Zara Business Plan

1168 Words5 Pages

During the past 20 years, the textile industry has been facing major changes. China mainly embodies these changes. But other factors have to be taken in account such as the augmentation of costs and the apparition of new competitors. That being said, a ready-to-wear chain distinguishes itself through its original strategy and its lightning growth: Zara. This apparel retailer belongs to the group Inditex, which also owns for example brands such as Massimo Dutti and Bershka. The company’s headquarters are in Corunna (Spain), and was founded in 1975 by Amancio Ortega. The concept of Zara’s stores is to propose a wide range of clothes as well as underwear, accessories and shoes –and even recently, interior decoration with Zara
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Such strategy is not possible in the textile industry. The near-total outsourcing consists in not producing internally, and selling in partnered networks. The company handle the creation of products, the brand, and financial elements; it is for example the case for Nike. Companies’ situation is in-between those two extremes and the goal is to reach trends: integrated companies and outsourcing ones.

Zara does not resort to a franchise network, so it is a commercial integration. For their production, Zara/Inditex owns 20 factories in Spain, but still subcontracts the assembly of clothes. By controlling most part of its production, and its whole distribution, Zara can control its costs (cost chain and internal margins). In that way, such integration is coherent with its generic strategy of low cost strategy. The main advantage of such strategy for Zara is the reactiveness possibilities and the obtaining of a record delay of 15 days between the creation of a production and its notice for bids. Moreover, the total control of their supply chain leads to zero stock and the minimization of unsold. The main limit of such thing is linked to the variation of the dollar’s exchange rate comparing to the euro’s. Indeed, producing in Spain, Inditex buys its products in euros, which could be disadvantageous
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