presentation zara case of harvard 2003

Group 01 // Presentation // prof. Grilli

ZARA Project Work // Business Industrial Economics Yong Claudio Ke – 853051 Pierenrico Ferraro – 853693 Simone Ferrari - 851438

Alice Gilardetti – 853063 Carlo Faravelli - 854072 Roberta Guarino - 858889

INTRODUCTION

DESCRIPTION

Group 01 // Zara Presentation // prof. Grilli

Zara leads the international expansion of its parent, Inditex group

Inditex is one of the world's largest fashion retailers.Inspired by a responsible passion for fashion and care of customers.

Founded in Spain in 1975, by Amancio Ortega

INTRODUCTION

DESCRIPTION


Founded in Spain in 1975, by Amancio Ortega

Zara leads the international expansion of its parent, Inditex group

Fashionable and affordable clothing for every bodywith short LT and low inventories

THE PERFORMANCES


INTRODUCTION

In the last year raised 2$ billions of revenues.

Growth of sales of 23% in 4 years.

Zara provided 78% of total revenues of the group.

Net profit still 10% of the weight of revenues.

The assets growth from 1997 about 85% and the inventory weight kept 10%.

The percentage of stores abroad growth every year, the international power of Zara increases.

1997 1998 1999 2000

From Income Statement

Reveneus net income

1997 1998 1999 2000

From Balance Sheet

assets current Assets inv


MARKET ANALYSIS

MACRO ANALYSIS

MARKET ANALYSIS


Increasing pressure on prices.

Big successful chains vs small independent ones.

Usually the players use Outsourcing due to low transportation and labor cost.

Germany liberalization of blue laws.

UK most concentrate market.

In Spain, France and Netherlands are concentrated markets.

In Italy the independent retails have more power.

MACRO ANALYSIS

THE ENVIRONMENT


Fashion industry, with a lot of independent firms

The majority of Market share is owned by few players

The market is near to an Asymmetric Oligopoly and Monopolistic competition

model


THE COMPETITION

THE COMPETITION

THE PLAYERS


High Quality

High Price

MID POSITIONING

HIGH COMPETITION

CHALLENGE

MAIN COMPETITORS: H&M


THE COMPETITION

Founded in Sweden in 1947, by Erling Persson.

3$ billions earned in 2000 from its 730 stores, 86% abroad, 21 countries served.

Casual fashion at a low price.

Production of goods between 6 and 8 months in advance, 900 suppliers (50% manufactured in EU)

Its range covers 12 categories from traditional collections to more sophisticated ones.

Huge-dimensioned shops, strong advertisement.

MAIN COMPETITORS: GAP


THE COMPETITION

Founded in USA, 11,6 billions sales in 1999.

Basic casual wear, spends 5% of revenues in advertising

Gap kids (0-12), Baby Gap and Gap body are sub-brands that differentiate its offer.

Banana Republic sub-brand more innovative and fashion oriented, closer to Zara’s style with higher prices, covering a complete fashion wardrobe.

Old navy division is a retailer owned by GAP too, offering basic products of fair quality under an “everyday low price” policy.

MAIN COMPETITORS: BENETTON


THE COMPETITION

Founded in Italy in 1965, by Benetton Brothers.

Successful abroad campaign with an “Italian stylish fashion” brand image.

Although 34% sales and 45% profits comes from Italy in 1999Benetton kids (0-12 age), Sisley (more fashion oriented) are the main sub-brands.

Full-integrated process, 7000 stores.

MAIN COMPETITORS: C&A


THE COMPETITION

Founded in Netherlands in 19th century, by Clemens Brothers.

Quality fashion at reasonable prices.

Lower volume growth and little price inflation outside South.

Europe pressed it to withdraw from the UK.


MICRO ANALYSIS

MICRO ANALYSIS

THE INDITEX GROUP


MICRO ANALYSIS

PORTER’S VALUE CHAIN


Inbound logistics Operations Outbound

logisticsMarketing

& Sales Service

Firm infrastructure

HR Management

Technology

Procurement

VALU

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MICRO ANALYSIS

Zara is working through the supply chain as a Vertical Integrated Company, but capital intensive.

