AGENDA  Industry Overview  Zara Overview Zara Supply Chain Zara Challenges    Recommendations .

INDUSTRY OVERVIEW • High Demand Uncertainty • Push vs. Pull Method • 30% of world production exported from developing countries Geographic Differences • Per capita spending and preferences different in any given market • .

H&M Benetton Zara Production Production Lead Times Net Margins Outsourced Outsourced In-House 40% In-House 60% Outsourced High High High Low -.INDUSTRY OVERVIEW: COMPETITION Gap. Inc.47% .05% 10.6% 7.06% 9.

INDUSTRY OVERVIEW: POSITIONING Price + Benetton Gap Fashion ZARA H&M Fashion + Price - .

153 $2.000 $782 $500 $0 Zara  500 stores in 30 countries For women.500 $2.000's) Zara vs.000 $1.15 Euro=$1)  $2.500 $1. and youth From infants to age 45 Zara starts with “Z”    Massimo Dutti + Bershka + Pull and Bear + Stradivarius + Oysho . men. 5 other Inditex Chains (2001 exchange rate: 1.ZARA OVERVIEW  Owned by Inditex (Industria de Diseno Textil) Largest of 6 Inditex Chains Sales ('000.

The “yoo-goo-goo-lizer” – you know. the guy that speaks at funerals! .

ZARA OVERVIEW: ADVANTAGES • • • • Vertical Integration Quick Response to Demand (Pull System) Small Batch Production High Product Turnover • Central Distribution Center / Strong IT System .


AFRICA (40%) High QR High cost Returns from stores either rerouted or disposed of in local stores near dist. quick response (QR) to demand. center IT SYSTEMS Provides accurate demand information to determine manufacturing locations and production levels . and reduced number of markdowns Distribution DISTRIBUTION CENTER Design INDITEX MANAGEMENT / DESIGNERS Determine apparel designs and manufacturing locations Low QR Low Cost Sale STORES Decentralized store management supplements QR Managers determine products to sell and return IN-HOUSE (40%) High QR High Cost Increased shipment frequency increases QR Small batch production lowers cost of demand uncertainty EUROPE / N.ZARA OVERVIEW: SUPPLY CHAIN ASIA (20%) Manufacturing System is designed for short production cycles.

Strong IT System . Quick response. High product turnover.ZARA CHALLENGES  Aggressive growth strategy needed  76% of equity value based on future growth expectations  Need to maintain competitive advantages in new geographic markets  Data collection.

RECOMMENDATIONS  Short-Term Solution: Expand in Europe   Focus on Italy (63 Billion Euro Market) Implement “Oil Stain” expansion method  Long-Term Solution: Expand Outside of Europe     Establish operations in North America North American Distribution Center (Mexico) Initially focus on coastal cities Implement “Oil Stain” expansion method  Culturally Diverse Management Team .

Q&A .