Govt Girls Degree College Quarry Road Quetta
Submitted by: sahiba
Submitted to: Miss Hina
Assignment: 01
Subject: international financial management
Zara Fashion Company
Introduction:
Amancio Ortega was born on March 28, 1936, in Spain. His father was a railway worker, and his
mother worked as a housemaid. Ortega dropped out of school at the age of 14 and started working
as a delivery boy for a local clothing store. In 1975, Ortega and his then-wife Rosalía Mera started
a small fashion store in Galicia, Spain, called Zorba (Zara). They started by making clothing in
their home and selling it in their store. Their goal was to provide affordable clothing to the people
of Galicia. It is worth noting that he initially called it Zorba after the classic 1964 film Zorba the
Greek, but after learning there was a bar with the same name two blocks away, he rearranged the
letters to read “Zara”. In 2009, Zara was part of the Inditex group (Industrias de Diseño Textil
Sociedad Anónima).During the last two decades Zara tripled its profit and stores and nowadays is
ranked the third biggest retailer world-wide. It has 3000 in-house designers located in it’s
headquarter in the region of A Coruña, Spain, which design over 40 000 items per year among
which only 10 000 are selected for production. Opposite to its competitors, more than 50% of its
production is in Europe and not in Asia or South America (Bruce and Daly, 2006). Zara changes
its clothing designs every two weeks on average, while competitors change their designs every
two or three months. It carries about 11,000 distinct items per year in thousands of stores
worldwide compared to competitors that carry 2,000 to 4,000 items per year in their stores. Zara’s
highly responsive supply chain is central to its business success. The heart of the company and its
supply chain is a huge, highly automated distribution center (DC) called “The Cube”. The
company’s core market is women 24 – 35 years old. They reach this market by locating their stores
in town centers and places with high concentrations of women in this age range. Short production
runs create scarcity of given designs and that generates a sense of urgency and reason to buy while
supplies last. As a consequence, Zara does not have lots of excess inventory, nor does it need to
do big mark-downs on its clothing items. Zara has 12 inventory turns per year compared to 3 – 4
per year for competitors. Stores place orders twice a week and this drives factory scheduling. Such
short term focused order cycles make forecasts very accurate, much more accurate than
competitors who may order every two weeks or every month. Clothing items are priced based on
market demand, not on cost of manufacture. The short lead times for delivery of unique fashion
items combined with short production runs enable Zara to offer customers more styles and choices,
and yet still create a sense of urgency to buy because items often sell out quickly. And that
particular item or style may not be available again after it sells out. Zara sells 85 percent of its
items at full price compared to the industry average of selling only 60 percent of items at full price.
Annually there is 10 percent of inventory unsold compared to industry averages of 17 – 20 percent.
Mission statement of Zara:
"To give customers what they want, and get it to them faster than anyone else."
Vision statement of Zara:
"To contribute to the sustainable development of society and that of the environment with which
we interact."
Product:
Zara stores have men's and women's clothing as well as children's clothing (Zara Kids). Zara Home
designs are located in European stores. The majority of Zara customers are aged between 18 and
about 35. After products are designed, they take 10 to 15 days to reach the stores. All of the clothing
is processed through the distribution center in Spain. New items are inspected, sorted, tagged, and
loaded into trucks. In most cases, the clothing is delivered within 48 hours. Zara produces over
450 million items per year.
Zara also includes accessories, shoes, swimwear, beauty and perfumes.
In May 2021, Zara launched its first beauty line, ZARA Beauty.
Objectives of zara:
The main objective of Zara is to democratize fashion. Instead of seeing it as a privilege, we offer
affordable fashion, that can get to the streets, inspired by the styles, desires and lifestyle of modern
men and women.” Amancio Ortega. Zara is known as the Fast Fashion Pioneer and the leader.
They can identify new trends not just at catwalks, but in the streets, and produce new clothes in
few weeks. Zara’s stores receive new products twice a week, and they are always producing new
ones. Their focus is to find what customer wants, and then make it. The fact that their stores have
new products every week is a motivation for their consumers to visit Zara’s stores more frequently.
Website and mobile apps:
At the end of 2015, Inditex had launched 1443 online stores, of which 517 were from Zara. In
Portugal, the online store was launched in 2010. In Zara’s website, we can see that they have more
than one wallpaper that is always rolling, with the season editorials. In this case, the SS’17
collection of each section: Woman, Man, Kid and TRF.
Social network:
Zara is present in the most known social network, and they use it especially to announce the newest
campaigns. It is possible to join the newsletter and always keep updated. (Attachment 24) On
Instagram Zara count with 20,5 thousand followers (Attachment 25), on Facebook more than 25
million followers (Attachment 26), on twitter more than 1 million followers (Attachment 27), on
Pinterest more than 360 thousand (Attachment 28) and on YouTube more than 36 thousand
subscribers (Attachment 29). The Facebook page is by far the most followed social network.
Competitors of zara:
Zara's competitors and similar companies include Fast Retailing, UNIQLO, H&M and
Reformation. Zara is a Spanish fast fashion clothing and accessories retailer. Fast Retailing is a
retail holding company. Uniqlo is a casual wear designer, manufacturer and retailer.
The Secret of Zara’s success:
Their Supply Chain Zara’s Supply Chain made it possible for the brand to become the Fast Fashion
Pioneer because of their ability to follow new trends and to respond to changes in the demand.
“The original business idea was very simple. Link customer demand to manufacturing, and link
manufacturing to distribution. That is the idea we still live by.” José Maria Castellano Ríos, Inditex
CEO. Inditex group committed to the vertical integration model in its operations. When a supply
chain of a company is vertically integrated, it means that some stages of production are integrated
within the company. They produce a substantial proportion of their products in their own factories,
production stages that are more capital-intensive and value-added-intensive (purchase raw
materials, design, cut, dye, quality control, iron, packaging, labelling, distribution and logistics);
and they outsource the production stages that are more labor-intensive and less value-addedintensive (sewing).