A proper case study or report on Zara under the subject 'Global Business Management'

1. FACULTY OF MANAGEMENT
IMBA
Project
For
GLOBAL BUSINESS MANAGEMENT
“A CASE STUDY ON ZARA’’
SUBMITTED TO:
PROF. SMRUTI VAKIL
SUBMITTED BY:
MEERA THAKKAR (IM 15099)
Year 2017-18

3. INTRODUCTION
Zara, a well-known reputed fashion designing and manufacturing company has been declared most
efficient and market responding enterprise in UK’s fashion industry. Mr. Amanico Ortega, the
creator and initial organizer of Inditex is appreciated for his strategic decisions as well as his
market competition winning strategies have been accepted and followed by his competitors now.
Zara, one of the brands of Inditex, founded in 1975, is the most renowned and famous fashion
icon. It is not only generating the highest profit margins for organization but also is the most
famous and recognized by customers in market. The majority of captured market by Inditex is for
Zara. An estimated share of Zara in total revenue of group is 80%. It’s a Spanish based company,
and has successfully proven itself as a leading company which is successful in positively providing
service to their customers. It is the fashion icon which is serving industry since decades and still
its customers are so satisfied that is going to be even better in future.
Management has taken decisions that were entrepreneurial at that time and still most of the
companies in industry are not deciding on same in fronts. Such decisions that lead to success are
possible after a deep thoughtful process that requires environmental analysis. Zara has already
reached its objectives and is a leading company and now further expansion is under consideration.

4. PRESENT OBJECTIVES AND MISSION
Inditex group has clear and definite concept and plans for future. In their mission statement, they
have described their priorities and general processes that are selected for organization. The founder
has chosen a set of strategies that ensures a long lasting, promising successful career. The group’s
mission statement for Zara, under the head of ‘Environmental Policies ‘says: “Through Zara’s
business model, we aim to contribute to the sustainable development of society and that of the
environment with which we interact”. At every store level, the mission has been defined as, “At
the store”
 We save energy.
 The eco-friendly shop.
 We produce less waste, and recycle.
 Our commitment extends to all our staff.
 An environmentally aware team.
 We use ecological fabrics.
 Organic cotton.
 We manufacture PVC-free footwear.
A business vision for specifically Zara, a fashion based product offering company is,
ZARA IS COMMITTED TO SATISFYING THE DESIRES OF OUR
CUSTOMERS. As a result, we pledge to continuously innovate our business to improve
our experience. We promise to provide new designs made from quality materials that are
affordable.
So far, the company has satisfying progress towards completion of defined goals. Inditex
as a group has been recognized more co-friendly than competitors and now has gained a
repute of being sensitive and rational towards the community and environment welfare
issues.

5. Zara, is offering products (clothes, shoes and furniture) in 68 countries. A range launched
in a country is followed in all the stores and same culture of rapid sale and removal of
older inventory is followed. A General concept followed by Zara so far is to offer variety
of clothes in a short quantity and for a shorter time period, customers being aware of this
flow of items in stores, choose and buy the items right away rather than waiting for some
‘sale. Products offered by Zara are not very highly priced and a common acceptance for
prices and quality of items has been observed Men, women and children section have duly
served for and targeted the potential customers. Its products are capable of satisfying
shoppers ‘needs.
Demand management is done by supplying directly from Zara, Spain. A fast and
responsive system for shipments have been developed that is satisfying current needs.
Currently Zara is working on its environmental friendly program and launching stores
with technology that supports its approach.