Only the inbound and outbound logistics are externalized.

Zara is producing the most of his goods in house, to better perform in flexibility, variety and frequency of their new styles (Efficiency).

VERTICAL INTEGRATION

Limited Run &

inventoryEfficiency

&Control

MICRO ANALYSIS

ZARA DIVISIONS


• Men’s Line • MEN Basic • 100ZARA• ZARA

sport ZARA kids

• ZARA Woman • ZARA Basic • Trafaluc

MICRO ANALYSIS

THE DIVERSIFICATION


Prices among different countries & Brands with different targets.

Several products based on local preferences, to better satisfy consumer’s needs.

OPERATIONS


MICRO ANALYSIS

80% of the production is made in Europe.

The labelling and the quality control before the shipping is made in Arteixo (headquarter). (10-15 later the product’s design).

In Arteixo there’s the distribution center, whose process the garments to the store (60000 clothes/hour).

LOGISTICS


MICRO ANALYSIS

Raw material supplier, fabrics coming from Spain, Italy, Turkey, India, China, or the Far East were cut and colored, and sent to 400 small special shop in Galicia and northern Portugal (multiple sourcing, offshoring).

Transportation & delivery to the stores twice a week.

MARKETING & SALES


MICRO ANALYSIS

Stores: the product stay here no more than one month (short lifecycle).

Real time feedbacks according to request by customers.

NO advertising as company’s policy.

Only twice a year to announce each of biannual sales in major newspapers.

With the season’s-end sales, Zara empties the stores.

THE STORES


MICRO ANALYSIS

Only way to purchase.

Minimal design, that changes each 2 years.

Leasehold arrangement is preferred, but only the principals are acquired.

Large windows.

Elegant atmosphere with Crystal elevator.

SERVICES


MICRO ANALYSIS

Customers could bring merchandise back to any store.

Credit was given for returned items according to the prices.

HUMAN RESOURCES


MICRO ANALYSIS

As things move so fast, there’s no one to teach you in a formal way. You need to be proactive and make yourself useful, keep a young mindset, and be open to change.

Building the all-important confidence in the company.

Before open a new store all the personnel has to be trained.

Compensation: fix part (15,6% of cost), variable part according to the performance.

R&D // Technology


MICRO ANALYSIS

ZARA’s motto is to keep it SIMPLE. The key is not in the software, but rather in managing the information effectively. The software should be simple and easy to use.

They use a team of Trend spotters.

Design of a core collection according to the forecast of 50% of the whole production, while 50% according to the demand.


BUSINESS MODEL


Stores

Allow customer to return product• Low cost and

medium quality• Latest fashion

garments• Continuously

new design

Clothes sales

• Design• Logistic• Forecast of

trends

• Distribution• IT

• Production• Logistics • Stores

• Fabric companies

• Fashion magazine

• Logistic companies

Zara’s main target is young, price-conscious and

highly sensitive to the latest fashion

trends

INTERNATIONALIZATION


BUSINESS MODEL

BUSINESS MODEL

SWOT


STRENGTHS WEAKNESSES

THREATSOPPORTUNITIES

-Design-on-demand retailing-Brand awareness-Good quality at reasonableprice-High number of stores in strategic point of main metropolis

-New markets’ conquest-Internet advent-Franchising-Promotion of other Inditex formats

-Internet boom, new environment-Efficiency problem acting in 2 hemispheres-New Entrants and local suppliers

-High production costs-Few time for forecasting costumer demand-High labor costs


NEW CHALLENGES


NEW CHALLENGES

EXTERNAL CHALLENGES

Different Cultures

Opposite SeasonEffect

USAMarket

South AmericaMarket


NEW CHALLENGES

INTERNAL CHALLENGES

Sustainability of the concept Design

On Demand

Retail

Franchise Dilemma

Expansion formats


THANK YOU