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Copy of Copy of H&M & ZARA: Organizational Capabilities & Competitive Advantage

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Yifan Yang

on 29 July 2013

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Transcript of Copy of Copy of H&M & ZARA: Organizational Capabilities & Competitive Advantage

Organizational Capabilities
&
Competitive Advantage

In the Future ...
1975
2011
Laura Boyle
Thomas Couper-Edwards
Fayaaz Hajiani
Marisa Martinez
Diane Mironesco
Samantha Potts
Sonia Trevisan
A little History of Zara ...
Value Chain Analysis
INDEX
1. A little History ...
2. Value Chain Analysis
3. Comparative Analysis
4. H&M Vs. Zara

(cc) image by anemoneprojectors on Flickr
Resources
Capabilities
Threshold Capabilities
Capabilities for Competitive Advantage
In the Future ...
Vs
Strategic & Threshold Level Capabilities
SWOT ANALYSIS
SWOT ANALYSIS
Fast Fashion and the industry...
Fast Fashion
Benchmarking
Benchmarking
(cc) photo by medhead on Flickr
Hiring Requirements
Equality
Success based team success
Computer guided fabric cutting
Costs for IT a quarter of competition
Handheld PC’s for sales floor research and contact
Just in Time approach
In Spain
5 steps process
In house prototyping and seamstresses
Designs, produces and distributes itself
Point of sale
Word of mouth ONLY
Market penetration
Little outsourcing
Alterations
Flexible supply chain
2011
(cc) image by jantik on Flickr
A little History of H&M ...
Opening of first Zara Store
Opens first store outside of Spain, in
Portugal
Launch in Florence (Italy) of Zara shop number 1,000
1557
stores in 78
countries
Expand to major Spanish cities
International Expansion
Develop Online Store
Zara's capabilities
Target mass market with low priced fashionable products

Sell stock in short term

Integrate production with retailing

Capital intensive operations in house

Labour intensive operations outsourced to local subcontractors

Respond quickly to market
Democratization of luxury
Immediate reaction to trends

Cost leadership

In-house manufacturing

Information flow between stores, Strong IT system
Empowered store managers

Limited inventories and strictly controlled
50% - 60% of production in advance
Efficient distribution system

Ultra-prime store locations
Stores are tailored to local markets
High costs : Vertical integration and staff training

Lack of advertising

Recent E-commerce
Strengths
Weaknesses

Online market - Increase presence

Unusual sourcing model

International expansion in emerging markets

Desirable to Asian consumers
Opportunities
Global competitors

Potential oversaturation in Europe

“Broad but thin” presence in most markets

In-house manufacturing may become expensive

Currency value in Euro may hurt global competitiveness - Current Crisis
Threats
1988
2007
2010
76-84
89-11
H&M's Capabilities
CONCLUSION
References
H&M outsources the production of the items to around 700 independent suppliers, primarily in Asia and Europe.

Present: Around 2,300 stores spread across 38 markets. 16 production offices around the world, mainly in Asia and Europe.

Over 100 in-house designers
1947
Created by Erling Persson in Västerås, Sweden.
Only sold women's clothes
(called Hennes, Swedish for Hers)
Around 2,300 stores spread across 38 markets.
1968
1977
1974
1999
2000
2006
2007
Brought hunting shop
(Mauritz Widforss)
Started menswear
Renamed H & M
First non-Swedish store in Norway
1964
IPO Stockholm Stock Exchange
First UK Shop 1976
(first outside of Scandinavia)
Diversified products – cosmetics & teens
Started online service
(certain countries)
First US shop (now 219)
First Asia store / Dubai
(also first franchise)
East Asia (Hong Kong)
Either create new sub-brands...
Resources
Capabilities
Threshold Capabilities
Capabilities for Competitive Advantage
Strategic & Threshold Level Capabilities
Multiple regional distribution centres

Uses over 700 suppliers primarily in Asia (No production facilities)

