A COMPARISON OF THE ORGANIZATIONAL STRUCTURE

OF INDITEX VS HENNES & MAURITZ

Norah Bianculli, Belmin Beganovic, Alina Ahmedbegovic, Irnes Imamovic
International University in Sarajevo, Faculty of Business and Administration, Management
Sarajevo, Bosnia and Herzegovina
norahbian01@gmail.com DODAJTE MAILOVE

AN OVERVIEW OF TODAY’S COMPETITIVE TEXTILE INDUSTRY

Being well-dressed has always carried a social construct of status. In the past, being well-dressed was directly
correlated to one’s wealth, making a clear cut line between the rich and the poor. As the industrial revolution begun,
textile production was simplified and gained a great advantage in mass production. This blurred the line of clothing
as a show of class, and allowed for accessibility amongst all instead of just the highest social classes. However, being
well-dressed and fashionable never lost its meaning in society, and knowing what to wear is still highly valued – but
today, it is possible for almost everyone to partake in. The modern textile industry is based on the mass production of
ever-changing trends that create a constant inflow of demand, today called “fast-fashion”, making it a very dynamic
market. As seasons come and go, so do looks, and consumer demands follow in toe. The continuation of this paper
will give some insight on two textile giants and how they’ve structured their organizations to keep up with such rapid
demands and competition.

1. A SHORT HISTORY OF H&M AND INDITEX

1.1. H&M
H&M’s story starts in Sweden in the mid-20th century, and leads it to being the world’s
second largest apparel retailer today. Originally opened as woman’s clothing store in 1947 by
Erling Persson called Hennes (sw. “hers”), the store quickly flourished, spreading to Norway
within the next years. Because of the given success, an acquisition of the hunting apparel brand
“Mauritz Widforss” followed. This lead to the creation of Hennes & Mauritz – or H&M – a
clothing store for both men and women, in 1968.
The expansion of H&M out of Scandinavia began with London in 1976, and soon
continued to reach around Europe. In 1977, the firm began a line of “Impuls stores” with a focus
on the teenage market, and began selling cosmetic items along with clothing. In the 1980s, H&M
acquired a mail order company, and began offering the delivery of their products to the doors of
their consumers. This wasn’t the only way H&M was well ahead of their time, however, as they
began with online retail as early as 1998 – the same year they opened their doors in France (Forbes,
n.d.).
Two years after this, the first U.S. H&M appeared in New York – March 31st, 2000 marked
the start of the retailer’s extension beyond the European continent. To follow up this leap across
the ocean, H&M would soon start to cooperate with various fashion designers and other influencers
and icons of the time, such as Madonna, Stella McCartney, Robert Cavalli, Versace and Jimmy
Choo (Bhatia, 2019).
H&M continues to blossom today, recently even spreading to our own market, and is close to
opening its 5000th store with sales at $24.3 billion (H&M Groupation, 2018).
1.2. Inditex
The birth of Inditex, or Industria de Diseño Textil, was much humbler than that of its main
competitor. Their story begins in A Coruña, Spain, in the early 1960s. Amancio Ortega worked
for a local shirt maker before beginning to produce clothes in his home with his wife. After some
years, he’d saved up enough to open a small factory and begin producing their own clothes, selling
to, amongst others, his former employer. By 1975, Ortega and his wife opened their first store –
Zara – with the goal of selling fashionable garments for low prices (Amanacio Ortega Gaona,
2019).
In the following years, their success allowed them to open more stores in Spain, and Ortega
realized in this time the importance of bringing in digitalization and technology early. This lead
him to hire a local computers professor - José María Castellano - to work on the company’s
computing power. This first mover’s advantage proved extremely effective in the long-run, with
Inditex being today’s number one fashion group. The 1980s lead to Castellano creating a new
system for design and distribution, greatly decreasing the time needed to bring a product from its
design phase to its place on the shelf, and bringing him to the position of CEO (Grant, 2006).
1990 was quite a year for Inditex, as they began to circulate their footwear brand Tempe in
Zara stores, and opened Pull and Bear, then a men’s casualwear store. They soon acquired a large
portion of shares for the upper-end men’s apparel store Massimo Dutti, and bought the remainder
of the shares five years later, expanding the brand into women’s apparel.
In 1998, Bershka was launched with the ambition of offering trendy female clothes for
affordable prices, and they acquired Stradivarius in 1999, spreading their grip over the fast-fashion
industry even further. They only began selling shares of their corporation in 2001 on the Bolsa de
Madrid, selling 26% of these shares to public investors. 2001 also lead to the creation of the
lingerie and women’s apparel store, Oysha (Hansen, 2012).
The Zara Home brand opened in 2003, leading to the opening of their 2000th store. This number
had doubled to 4000 by 2005, proving for a nearly never-before-seen growth rate by any retail
store. In 2019, Inditex is the world’s largest fashion retailer by revenue, with sales at $30.7 billion
(Forbes, n.d.).

