Excecutive resumee (Case 1)

This work is based on the “Zara: Fast fashion” case which will be analyzed from the perspective of
international Businnes curse.

Zara is one of the five retail chains of the Spanish company Inditex, which is dedicated to the
sale of “fashionable clothes, of medium quality at permissible prices” (Ghemawat & Nueno,
2003, page 7), and whose main competitors are the Benetton, The GAP and Hennes & Mauritz
brands. In Regarding the industry, it is worth highlighting the focus on reducing costs through
the outsourcing in the production area, in the expansion / internationalization through
franchises, joint ventures, among other practices. The analysis set out below is based on the
problem presented through the following
Question: How to continue with the expansion of the brand? Emphasizing its relevance given
that 76% of Inditex shares was based on growth expectations. This problem, after a series of
proposals, it is proposed to face by building a new headquarters in a strategic place that can
streamline processes.

Executive resume (Case 2)

Notes Zara fast Fashion :
Inditex is one of the larger fashion distribution companies in the world, known and characterised
more by its stability than by it´s high profits. Currently the company is owner of six apparel retail
chains Zara, Pull& Bear, Massimo Dutti, Bershka, Stradivarius and Oysho (p. 26 Inditex
Timeline) competing globally with companies like The Gap (US), H&M (Sweden) and Benetton
(Italy).
The most successful and internationalized chain of Inditex is Zara which means 76% of the total
sales (p.8). Zara positioned itself as a store selling “medium quality, fashion clothing at
affordable prices”(p.7) and has this as an important aim until today. One pillar that highly
contributes to Zara´s success is its operational strategy, it stands out as a hallmark of its
products and shows how important clients´ preferences and interests are for the chain when
making decisions of design. Zara and so Inditex have been increasing in every aspect. In 2001
the company owned 1284 stores including every chain all over the world. They usually had
plans for growth in the short and long term, so they are familiar for being in constant expansion,
and searching for new places.
The challenge is complex, because it is becoming increasingly difficult to grow in the unfinished
industry in the market overcapacity (as is the case in the United States). Similarly, is
problematic the fact to develop in the industry avoiding to affect negatively other individual
chains. So, Inditex has many options to prevent falling into a stagnation or losing sales due to
bad management: Its convenient to Inditex continue to expanding in the textile industry or will it
be that its growth opportunities are in other type of market? In this document, we will analyze
the textile industry and the headquarter company Inditex, to later detail the optimal solution of
the company and the corresponding action plan to follow
Analysis: (Case 1)
Zara is known to be an international brand, which works with a single headquarters located in
Spain and has a total of 1284 stores, with more than 500 located outside Spain. On the other
hand you have that your most direct competitors are, as mentioned in the Start, The Gap,
Hennes and Mauritz and Benetton.
Since the objective and problem is to expand the brand, it was decided to perform a Porter
analysis, to see if the industry is attractive or not for Zara to enter in the US.

Analysis (Case 2)
External Analysis: EXPANDING OR GROWTH POSSIBLE?
PORTER:
Threat of new entrants (moderate):
In terms of retailers selling clothing, there exist a lot of barriers that complicate the entrance to
significant competitors since the required initial capital to achieve the same level of size and
reputation like Zara for Inditex is enormously high.
Rivalty among existing competitors (high):
the huge variety of offer in this industry causes a constant controversy in terms of price, quality,
design, innovation or marketing. Like Zara, who deals directly with it´s global competitors The
Gap, H&M and Benetton.
Treat of substitutes (low):
In general there´s no real substitute for clothing. In terms of substitution in the clothing industry
one could only say that there will exist replacing brands more than a replacing product.
Bargaining power of suppliers (low):
Having a look at the bargaining power of suppliers one can observe a great range(variety) of
raw material as well as of workforce for the making of clothes. In the particular case of Zara,
40% of the finished products are tailored internally in Comditel, the subsidiary company that is
linked to more than 200 suppliers. The other part of finished goods ( 60%) is made using
workforce at low costs available in Europe, Asia and Northafrica.
Bargaining power of buyers (high): the buyer has a large influence in the fashion industry,
because the fashion production needs to serve the customers´ preferences. This means that an
analysis of clients is necessary so they would not prefer goods of the competitors over ours.
To conclude, if the company would like to expand or create new chains the clothing industry is
not too attractivity for Inditex. Having in mind the strong existence of entry barriers and the
density of competition, the chance to create another brand that is as valuable and successful
than the current ones isn´t very high.
Solutions: (Case 1) (This is for the SWOT analysis, maybe some of them are useful)

Given the above, 3 proposals for improvements or solutions to Zara's problem were found.
These
described below:
1. A proposed solution is to start a better market analysis before
Entering the countries, since this could make Zara's entry to the most efficient
new sectors (if franchising is required, enter as a joint venture, etc.). (This is the porter
analysis which we are doing)

2. Install an additional Headquarters, in a strategic place that facilitates and streamlines the
processes of
Inventory and brand expansion. The second most important market after
Europe for Zara is America, so they should focus the search one on one
strategic point that, after a brief analysis, came to be Mexico. This is found
as the most suitable given that it is the one with the largest Zara stores in America, in
addition that it is a place where its labor costs are lower than in the rest of the
area, which is currently maintained according to a study by Deloitte (Deloitte, 2016) and
delivers a privileged position to be able to enter the market with greater force North
American and South America.
Another important point is that Mexico´s language is the same as in Spain, which will allow
no language barriers, considering that the when opening a new hedquarters, it will seek to
maintain all the standards that they had in Spain.

3. Explosion of initial marketing in sectors where the brand is not as well-known }and there
is little market penetration Although it is not the style of the brand, in some places it may
be necessary required of advertising as an initial engine so that later the brand can follow
its normal course in that country.

