IBS 3807 REPORT

ON

ZARA THE WORLD’S LARGEST FASHION RETAILER

SCHOOL OF MANAGEMENT, GD GOENKA UNIVERSITY, GURGAON

ACADEMIC SESSION
2018-2019

SUBMITTED BY:
AGOSTINHO N’TAWALE JUNIOR
ENROLMENT NO: 160010201002
&
SHREYESTH UPADHYAY
ENROLMENT NO: 160010201046
&
SIDDHARTH SETHI
ENROLMENT NO:

GD GOENKA UNIVERSITY
SOHNA ROAD, GURGAON – 122103, HARYANA, INDIA

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TABLE OF CONTENT
1. ZARA.............................................................................................................................................. 3
1.1 The Zara brand strategy ................................................................................................................ 3
2. PORTERS DOUBLE DIAMOND MODEL OF ZARA ................................................................ 4
3. CAGE OF ZARA ............................................................................................................................ 5
4. AAA OF ZARA .............................................................................................................................. 6
4.1 Adaptation ..................................................................................................................................... 6
4.2 Aggregation................................................................................................................................... 6
4.3 Arbitrage ....................................................................................................................................... 7
5. CONCLUSION ............................................................................................................................... 8
6. REFERENCES ............................................................................................................................... 9

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 1. ZARA

Zara is Spanish clothes and accessories brand, it is the flagship brand of the Inditex group. Few
clothing brands keep up with the latest fashion, are of high quality and yet, affordable. It is
probably the amalgamation of all these qualities that made Zara, the Spanish clothing brand
become the go-to fashion brand for all.

It is no surprise that Zara, which started off as a small store in Spain is now the world’s largest
retailer and its founder, Amancio Ortega, the 4th richest man in the world.

Zara stores have men's and women's clothing, as well as children's clothing (Zara Kids). Zara's
products are supplied based on consumer trends. Its highly responsive supply chain ships new
products to stores twice a week. After products are designed, they take ten to fifteen days to
reach the stores. All of the clothing is processed through the distribution center in Spain. New
items are inspected, sorted, tagged, and loaded into trucks. In most cases, the clothing is
delivered within 48 hours. Zara produces over 450 million items per year.

1.1 The Zara brand strategy

In 2017, Zara was ranked 24th on global brand consultancy Interbrand’s list of best global
brands. Its core values are found in four simple terms: beauty, clarity, functionality and
sustainability.

The secret to Zara’s success has largely being driven by its ability to keep up with rapidly
changing fashion trends and showcase it in its collections with very little delay. From the very
beginning, Zara found a significant gap in the market that few clothing brands had effectively
addressed. This was to keep pace with latest fashion trends, but offer clothing collections that
are a combination of high quality and yet, are affordable. The brand keeps a close watch on
how fashion is changing and evolving every day across the world. Based on latest styles and
trends, it creates new designs and puts them into stores in a week or two. In stark comparison,
most other fashion brands would take close to six months to get new designs and collections
into the market.

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It is through this strategic ability of introducing new collections based on latest trends in a rapid
manner that enabled Zara to beat other competitors. It quickly became the people’s favourite
brand, especially with those who want to keep up with fashion trends. Founder Amancio Ortega
is famously known for his views on clothes as a perishable commodity. According to him,
people should love to use and wear clothes for a short while and then they should throw them
away, just like yogurt, bread or fish, rather than store them in cupboards.

2. PORTERS DOUBLE DIAMOND MODEL OF ZARA

Figure 1- PORTERS DOUBLE DIAMOND MODEL OF ZARA

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 3. CAGE OF ZARA

“Cultural distance

■ English language

■ Westernized elites.

Administrative

■ It has common law

■ Good political friendship

■ Consists of lower long-run risks.

Geographic Distance

■ Only in two cities however analysing to expand in more than that.

Economic Distance

■ Specialised labour

■ Profitability

■ Firm strategy and upgrading

■ Capital availability

■ Soft infrastructure” (Arshad, 2017)

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 4. AAA OF ZARA

4.1 Adaptation

■ Zara generally adopts the standardization policy worldwide with minimal changes
to products in countries which have laws that affect their marketing mix.(e.g.-
Argentina requires the availability of garments for youths in all sizes, cultural
differences in Arab countries where some garments cannot be sold; and the seasonal
differences in the southern hemisphere.)

■ Product offering and promotion policies vary minimally internationally.

■ 85% to 90% of basic designs sold in stores tend to be common throughout the world
except for the differences caused due to physical, climate or cultural factors.(e.g.-
the smaller sizes in Japan, different seasonality in Southern hemisphere, and special
women’s clothes in Arab countries.)

4.2 Aggregation

■ The ‘oil stain’ strategy as described by its management is the pattern of ZARA’s
international expansion. It begins with the opening of a flagship store in a major city.
After developing and gaining experience to operate locally in the country, they then
proceed to have stores in adjoining areas.

■ ZARA is known for its flexibility as it is able to create garments from scratches in very
short lead times, in 2 to 5 weeks and that is the same amount of time it takes them to
get the clothes to their retail stores from the ramp walks and the fashion shows where
they are first showcased.

■ It maintains exclusivity by adopting trends instead of forecasting it. Their products can
also be characterized as specialties as they are highly demand dependent, they are
available in just few different size and colors for a short period of time.

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 ■ The vertical integration means that design, production, distribution and sale are all
included in the supply chain, enabling the company achieving synergies and ensures
flexibility and speed resulting in reduced costs and reaching economies of scale.

4.3 Arbitrage

■ It calls on subcontractors in low labor costs countries for garments for which demand
is quite steady to get them for lower costs and subcontractors in Spain, Portugal,
Morocco and Turkey for trendy clothes, which represents about 50% of the production,
to benefit from the flexibility and prevent from large lead times.

■ Of the outsourced production, 60% comes from Europe and 30% from Asia and the
remaining 10% from the rest of the world.

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 5. CONCLUSION

The Zara brand was born with a keen eye on its customer – its ability to understand, predict
and deliver on its customers’ preferences for trendy fashion at affordable prices. In addition
to its effective supply chain, the brand’s ability to have its customers co-create designs is
unique and provides it with a competitive advantage. Most fashion trends often start
unexpectedly, originate from uncommon places and grow out of nowhere.

One of the secrets behind Zara’s global success is the culture and the respect for the fact that
no one is a better, authentic trendsetter than the customer himself or herself – and this
philosophy needs to be continually reflected in all its business strategies going forward.

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 6. REFERENCES

https://martinroll.com/resources/articles/strategy/the-secret-of-zaras-success-a-culture-of-
customer-co-creation/
Charles & Keith – A Truly Successful Asian Global Fast Fashion Retail Brand
www.zara.com

www.inditex.es/en

http://researchingsustainability.files.wordpress.com/2012/01/zara-harvard-case.pdf

http://www.slate.com/articles/arts/operations/2012/06/zara_s_fast_fashion_how_the_compan
y_gets_new_styles_to_stores_so_quickly_.html

http://www.forbes.com/sites/gregpetro/2012/10/25/the-future-of-fashion-retailing-the-zara-
approach-part-2-of-3/

http://cmuscm.blogspot.com/2012/09/fashion-forward-zaras-supply-chain.html