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Nathalia Narvaez

on 28 May 2013

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Fashion Business case Agenda
1.Fashion Business industry
2. Zara
3. SWOT analysis
4. Competitors analysis
5. Key Words and Special issues
5.1. Value Proposition
5.2. Competitive advantage
5.3. Internationalization
6. Summary (video)
7. Conclusions and Recommendations. Value Creation in the
Global Apparel Industry Christian Schäfer Nathalia Narvaez Ahmet Senses 01 The Fashion Business Industry 02 ZARA History İnditex Group Amancio Ortega Gaona is the president and founder of Inditex. He began his career as a clothing manufacturer. (tailor)

In 1975 decided to open the first Zara store in La Coruña (Spain).

Zara, the biggest brand of Inditex group, it´s present in 86 countries on the five continents, with a network of 1.751 Stores located in the biggest cities. The Inditex Group has more than 120,000 employees worldwide. Most employees (80.4%) are female, and the average employee’s age is 26 years.

Currently there exist 6.009 stores in 86 markets 03 SWOT analysis 04 Competitors analysis Competitors analysis Price Fashion Key Words + Special issues 05 Key Words + special issues 1. Value proposition Key factors behind H&M’s success:

•H&M’s business concept is to offer “fashion and quality at the best price” for men, women, teenagers and children.

•H&M outsources its production from 700 suppliers of clothes.

•The location of its stores,

•Flexibility of its production and very low prices

•High investment in advertising (celebrities) Gap Inc’s market growth was based on four strategies:

•International expansion,

•diversification into accessories and personal care articles,

•creation of new brands and

•development of other channel of sales like electronic commerce,

•High quality in the products

•High prices Value Chain analysis Epicenters for Zara´s value proposition Firm infrastructure Vertical organizational structure allows to have a better coordination and control of the intern process. Human resources Training is one of the most important aspect for Zara´s employees

For the "Zara team" customers are always right and employees have to satisfy in everything clients need. Epicenters for Zara´s value proposition Operation: Design Coordination with the store managers (previous research of the customer)

Zara´s design staff consistently attends Haute Couture shows, to take the fashion trends around the world and immediately apply them to the mass market. Marketing Zara, spends less than 1% of its revenue on media advertising.

Zara adjust pricing for the international market

"Armani at moderate prices" - Marcos Lopez Inditex Executive The Promotion and Advertising - Zara sells image

- Zara´s (attractive) stores have two key tasks: Promotion and Advertising.

“We invest in prime locations. We place great care in the presentation of our storesfronts. That is how we project our image"
Luis Blanc - Zara´s Brand Executive

- Word of mouth: "Buy now because you won´t see it later"
"We want our customers to understand that if they like something, they must buy it now, because it won’t be in the shops the following week. It is all about creating a climate of scarcity and opportunity." 3. Internationalization Luis Blanc - Zara´s Brand Executive 1. Value Proposition Concept:
The value proposition is an aggregation, or bundle, of benefits or satisfactions that a company offers to customers. Concept:

Internationalization has been viewed as a strategic process of increasing involvement of enterprises in international markets.
It is a combination of design, production, buying and distribution conditions. Reasons for a Internationalization strategy Strategic vision:
•Grow to have a larger market.
•Strategic alliances with companies in other countries.
•Improve corporate image
•Reduce raw material costs.
•Increased profitability. Necessity:
•The local market is saturated
•Competition in the domestic market increases.
•The demand is less local than international
• New market niches internationally
• Shortage of products internationally. What Value Proposition does:

•It explains how your product solves customers’ problems or improve their situation (relevancy),

•It delivers specific benefits (quantified value),

•It tells the ideal customer why they should buy from you and not from the competitors (unique differentiation). Successful strategy for Zara Zara does not develop products to respond to a particular country’s requirements.

Management believes that the convergence of fashion and taste across national boundaries endorses its strategic bias toward standardization. However, some product designs do cater to physical, cultural, or climate differences. Successful strategy for Zara Reasons for the success of ZARA in the world:

•Previous Research for the market

•Understand the “needs”, behavior,
preferences of each market (country)

•Involve the entire organization

•Global think, global act.

•React quickly to global changes and trends Summary (video) 06 CONCLUSIONS 07 High quality
High prices
Classic designs
High investment in Advertising and marketing campaign What is fashion ...? ? This is fashion What is fashion?

Fashion is a form of speech and is associated with social changes and it is itself a tool for change through

Beauty and body art…. The Fashion Business industry Highly globalized industry Fashion company Warehouse in USA for global distribution Finishing plant Manufacturing plant Source fabric
The fashion industry consists of four levels:
The production of raw materials
The production of fashion goods by designers, manufacturers, contractors, and others retail sales various forms of advertising and promotion

…with the goal of satisfying consumer demand for apparel by operating for almost no or less profit The Fashion Business industry - Globalization of the fashion industry

- Most creative and innovative branch

- Fast fashion (throwaway mentality) vs.
Slow fashion (Sustainable fashion – eco fashion)

E-commerce -> difficult development of stationary trade

- Growing of luxury and premium labels

- Growing differentiation in clients` social status Situation - fashion business industry Concept:
Is a product or service element acknowledged by the customer, not offered by the competitors and for which the customer is willing to pay.

3 determinants of competitive advantage:
Product or service
Target market
Competition 2. Competitive advantage Subjectively acknowledged advantages such as product image
Real advantage in performance e.g. special quality
Global presence
High cost‐effectiveness
Special competences, assets or contacts Sources of competitive advantages Customer specific competitive advantages

superior customer orientation by offering specific problem solving
by having a network of specialized dealers
tailor made solutions or tailor made machines

Resource based competitive advantages
unique resources like competencies or advantage of site

Competitor related competitive advantages
e.g. in consumer good markets

Combined competitive advantages
e.g. in niche markets Competitive strategies Cost Leadership Strategy
Broad differentiation Strategy
Best cost provider
Focused differentiation
- Focused low cost
-Overall low-cost provide strategy Just because a company is the market leader now, doesn't mean it has a sustainable competitive advantage.

A company must create clear goals, strategies, and operations to sustain its competitive advantage over time.

The corporate culture and values of the employees must be in alignment with those goals, as well. Strategies for a sustainable competitive advantage The essence for the competitive of Zara is based on:
Customer orientation:
Good analysis of customers needs and wishes
Customer is in the focus
Live collections vs. Conventionel seasonal clothing

Lead us to the INDITEX MODEL ...A sustainable competitive advantage Employs more than 15,000 people – 40% of finished garments in 20 factories. 18 of them around headquarter and Spain

Focus on the capital-intensiv parts of production process
-> pattern, design and cutting as well as on finishing & inspection
-> good quality at affordable and competitive prices

Network of 500 workshops are specialized in Zara`s product types Competitive advantage through
Production Competitive advantage through Logistics Zara´s quick response by vertical integration and Just in time source: FH Worms - Vorlesung Kooperationsmanagment - Prof. Dr. Dirk Funck SS 2013 Differences between traditional models and ZARA: source: FH Worms - Vorlesung Kooperationsmanagment - Prof. Dr. Dirk Funck SS 2013 Involvement of the whole company in the decisions
Perfect position in the market (fast fashion, customer analysis)
Internal & external adaptation of strategy
Understand the markets.
Standardized production in the production plants and in the workshop. (cluster)
Zara´s strategy is not focus on the rivals, is focus on the customer Conclusions Thank you
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