Alysia Gooden BUS 550 The Contemporary Firm Zara Case Study Alysia Gooden BUS 550 The Contemporary Firm

Zara Case Study Objectives Background information about Zara Organization (Vertical Integration) Turn around time Technology Business Challenges Fast Fashion Competitors Zara In the News Mini Quiz Question/Answer

What is Zara? Financial Metrics YouTube Video: Zara Business Introduction Zara Company (its parent company is Inditex) Clothing and accessory retailer based in Galicia, Spain Founded in 1975 by Amancio Ortega and Rosalia Mera Provides services worldwide Provides “instant fashion” at a decent priced value Financial Metrics Revenue: $31.3 Billion Net Income: $4.2 Billion Number of Stores: 7,475 Number of countries: 96 11/12/2018

Profitability of Vertical Integration Harvard Business Review author wrote an interesting article about why vertical integration is profitable Transaction cost Supply assurance Improved Coordination Technological Capabilities High Entry Barriers 11/12/2018

Profitability of Vertical Integration in Zara YouTube Video: RFID Technology Distribution center in La Coruna Zargoza moves over 17 million items every week Ceiling mounted racks and customized sorting machines Clothes are ironed in advanced and packed on hangers with security and price tags affixed RFID Technology 11/12/2018

Zara Reduces Turn Around Time There are five key tactics that Zara uses from their production process to distribution management Concentrate on In-Time production and distribution Just in time inventory rather than forecasting the future Reduce delivery time with a solid distribution management Reduce marketing costs Continue learning from customer feedback 11/12/2018

RFID Tags Radio Frequency Identification (RFID) tags wirelessly emit a unique identifying code for the items that they are attached do. Allows Zara to keep track of product. Technology Zara affix tags to all products before sending them out to stores Stores remove tags when customers buy items Stores send tags back to Zara warehouses for reuse Take in-store inventory four times a day All items are flowed to Zara warehouses 11/12/2018

Technology Intelligence-Gathering Effort Customer feedback on products Mobile devices recording data based upon customer feedback on product. Customer feedback on products Staff enters response on mobile device & sends back to headquarters Data goes to “The Cube”, where the clothes are designed 11/12/2018

Business Challenges Financial Vulnerabilities Online Resale Market The fashion industry is a fast moving market with several competitors. Zara could potential face financial currency issues along with online fashion resale markets such as ASOS and Boohoo. Financial Vulnerabilities Online Resale Market More susceptible to financial vulnerabilities during periods when the euro strengthens relative to foreign currencies Stronger euro would mean that Spain-centric costs would rise at higher rates compared to competitors If fuel costs rise that would be a huge financial impact as Zara has twice-weekly deliveries According to a Bloomberg business article- “The shift to internet shopping isn’t playing to the strengths of Zara as it’s exposing issues with the fashion retailer’s fit, product quality and online service, according to Credit Suisse analyst Simon Irwin Incorporating E-Commerce (More Sales + Better Customer Experience) 11/12/2018

Fast Fashion Competitors Online Retailers ONLY “High End” Fashion Retailers “Low End” Fashion Retailers 11/12/2018

Fast Fashion ANSWERS Online Retailers ONLY “High End” Fashion Retailers “Low End” Fashion Retailers 11/12/2018

Zara in the News Fast Company “People are loving Zara a little less after its worker pay issues went viral” Zara partnered with Turkish factory for the labels and It was found that the workers were not getting paid Workers started a campaign. They put tags on garments across every Zara store Zara Change Petition Inditex promised to look into event and strengthen supervision of its suppliers’ production facilities “Has signed a Global Framework Agreement with IndustriAll Global Union and accepted responsibility for the basic rights of the workers in its supplier factories.” 11/12/2018

Zara in the News Flat World Tech for Good: The Fair Factories Clearinghouse Provides systems where apparel and other industries can share audit information on contract manufacturers Ethical clothing brans betting against fast fashion. “As consumers, we have become increasingly conscious about our purchases, channeling the power of our vocalized objections to make a positive difference for the people involved in making of our clothes and goods.” – The Good Trade 11/12/2018

Mini Quiz Question 1: Question 3: Question 2: What is the average time for a Zara concept to go from idea to appearance in store? Ten Days Eleven Days Fifteen Days Thirty Days Question 3: What is the name of the location where the team members design new products for Zara? “The Cube” “The Design Center” “Zara’s Cube” “The Center” Question 2: Who acquired Zara? Indeed Inditex Google Amazon 11/12/2018

Answers! Question 1: Question 3: Question 2: What is the average time for a Zara concept to go from idea to appearance in store? Ten Days Eleven Days Fifteen Days Thirty Days Question 3: What is the name of the location where the team members design new products for Zara? “The Cube” “The Design Center” “Zara’s Cube” “The Center” Question 2: Who is the parent company of Zara? Indeed Inditex Google Amazon 11/12/2018

Topics of Discussion How do you think Zara could maintain their high revenue stream? There are several news articles of Zara, of the news articles that we have discussed in class, which do you feel will have the most negative impact of the company? Can Zara survive without resorting to factories to third world countries? What other technology could Zara implement besides POS, Mobile device feedback, and RFID technology? Do you believe that a company such as Amazon could potentially buy out Inditex? What other companies mirror the “Just in time” approach? 11/12/2018

Thank you! Alysia Gooden Alysia.gooden532@myci.csuci.edu 520-404-5665 Email: Alysia.gooden532@myci.csuci.edu Phone: 520-404-5665

Source Data http://www.gapinc.com, http://www.inditex.com, and https://fashionunited.uk/news/business/inditex-posts-7-percent-profit-growth-in-fy17/2018031428641 (Slide 3) https:/hbr.org/1983/01/is-vertical-integration-profitable (Slide 4) https://www.bloomberg.com/news/articles/2018-09-03/zara-s-treasure-trove-stores-not-so-good-for-online-shoppers (Slide 6) https://www.bbc.com/news/world-europe-41981509 (Slide 7) https://www.change.org/p/justiceforbravoworkers?source_location=topic_page (Slide 7) https://www.wsj.com/articles/zara-sharpens-focus-on-digital-1521042436 (Slide 9) http://www.thegoodtrade.com/features/fair-trade-clothing (Slide 9) 11/12/2018