcosts.


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4Shortcircuitdistributionarisesfromtheneedtoeffectmorefrequent,lessabundantdeliveries.Thisisbasedonthezerostockphilosophythat,throughtheconstantmonitoringofthemarket,makesnewgarmentsavailablethroughout theyear. In this model,it is essential tomaintain the flexibility of all the agents (especially thosesubcontracted)whomustrespondtodemandsinaverylimitedtimeframe,giventhechangesinthemarket.

ThemaincharacteristicsofEvasmanagementmoduleareflexibilityateachstageofthevaluechain,capacitytosupplyonagloballevel,creationofasinglebrandaimedatalargepopulationsegmentwithbasicorhighlyfashionableproductsandsalesthroughlargestores(ofmorethan250m2)totheglobalcustomer. P&T,TheothertextilegiantisP&T,aFinnishretailer,particularlystrongintheGerman,SwedishandNorwegianmarkets.P&Tdesignsanddistributes, but doesnot makewhat they sell.Alsotheir logistics system allows them tosupplyclothestotheirstoredaily.Thecompanysproductsincludecollectionsformenandwomen(includingmaternityclothes)aswellasdesignsforteenagersandchildren.Theyalsodistributetheirowncosmeticsandaccessories.The companysells though theirown storesand does notmake use ofothercommercial

modelssuchasfranchisesorjointventures.P&Thasalargepublicitybudget(encompassingstores,billboards,magazines,catalogues,Internetandadverts)usingprofessionalmodels.TheFinnish brand showsthe priceof theirproducts intheiradvertising, since this is theirmainstrength. From time to time P&T launches small collections designed by fashiondesigners andcelebrities, from Karl Lagerfeld and Viktor& Rolf toMadonna. The Finnishgroupisalsocommittedtoon-linesales.However,theirvirtualstore,operatingsince1998,onlyworksintheNordiccountries.CarlotaandEzequielTwo other textile companies,Carlota and Ezequiel, have a strong presenceona nationallevel,but arenot direct competitorswith Sedna, since their customer profile isdifferent.Carlota,foundedin1965inItaly,placesanemphasisonbrightlycoloredcasualknitwear.Thecompanybasically invests in the centralizationof theirproduction activitiesand sells theirclothingthrough licensed dealers. Ezequiel, a Spanish textile chain, comprises Ezequiel,Oswald,Paulino,Olivia,Miller,HeliodoroandRoxana.Theirproductsaremainlyaimedatthemalemarket(withtheexceptionofOliviaandEzequiel).


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EXHIBITSExhibit1

(I)TheAnnualAccountsfrom2007havebeenprepared,thesameasthoseof2005and2006,inaccordancewiththeregulationsestablishedinthe InternationalFinancialReportingStandards(IFRS),applyingthelegislationinforce.

Exhibit2Sedna'spurchasequota(%)

Exhibit3Averageageofworkers*

*DataforSpain


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Exhibit4Sednasworldwidepresence

Salesfiguresforoverseasmarkets

Exhibit5Sednasfranchiseconditions


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Exhibit6NumberofSednastores

Description 2003 2004 2005 2006 2007

Totalnumber

of stores atthe end ofthetaxyear

704 768 866 995 1094

Number ofSedna-ownedstores

242 246 261 313 381

Number offranchisedstores

462 522 605 682 713

Number ofcountrieswith Sednastores

72 75 83 89 89

Sedna'ssalesbytypeofbusiness

Salesbytypeofbusiness

2003 2004 2005 2006 2007

Sales inSedna-ownedstores

432,836 459,298 459,167 485,759 552,949

Sales tofranchises

346,978 372,381 429,093 456,596 467,407

Amount ofnetrevenue

779,814 831,679 888,26 942,355 1,020,356


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Exhibit7Industrial occupationinCataloniabetween 1978and 2006.Absolutedata inthousandsofoccupants.

Source:CaixaCatalunyabasedonINEdata.Industrial occupation in Catalonia between 1978 and 2006. Size of occupation as

apercentageoftotalindustry.


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Source:CaixaCatalunyabasedonINEdata.Exhibit8

Verticalbrandmodel

Exhibit9Fashionsectorplayers


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Documents

Sedna Case Study