Jardenil, Precious Mae Z.

Lumanas, Merasol Billanes

Oliverio, Mark Anthony
Playda, Migui Karl Duane
Sencio, Nekinah

I.Introduction

Zara is a fashion clothing retailer that was established and founded by Amancio Ortega
and Rosalia Mera in 1975 in Galicia, Spain. It is owned by the Inditex group, which belongs to
the biggest retailers in the fashion industry. Zara is known for their fast fashion, rapid production
cycles, low prices, imitation of high-end fashion, frequent inventory turnover, and disposable
fashion culture. Zara's supply chain is characterized by vertical integration, quick response
manufacturing, localized production, limited inventory, and a global synchronization strategy.
This unique approach allows Zara to stay ahead in the fast-paced world of fashion retail.

1.1 Mission and Vision

Mission

“Zara's mission is to "Give customers what they want, and get it to them faster than anyone
else”

Vision

“Zara's vision is " to contribute to the sustainable development of society and that of the
environment with which we interact."

1.2 Corporate Officers

Name Position Committee

Amancio Ortega CEO Executive

Maria Ortega Perez Chair Executive

Jose Arnau Sierra Deputy Chair Executive

Pilar Lopez Alvarez Chair Audit and compliance

Jose Luis Duran Schulz Chair Nomination

Rodrigo Echenique Gordillo Chair Remuneration

Denise Patricia Kingsmill Chair Sustainability

1.3 Present Strategies

Manufacturing designs close to home

Zara departed from the trend set by other clothing companies by manufacturing in the
area. Instead of transferring manufacturing to Asia, Zara produces more than half of its products
in Spain and a few neighboring countries such as Portugal, Morocco, and Turkey. That makes it
simpler for Zara to deliver products swiftly to its stores.

Investing less in advertising

Zara chose to spend more on their stores than on advertising. Zara spends very little on
advertising; instead, it relies on stores to create awareness for its brand. Zara only focuses a
little on marketing but concentrates on stores to increase brand awareness.

Manufacturing in small batches

Zara produces goods in small quantities, allowing it to respond quickly to shifting trends.
Zara can bring new trends to the public in just five weeks, and in a matter of weeks, an item can
be changed and delivered to stores just in time to allow customers to grab it off the shelves.
Zara's production runs are short, so customers will purchase their products until supplies run
out. People tend to buy their products quickly because of their fast production.

Staying on top of key trends

Zara's designers frequently observe what influencers wear to determine which trends are
gaining popularity. The designers at Zara also consider feedback from store employees,
evaluate what consumers look for on Zara's website, and respond to consumer requests.

1.4 Present Supply Chain Structure

1.5 Environmental Conditions

Zara has issues with the environment, especially those associated with greenwashing.
Regardless of using environmentally friendly fabrics such as wool and leather, Zara's emphasis
on these materials raises concerns about the sustainability of all of its practices. As Zara makes
efforts, it appears to deal with just one aspect of broad sustainability concerns in the fashion
industry. The company emphasizes using environmentally friendly materials and strives to raise
animal welfare standards, which is admirable. However, the issue lies in the broader field of
greenwashing, in which Zara may be ignoring other major environmental problems. Stating an
item is "eco-friendly" is insufficient; consumers require a more profound comprehension of a
company's sustainability operations.

Zara uses operations that minimize waste from manufacturing and encourage recycling.
Stores gather recycling security tags and hangers, which are then processed into different kinds
of plastic as a part of their waste management actions. To reduce the environmental impact of
its organization, the company processes hundreds of thousands of security tags and hangers
each year.

