ZARA - ZARA On Jos Mara Castellano Ros chief executive...

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1 ZARA On January 15, 2002, José María Castellano Ríos, chief executive officer of the Spanish apparel company Inditex, stepped to the podium at the Jacob Javits Convention Center in New York City to accept the International Retailer of the Year award from the National Retail Federation. The year just closed had been a tumultuous one on the international scene, and for retailers it had been a down year. Retail consolidations and bankruptcies were occurring at a fast pace. Yet Inditex and its flagship company Zara had managed yet another year of impressive growth and strong profitability. Indeed, 2001 had in many respects been a landmark year for Inditex, for founder Amancio Ortega Gaona and for Castellano. History of Zara Amancio Ortega Gaona, a native of Galicia, had worked as a clerk at a ladies’ apparel retailer before starting his own housecoat manufacturing business in 1963. He opened the first Zara store in La Coruña in 1975; by 1989, there were 82 Zara stores in Spain, and Ortega began international expansion with Zara stores in Portugal, Paris and New York. Zara’s parent company Inditex took on 4 Professors Nelson Fraiman and Medini Singh of Columbia Business School, together with Linda Arrington and Carolyn Paris, prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of a business situation. This case was prepared under the auspices of the W. Edwards Deming Center. It was sponsored by the Chazen Institute and the Center for International Business Education. The authors wish to thank José María Castellano Ríos of Inditex and Luis Bastida and Francisco González of BBVA for making this project possible. Copyright©2002 by Columbia Business School. other formats, Pull & Bear, Massimo Dutti, Bershka and Stradivarius, 1 and in 2001 had launched Oysho, an intimate apparel and swimwear brand. See Exhibit I for selected financial information. The brand names Zara, Pull & Bear, Bershka and Oysho were invented, generic names suitable for “export”; and by fiscal 2000, over half of Inditex sales were outside Spain. During 2000-2001, Inditex received widespread favorable press and analyst coverage, touting Inditex’s success and attributing it to Zara’s unique integrated business model. 2 Its success has led to Zara being described as “possibly the most innovative and devastating retailer in the world” by Daniel R. Piette, Chairman and CEO, LV Capital. Inditex made an initial public offering of stock in May 2001, and was by then the world’s third largest clothing retailer. Ortega’s stake in Inditex was worth billions, but Ortega 1 Pull & Bear (6.6% of 2000 sales) was launched in 1991 as a men’s basic, casual line, with women’s apparel added in 1998. Inditex purchased an interest in Massimo Dutti (7.8% of 2000 sales), a men’s shirt company, in 1991 and acquired 100% in 1995, in the meantime evolving it into a more classic and upscale line for men and women. In 1998, Bershka (5.2% of 2000 sales), a “club” look line for teenage girls, was launched, and a 90% interest in Stradivarius (2.8% of
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