INNOVATION GRAAPH FOR ZARA CASE STUDY

INTRODUCTON PHASE:

• Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel
retailing chains, continued a trajectory of rapid, profitable growth by posting net income of
€€ 340 million on revenues of €€ 3,250 million in its fiscal year 2001.
• Ortega initially named the store Zorba after the classic film Zorba the Greek, but after
learning there was a bar with the same name two blocks away, they rearranged the
letters molded for the sign to "Zara".
• ZARA is a Spanish clothing and accessories retailer based in Arteixo, Galicia.
• Founded in 24 May ,1975 by Amancio Ortega and Rosalía Mera.

GROWTH PHASE:

• Lower price product.

• They take customer trust.
• In 1988, the company started its international expansion .
• Zara also brought out new items continuously throughout the year, including both changes to
existing garments (for example, a shirt with a new collar or color) and entirely new creations.
• Zara respond to the fast-changing and unpredictable tastes of its target customers.
• Three implications followed from this approach. First, experienced Zara shoppers knew that if
they saw a garment they liked they should buy it on the spot, because it might not be there on
their next visit (about 75% of the merchandise in the average store was changed over three to
four weeks). Second, shoppers also knew that they should visit the store often, since new
styles showed up all the time. Finally, Zara garments were not designed and manufactured to
be highly durable; they were described as "clothes to be worn 10 times."
MATURITY PHASE:

• Zara did not have to predict what would be selling six months, or even one month, in the
future; it could continuously sense what customers wanted to buy and respond "on the fly."
• Zara generated 73.3% of the group's sales. Of the three departments inside Zara, Women
accounted for 600 0 of sales, with the rest evenly split between Men and the fast-growing
Children segment.
• Zara did not try to produce "classics"—clothes that would always be in style.
• The company intended its clothes to have fairly short life spans, both within stores and in
customers' closets.
• Zara needed to be able to respond very quickly to the demands of target customers, who were
young, fashion-conscious city dwellers. Their tastes in clothing changed rapidly, were very
hard to predict, and were also hard to influence.
• Store layouts were completely changed every four to five years, with artwork, window
displays, and sales racks changed more frequently.
• While it spent little on ads, Zara spent relatively heavily on its stores.
• They were always located in a city's prime retail district, often on the best-known street.
• They have a separate section for men’s, women’s and kids.
 VRIO FRAMEWORK

VALUE:

• Zara’s garment were 10 times washable and cheap.

• It has many styles in contrast and design with other competitor.
• It had arrangement of section (men, women and children) including specific collection
("Basic" and "Sports," for example, were both collections within Women).
• Zara shoppers knew that if they saw a garment, they liked they should buy it on the spot,
because it might not be there on their next visit.
RARE:

• Zara had a group of ‘commercials’ in which store product manager were aware of the designs
and kind of clothes worn by the residents of every place so that Zara can meet the customer’s
requirement and demand.
• It has a sophisticated system through which a customer can get the desired item by filling the
form ‘the offer’ and will get in less than three weeks.
• The stock in every store was reviewed to every 2 weeks, through this approach customer used
to buy the items they found on the first visit.
• The network of Zara brings the garment from conception to designing and manufacturing, ten
to dc and to store as little as 3week.
IMMITABLE:

• Zara did not care about design cheating or imitability by other competitors due to the fact that
the ratio of design generating of Zara was much high with respect to other competitors which
means if someone tries to copy the design of Zara, when they made garment of that design,
Zara will have already moved to a new design through which customers will retain to Zara.
• The designs generated in a typical year by Zara were 11,000 whereas other competitors were
with the speed of 2,000 to 4,000 per year.
ORGANIZATION:

• Zara worked on sophisticated systems through which a single product from order to sales
takes as little as three weeks.
• Back rooms non-Availability reduces the time to deliver an item to the customer.
• IT department was efficient in managing the order, fulfilment and manufacturing in a very
less time.
• Customer was satisfied with the Zara’s store organized sections and product store managers.
• From distribution centre to the Store, the just product needed two days to reach the customer.
 PORTER FIVE FORCES

Bargaining Power Of
Supplier

Threats Of Threats Of
Entrance RIVALRY Substitution

Bargaining Power Of Buyer

RIVALRY: (COMPITITION IN THE INDUSTRIES)

• Zara faced the industrial competition of H&M and Gap, they also used to
produce garments.
• Zara’s garment quality was low as compared to them but it focused on the
retailing price and number of generating design.
• They introduce 11,000 design with different style.

THREATS OF ENTRANCE:

• Zara’s root name was ‘Zurda’ but Zurda was also a bar there, so inorder
to be unique in the market they converted ‘Zurda’ to ‘Zara’.
• The threat was low quality garment but it was compensated by cheap
rates.
• Threat was classical clothes but Zara had unique design.
 • The threat was lower advertisement but they overcome that thread by
introducing their web site www.zara.com for providing some details
about their new collection.
•
THREATS OF SUBSTITUTION:

• Here comes the major role of IT department that is responsible for the
replenishment of the newly ordered products as well as the previous stock
items.
• Zara made all necessary effort to retain the customer by providing the
alternate product to the same product or of the other identical design.

BARGAINING POWER OF SUPPLIER:

• Barging power of supplier include the gadgets that convince a customer
to buy a product as per supplier’s demand.
• Suppliers estimate the cost of a product that will be negotiable for a
customer.
• All the products are rearranged and organised with new places and
impressions on the buyer.
• They also open salle of yearly stock so that the buyer can purchase with
curiosity.

BARGAINING POWER OF BUYER:

• If a firm have only a small number of buyers, they may be able to
negotiate a better price.
• Zara’s customers were loyal and stick to it due to their attractions and
ease for shoppers than any other company.
• Zara compensated the buyer’s bargaining power by continuously creating
new designs and styles at low costs.