II. ANALYTICAL TOOLS

2.1 SWOT Analysis

 STRENGTHS
1. Fast Fashion Model- Fast fashion
retailers like Zara are well-known for
their ability to quickly adjust to shifting
consumer tastes and introduce new
merchandise into their stores. Zara's
ability to quickly adapt to changing
fashion trends gives it a competitive
advantage.
2. Vertical Integration-Zara has greater
control over production schedules,
quality, and costs because it owns a
large portion of its supply chain,
including manufacturing and
distribution.
3. Global Presence- With stores in
several countries, Zara has a huge
global footprint that gives them access
to a variety of markets and customers.
4. Brand Image- Zara has a strong and
favorable reputation for being stylish,
reasonably priced, and high-quality.
OPPORTUNITIES
WEAKNESSES
1. Dependence on Fashion
Trends-Zara's success can be
attributed in large part to its ability to
correctly forecast fashion trends and
make necessary adjustments. A
failure to anticipate trends could result
in an excess of outdated products.
2. Limited Online Presence- While
Zara has an online presence, it may
not be as robust as some of its
competitors. The company's
e-commerce infrastructure may not be
as sophisticated as that of some of its
competitors, despite its efforts to
improve it.
THREATS
 1. E-commerce Growth- There is a
significant opportunity for Zara to
expand its online presence and
capitalize on the growing trend of
e-commerce, especially considering
the changing consumer preferences.
2. Market Expansion- Zara can explore
opportunities to enter new markets or
further penetrate existing ones,
especially in regions with growing
economies and fashion-conscious
consumers.
3. Sustainability Initiatives- Investing
in sustainable and ethical practices
can enhance Zara's brand image and
appeal to environmentally conscious
consumers.
1. Competition-Zara confronts
competition from both traditional
retailers and online-only platforms in
the fiercely competitive apparel
market.
2. Economic Downturns: The influence
of economic downturns on consumer
spending on non-essential items can
have an effect on Zara's sales.
3. Supply Chain Disruptions-Due to its
reliance on an international supply
chain, Zara is vulnerable to hazards
including pandemics, natural
disasters, and geopolitical unrest that
could impede the manufacture and
delivery of items.
4. Changing Consumer
Preferences-There may be a threat
from customer tastes moving in favor
of sustainably and ethically created
goods if Zara is unable to adapt to
changing trends.

2.2 MICHAEL PORTER’S 5 COMPETITIVE FORCE MODEL

1. COMPETITIVE RIVALRY (HIGH)

Preferences of consumers vary not from their own taste but from the influence of others
also the weather, season, and even from the stage of their life they currently live in. Therefore
retail companies like Zara infiltrates the market and creates, innovates and thinks of strategies
everyday. The high number of retail companies and their shared goal that they will be the one
buyers choose is fierce therefore making the competitive rivalry high for ZARA.

2. THREAT OF NEW ENTRANTS (HIGH)

Although Zara has already established its brand to be a reputable one, it is still easy to
enter the retail industry. Consumers’ taste could change especially now that they can choose
from big companies like Zara to small time shirt vendors they randomly found on the internet
and in some cases, consumers could even prefer to wear local brands if they want to. To enter
into a retail business like Zara is easy for anyone who wishes to therefore making the threat of
new entrants high.
 3. THREAT OF SUBSTITUTION (HIGH)
Many clothing labels, both inside and outside the fast fashion industry, are available for
consumers to select from. Other than that, replacements that could threaten Zara's established
quick fashion lines could be produced by shifting consumer preferences, such as a move toward
ethical or ecological fashion.

4. BUYER’S BARGAINING POWER (HIGH)

The fashion industry being highly dependent on consumer’s preference leads Zara to
adhere to the buyer’s demands. The availability of numerous alternatives also adds pressure to
the company to be on top of the competition and concur to what their customers demand.

5. SUPPLIER’S BARGAINING POWER (LOW)

Because of its vertical integration and ownership of a substantial portion of its supply
chain, including production facilities, Zara holds a certain influence over its suppliers. The
fashion industry depends on a wide range of raw materials, and suppliers' bargaining power can
be influenced by the availability of these resources, the number of replacement suppliers, and
the uniqueness of inputs. Due to its scale and global presence, Zara typically has negotiation
power over suppliers.

Part 3 Problem Ideation

1. Statement of the Problems (SOP)

Zara's unique business model heavily relies on its fast-fashion supply chain, which
involves rapid production and distribution of trendy clothing. While this has been a key to its
success, it also poses a risk. Any disruption or flaw in this supply chain could have significant
consequences for the entire business, making it vulnerable to external shocks such as natural
disasters, geopolitical issues, or global supply chain disruptions.

2. Causes and Indicators of the problems

Causes: The pressure to deliver new styles quickly is often driven by consumer demand
for the latest trends. If Zara perceives that consumers prioritize speed and low prices over
sustainability, it might prioritize these aspects in its business model, potentially neglecting
long-term environmental concerns.

3. Impact if the problems if not solved (short term / long term)

Short Term Impact: In the short term, the impact of sustainability concerns may
manifest as potential backlash from environmentally conscious consumers. This could lead to a
decline in brand loyalty, negative publicity, and a shift in consumer preferences towards more
sustainable competitors.

Long Term Impact: Failure to address sustainability concerns may result in a

diminishing market share over the long term as consumers increasingly prioritize eco-friendly
practices. Additionally, the company might face regulatory challenges and increased scrutiny
from stakeholders, impacting its ability to operate in a changing business landscape where
sustainability is a key focus. This could lead to strategic disadvantages compared to competitors
adopting more sustainable practices.

