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

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Nissa Jamal

on 10 April 2013

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Transcript 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
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