WELCOME

C O M PA N Y A N A LY S I S

VA LU E C H A I N A NA LY S I S
 GROUP 4
1. Pham Thi Quynh Anh
2. Dang Anh Minh
3. Tao Gia Bao Ngan
4. Do Huynh Phuoc Thinh
5. Ngo Ngoc Mai Thy
6. Ho Khang Trinh
7. Nguyen Hoang Anh Tu
 OUTLINE

VA LU E
1 CHAIN 3 BENCHMARKING 5
A NA LY S I S

OVERVIEW COST 4 CONCLUSION

2 COMPARISON
OVERVIEW

 W h a t ke e p s a c o m p a ny
s u r v ive i n a m a r ke t ?
 Va l u e c h a i n a n a l y s i s
 What is ZARA?
What keeps a company survive in
a market?

• The company has to keep the company’s cost

and customer value proposition stay
COMPETITIVE.
• Two analytic tools: value chain analysis and
benchmarking.
• Value chain represents the internal activities a firm engages in when
transforming inputs into outputs.
• Value chain analysis is a process where a firm identifies its primary Value chain
and support activities that add value to its final product and then
analyze these activities to reduce costs or increase differentiation. analysis
 What is
ZARA?

• ZARA is one of the top leading affordable

fashion retailers, which belongs to Inditex –
one of the greatest groups of distribution in
the world.
• It sells shoes, cosmetics and accessories for
all ages and genders.
 VA L U E
CHAIN The concept of
A N A LY S I S Z A R A’ s v a l u e
chain
Primary
Activities
Support
Activities
How much of the
industry value
chain that has
been covered by
ZARA?
T h e c o n c e p t o f Z A R A’ s v a l u e c h a i n
 Primary Activities

S U P P LY C H A I N M A N AG E M E N T
• Using vertical integration system.
• The material and fabric is stored in
warehouses doesn’t have exactly
colors or prints.
• ZARA head office are in Spain: 50%
of its products are manufactured in
Spain, 26% from Europe and 24% in
Asian.
→ The whole production is stored in
the Spain’s Logistic center before
delivering to all the ZARA shops.
Primary Activities

O P E R AT I O N S

• 3 product lines (men, women and children)

can work parallel with each others →
Reducing lots of time in production stage.
• ZARA is a fashion imitator, design new
items base on Fashion trends and Customer
feedbacks → ability to design more
quickly.
• Ex: Produces around 12,000 new designs,
and introduces new items every week.
Where as, its competitors create around
2,000 to 4,000 new designs per year.
 Primary Activities

DISTRIBUTION
ZARA has a strong logistical operation:
• The goods are shipped by planes or
trucks to ZARA Europe shops in 24
hours, and 48 hours for the remaining
stores.
• ZARA cans design a new product then
gets its to stores in just 2 weeks while
the average standard is 6 months →
ZARA is faster 10-12 times than its
nearest competitor GAP and H&M.
 Primary The 4Ps of ZARA Marketing Mix

Activities Fast fashion company with 3 lines

Product product: men, women, and children.

SALES AND Price ZARA is an affordable brand.

MARKETING
ZARA stores is located at big city
Place center.

Relies on word of month, and using its

Promotion stores to advertising.
The 4Ps of ZARA Marketing Mix

Fast fashion company with 3 lines

Product product: men, women, and children.

Price ZARA is an affordable brand.

Place ZARA stores is located at big city center.

Relies on word of month, and using its

Promotion stores to advertising.
Product positioning:
 Primary Activities

S E RV I C E

• Target customers: 18-40 year old

with mid-range income.
• Designing based on consumer
trends.
• Training employees and managers to
be sensitive to customer needs and
wants, then respond as soon as
possible.
• Having online shops.
 Support Activities

G E N E R A L A D M I N I S T R AT I O N

• ZARA owns 20 factories for internal

manufacture, but still input raw material from
other low-cost suppliers (mainly in Asia) and
from Inditex.
• Working on existing raw materials.
• Fast-fashion: ZARA cans design a new product
then gets its to stores in just 2 weeks, and
finished goods in 4 weeks.
 Support Activities

