Question: Continues Growth of Zara and Inditex Case study analysis
Zara is one of the trendiest clothes shopping brand and its parent company Inditex wants to expand it in a global scenario. The plan was to enter into new markets by opening new stores so that it can reach customers faster than anyone else. Zara has almost 60% of total business of Inditex so it is obvious that the growth and success of Inditex is more dependent on Zara’s performance in market. The economic downswing caused a fear of downfall of revenue and profit of Inditex especially in Spain market where 1/3 of total revenue comes. Thus Inditex had to think an action to hold the market tight in this crunch situation. [Mazaira, A et.al2003]
Issue under study- Availability of new and latest trend to the customers before anyone reaches.
Approach of Inditex and Zara-
The first challenge for Inditex and Zara was to deal with the competitive actions. For ex- Japan’s Forever 21, Patagonia Inc., H&M and Mango, all were in going for expansion either by setting up new stores or by bringing new fashion. Zara is mostly known for its inexpensive trendy fashion but to capture more market, it also started luxury fashion brand like Gucci, Bur berry and Louis Vuitton. Inditex went for 560 stores within a year and it made the presence around 68 countries.
Zara follows two key traits which are- 1.Know what customer is looking for and 2. Make it available at the lowest rate by controlling its supply chain or logistics cost. The only thing that Zara and Inditex needed to do is to make the latest trend available to its customers. How did they achieve that?
Analysis of Supply chain
Zara’s new and latest arrivals reach the stores within 15 days on an average. This is much faster to rest of its competitors whose average days are not less than 180 days. The whole design, produce and then delivery takes place within that span. Zara at first to reduce the cost of labour, it brought flexibility in production i.e. production is carried out nearby warehouse and distribution centres. It introduced a software system that enables in stores to schedule staffs as per sales volume thus it helped to deal with customers better. Further such software system helped them to rank the bestselling items in stores within an hour so that order for more stocks can be placed at right time to get clothes as early as possible. The designer team designs let’s say 40000 items annually out of which 10000 selected for production thus it becomes possible for Zara to bring new fashion faster without worrying earlier fashion stocks available or not.
The fast fashion concept of Zara lies in the way communication takes place. Customer expresses that desire to store manager then it goes to designers of Zara and from there to production department who places material order to the sub-contractors. As Inditex takes the whole responsibility, it becomes the centralised system thus control of supply chain remains tight.
With the online launch, it has expanded the operations to many other parts of the world and that resulted growth in their business. [Zhelyazkov, G. (2011).]
The existing supply chain is doing well but few more things if gets considered, it will do better in market-
•Increase the tie-ups with e-commerce stores as they have better logistics services and also customer connections. Ex- Amazon, Alibaba, E-bay
•Increase the focus on Asian market which is getting better with trending dress. This can be possible with opening distribution centres in countries like China, India and Russia.
•Find some creative ways to look the stores fresh.[Tokatli, N. (2008).]
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Mazaira, A., Gonzalez, E., &Avendaño, R. (2003). The role of market orientation on company performance through the development of sustainable competitive advantage: the Inditex-Zara case. Marketing Intelligence & Planning, 21(4), 220-229.
Tokatli, N. (2008). Global sourcing: insights from the global clothing industry—the case of Zara, a fast fashion retailer. Journal of Economic Geography, 8(1), 21-38.
Zhelyazkov, G. (2011). Agile Supply Chain: Zara's case study analysis. Personal Website.