Action curse: (Case 1)

First, Zara must make the choice of strategic places that will be options for the Installation of a
new headquarters. Then, they must conduct a market study that allows them to see the
feasibility of conducting a new headquarters in the places selected as options, doing this
analysis in places such as Mexico in America, China in Asia, among other options.
 As a group, Mexico was chosen as the best option, a country which is ideal given that it is the
one It has more Zara stores in America, the cost of labor tends to be less than in the rest of the
area and delivers a privileged position to enter with greater power to the North American
market. Another important point is that in Mexico share the same language than Spain, which
will not allow language barriers, considering that at the time of opening a headquarters company
will seek to maintain all the standards that previously had in Spain.
The next step will be to opt for a lease to acquire this new headquarters, so that they can
evaluate the progress of this decision without having to invest in such high costs immediately.
Then, part of the staff of the headquarters from Spain will be taken to Mexico to ensure that the
process be carried out under the same strategy. This selection of personnel must be rigorous,
so that the team can handle all the functions that correspond to it, and delegate the best
possible way the different positions that arise in this place. With this new headquarters, finally,
the idea is to energize the distribution, and with this focus the work on opening new brands
throughout America, starting by expanding in its place of origin (Mexico) and then follow the
United States and South America, and thus meet the goals of brand expansion.

Action curse (Case 2):

Recommendation and Action Plan
According to what has been analyzed, we propose the following solutions. First of all, it is
possible to observe that all Inditex chains have a similar market positioning in relation to price
and fashion (Ghemawat & Nueno, 2006), so they continuously compete with each other within
the segments that cover in common. This can affect the success of one of the chains by being
located in the same country. To avoid the above, we propose that Inditex continue in the same
direction of growth but focused on a different strategy. The company could create a new chain
related to the textile industry but oriented to different attributes, for example, focused on the flow
and quality at a price relative to these characteristics.
Inditex has the advantage of having an established operation and distribution system, which
works well in each one of its chains, so that this new one can be adapted based on what is
already implemented, for example, using production plants, distribution channels, the use of
experienced personnel, among others. This, on the other hand, involves more personnel hiring,
designers, launch costs and integration in the market in question.
Second, we see that Inditex is having exponential growth (Ghemawat & Nueno, 2006, p. 19),
so that there will be a limit on where to grow will become more expensive for chains, which
would affect their excellence and the possibility of offering convenient prices to their consumers.
That is why we propose that the company expand into new and unexplored industries, such as
example in footwear, home or accessories.
The benefit of this proposal is the opportunity for vertical growth which would be the first step
towards new development challenges. In addition, this type of expansion would not affect the
current chains directly, since there are different needs, even complementing the segments that
Inditex covers today. On the other hand, the cost of penetration into a different industry implies
more hiring, launch costs, market integration and adaptation to the culture of each country.
 Thirdly, we propose to carry out more outsourcing particularly in the Asian continent. To our
analysis and to the information provided, we want to highlight the high prices that Inditex stores
have in Japan which are 231% in Spanish relative prices (Ghemawat & Nueno, 2006, p. 32).
According to the landing prices of a shirt, the total costs in Spain is 42.24 and in Asia it is 29.09.
There is also a difference in labor costs, in Spain these are 7 per hour and in China 0.4
(Ghemawat & Nueno, 2006, p. 21). These high prices could potentially be depleted by a nearby,
cheaper source of production; This would reduce the costs and at the same time the prices of
the commercialized clothing.
The benefit of this strategy would be to be able to reach a larger audience in the Japanese
country, since the clothing offered by Inditex would be more affordable for a part of the older
population. Despite being a very attractive proposal in terms of cost reduction, it should be
noted that Inditex has a highly functional and effective centralized structure which would be
affected by a decentralization of its production.
After evaluating each of the options, we have decided to select the second option (open up new
industries), as the other alternatives are in the direction of continuing in the textile industry and
we believe that Inditex must make more challenging decisions to grow. In this sense, we
present the action plan that the company must follow to implement it successfully.
In the short term, market research must be carried out, evaluating the industry, the country and
the most attractive strategy (create a completely new chain, buy a chain or use the name of any
of the current Inditex chains). At medium term , where it is already clear the mentioned criteria
must be negotiated with the country, so it is necessary to know and adapt to its culture, its laws
and customs, so it is recommended to start in one of the countries in where Inditex already
works. At long term, set a production and income goal, which allow to increase the volume of
stores and number of countries to expand. You must keep a strategy that allows to add even
more value to the chain and its reputation, so eventually consider an active expansion in terms
of product diversification.
Bibliography (Case 1):

Deloitte (2016). The Competitiveness Index of Mexico will improve over the next four years.
Obtained from
https://www2.deloitte.com/content/dam/Deloitte/mx/Documents/manufacturing/Competiti vidad-
en-Mexico.pdf Ghemawat, P., & Nueno, J. L. (2003). Obtained from Harvard Business School:
http://pregrado.fen.uchile.cl/Pregrado/DocenciaWeb/Curso.aspx?Opcion=Descargas&Period o
= 20181 & Cod_Catedra = ENNEG310 & Cod_Seccion = 02 & Download = 2018-03-
152018169Zara_Fast_Fashion.pdf

Bibliography (Case 2):-

Ghemawat, P., & Nueno, J. L. (2006).

Zara: Fast Fashion

.
 - Ghemawat, P., Nueno, J.L., & Dailey, M. (2003)ZARA: Fast fashion (Vol. 1). Harvard Business

School Boston, MA.

-Prensa. (n.d.). Retrieved March 21, 2018, from

https://www.inditex.com/es/quienessomos/conoce