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ZARA INTERNATIONAL_Unit:Global Logistics_Group Presentation_Final
Transcript of ZARA INTERNATIONAL_Unit:Global Logistics_Group Presentation_Final
Apparel for men , women , kids
Zara is Inditex's principal chain and accounts for more than 60% of its parent company's sales
The first Zara shop opened in 1975 in A Coruña, Spain,
1,485 stores in major cities worldwide
Zara boasts about 50 shops each in the US and Mexico.
Zara is also owned by Intedix Market Environment International
(Group Presentation) Market Environment &
Competitor Analysis Competitor;
Hennes & Mauritz AB established in 1947
1,988, of which 36 are franchise stores, 23 are operated under the COS banner
Germany being there largest market, following the UK & Sweden
Outsource all production with 700 suppliers & sub-contact Competitor;
Established 1965 , at Ponzano Veneto , Italy
6,300 shops , more 120 countries worldwide
Production in Italy, Eastern Europe, the Mediterranean and in Asia
The manufacturing organization is also characterized by an upstream vertical integration, controlling 100% of a textile group called Olimpias, involved in 2 main activities: -
Transforming raw materials into spinning and fabrics, from spinning to finishing.
US owned company founded in San Fransico
Gap had 3,068 company-owned retail stores and 178 franchise stores.
The company operates through two segments: stores and direct. (Datamonitor 2011 Gap Inc Report)
Distribution & Logistic
12 Distribution Centers : United States: 9 , Canada: 1 United Kingdom: 1 , Japan: 1
Manufacturing and distributing its products sourcing and logistics group, along with their buying agents. Both Manufacturing and distribution depend upon outsourcing within there logistics system
It purchases from more than 1,000 vendors in 3,600 factories in more than 50 countries. I) Market Entry
The direct investment strategy
High-profile countries, high growth prospects, and low business risk
Mostly within European and South American countries
Conducing the greatest commitment of resources
Joint Ventures: -
The co-operative strategy
Barriers to direct entry
Prime retail space difficulty
Co-operation with local companies
Partners allow Zara management control
ZARA and its partners (50:50): -
Germany (Otto Versand, the largest German catalog retailer)
Japan (Biji, major mall owner) II) Market Entry
High risk countries (Flavian and Polo, 2000)
Significant cultural differences
Low sales forecast markets
E.g., Saudi , Arabia, Kuwait, Andorra or Malaysia
Zara’s franchises follow the same business model as own subsidiaries: -
Fully corporate service -products, store location, interior design, logistic, human resource and training.
Responsible in investing fixed assets and recruiting staffs
Allow franchises to return merchandise in geographic
Zara has the right to open its own store in the same location (Castellano, 2002) Design: -
Designers select the fabrics and other complements (price checking)
Preparing sample and presenting to sourcing and product development personnel -> selection process
Insourced and outsourced
Communication between designers & store managers are important regarding to sales data captured by IT system (functional intergration)
Other sources from industry publications, TV, internet, film content, trend spotters (such as university campuses, night club, etc)
The responsibilities of Zara’s design team :
Tracking customer preferences by using sales potential based info
Analysis of product life cycles to transmit repeat orders and new design to internal and external supplier Sourcing & Manufacturing System Design Logistic system: -
Asia, transported by ocean.
Within Europe, H&M’s ambition is to increase the share of movements by rail over road. More than 90 percent of all transports are done via ocean, rail or road.
Air is used only in exceptional cases when faster deliveries are required.
The individual stores do not have backup stocks; they are replenished as required from central stockrooms.
Distribution Center: -
These centers are in some cases supporting the stores in a geographic region, consisting of several sales countries. Double Supply Chain
Design, planning, coordination and programming in Italy.
Quality, efficiency, and the necessary cost control in each area
Direct control both own manufacturing and sourcing
Operation at Castrette (Italy)
Handle 120,000 incoming/outgoing boxes a day
Multi-hub model is supported by a centralized IT system which is able to coordinate and optimize product deliveries customized according to required dates and destinations worldwide International Expansion & Market Entry International Market Expansion:
The pattern of expansion as an “oil stain”
(1) Flagship store in main city,
(2) operating locally
(3) add stores in adjoining areas
Specific entry strategy: -
Local macroeconomic variables
(e.g., tariff, taxes, legal costs, salaries, and property prices/rents)
(e.g., local demand, channels, available store locations, andcompetitors)
Focusing on market prices > costs in forecasting its price I) Sourcing and Manufacturing
Souring fabric and finished products from external suppliers, is conducted by the Zara purchasing team in Barcelona and Hongkong
Comditel is a 100% owned subsidiary of Inditex, of whom manage the dying, patterning and finishing.
