41126-piy-ch01-01.pdf_18891 - CHAPTER 1 Zara: Fast Fashion...

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CHAPTER 1 Zara: Fast Fashion From Savvy Systems 1. INTRODUCTION LEARNING OBJECTIVES After studying this chapter you should be able to: 1. Understand how Zara’s parent Inditex leveraged a technology-enabled strategy to become the world’s largest fashion retailer. 2. Contrast Zara’s approach with the conventional wisdom in fashion retail, examining how the firm’s strategic use of information technology influences design and product offerings, manu- facturing, inventory, logistics, marketing, and ultimately profitability. 3. Detail how Zara’s approach counteracts specific factors that Gap has struggled with for over a decade. 4. Identify the environmental threats that Zara is likely to face, and consider options available to the firm for addressing these threats. The poor, ship-building town of La Coruòna in northern Spain seems an unlikely home to a tech- charged innovator in the decidedly ungeeky fashion industry, but that’s where you’ll find “The Cube”, the gleaming, futuristic central command of the Inditex Corporation (Industrias de Diseño Textil), parent of game-changing clothes giant, Zara. The blend of technology-enabled strategy that Zara has unleashed seems to break all of the rules in the fashion industry. The firm shuns advertising, rarely runs sales, and in an industry where nearly every major player outsources manufacturing to low-cost countries, Zara is highly vertically integrated, keeping huge swaths of its production process in-house. These counterintuitive moves are part of a recipe for success that’s beating the pants off the competi- tion, and it has turned the founder of Inditex, Amancio Ortega, into Spain’s wealthiest man and the world’s richest fashion executive. FIGURE 1.1 Zara’s operations are concentrated in Spain, but they have stores around the world, including these in Manhattan and Shanghai. The firm tripled in size between 1996 and 2000, then skyrocketed from $2.43 billion in 2001 to $13.6 billion in 2007. By August 2008, sales edged ahead of Gap, making Inditex the world’s largest fashion Personal PDF created exclusively for fangxin (fangxin@umd.edu)
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contract manufacturing Outsourcing production to third party firms. Firms that use contract manufacturers don’t own the plants or directly employ the workers who produce the requested goods. retailer [1] . While the firm supports eight brands, Zara is unquestionably the firm’s crown jewel and growth engine, accounting for roughly two-thirds of sales [2] . 1.1 Why Study Zara? While competitors falter, Zara is undergoing one of the fastest global expansions the fashion world has ever seen, opening a store a day and entering new markets worldwide—73 countries so far. The chain’s profitability is among the highest in the industry [3] . The fashion director for luxury goods maker LVMH calls Zara ‘the most innovative and devastating retailer in the world’ [4] .
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This note was uploaded on 02/02/2012 for the course BMGT 301 taught by Professor Wang during the Spring '08 term at Maryland.

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41126-piy-ch01-01.pdf_18891 - CHAPTER 1 Zara: Fast Fashion...

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