HUMAN RESOURCE MANAGEMENT

• Recruitment:
- Employees need many skills to work on
international environment such as: Good
communication, teamwork...
- Asked to be creative, flexible, and passionate
to Fashion.
- Need to be trained at least one week before
officially working in the store.
- Employees performance is continuously
evaluated.
• Environment: ZARA half of their employers in
Spain and the rest in various countries where it
operates. The group of workforce is young(the
average age is 26). Gender proportion: 76%
Women to 24% Men (Inditex report).
Support Activities

PRODUCT R&D

• By using Just-in-time system, and working

on exiting raw materials → ZARA can
quickly react to market requirement, satisfy
customer currently demands, and has the
lowest invention → reduce lots of time, and
minimize costs.
• Aims to become an eco-friendly company…
Ex: Using ecological fabrics, organic cotton,
and biodiesel fuel.
 Support Activities

T E C H N O L O G Y, A N D S Y S T E M D E V E L O P M E N T

Company puts the value on information

transfer. Company now is using PDA

(Personal Digital Assistance) in stores,

this system helps for the company to find

out about new market trends as fast as

possible and possibility to react quickly.

Who are ZARA
competitors?
Comparison
oOperation
COST
oOperating C O M PA R I S O N
expenses
• Company’s cost includes:
- Cost of internally performed activities
- Cost in the value chains of its suppliers and distribution
channel allies

• Key purposes:
ZARA cost
-Develop data for comparing a company’ cost activity by comparision
activity against the cost of rivals
-learn which activities are source of cost advantage or
disadvantage
Who are ZARA’s competitors?

Z A R A’s
competitors
Criteria for selecting H&M (Sweden) and UNIQLO (Japan):
*Same industry: fashion
*Similar products and services: Clothing and accessories
*Market segmentation: Teenagers, Adults, Kids (almost all ages)
*Reputation: 2018 (source: internet, annual report)
Ranking where
H&M UNIQLO ZARA
listed/ Company

Best global brand 30 9 25

The world’s most

47 96 46
valuable brands Z A R A’s
Top 100 Brands competitors
34 76 99
for Millennials
 o Operation
H&M ZARA UNIQLO

Operation -Outsoursing: from -Vertical intergration: -UNIQLO Takumi Teams:

design to production technical specialists in
-Fast-moving 3 product lines → sewing and plant
retailer: determining Reducing production management-enhance the
consumer interests quality and improve yields
through both time at the plants.
traditional analysis -Fashion imitator: -The Material Development
and experimental Team: negotiate globally
technologies design based on with leading manufacturers
Fashion trends and and procure the best
materials -> offer better
feedbacks → more fabircs, low prices.
quickly design
oOperating expenses
• ZARA

Comparison
o Operating expenses
• H&M

Comparison
H&M MARKET OVERVIEW
o Operating expenses
• UNIQLO

Comparison
 Cost comparison
H&M ZARA UNIQLO

Operating expenses 12091 (million USD) 8944 6393

Number of stores 4739 2251 1920

Ratio:
2.55 3.97 3.33
Operating expenses per store Comparison
COMPETITIVE ADVANTAGE
How much of
the industry
value chain
that has been
cove re d by Value chain for an entire industry:
ZARA?
• The firm’s internal value chain.

• The value chain of industry supplier.

• The value chain of channel

intermediaries.
How much of the industry value chain that
ha s be e n cove re d by Z ARA?
 Benchmarking
involves improving
a firm’s internal
activities based on
learning from
other firms’ “best BENCHMARKING
practices”.
 BENCHMARKING

ASOS owns the largest

market share of the
fast fashion market in
2016-2017, 5 times
larger than ZARA.
(Source: Hitwise)
 Sales vs. Supply chain lead times
30.0% Boohoo

25.0%

20.0% ASOS
Slaes growth, 2016

15.0%

10.0%
ZARA
BENCHMARKING
5.0% Ted Baker
OVS
Primark Debenhams
0.0%
0 2 4 6 8 10 12

