Zara Case

Study

Group 4
Bhooshan Agnihotri | Arpan Bhim | Saurabh Butala | Akshay Jadhav | Manav Rizwani
Zara
Flagship brand of Inditex fashion group
Revenue $17.2 billion as of May 2017
2,200 stores in 93 countries
Zara added a net of 65 stores in 2015
Spain is the biggest market with 436 stores
China (193 stores), France (129), Italy and
Japan (100 each). The U.S. has 78 stores as of
January 2017.
online presence in 45 markets out of its 93
markets
Fashion clothing industry
sales revenue(in billion $)
25
20
15
10
5
0

source www.tharawat-magazine.com/facts/top-5-largest-fashion-clothing-
retailers
Inventory management
Focus on reducing response time
Launched 11000 new items per year
against 2000 for H&M & 4000 for GAP
Zara holds 6 days worth of inventory
against H&M 52 days and Spanish
retailer cortefiel 94 days
Designing
Team of 2000 young designers producing
60 styles a year based on customer
inputs
Three design Centers- one each for men,
women and children's apparel
Each line has separate procurement,
design and production planning team
Use of CAD to build prototype and
enhance color and texture
Manufacturing process
sales &
designer Quality
distribution
market inspection
inputs

In house
Decision on cutting &
Sorting out
price, fabric outsource
sewing

Sampling
Concurrent Deliver to
and
engineering stores
approval
 Final product was ready within 10 days as
fabric was in stock. it included designing
pattern making and cutting
labor intensive activities like sewing were
outsourced. it took 1 to 2 weeks
Capital intensive activities like cutting and
dyeing done by Zara.
For outsourcing factors like expertise, cost
and time sensitivity were considered
60% production done at Portugal and Spain
Distribution
Centralized distribution at Arteixo of 50000
sq meter
Centrally located among 14 manufacturing
plants
Hanging garments were arranged on coded
bars that sorted automatically by style at
distribution centre
Folded garments were sorted on a carousel
and each garment dropped toward a box
based on its bar code
 About 2.5 million units moved each week
Twice a week outward shipment by trucks to
Europe and by air freight outside Europe
Own railway tracks to move goods from plant to
distribution centre
Optical reading device for sorting 60,000 items per
hour
Use of automatic routing devices for routing
garments according to destination
98.9% accuracy of shipments and faster to shelf
doing pre pricing and ironing in advance
Lean techniques used by
Zara
Just in Time Production
Agility
Kanban
Customer Value
One Piece Flow
 STRENGTHS
More than 2200 stores
worldwide
Well established brand name
Low cost supply chain
management
Strong online presence
Clothes are produced with
most innovative and
fashionable designs
Fast delivery of productsSWO
Highest number of products
Low Inventory stock
OPPORTUNITIES
T THREATS
Explore more global
markets
Market development by
entering into new market
segments
WEAKNESSES
Risk that their innovation
may falter with time
Inditex over dependance on
Zara (about 80% of Inditex
business)
Limited marketing and
advertising as compared to
other brands
Threats from competitors
like H&M, UCB and GAP
Price war
Increase in raw materials
and labour costs
Economic crisis may result
in consumer spending less
Possible immitation of
goods
 PESTEL ANALYSIS

Government intervention
POLITICAL Restrictions in different countries need
to be analyzed before entering

Recession
ECONOMIC Price of products
AL Difference in per capita income of
different countries

Socio-cultural differences in
SOCIAL countries
Sizes of clothes
Discounts and offers
 PESTEL Contd.
Social media
Online presence
TECHNOLOGIC Interactive maps to locate the store
AL Launching apps for feasibility of
customers

Earthquake in Japan in 2011

ENVIRONMENT Asian countries require rapid fashion
AL change
sustainability

Litigation changes in different

countries
LEGAL Copyright issues
Sweatshops
Q1 Vertical Integration to its advantage

Store managers and sales staff role

Spot emerging trends and react quickly
Process Time taken
Style idea, quantity 1 day
conveyed to HQ
Fabric from Stock 1 day
Design 3 days
Style Approval 1 day
Prototype 3 days
development/ Fit
Sample/ Approval
Garment Production 10 days
Shipment 5 days
 Design team
Expertise, cost, time sensitivity while
outsourcing
Drawbacks
Lack of economies of scale
Centralization
Global expansion modifications
Decentralized production, production cluster
of countries
Mass production of popular products for
Asian markets
Q3 Existing Vs New Model of Reducing
Cost

Go with the existing model for existing

markets
Reducing cost model for emerging
markets: China & India
H&M became profitable within 6 months
Zara 7 years
H&M keeps large inventory
Can have decentralized production to
capture Asian market