This document contains the names of 5 people: Christian Deing, Simon Luyken, Julika Reusse, Sebastian Stratmann, and Anna Worster. No other information is provided.
Report
Share
Report
Share
1 of 58
Download to read offline
More Related Content
Zara1
1. Christian Deing
Simon Luyken
Julika Reusse
Sebastian Stratmann
Anna Worster
1. What are the sources of Zara’s competitive advantage?
What is unique compared to H&M, The Gap and Benetton?
2. competitive advantage
Competitive advantage is defined as:
• a performance feature, which is silhouetted against other
competitors
• has to be tenable and economic
• is able to reach dimensions like price, time and quality, e.g.
cost advantage or differentation advantage
3. INDITEX
Brand Number of stores
ZARA 1501
Bershka 573
Pull and Bear 567
Massimo Dutti 461
INDITEX
Stradivarius
Oysho
444
363
ZARA Home 237
Uterqüe 24
Total 4.170
Quelle: www.inditex.com
4. ZARA
• 1501 stores in 71 countries in 2008
• Employees 25.000
• Employed €1,050 million of the company´s capital in 2001
72% of the total capital of INDITEX
•Revenue of €6,264 million in 2007
67% of the total of INDITEX
5. ZARA
• Headquarter in Arteixo, outside La Coruna
• Manufacturing most of the fashion-sensitive products internally
• ZARA´s designers produce about 11.000 distinct items during the year
competitors: 2000-4000 items
• Products are shipped to well-located stores twice a week
• Finished goods in stores within four to five weeks (entirely new designs)
in two weeks for modifications of existing products
6. Competitors
H&M The GAP Benetton
stores 1.700 3.100 5.500
countries 33 19 120
employees 68.000 152.000 8.000
designers 100 n.s. 300
revenue €9.6 billion $15.8 billion €2.085 billion
7. Comparison: ZARA vs. H&M
-vertical integration -all production outsourced
⇒Short lead times ⇒Long lead times
- engages many designers -60 % fewer designers
⇒Originate designs in a few weeks
- one distribution center -a distribution center in each country
⇒Better survey over inventory ⇒High costs
⇒ low costs
- expand very fast -expand very slow
(stores in 39 countries) (stores in 8 countries)
- stores as a „face to the world“ - no focus on store makeups
⇒Competitive advantage
8. Comparison: ZARA vs. Benetton
- three different modes for -one main mode for
expansion: expansion:
1.Franchise systems 1. Licensees
2.Company owned stores
3.Joint Ventures
⇒Competitive advantage
9. Comparison: ZARA vs. GAP
- vertical integration - outsourced all production
⇒Short lead times ⇒Long lead times
- fast expansion in 39 - slow expansion in 5
countries countries
⇒Competitive advantage
10. What‘s unique about ZARA?
- freshness (fast production and distribution to offer the latest
fashion)
-Change 75 % of the merchandise on display every 3 or 4 weeks
⇒The frequency of customer visits rises
⇒Scarcity
-few advertisement
⇒Customers need to visit stores to get the newest fashion
⇒Save costs for publicity
11. Case Study 2:
ZARA: Fast Fashion
Group 7:
Matthias Freese, Thorsten Hiedels
Kirstin Jansen, Sabine Kürten
Aleksandra Ludwa, Jennifer Montag
Johanna v. d. Asseburg
Case Study 2: ZARA: Fast Fashion, Group 7 1
12. Table of contents
1 Introduction
2 Zara’s Business System
3 Pros and cons of Zara’s activity architecture with regard to The
Gap, H&M and Benetton and in light of the changing
environment
Case Study 2: ZARA: Fast Fashion, Group 7 2
13. 1 Introduction
- Inditex:
- umbrella group of Zara and 5 other apparel chains
- founded in 1963 in Galicia, Spain
- Zara:
- headquarters in Arteixo, Spain
- till 2002: 507 stores in 42 countries
- position: “medium quality fashion clothing at affordable
prices“
- competitors: The Gap, H&M, Benetton
Case Study 2: ZARA: Fast Fashion, Group 7 3
14. 2 Zara‘s business system
Activity circle:
Case Study 2: ZARA: Fast Fashion, Group 7 4
15. Design
- creative teams
- different sources for information: store managers, consumption
information system, TV, internet, industry publications, film,
