Essay about Zara Business Strategy

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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…show more content…
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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