Zara Zara was established in 1975 by Amancio Ortega founder of parent holding

Zara zara was established in 1975 by amancio ortega

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Zara Zara was established in 1975 by Amancio Ortega, founder of parent holding com- pany Inditez, in Galicia in North West Spain. After rapid expansion, it is currently the world’s second-largest clothing retailer, with 5500 stores in 80 countries. The essential feature of its business is to provide inexpensive fashion-basic garments to a mass market in which fashions are constantly changing. The owner likens the fashion business to selling fish. When it’s fresh, it sells quickly and at a high price; the older it becomes, the harder it is to sell and often requires discounting ( The Economist , 2012). The company’s operational success is predicated on its speed of response to customer demands and its flexibility in manufacturing, retaining the capital inten- sive and higher value-added stages of production in-house and outsourcing more labour-intensive activities (Crofton & Dopico, 2007). Zara’s model is twofold: develop ways of monitoring consumer behaviour to pro- vide the most up-to-date fashions and find ways of expediting the design, manufac- ture and distribution of garments in 2–5 weeks to meet demand for what is actually selling. The latter was accomplished by sourcing production with internal and exter- nal suppliers that were geographically proximate to the retail market. Understanding and responding quickly to what is often fickle consumer behaviour entailed devolving decision making to retail store managers and staff in various regions who could mon- itor trends and transmit that information back to designers, who could then quickly
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256 IAN MALCOLM TAPLIN provide new styles for speedy manufacture. For their part, Zara’s designers trawl through fashion magazines and runway shows discerning trends that are then simpli- fied and tailored for specific markets (Reinach, 2005). The company then develops a pricing strategy based upon what customers might pay for competitor products, minus 15 per cent (Crofton & Dopico, 2007). By reducing the design-to-retail cycle, Zara can save costs and provide customers with products that have scarcity value, which in turn encourages frequent shopping. Zara manufacturers about 11,000 distinct items a year, as opposed to 2000–4000 for its principal competitors. The most time-sensitive items are placed with vertically- integrated parts of the company and typically involve small batch, labour-intensive production either in one of its 20 factories around company headquarters or in small workshops, mainly in Galicia and northern Portugal (and, more recently, Morocco). With long-term contracts and often financial support, these small firms have been provided with the necessary technology, logistics and financial support to enable their production to be seamlessly integrated within Zara’s overall distribution system (Ghemawat & Nueno, 2006). The company now has three offices in Hong Kong, which help with fabric purchasing and sourcing manufacturing in Asia, mainly China and Bangladesh, for items that are price-sensitive. These offices assume the role
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