High marketing investments in design and advertising, significantly increasing brand recognition
Limited fashion risk: “must have now” effect

Low prices oriented business model
Has a very large network of shops that is on the rise

Concentrated efforts on the supply chain optimisation

Selected international presence
Expansion through space growth

Increasing brand image

Better opportunities to transfer price advantages to the costumers (Sourcing)
Centralised operations and decision making in Spain

“Pull”distribution model, demand orientated

Constant communication flow through the value chain
Cost and Time-saving Operations flow

Large manufacturing capacity
Strong Inditex group support

Broad international presence (77 countries, 1,400 stores)

Resilient and growing financial position
Very responsive and dynamic production line (just in time supply chain)

Does not require large scale to be profitable in new markets

Online opportunity (small number of stores but prime-locations, transforms “high street” shopping as a leisure)
Thank you for your attention !
Zara, backed by INDITEX group, seems to have more power and opportunity to grow despite H&M’s larger operation
So what company seems to be better equipped for the current trend of internationalisation in the Fast Fashion industry ?
Strengths
Strong procurement & Designing strategy

Wide geographical market presence

Strong Brand Awareness

Pioneer in Fast Fashion

Established Online Store
Weaknesses
Product Recall

Product Quality
Opportunities
Business expansion in new and existing markets

H&M Home initiative

Establishing a footprint in Japan

Mobile commerce
Threats
Declining consumer confidence

Intense competition

Exposed to rising Asian wages (work force)
Traditional Brands
Or make designer collaborations...
H&M's Speciality !
November 2004
Karl Lagerfeld
November 2005
Stella McCartney
November 2006
Viktor & Rolf
March 2007
Madonna
November 2007
Roberto Cavalli
2007
Kylie Minogue (In Shanghai)
2008
Comme des Garçons (Company)
2009
Matthew Williamson
November 2009
Jimmy Choo
December 2009
Sonia Rykiel
2010
Lanvin
June 2011
Versace
Strategy of Fast Fashion
Democratisating Couture

Bringing Trendy & Affordable items to the masses

Adapting merchandise assortments to current and emerging trends

... as quickly as possible
Designers -> Push approach
Fast Fashion -> Pull approach
Worldwide presence and aggressive expansion plan
Heavy investment in marketing, campaigns using major fashion designers
Centralized procurement
Centralized distribution systems
In-house designers
Quality controls
Top priority: Asia
Important market for Inditex on the long-run
Showed it could manage growth even during recessions
Develop Online Presence (US)
World's largest apparel retailers
1. The Gap
2. Inditex (Zara, Massimo Dutti...)
3. Hennes & Mauritz
Recession opportunities to score bargains on Real Estate -->
Keep operating expenses under control is critical
Launch H&M Home
Reinforce presence in Japan
Opening on Mobile e-commerce --> Smartphones and Tablets
EXCLUSIVITY
for Zara Products
Limited editions
'Now or Never'
Pioneer in the industry
Strong E-commerce
H&M said long-term strategy -->
Diversifying into an IKEA or Wal-Mart concept
Industry benchmarking: Automotive
First to open to Home products
ADVERTISING
Which brand is this ?
YouTube Page for Versace/H&M collaboration
Fast fashion lessons,
Donald sull and Stefano turcono, London Business school (2008)

Zara: Fast Fashion
, Pankaj Ghemawat & José Luis Nueno, Harvard Business School (2006)
Company Data
Inditex, Not a train we want to get off
. Morgan Stanley Research
http://www.themarketingsite.com/live/content.php?Item_ID=8560

http://about.hm.com/gb/abouthm/factsabouthm__facts.nhtml

http://about.hm.com/gb/abouthm__abouthm.nhtml

http://www.mycloset.com/fashionpedia/?l=491&designer=H+%26+M

http://about.hm.com/gb/corporateresponsibility/supplychainworkingconditions__supplychain.nhtml

http://blog.modelmanagement.com/2010/06/01/zara-and-hm-fast-fashion-on-demand/
Websites
Full transcript