6. STRATEGIC OPTIONS AND CHOICES
Manufacturing tasks i.e. major assembly of components are done at a center in Spain and
concept of cheap outsourcing is denied by Zara. This is a good approach towards owned
working force and not to get involved in activities that may lead to unethical concerns.
Organization has developed a smooth image for quality management process implications
in industry and now it is time to unleash new domains for organizations. It is not
recommended that company should start activities in outsourcing that may led to
questions and confuses in current quality management and employee relationship
management, but a healthy process that leads to internationalization should be considered.
Another option that has been followed by management in last years is to become eco-
friendly and development of such sales points. The Inditex group has achieved eco-
efficient and friendly certificates; a major one is LEED (Leadership in Energy and
Environmental design). LEED is a famous and one of the acknowledged certificate and
Inditex had got it for Zara Barcelona. Inditex management has mentioned this in its
mission statement and following this objective will create a competitive advantage.
Competitors are in process of getting this milestone and the group has to make new plans
and create more benchmarks in this eco-friendly race.
Zara has spread a common concept of fast fashion. New style ranges are frequently
introduced in market and thus Zara is moving parallel to market trends. Sales persons at
stores with PDAs communicate and inform “The Cube” so fast that enables Zara to
respond market in two weeks. Team of designers, including 300 stylists take the
information and feedback from stores directly, analyze and propose new designs, which
take less than 10 days to reach the market and customers see their realization of their ideas
in a practical form. Such rapid and fast paced response has created competitive advantage
and other companies that take six months to take a design from idea to realization form
are now moving towards this continuous and consistent communication with market. The
basic concept behind this strategy was to stay in contact with the customers, the real target

7. of a company, taking their feedback and then changing the products according to the
products. Zara is successful in creating an edge for itself and dominating its competitors
as no other firm can reach this level of fast delivery of inventory in store. Zara has focused
customers with short term needs and the reason behind was to minimize the operating
capital.
Becoming international brand is an aim that has been satisfied by the company but this
has been done to the extent of operating store in different stores. Now the expanding
markets, people with different high rated skills and countries offering favorable terms to
invest should be considered. All activities from design till shipment of consignments are
performed at single plant in La coruna. Management should take into account the
increasing risks of survival and security and business should be partly divided among
other favorable countries as well.
This will increase the targeted market and designs may flow in a domain of counties to
another. Customers from different countries have different preferences and hence a design
not appreciated in one country may get a welcoming response by customers from another
company.

8. DESIGN
Zara rejects the idea of conventional spring and autumn clothing collection in favor of “live
collections” that can be designed, manufactured, distributed, and sold almost as quickly as their
customers’ fleeting tastes-no style lasts more than four weeks. Zara’s 300 or so designers
continuously track market events, fashion trends, and customer preferences in designing about
11,000 distinct items per year compared with 2,000 to 4,000 items by rivals.
Designers get ideas from store managers, industry publications, TV, Internet, film content, and
trend spotters who focus on university campuses and nightclubs. Zara’s so-called slaves-to-fashion
is quick to snap digital pictures at culture shows and immediately reproduce the looks for the mass
market.
Zara does not develop products to respond to a particular country’s requirements. Management
believes the convergence of fashion and taste across national boundaries endorses its strategic bias
towards standardization. However, some product designs do cater to physical, cultural, or climate
differences-smaller sizes in japan, special women’s clothing in Arab countries, and different
seasonal weights in South America.

9. SOURCING
Zara sources from external suppliers with the help of purchasing office in Beijing, Barcelona,
Hongkong, along with headquarters staff. Zara also acquires fabric, other inputs, and finished
products from numerous suppliers in Spain, India, Morocco, and the far East. Linked with Zara’s
network, suppliers can coordinate their production with Zara’s projections. About half of the fabric
purchased is “gray” to update designs quickly during a season.

10. PRODUCTION
Like its rivals, Zara sources many finished garments from suppliers in Europe, North Africa, and
Asia. But unlike its rivals, Zara employs more than 14,000 people to male about 40% of its finished
garments in any of its 20 fully owned factories, 18 of them clustered around its headquarters in La
Coruna. Zara makes the most time-and fashion-sensitive products internally. Its factories are
automated, specialize by garment type, and focus on the capital-intensive parts of the production
process-pattern design and cutting-as well as final finishing and inspection.
Although it has been making garments since the 1980’s, Zara solicited the help of Toyota of Japan
to install a just-in-time system in the early 1990s. The company spent some 20-40% more to make
garments in Spain and Portugal than rivals in China, mainly due to labor costs. Zara compensates
for higher costs by minimizing advertising, cutting inventory expenses, and adjusting fashion
trends quickly.
Despite technology, many garments cannot be made by machine. In response, Zara has built a
network of about 450 workshops, located primarily in Galicia, the home state of La Coruna, and
across the border in northern Portugal, that perform the labor-and scale-sensitive activity of sewing
the garment pieces that were cut out at the factories. These workshops are small operations
averaging about 20-30 employees that specialize by product type.
Zara’s factories cut and color fabric of a particular garment. It then sends these pieces to the
workshop workers, who then return the finished garments to Zara. Upon return, they are inspected
ironed, folded, bagged, and electronically tagged before travelling on hanging rails along 125 miles
of underground tracks that link the various production sites to the logistics center.