trend spotters, ready-to-wear fashion shows
- first sketches about nine months before start of a season
- presentation in certain key stores
- determined prices
Case Study 2: ZARA: Fast Fashion, Group 7 5
16. Sourcing and Manufacturing
- assistance of purchasing offices in Barcelona and Hong Kong
- more than 200 external suppliers
- 60% of the clothes produced externally, 40% internally
- 450 workshops where garments are sewed
Case Study 2: ZARA: Fast Fashion, Group 7 6
17. Distribution
- own distribution center in Arteixo
- satellite center in Argentina, Brazil and Mexico
- center works on a dual-shift basis
- equipped with mobile tracking system
- delivery upon Europe takes about 24-36 hours, outside Europe 24-48
hours
- scheduled shipments by time zones
- establishment of a second distribution center at Zaragoza in 2003
Case Study 2: ZARA: Fast Fashion, Group 7 7
18. Retailing
- consists of merchandising and store operations
- stores placed in premier shopping streets and centers
- set high value on presentation of store window displays:
prototypes at headquarters
- continuous training on their personnel
- very low advertising expenditures, no fashion shows
- main retailing-tactic: create a sense of scarcity
- aim: reduce inventories at marked-down prices
Case Study 2: ZARA: Fast Fashion, Group 7 8
19. 3 Pros and cons of Zara‘s activity architecture
- most significant advantage: reduced cycle time due to the
implementation of the quick response system
Case Study 2: ZARA: Fast Fashion, Group 7 9
20. 3 Pros and cons of Zara‘s activity architecture
- different product precommitement:
Case Study 2: ZARA: Fast Fashion, Group 7 10
21. 3 Pros and cons of Zara‘s activity architecture
Design:
+ store managers gather information directly at point of sale
+ design department organized in flat structure
- Zara has more staff employed although it is smaller than H&M
higher labor costs, but lower risk of fashion miss (as H&M)
+ continuous tracking of customer preferences
numerous variations of items
+ presentation of items in key stores
reduced failure rates
Case Study 2: ZARA: Fast Fashion, Group 7 11
22. 3 Pros and cons of Zara‘s activity architecture
Sourcing and Manufacturing:
+ in-house production of 40% of the garments
better control of most fashionable clothes
short lead times
+ offers always the latest fashion trends
+ change of MFA: no import quotas and reduced tariffs
no more barriers for outsourcing production, but larger
benefits for H&M
- increasing complexity of cross-border intermediaries
higher coordination costs
Case Study 2: ZARA: Fast Fashion, Group 7 12
23. 3 Pros and cons of Zara‘s activity architecture
Distribution:
+ cost savings by centralized distribution center
- capacity problems with only one center when Zara keeps
expanding
establishment of second distribution center
- H&M: closer to the market by decentralized distribution center in
each country
does not need scheduled shipments by time zones
Case Study 2: ZARA: Fast Fashion, Group 7 13
24. 3 Pros and cons of Zara‘s activity architecture
Retailing:
+ flexibility of operating in the best spots by using joint-ventures
+ standardized offering: 85%-90% basic items
satisfaction of many markets with little effort
even easier in the future as tastes assimilate
+ standardization of store window displays
consistent image
low costs
but: ignorance of individual preferences
- low advertising expenditures
missing of the chance to gain more customers
no communication of social responsibility as Benetton does
Case Study 2: ZARA: Fast Fashion, Group 7 14
25. Thank you very much for your
attention!
Case Study 2: ZARA: Fast Fashion, Group 7 15
26. Harvard Business Case Study “ZARA: Fast Fashion”
Question 3:
Evaluate ZARA’s global strategy in light of the
McKinsey recommendations in the assigned reading1.
How does it compare?
1: Incandela, D.; McLaughlin, K.L.; Smith Shi, C. (1999): Retailers to the World, in: The McKinsey Quarterly,
Vol. 3, pp. 84-97.
