1. Competing on
Capabilities
Professor S. Lioukas
2016 Update:

2. Zara is the world's largest fashion retailer, present in 88 countries, with a network of over stores in privileged locations of major cities
66 % international sales
Its international presence is a testament to the idea that national borders are no impediment to “sharing a single fashion culture”.

3. Retail shops

4. Zara- important events (1975-2014)
1975: Amancio Ortega opens the first Zara store in a central street of La Coruña (Spain)
1988: Opens the first Zara store outside Spain, in Porto (Portugal).
: Opens stores in other countries
New York (1989), Paris (1990), Mexico (1992), Greece (1993), Belgium & Sweden (1994).
2001: Inditex group is listed in the stock market
2013: Zara opens its first store in Algeria. The Group continues to expand its brands online in new markets such as Canada and Russia.
2014: Global online sales launches reach 27 markets.

5. Zara’s Value Chain Vertically integrated
The tight integration of design, planning, merchandising and production in La Coruna enables the company to respond quickly to any market need
more integrated than others manufacturers, who are “highly-labor” intensive
Manufactures 60% of its own products
Zara has resisted the industry-wide trend towards transferring fast fashion production to low-cost countries
Only garment making is sub-contracted in 350 small sewing units in Spain

6. Distribution & Logistics
A central distribution center channels all production to all stores worldwide
Distribution takes place twice a week
Each consignment always includes new designs
Stores are constantly renewing their offer
The time between receiving an order in the distribution center to the delivery of goods in the store is on average
24-36 hours for European shops
48 hours maximum for American or Asian shops

7. “ZARA reacts to revealed demand immediately”
Zara’s Business Cycle
Daily analysis of product sales and company’s performance. Customer feedback
Information from stores is constantly transmitted to a design team
( 200 professionals, new designs per year)
“ZARA reacts to revealed demand immediately”
Small production-Scarcity effect. Extremely small lead times
Central distribution, shipment to all store 2ice per week, 24-48hr delivery

8. ZARA’s strategy: hybrid and focused ?
Differentiates from traditional garment making.
Instant fashion at rather low prices
Targeted at young people
Mission
“Give customers the fashion they want”
Global reach
Standardized fashion
Economies of scarcity
Continuous shelf renewal
No traditional advertising
Dependent on word of mouth

9. Economies of Scarcity Strengthen the sense of “now-or-never’”
Regular customers know that the new products are introduced every two weeks and most likely would not be available tomorrow
Selling more items at full price (little left over for sales)
Increase of visits
a typical ZARA customer visits the store 17 times per year (c.f. 3 time/year for a high-street store in Spain)
Better stock management

10. Key Capabilities
Recognition and identification of fashion on demand- latest trends
Ability to react quickly rather than predict
85% of the production is done through the season
Unmatched speed from design to stores
Between 2 weeks (modified design) and 5 weeks (new design)
Abundance of choices for customers
designs per year
Quick product life cycle, greater customer satisfaction through high turnover in offerings

11. Key Capabilities Renewal of store layout (every three-four days)
Accurate demand forecasting
Accurate demand forecasting enables mass production leading to well managed inventories, lower markdowns, higher profitability and value creation for shareholders in the short and long term

12. “Zara is a fashion imitator” (Businessworld magazine ).
Accusations
Although the firm does not admit it, a lot of its products’ design is “strongly influenced” by very expensive brands
A team of 200 designers creates versions demanded
“Zara is a fashion imitator” (Businessworld magazine ).

13. Zara’s Capabilities Which cannot be imitated? Which of them add value?
are “dynamic”?
Zara …“possibly the most innovative and devastating retailer in the world”
Daniel Piette, Fashion Director, Louis Vuitton

14. Distinctive Capabilities
Key capabilities (according to J. Kay)
Distinctive elements
Architecture
Relations with stores
Relations with 200 designers
Relations with 350 small sewing units to which garment making is sub-contracts
Reputation
Fashion clothes at affordable prices
Technical scarcity: “now or never”
Innovation
11000 designs per year (competitors: 2000 – 4000)
85% are designed during the season
(competition 6 months in advance)
Strategic assets
Location of stores in central positions 5 4

15. Dynamic Capabilities Categories of DC Distinctive elements
Reconfigure / recombine resources
Reconfigured value chain: a central distribution center (1986) and two new ones (2002 and 2003)
Even manufacture on shore (in a ship)…Kept speed of delivery despite addition of outlets
Integrate / coordinate
Integrates design, manufacture, distribution and sales at high speed
 the cycle from design to store between 2 (modified design) to 5 weeks (new design)
Learning
Capability to recognize trends in fashion, interpret, adapt and satisfy fashion needs of millions (unmatched by competitors)
Stores become a source of information for new designs 5 4

16. The INDITEX Group ( )

17. Zara is the leader in the group

18. INDITEX Group 2015

19. Performance data

20. Financial results of the Inditex Group

21. thanks