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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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
MACRO ANALYSIS
MARKET ANALYSIS
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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 PLAYERS
Group 01 // Zara Presentation // prof. Grilli
High Quality
High Price
MID POSITIONING
HIGH COMPETITION
CHALLENGE
MAIN COMPETITORS: H&M
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
PORTER’S VALUE CHAIN
Group 01 // Zara Presentation // prof. Grilli
Inbound logistics Operations Outbound
logisticsMarketing
& Sales Service
Firm infrastructure
HR Management
Technology
Procurement
VALU
EPr
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y ac
tiviti
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es
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
• Men’s Line • MEN Basic • 100ZARA• ZARA
sport ZARA kids
• ZARA Woman • ZARA Basic • Trafaluc
MICRO ANALYSIS
THE DIVERSIFICATION
Group 01 // Zara Presentation // prof. Grilli
Prices among different countries & Brands with different targets.
Several products based on local preferences, to better satisfy consumer’s needs.
OPERATIONS
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
MICRO ANALYSIS
Customers could bring merchandise back to any store.
Credit was given for returned items according to the prices.
HUMAN RESOURCES
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
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.
Group 01 // Zara Presentation // prof. Grilli
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
BUSINESS MODEL
SWOT
Group 01 // Zara Presentation // prof. Grilli
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
Group 01 // Zara Presentation // prof. Grilli
NEW CHALLENGES
EXTERNAL CHALLENGES
Different Cultures
Opposite SeasonEffect
USAMarket
South AmericaMarket
Group 01 // Zara Presentation // prof. Grilli
NEW CHALLENGES
INTERNAL CHALLENGES
Sustainability of the concept Design
On Demand
Retail
Franchise Dilemma
Expansion formats