2. TEXTILE INDUSTRY ORGANIZATIONAL STRUCTURE NECESSITIES

The textile industry, as aforementioned in the abstract, is a rapidly moving and ever-changing
market that cannot afford to stand still. As globalization continues, new trends are created by a
long list of highly recognized and well-respected designers constantly, and everyone who is
anyone wants to own the things they create. This creates a constantly flowing industry, always
thirsty for something new in every direction. Due to this wild demand, the organizational structure
required for success must follow the demands. The fashion industry’s structure shares some of the
sectors with every organization, such as human resources and accounting, but branches out to fit
their own production needs. This section will disregard the universal sectors, focusing on the
industry-specific departmental structure.
2.1. The General Role of Organizational Structure
The organizational structure of a corporation can quite easily make or break its success, as
seen in countless examples analyzed in organizational theory. The three key functions of any
organizational structure are as follows: a) to determine formal reporting relationships – this
includes the layers within the organization’s hierarchy and the span of control given to managers;
b) to define the number and span of departmental divisions and c) to create the necessary systems
for a smooth flow of communications and coordination amongst divisions (Daft, 2010). The given
factors incorporate both vertical and horizontal organizational structure, and offer a general
framework for creating an optimal profit-making system within any organization if properly
utilized.
2.2. The Market Requirement Basis for Organizational Structure in the
Textile Industry
A basis for formulating any industry’s organizational structure is understanding what the
market asks for. In the context of the fashion industry, demands are quite variable, but there are
some requirements that stay constant throughout the trends.
 Contemporary Appearance and Styles – One of the bases of the apparel industry’s market
is, of course, keeping up-to-date with the constant influx of new trends, looks, color
schemes and designs. Because of this condition, it is vital for firms in the clothing industry
to have a competent team of stylists and designers that can both understand the current
trends, and foresee what is likely to follow in the future. One of the largest issues with
designers and most right-brained professionals is that of keeping within the constraints of
abundant resources and manufacturing capabilities. This creates a tricky position for these
individuals that must be balanced out through organizational structure (Textiles: A
Handbook for Designers, 1996).
 Affordability to the Mass Public – Fast-fashion is called fast-fashion because it is
replaceable. As it changes as rapidly as it does, it is nearly impossible to attract the masses
with premium prices of products. This means that the cost of production of these goods
must be optimized to keep consumers interested, available and able to keep up with these
trends while still maintaining a reasonable profit margin for producers (Linden, 2016).
 Openness to Flexibility and Sudden Demand Fluctuations – With such an unpredictable
demand, it is nearly impossible for clothing producers to ever stock up on any good – they
must keep up with what tomorrow brings as quickly and efficiently as possible, leaving
little room for standardized production. Those in this industry cannot afford to produce a
 lot of one thing, as no trend stays around very long, and manufacturing operations must
stay vigilant and prepared to start a different production at a moment’s notice (Ian
MacKenzie, 2013).
 Reasonable Product Quality – No apparel producer could get away unscathed with selling
a blouse that tears after its first spin in the wash. This is what brought upon the creation of
the Acceptable Quality Level, often shortened as AQL. This standardized inspection
procedure is mandatory before the shipment of any goods to the market. By keeping this
standard, producers lower their risk of disappoint a very needy market, and thus fulfill
another requirement (Raaz, n.d.).
2.3. The Production Requirements for Organizational Structure in the
Textile Industry
Considering the given market restraints, the addition of production requirements makes for a
very specific reach of possibilities for the organizational structure in the textile industry. Keeping
up with all of them means the structure must be highly complex. The main production requirements
that must be adhered to are as follows.
 Enough Time to Plan – Clothing producers, though required to constantly produce
something new, must at least have a plan of when this production will begin and what
it will require ahead of time to be able to formulate schedules and plans that will
ultimately optimize their value creation.
 Large Orders Placed in Advance – It is unavoidable for those in this industry to have
long-term partners or their own retailers whose orders they can regularly rely on. This
is needed to avoid the risk of wasted or inefficiently used resources in the production
of goods – a particularly relevant problem when what is desired is constantly changing
(Ray, n.d.).
 An Availability of Various Materials and Styles – If textile producers do not have
designers on hand to compose new, modern concepts, or don’t have a steady influx of
assorted raw materials to select from, it is not realistic to expect them to be able to keep
up with competition in this market.
 Time and Resources to Develop Engineering Mechanisms – With the varied nature of
products in question, it is necessary that clothing producers have capable engineers and
enough time to create methods that can handle sensitive fabrics, or function on a highly
time-sensitive basis. Engineers must be given the proper tools and time to create
systems that can effectively deal with whatever manufacturing needs to keep up their
pace (Textile, Textile Product, and Apparel Manufacturing Industries, 2017).
2.4. Textile Mills
The first step of the supply chain, thus the organizational structure, are mills. This is where
raw materials are turned into fabrics, that can then be turned into wearable garments of any
 description. Textile mills can be owned by the
manufacturing firm, may be a place in which large textile
organizations outsource their material production to, or
textile firms may otherwise supply their materials to these
firms (Duff, n.d.). The locations of these mills are usually
based on the cheapest labor force and the availability of
raw materials, though the latter is slowly becoming less of
a deciding factor as trade restrictions lower across the
globe. In either case, what is done in textile mills directly
reflects the production possibilities of clothing producers,
and thus must fall into the organizational structure in one
way or another. Figure 1 shows a potential organizational
structure for a textile mill (Mourtzis, Doukas, &
Papakostas, n.d.).
Textile mills are important to mention, as they are the
underworld of the apparel industry – the actual creation of the end product happens in these
factories, though because of outsourcing, they often go overlooked.