One-half of the fabric purchased are gray (undyed) to facilitate in-season updating with maximum flexibility
The gray fabrics supplied, allow products to be finished within 1 week. II) Sourcing and Manufacturing
The most fashionable items tend to be the riskiest which are produced in small quantities internally these are approximately 40% of finished garment
More basic items are likely to be manufactured in Asia due to more price sensitivity than time sensitivity
Production in Europe is 15%-20% higher than Asia
About 20% suppliers accounted for 70% of all external purchases
Zara has long term relationships with many suppliers to minimize formal contractual commitments. (sectorial intergration) Distribution & Retailing Zara's Distribution Design
Competitive advantage by minimizing lead times
Cost effective Competitor Analysis
Zara has 3 Primary Competitors According to Inditex’s Lorena Alba (logistic director),
"The warehouse is a place to move merchandise rather than to store it". Distribution System Model Distribution
Shipment from warehouse – twice a week via third-party delivery services:
75% of Zara merchandise are shipped by truck to stores in Spain, Portugal, France, Belgium, UK, and parts of Germany
25% are shipped by Air via KLM and DHL
Shipment scheduling by time zone:
Spain and Southern Europe by 3:00 pm Wed and 6:00pm Sat
Others by 3:00pm Tues and 6:00 pm. Fri
Products will be delivered :
24-36 hours to stores in Europe
24-48 hours to stores outside Europe Retailing
Zara aims to offer fresh assortment of designer style garments and accessories
Emphasis on using backward vertical integration
Zara is very quick fashion follower than to achieve manufacturing. Building up significant forward order books for upstream operations
Production runs are limited and inventories strictly control Conclusion Conclusion:
Zara International has acquired success and growth throughout Europe. Its Critical Success Factors are as follows: -
Short Lead Time
Lower quantities and more styles
Zara's operational design and business model collectively with there sustainable growth, give Zara a competitive advantage within the continously challenging apparel industry. Many companies now view Zara's business model as the new industry standard. Recommendations Also own the following brands: -
Pull & Bear Bershkah Uterque Massimo Dutti
Oysho Stradivarius For the purpose of this presentation we have used this model sourced from Laurence Fisher, to explain Zara's Market Entry (Fisher (2011) Week 5 Presentation; Process and Practice of Exporting) Any Question? Retailing Competitive Product Market Postioning Matrix Source: Palladino, A. (2010) Zara and Benetton: Comparison of two business models ZARA BUSINESS SYSTEM MODEL Source: Palladino, A (2010) Zara and Benetton: Comparison of two business models Design III) Sourcing & Manufactureing
Zara’s Internal manufacture: -
20 fully owned factories are located in and around Zara’s headquarters in Arteixo
Heavily automated and specialized by garment type
Focused on the capital intensive part of the production process Pattern design, cutting, and inspection of finished goods.
Cutting garment: –
450 workshops, located primarily in Galicia and across border in Northern Portugal
Labor-intensive performed Small operation with 20-30 employees
Sewn garments are sent back to Zara’s manufacturing. Where they are inspected, ironed, folded, bagged and ticketed before sending to distribution center. Reccomendations
Market Side: -
The European market has become saturated, after viewing Zara's market expansion, one market that Zara is expanding to is Australia. Recently opening the first Zara shop in Sydney (Inditex, 2011).
One reccomendation is to continue to persue the Australian market particularly as H&M are yet to penetrate this market; though a smaller market, Australia has growth opportunity particularly within the online sector, especially after having launched there online shop in New Zeland with successful results.
An additional recommendation is that Zara should provide specialized products for different geographic locations within the same city. In some locations, there are many Zara stores that carry the same products (Craig, Jones &Nieto, 2004). This makes Zara experiences the cannibalization among its stores in a location. (Beneton Group Spa, Bloomberg Businessweek) (United Colours of Beneton (2009) Logistics) (Datamonitor (2010) H&M Report) (H&M (2011) Supply Chain Working Condition) (Gap Inc (2011) Key Facts ) (H&M (2011) Green logistics) (Zara (2010) Company [Online]) (Inditex Group (2011) [Online]) Sector Size Forcast Source: Mintel (2010) Clothing Retail UK Source: GE Mckinsey Matrix (Adapted for the purpose of this presentation) Source: Ipsos Mori/Mintel (2010) (Berkeley, N & Steuer, N. (2000), Comparative analysis of EU and national trends in the textile and clothing industry) Zara is in a Growth Market with a strong Business Unit. Recommendations
Logistics & Distribution Side: -
Postponement in textile products.
Centralized distribution may prove challenging in the future as Zara further expands internationally
Zara may have to consider the Decentralized distribution model especially within the Asian and South African countries. Source: Palladino, A (2010) Zara and Benetton: Comparison of two business models