11. LOGISTICS
All garments, both internally made and externally contracted, flow into Zara’s massive distribution
center in La Coruna or smaller satellite centers in Brazil and Mexico. Equipped with a mobile
tracking system that docks hanging garments in the appropriate bar-coded area, and with carousels
capable of handling 45,000 folded garments per hour, they have the mission to move as fast as
possible from the warehouse to stores around the world.
Driving the process are the twice-weekly deliveries to every Zara store triggered by real-time
inventory data collected through a network of Web-connected handles computers. Lorena Alba,
Inditex’s director of logistics, regards the warehouse as a place to move merchandise rather than
store it. Third-party delivery services manage the transfer of preprogrammed lots of stores. This
fancy digital footwork has dropped Inditex’s inventory to 7% of annual revenues, compared with
the mid-to high teens of its rivals.

12. STORE OPERATIONS
Zara’s stores have two primary purposes; present the company’s face to the world and function as
grassroots marketing research agents. The stores are put in high-profile slots, most often premier
shopping streets in markets such as the Champs-Elysees in Paris, Regent Street in London, and
Fifth Avenue in New York takes great care to make sure it puts its best face forward. Regional
teams of window dressers and interior coordinators visit each and every store every three weeks,
making sure the window displays and interior presentations convey the targeted message.
Back at the headquarters, designers wander the mock store space and test possible themes, color
schemes, and product presentation. These same standards apply to the staff: store employees wear
Zara clothes while working. Store managers and staff choose which merchandise to order, which
to discontinue and which to propose. Zara equips all salespeople with wireless handles organizers
that let them punch in trends, customer comments, and trends. Networked store transfer data on
which merchandise is selling along with the customer request, to Zara’s design terms, factories,
and logistics center in La Coruna. The availability of store managers capable of handling these
responsibilities.

13. FIRM INFRASTRUCTURE
The infrastructure that Zara has built to support these operations is a point of particular competency
for the company. There are many aspects, but two stand out: managers’ sense of customers,
markets and their ability to coordinate activity worldwide. Managers believe the allure of Zara is
the freshness of its offerings, the creation of a sense of exclusiveness, an attractive in-store
ambience, and positive word of mouth.
These ideas led to the notion of rapid product turnover, with new designs arriving in each twice
weekly shipment. About the three-quarters of the merchandise on display is changed every 3-4
weeks. This corresponds to the average time between visits given estimates that the average Zara
shopper visits the chain 17 times a year.
ZARA’S INFRASTRUCTURE AT MUMBAI

14. QUESTION AND ANSWERS
1. On which way can vertical integration of Zara be an advantage for the company?
 Cutting cost because they do not use any outsource channel.
 Cutting time, faster, effective, and efficient.
 Avoid conflicts emerge from different channels.
2. On which way can the fact that Zara has a single distribution center be an advantage?
 Centralized control, avoid misunderstanding or conflicts.
 Manageable time scheduling, focused on one rather than managing several
different time schedules.

15. CONCLUSION AND SUGGESTIONS
Zara is currently enjoying competitive leadership in fast fashions. It has made its
founder, the richest man in Spain. So far, strategies implemented by Zara provided
a firm base to organization. The changing or introducing change in strategies is a
difficult process to conduct, but to excel in business and cope with current
expanding markets Zara has to introduce some new objectives and strategies. No
single strategy can serve the purpose. Like, before Zara has to decide and
implementable combination for future. It is recommended that, not to implement
all the decisions in a single step, rather act and wait for response and then decide
for further actions to be taken. Detailed assessment of scenarios is to be done before
finalizing any decision because fashion market changes frequently, that rough
estimates may lead to undesired results.