27. Agenda
• Introduction to ZARA’s international operations
• Recommendations by McKinsey
• Evaluative comparison
• Summary of conclusions and recommendations
28. Agenda
• Introduction to ZARA’s international operations
• Recommendations by McKinsey
• Evaluative comparison
• Summary of conclusions and recommendations
29. Introduction to ZARA’s international operations
largest and most internationalized chain of Inditex
282 stores in 32 countries outside Spain (in the end of 2001)
expansion began in 1988 in Oporto, Portugal
rapid internationalization between 1998-1999: 16 countries
ZARA is expanding very rapidly
in comparison to other retailers like H&M,
who added only 8 countries in 20 years
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 4
30. Agenda
• Introduction to ZARA’s international operations
• Recommendations by McKinsey
• Evaluative comparison
• Summary of conclusions and recommendations
31. Five approaches to launch a self-reinforcing cycle of
benefits propelled by access, scale and expertise
Choose your sliver - decisions about which The “virtuous circle”
1 sliver to own, which to control without
owning and which to off-load are necessary
Get comfortable partnering – access to
2 new distribution systems and brand equity
Invest in intangible assets - the new
3 source of competitive advantage 3. Expertise 1. Access
• brands and reputation
• technology and know how
• talent and skills
Keep expenses and capital require-
4 ments low – by centralization, restructuring
and outsourcing 2. Scale
Exploit opportunities to arbitrage –
5 by value proposition arbitrage
and/or cross-border arbitrage
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 6
32. Agenda
• Introduction to ZARA’s international operations
• Recommendations by McKinsey
• Evaluative comparison
• Summary of conclusions and recommendations
33. 1
McKinsey recommends retailers to optimize the value
chain by focusing on slivers
Companies have to decide which slivers of the value chain
to own, partly-own or to off-load
• It is not always efficient to own all parts of the value chain
Reason: • Some processes have very high outsourcing potential
Outsourcing decision drivers:
Cash Flow Capital Requirements Risk Competitive Advantage
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 8
34. 1
Selected Slivers of ZARA’s Value Chain
Slivers and Processes
Design: Sourcing:
All design related processes are fullfilled
In ZARA’s Responsibility All sourcing activities are done externally.
Fully outsourced
inside the company.
Manufacturing: Logistics:
Basic-items are manufactured in Asia. Fashion Logistics are completely outsourced. About
Partly outsourced
items are more risky and therefore produced 75% are deliveredoutsourced
Fully by truck. The remeining
by ZARA‘s fully owned factories ones are manily organized by airmal.
Sales: Distribution:
ZARA delegated store management espacially All distribution processes are supervised and
Partly outsourced
in smaller and riskier countries by using In ZARA’s Responsibility
executed from one central and fully-owned
franchising. Joint Ventures are used if prime distribution center in Spain.
shopping space is not avaiable for ownership.
ZARA decided carefully on which slivers to concentrate and which to off-load
Therefore ZARA succeeded in implementing McKinsey’s advice concerning the value chain
HBS Case Study “ZARA”, Gruppe 8 9
35. 2
McKinsey recommends to establish partnerships to be
successful internationally
Build partnerships
• To get leads
• To enhance the distribution system
• To build brand equity in new markets
Remain in control of these alliances !