4 Identify Decision Criteria

Alternatives Decision Criteria Total

1 2 3 4
Diversification
of Suppliers

1 29 17 20 21 87.00

2 29 28 18 10 85.00

3 12 15 28 29 84.00

Part 4 Alternative Strategic Choices

Identify 3 Strategic Alternatives

Each problem identified in Part 3 should have 3 alternative solutions each

Problem : Supply and Demand Uncertainties (Shortage of Cothing and

Limited Online Visibility)

Alternatives Advantages Disadvantages

Agile Supply Chain 1. Flexibility: An agile 1. Complexity: Managing

Management and Advertising supply chain allows an agile supply chain
Strategy ZARA to quickly can be complex,
respond to changes in requiring
demand or supply, sophisticated
minimizing the impact forecasting models,
of uncertainties. real-time information
2. Reduced Inventory systems, and
Costs: By aligning responsive production
production closely processes.
with actual demand, 2. Higher Costs: The
ZARA can minimize need for flexibility and
excess inventory, quick response may
reducing holding costs result in higher
and the risk of production costs and
obsolescence. increased expenses
 3. Improved Customer associated with
Satisfaction: Faster supply chain
response times optimization.
enable ZARA to meet 3. Supplier
customer demands Relationships:
more accurately and Frequent changes in
quickly, enhancing production schedules
customer satisfaction. may strain
relationships with
suppliers who may
find it challenging to
adapt to ZARA's
dynamic demands.

Diversification of Suppliers 1. Risk Mitigation: 1. Coordination

and Sourcing Working with a Challenges: Managing
diversified set of relationships with a
suppliers and diverse set of
sourcing from multiple suppliers can be
regions helps ZARA challenging, requiring
mitigate the risk of effective
disruptions in the communication and
supply chain. coordination.
2. Access to Varied 2. Quality Control:
Resources: Different suppliers
Diversification may have varying
provides access to quality standards, and
different raw maintaining consistent
materials, production quality across the
capabilities, and supply chain can be a
expertise, reducing challenge.
dependence on a 3. Increased Complexity:
single source. Managing a diverse
3. Cost Optimization: supplier network adds
Competition among complexity to
suppliers can lead to procurement,
more competitive logistics, and quality
pricing, and assurance processes.
diversification may
also reduce the
impact of price
fluctuations in specific
markets.

Optimize Inventory 1. Buffer against 1. Holding Costs:

Management Uncertainty: Maintaining larger
Maintaining strategic inventories incurs
inventory levels acts storage costs, tying
as a buffer against up capital, and
 sudden fluctuations in potentially leading to
demand or supply, increased holding
ensuring product costs.
availability. 2. Obsolescence Risk:
2. Customer Service: Products held in
Adequate inventory inventory for extended
helps prevent periods may become
stockouts, contributing outdated or obsolete,
to positive customer resulting in losses.
experiences and 3. Environmental Impact:
brand reputation. Larger inventories
3. Economies of Scale: contribute to a higher
Bulk purchasing and environmental
storage of raw footprint due to
materials may lead to increased resource
economies of scale, consumption and
reducing per-unit waste.
production costs.

Problem Decision Table

Alternatives 1 2 3 4 total

1 29 17 20 21 87.00

2 29 28 18 10 85.00

3 12 15 28 29 84.00

Part 5 - The Best Solutions and Implementation Plan

1. What is/are the best alternative for each problem?

Zara introduces new clothing designs approximately every two weeks, setting itself apart
from competitors who refresh their designs every two or three months. The data suggests that
online visibility is a challenge for Zara, prompting a strategy that encourages customers to visit
physical stores, where they can personally experience and try on the distinctive fashion
offerings.

Moreover, Zara directs its financial resources towards expanding its physical footprint
through new store openings, prioritizing this investment over extensive advertising campaigns.
Therefore, embracing an effective advertising strategy is crucial for keeping individuals
informed about your offerings, especially considering that not everyone can physically visit Zara
on a monthly basis. In today's generation, the convenience of online shopping is paramount,
and people are more inclined to make purchases when attracted to products showcased on
your business account. Also, Zara should adopt optimized inventory management to enhance
its operational efficiency, reduce lead times, and ensure a more responsive supply chain. By
optimizing inventory management, Zara can strike a balance between meeting customer
demands for the latest fashion trends and minimizing excess stock. This approach enables the
company to reduce costs associated with overstocking and markdowns while maintaining a
competitive edge in the fast-paced fashion industry.

