Essay about Zara Business Strategy

1637 Words Sep 30th, 2012 7 Pages
ZARA
- zara owned by inditex; posted net income eur340m on revs eur3.250m in 2001
- inditex ipo may 2001; oversubscribed; stock increased by over 50%
- 76% of equity value implied stock price was based on future growth expectations (higher than an estimated 69% for WMT)
- global apparel chain; buyer driven global chain
- branded marketers and manufacturers served as brokers in linking overseas factories with markets
- production; very fragmented (individual apparel firms on avg employed a few dozen ppl)
- about 30% of apparel production was exported (developing countries had very large share, nearly 50% of all exports)...cheaper labor + inputs
- proximity also important bc it reduced shipping costs
- china was export powerhouse
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all 3 had narrower vertical scope than zara (cara owned much of its production and most of its stores) vs gap, h&m who owned most stores but outsourced all production vs benetton invested heavily in production but licensees ran its stores.
- Zara; global specialty retailer that designed, manufactured, and sold apparel, footwear, accessories for men, women, children around the world; sold medium quality fashion clothing at affordable prices
- beginning 2002 inditex operated 6 separate chains; each chain operated independently and was responsible for its own strategy, product design, sourcing and manufacturing, distribution, image, personal, financial results
- zara business system: design --> sourcing and manufacturing --> distribution --> retailing
- products shipped directly from distribution centers twice a week (eliminated need for warehouses and kept inventories low)
- eliminate "bullwhip" effect (the tendency for fluctuations in final demand to get amplified as they were transmitted back up the supply chain)
- short cycle time reduced working capital intensity
- comditel, 100% owned subsidiary of inditex, was responsible for fabric
- zara had its own distribution system; all of zara's merchandise passed through there (whether it was from internal or external suppliers)
- zara only spent 0.3% of revs on media advertising vs competitiors 3-4%
- created climate of scarcity and opportunity by changing styles/offerings so frequently

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