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 10
36. 2
ZARA has established controlled partnerships in
production and downstream activities
Manufacturing
ZARA has long-term relations with suppliers CONTROL
and subcontractors
Sales
In smaller and riskier countries, ZARA uses
Franchise Systems CONTROL
Joint Ventures are used in mature and more
established markets like for example Germany
ZARA has successfully implemented McKinsey’s recommendations
regarding partnerships
HBS Case Study “ZARA”, Gruppe 8 11
37. 3
McKinsey recommends the investment in intangible
assets as the new source of competitive advantage
Brand and reputation IT, technology, skills People and talents
• Distinct value proposition • Invest in proprietary • Scarcity of qualified
with adjustments to technology to managers challenges HR
region/country specific - improve customer access policies
differences - raise service levels
- increase business • Build up talent pools in
• Personality of the brand efficiency several stages
must appeal to target group
and be reinforced at every
contact point
• Total visibility of the brand
through all appropriate
communication channels
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 12
38. 3
Regarding the investment in intangible assets, ZARA
focuses on innovative technologies
Brand and reputation IT, technology, skills People and talents
• adjustment of marketing • strong investment in • incentive-intense payment
mix to country individual technology since 1990 model for store managers
needs - innovative JIT - variable parts based on
- experience gained in manufacturing system (co- store performance
flagship store developed with Toyota) • low hierarchies
- price according to WTP - advanced - store managers as
- slightly different portfolio telecommunication system entrepreneurs
• concentration on store - sophisticated consumption • advanced training program
image information system
• But: scarcity of store
high brand awareness managers is main barrier to
• comparably little further expansion
investments in advertising, - 90% recruited from within
esp. in foreign markets
ZARA almost meets the McKinsey recommendations w.r.t. intangibles
ZARA should invest more in international brand power using various media channels
and put stronger emphasis on international recruitment
HBS Case Study “ZARA”, Gruppe 8 13
39. 4
McKinsey recommends retailers to strive to be
“expense and capital light”
Keep expenses and capital requirements low
Realize greater purchasing benefits and margins
by reducing capital commitment and costs
Manage a low need for capital Decide about global sourcing Centralize overlapping
by franchising or renting rather activities and IT investments category groups, e.g. finance
than owning stores functions
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 14
40. 4
ZARA has taken numerous measures to keep expenses
and capital requirements low
Operation Impact
• integrated just-in-time manufacturing system, short lead and cycle times,
central distribution center with direct shipping low storage costs
to the stores
• intense market research incl. interviews with low failure rates,
store managers and product development reach planned sales
• long-term leases instead of owning
• different business types to go global low financial strain
(own stores, joint ventures and franchising)
• flat hierarchies, e.g. design department
• main organization by divisions flexibility and shorter communication lines
(women, men and children)
• production of price-sensitive items outsourced
• minimum amount of advertising low production and selling prices, but with
• lean administrative organization expected hold up margins
ZARA strategy efficiency control corresponds to McKinsey’s advices
ZARA successfully controls its costs, realizing beneficial impact on operational results
HBS Case Study “ZARA”, Gruppe 8 15
41. 5
McKinsey recommends the exploitation of
opportunities to arbitrage in order to reduce costs
Cross-border arbitrage Value proposition arbitrage
• focus on price level when • no real differentiation among product
entering a new market portfolio across the different countries
• forecasting of prices on local • 85%-90% of products are common
market prices not on own costs • no design of products for specific
• entering markets with a higher preferences of only one country
preference for apparel (Italy) • standardized reporting systems
• same business model in similar types
high rate of absorption of countries
of buying power
amortization of centralized
concepts by rolling them out
across many markets
ZARA is implementing the suggestions of the McKinsey concept
HBS Case Study “ZARA”, Gruppe 8 16
42. Optimal expansion path depends on starting situation
McKinsey strategic control map
Initial situation… …determines global strategy
high Address performance problems first. Then
1
grow by a) investing in intangibles/ load-off
(4) unattractive value chain parts and/or b)
(2)
Super- penetrating home market and global expansion
Experts
leaguers
Performance
Expand the business into new markets
2 through organic growth or acquisitions; skills
transfer and synergies are crucial success
factors
(1) (3)
Incumbents Integrators Invest in intangible assets and take further
3 means to increase performance
low
Size 4 Stabilize the successful business concept
small large
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 17
43. ZARA heavily invested in technology to increase
profitability before starting major global expansion
ZARA’s expansion path
high
(4)
• high investments in intangible assets (2)
Super-
(esp. IT) in the 1990s, i.e. before Experts
leaguers
major phase of international
expansion Performance
• having a strong performance, ZARA
grows in size on a global scale, (1) (3)
opening 16 stores from 1998-1999 Incumbents Integrators
(282 stores in 32 countries today)
low
Size
small large
ZARA has gone the recommended global expansion path,
starting from an incumbent’s position
HBS Case Study “ZARA”, Gruppe 8 18
44. Agenda
• Introduction to ZARA’s international operations
• Recommendations by McKinsey
• Evaluative comparison
• Summary of conclusions and recommendations
45. ZARA almost completely lives up to McKinsey’s
requirements; few improvements to be realized
Approaches recommended Further improvements to be
by McKinsey addressed by ZARA in the future
1 Choose your sliver
2 Get comfortable partnering
• increase international investments
3 Invest in intangible assets in advertising
• increase international recruitment
efforts
4 Keep capital requirements low
5 Exploit opportunities to arbitrage
Source: McKinsey (1999)
HBS Case Study “ZARA”, Gruppe 8 20
47. Case Study Zara
“What do you think of Zara’s past international growth
strategy? Evaluate, in particular, its strategy for market
selection, its mode of entry, and its marketing approach. What
is the best way to grow Zara now?“
48. Agenda
Introduction – What is ZARA?