Leveraging Zara's strengths in fast fashion and responsiveness, the adoption of

optimized inventory management and an effective advertising strategy emerges as the most
strategically aligned solution for the company. These measures are essential for enhancing
operational efficiency, reducing lead times, and ensuring a well-managed supply chain. By
implementing these strategies, Zara is poised to improve significantly, leading to increased
profitability and a sustained competitive advantage in the dynamic fashion market.

2. Identify steps, how to implement it?

Implementing the recommended strategies for Zara involves a thoughtful and phased approach
to ensure effective execution. Here are seven steps:

1. Data Analysis and Market Research:

● Conduct a comprehensive analysis of online visibility challenges through data
analytics.
● Perform market research to understand online and offline customer preferences
and behaviors.

2. Advertising Strategy Development:

● Formulate a robust advertising strategy that leverages Zara's unique selling
points and resonates with its target audience.
● Focus on online platforms to enhance digital visibility and reach a wider customer
base.

3. Inventory Management System Upgrade:

● Invest in advanced inventory management systems to optimize stock levels,
reduce lead times, and enhance overall operational efficiency.
● Integrate real-time tracking and forecasting tools to align production with market
demand.

4. Supply Chain Optimization:

● Adopt an agile supply chain management approach to streamline processes and
respond quickly to changing fashion trends.
● Foster strong partnerships with suppliers and manufacturers, prioritizing clear
communication and efficient collaboration.
 5. Employee Training and Development:
● Provide training programs for employees to adapt to the new strategies,
emphasizing the importance of customer engagement, online promotion, and
efficient inventory handling.
● Equip staff with the necessary skills to embrace technological advancements in
inventory management.

6. Physical Store Experience Enhancement:

● Implement initiatives to enhance the in-store experience, encouraging customers
to visit physical locations.
● Consider interactive displays, fitting room technologies, and other innovations to
make the physical shopping experience more engaging.

7. Monitoring and Continuous Improvement:

● Establish key performance indicators (KPIs) to monitor the success of the
implemented strategies.
● Regularly review and adjust the advertising strategy, inventory management, and
supply chain processes based on customer feedback and market dynamics.

3. Identify performance measure on how to identify success?

To measure the success of the implemented strategies, Zara can focus on various performance
indicators across different aspects of its business. Here are five performance measures:

1. Sales Growth:
● Monitor overall sales performance to gauge the impact of the advertising strategy
and the appeal of new designs.
● Compare sales figures before and after and the implementation of strategies to
assess the effectiveness of the changes.

2. Online Engagement Metrics:

● Track online engagement metrics such as website traffic, social media
interactions, and click-through rates.
● Analyze user engagement data to evaluate the success of the digital advertising
strategy and online visibility efforts.

3. Inventory Turnover Rate:

● Measure how quickly inventory is sold and restocked over a specific period.
● A higher inventory turnover rate indicates that optimized inventory management
is effectively aligning stock levels with customer demand.

4. Customer Satisfaction:
 ● Collect customer feedback and comment through surveys, reviews, and other
channels to gauge satisfaction levels.

5. Supply Chain Efficiency Metrics:

● Evaluate key supply chain performance indicators such as lead times, order
fulfillment speed, and production cycle times.
● Improved efficiency in these areas indicates successful adoption of agile supply
chain management practices.

4. Identify 2-3 control measure to ensure success?

To ensure that the success of the implemented strategies, Zara should establish control
measures that allow for continuous monitoring and adjustment. Here are two to three control
measures:

1. Key Performance Indicator (KPI) Dashboards:

● Develop and regularly update KPI dashboards visually representing the critical
performance metrics identified earlier.
● Set specific targets for each key metric and regularly compare actual
performance against these benchmarks.
● Implement automated reporting systems to provide real-time insights into the
success of advertising efforts, inventory turnover, and supply chain efficiency.

2. Regular Performance Reviews:

● Conduct regular performance reviews at predetermined intervals.
● Establish cross-functional teams to assess the impact of the strategies on sales,
customer satisfaction, and operational efficiency.
● Use these reviews to identify any deviations from the set objectives and
determine necessary strategies adjustments.

3. Customer Feedback and Surveys:

● Implement ongoing customer feedback mechanisms, such as surveys and social
media monitoring, to gather qualitative insights.
● Analyze customer comments and feedback about their experiences with new
designs, online engagement, and in-store visits.
● Leverage this information to identify improvement areas and make data-driven
decisions regarding future strategies.