Zara Business Case

Good Essays
REV: DECEMBER 21, 2006


ZARA: Fast Fashion
Fashion is the imitation of a given example and satisfies the demand for social adaptation. . . . The more an article becomes subject to rapid changes of fashion, the greater the demand for cheap products of its kind. — Georg Simmel, “Fashion” (1904) Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel retailing chains, continued a trajectory of rapid, profitable growth by posting net income of € 340 million on € revenues of € 3,250 million in its fiscal year 2001 (ending January 31, 2002). Inditex had had a heavily € oversubscribed Initial Public Offering in May 2001. Over the next 12 months, its stock price
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Proximity also mattered because it reduced shipping costs and lags, and because poorer neighbors sometimes benefited from trade concessions. While China became an export powerhouse across the board, greater regionalization was the dominant motif of changes in the apparel trade in the 1990s. Turkey, North Africa, and sundry Eastern European countries emerged as major suppliers to the European Union; Mexico and the Caribbean Basin as major suppliers to the United States; and China as the dominant supplier to Japan (where there were no quotas to restrict imports).3 World trade in apparel and textiles continued to be regulated by the Multi-Fiber Arrangement (MFA), which had restricted imports into certain markets (basically the United States, Canada, and Western Europe) since 1974. Two decades later, agreement was reached to phase out the MFA’s quota system by 2005, and to further reduce tariffs (which averaged 7% to 9% in the major markets). As of 2002, some warned that the transition to the post-MFA world could prove enormously disruptive for suppliers in many exporting and importing countries, and might even ignite demands for “managed trade.” There was also
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