International Growth Strategy
Market Selection
Market Entry
Marketing Approach
Best way to grow Zara now
21.11.2008
49. Introduction
What is ZARA?
Foundation of Inditex (Industria de Diseno
Textil) by Amancio Ortega in 1975
ZARA is one of the six apparel chains of Inditex
(completely independent and organized
individually)
ZARA is Inditex’s most important chain
ZARA has over 500 stores in 30 countries
Fashion Collection changes twice a year
(autumn/winter & spring/summer)
Benetton, H&M and the GAP are their most
important global competitors
Unique selling proposition is due to short cycle
times
21.11.2008 Case Study ZARA: Fast Fashion 3
50. International Growth Strategy
Market Selection - Overview
Waterfall Strategy
Market Selection Process:
Countries which are similar to
ZARA’s home market
Macro Analysis
Micro Analysis
Preconditions for entering:
Minimum level of economic
development
Low entry barriers
Oil-Stain Strategy
21.11.2008 Case Study ZARA: Fast Fashion 4
51. International Growth Strategy
Market Selection - Evaluation
Enough time to explore markets from the Risk of competitors copying ZARA‘s
outside business model and entering markets
Test if their business model can be before ZARA is able to
applied to foreign markets (to reduce -> Increasing market barriers
risk)
High headquarter costs for only a few
No danger of loosing control shops in the beginning
Possibility to meet the special cultural Time-and-money consuming process
demands
Lately, ZARA decided to grow faster, enabled through their bigger
experience and equity which is a step in the right direction
21.11.2008 Case Study ZARA: Fast Fashion 5
53. International Growth Strategy
Market Entry - Evaluation
Company-owned stores
High level of influence over the behavior Require many resources such as high
of the employees capital commitment
Ability to control the Brand presentation
at POS
Franchising
Opportunity to generate fast growth Lack of control -> Image losses
without needing a lot of equity
Dependency on their partner
Overcoming cultural barriers
Joint Ventures
Sharing core competences
Dependency on a partner -> need of a
More control of the actions taken trust base
Different methods enable ZARA to meet the demand of every country
21.11.2008 Case Study ZARA: Fast Fashion 7
56. International Growth Strategy
Best Way to grow ZARA now (1/2)
ZARA needs to be more present in more
countries worldwide to strengthen the brand
name and their significance
Growth potential: Russia, East & North
Europe, Italy, Australia, South Africa
Exploration of new Markets in a short time
period -> Danger of competitors growing
Increase the amount of shops rapidly &
drastically to play a greater role in the
people‘s mind
21.11.2008 Case Study ZARA: Fast Fashion 10
57. International Growth Strategy
Best Way to grow ZARA now (2/2)
Establish a department whose task is
to visit the franchise stores
Use E-Commerce
Bigger focus on marketing (e.g.
internet, (TV) commercial, billboards)
People who bought online any of the following
products or services during the last three months
ZARA has big growth potential but they need to find the optimal balance
between risk and innovative methods to address their customers
21.11.2008 Case Study ZARA: Fast Fashion 11