Figure 1

2.5. Design Departments

Most commonly, the head of design also heads the entire creative department, managing all
product lines and the teams involved, and coordinating with upper management, the purchasing
department, the sales department and all others involved in the realization of new product designs.
The central tasks of designers are briefly explained below.
 Forecasting possible future trends – This is done through research and analysis of
current and past trends in the industry. These forecasts are planned into an in-depth
color and trend direction map 18 months in advance.
 Designing looks that fit the forecasted future trends – A creative process that varies
amongst designers, though digitalized conceptualization is on its way to becoming a
mandatory technology in design.
 Collection planning for the following season – Collections are composed of a group of
designs that share core similarities in style, color or fabric. Creating collections should
broaden the scope of potential consumers by making multiple pieces suitable for
multiple appearances.
 Overviewing the sample production – During the entire process of designing, various
sample products must be made, tested for quality, and offer a calculated cost of
production that designers must keep track of (Angrau, 2019).
 2.6. Purchasing Departments
If a textile producer does not own this step of their supply chain, then a department must exist
and be held responsible for the communication with suppliers regarding prices, quantities and
shipping & arrival schedules of materials. This department is crucial for keeping the production of
goods running smoothly, keeping costs low, and maintaining relationships with suppliers.
The responsibilities of the purchasing director include defining product categories and defining
the quantities needed for each product, as well as managing and optimizing the supply network.
Purchasing directors are often head of the quality control team as well as the purchasing team
(composed of textile buyers and supplier/product managers) (Textile School, 2018).
2.7. Sales Departments
As with all product retailers, apparel industries need to have a high-functioning sales
department to keep up with various distribution channels. Without a team of professionals in this
department, reaching the desired consumer proves a much bigger challenge than it need be,
ultimately leading to ineffectiveness in product dispersion, and a loss of profit – the very purpose
of any product manufacturing.
Sales directors are in charge of planning and coordinating the use of distribution channels such
as e-commerce and retail. In regards to retail, the sales director must coordinate any responsible
for the merchandising of their product, as well as actively cooperate with regional managers in any
region the firm is present in (Fibre2Fashion, 2009).
2.8. Marketing Departments
As global competition becomes all the fiercer, particularly in clothing brands competing for
the best looks, prices, quality and prestige, the marketing department in the textile industry truly
has their plate full. The tasks of marketers in the textile industry is to capture consumer loyalty to
their brand, done by manipulating their brand’s presence while it travels to future consumers in
as ideal a manner as possible. The primary functions of the marketing department are expressed
below (Sarkar, 2018).
 Marketing – This sections deals with product pricing and price evaluation, product
placement in the right geographical/virtual locations and product promotion to the
correct audiences.
 Merchandising – The element of merchandising focuses on the distribution of
products from their warehouses to retailers or stores, as well as warehousing,
allocating orders, packaging and determining the means of product transport (Angrau,
Marketing Department, 2019).