-5.0% H&M Next

M&S
-10.0%
Supply chain lead times, months

The shorter the supply chain

ASOS ZARA H&M lead times, the larger the sales
Sales growth 18% 9% -2% growth.
Supply chain lead times 1 month 3 months 5 months → ZARA needs to
improve its supply chain
to increase the speed.
 Sales vs. Supply chain lead times
30.0% Boohoo

25.0%

20.0% ASOS
Slaes growth, 2016

15.0%

10.0% ZARA

5.0% Ted Baker

OVS
Primark Debenhams
0.0%
0 2 4 6 8 10 12
-5.0% H&M Next
M&S
-10.0%
Supply chain lead times, months
(Source: Company data, Goldman Sachs global Investment Research)
Difference between ASOS and
ZARA:
• ASOS is an online retailer.
• ZARA has 328 stores in
Americas, 1352 stores in Europe,
571 stores in Asia and the rest BENCHMARKING
part of the world (total 2251
brick-and-mortar stores).
→ The expenses of ZARA is
much more than ASOS.
→ ZARA should ease back on
their rate of opening new
stores to shift focus online.
Take advantage of the already available
brick-and-mortar stores:
• Develop a new system to ship online BENCHMARKING
orders directly from certain stores, using
for the case an item is out of stock online
but available in a store nearby.

• 3 benefits of the method:

- Customers are more likely to receive
items more quickly if they live closer
to the store.
- Stores can stay relevant in the era of
online shopping.
- ZARA can better manage its inventory
levels.
CONCLUSION
 ZARA 2015 2016 2017
Sales revenues 71.22 69.84 67.73
Cost of goods sold 53.67 50.54 49.63
Operating income -0.2 4.25 5.9
CONCLUSION Profit after taxes -1.63 2.68 6.73
Gross profit margin 24.64% 27.63% 26.72%
Operating profit margin -0.28% 6.09% 8.71%
Net profit margin -2.29% 3.84% 9.94%
In Millions of JOD
(Source: https://www.investing.com/equities/zara-investmen-income-statement)
ZARA’s profit margins increase over the recent years.
 ZARA 2015 2016 2017
Sales revenues 71.22 69.84 67.73
Cost of goods sold 53.67 50.54 49.63 (Source: https://www.investing.com/equities/
Operating income -0.2 4.25 5.9 zara-investmen-income-statement)
Profit after taxes -1.63 2.68 6.73 (Source: https://about.hm.com/content/dam/
hmgroup/groupsite/documents/en/cision/
Gross profit margin 24.64% 27.63% 26.72%
2018/01/2110334_en.pdf)
Operating profit margin -0.28% 6.09% 8.71% (Source: https://www.asosplc.com/~/media/
Net profit margin -2.29% 3.84% 9.94% Files/A/Asos-V2/results-archive/
In Millions of JOD statement/full-year-results-2018.pdf)
H&M 2017 ASOS 2017
Sales revenues 200 004 Sales revenues 1 923.6
Cost of goods sold 91 914 Cost of goods sold 965.3
Operating income 20 596 Operating income 79.6
Profit after taxes 16 194 Profit after taxes 64.1
Gross profit margin 54.04% Gross profit margin 49.82%
Operating profit margin 10.30% Operating profit margin 4.14%
Net profit margin 8.10% Net profit margin 3.33%
In Millions of SEK In Millions of GBP
 • ZARA is already one of the leaders
of fast-fashion market.
CONCLUSION
• However it should reduce its cost
to gain more competitive
advantages over the competitors →
Create more customer value.
Q&A
 Q&A
What makes ZARA so unique that
improve its images to customers ?
(2/14) - Around neck
(9/14) - Socks and Sandals
(14/14) - a Skirt over a midi skirt

Around neck
 Q&A
What makes ZARA so unique that
improve its images to customers ?
(2/14) - Around neck
(9/14) - Socks and Sandals
(14/14) - a Skirt over a midi skirt

Socks and Sandals

 Q&A
What makes ZARA so unique that
improve its images to customers ?
(2/14) - Around neck
(9/14) - Socks and Sandals
(14/14) - a Skirt over a midi skirt

Skirt over a midi skirt

T H A N K YO U
THE END