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European Business School

International University Schloss Reichartshausen


Group Case Study of Zara
To obtain the academic degree
Bachelor of Commerce
Fast Fashion Lessons
Donald Sull and Stefano Turconi
London Business School
Professor Benjamin Bental
March 1, 21
!i "ae #Caroline$ Lee
Corentin %dam
Melis &esgin
'osaCastells Sala
(arren #Sid$ Tet)
Group 12
European Business School
International University Schloss Reichartshausen
Introduction
*+er the ,ast 1- .ears /ara has re+olutioni)ed the fashion retailing through something called
fast fashion0 Fast fashion is a com,etiti+e ad+antage created b. the efficient functioning and
coordination of man. o,erational areas0 /ara can ,roduce, mar1et, and sell high fashion loo12
a2li1es at e3tremel. reasonable ,rices faster than an. traditional retailer0 Through this ,a,er
4e 4ill brea1 do4n the strategic decisions that /ara has made to create this re+olutionar.
com,etiti+e ad+antage 4ithin the fashion industr.0
Strategic decision in Supply Chain
/ara fa+ours local ,roduction5 as a matter of fact, labour intensi+e o,erations are outsourced
to local subcontractors0 Fift. ,ercent of /ara6s ,roducts are manufactured in S,ain b. 22
factories and subcontractors 4hich are located in 7alicia0 Des,ite chea,er labour costs, /ara
a+oids sourcing ,roduction in %sian countries to a+oid 4aiting long lead times
1
for ,roducts
the. need ,roduced0 8t is noted, that se+ent. ,ercent of /ara6s ,roduction is in 9uro,e to hel,
minimi)e lead times0
*ther areas of o,erati+e ,roduction are +erticall. integrated 4ithin /ara0 Large in+estments in
com,uter guided cutting e:ui,ment ensure efficienc.0 (ith some areas of ,roduction being
sourced and other areas, such as com,uter guided fabric cutting, being done in2house /ara
maintains a stead. stream of information sharing0 %lmost all areas inside and outside the firm
recei+e information simultaneousl.0 #93hibit 1$
To facilitate this great su,,l.;,roduction chain, /ara also has a great ad+antage in logistical
,o4er0 Products that ,ass through the logistic ,latform of La Corogne re,resent 1 million
,roducts a 4ee10 There are more than 2 1ilometres of cable and a surface of around <
1
The time from ,roductions initiation ,rocess until com,letion
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International University Schloss Reichartshausen
m= in this entirel. automatic distribution centre0 9+en more im,ressi+e, t4o times a 4ee1 the
centre is em,tied and ne4 turno+er re,lenishes the old in+entor.0
Due to the high +olume of ,roducts and information that needs to be shared bet4een all areas
of the firm, /ara retains ninet. ,ercent o4nershi, to a+oid conflict bet4een cor,orate
decisions and franchises0 Due to the s,an of cor,orate hierarch., /ara ,a.s ,articularl. close
attention to team4or10 /ara tries to brea1 the cor,orate structure and a,,ears as more of a
socialistic firm0 9+er ,erson is e:ual in the e.es of the firm and this hel,s to enable 4or1 to
be done in an efficient 4a. 4ith the most information sharing as ,ossible0 Furthermore, this
also reduces the e3,enditures on fanc. cor,orate offices and hel,s further reinforce the
cor,orate culture0
Continuing 4ith efficienc. and lo4 costs, /ara a+oids e3tra+agant and flash. ad+ertising0 8n2
store and ,oint2of2sales ,romotion is the onl. ad+ertising that /ara utili)es0 >ot onl. is this a
strategic decision to lo4er costs but also to 1ee, consistenc. 4ith their o+erall strateg. of fast
fashion0 The high turno+er of in+entor. 4ithin the store does not gi+e /ara man.
o,,ortunities to ad+ertise their in2store selections in catalogues, brochures, or other traditional
Medias0
Zaras Core Competency: Shared situation awareness
Shared situation is the foundation for /ara6s success to res,ond :uic1l. to changes in demand0
This s.stem is built on three main ,illars? ra4 data collection, h.,othesis building, and
testing0
The first ,illar is managing huge amounts of ra4 data and incenti+ising managers to collect
accurate as 4ell as useful data0 Managers are re:uired to collect data that enables those
4or1ing in /ara head:uarters to find ,atterns and forecast future trends0 The ra4 data that
European Business School
International University Schloss Reichartshausen
managers collect consists of e+er.thing from 4hat is on the rac1s to 4hat has been tried on
and left behind0
(ith the successful collection of ra4 data, head:uarters can anal.se, mani,ulate, and add
en+ironmental
2
data to the series allo4ing for the formulation of h.,othesises to antici,ate
trends0 /ara6s o,en conce,t cor,orate culture is im,ortant here to facilitate brainstorming
during the de+elo,ment of h.,othesises0 This allo4s for man. different h.,othesis to be
created 4ithout fear that it 4ill not be considered for the ne3t ste,0
The ne3t ste, is testing the chosen h.,othesises0 This is the final ,illar in /ara6s shared
situation a4areness0 Based on the h.,othesis, ,rotot.,es are created0 These ,rotot.,es are
then e3hibited in a 2<, m= design hall0 8t is called @Fashion StreetA and it resembles
fashion streets of Milan or London0 The ,rotot.,es are designed in house so that the. can be
,roduced :uic1l. allo4ing decisions of 4hether to 1ee, the ,rotot.,e or cull it, to be made
:uic1l.0 %,,ro3imatel. 2B, ,rotot.,es are made but about si3t. ,ercent are culled0 This is
due to their failure to fit among the e3isting collection or bad results, in terms of data
collection, in the first fe4 4ee1s of testing0
Competitive advantage
/ara6s com,etiti+e ad+antage is de+elo,ed through their abilit. to collect data and res,ond
:uic1l. to fast2changing mar1et trends based on their situation a4areness strateg.0 *bser+ing
en+ironmental factors and collecting co,ious amounts of data, /ara can antici,ate the ne4
trends in the fashion mar1et0 This is +astl. different from the t.,ical designer ,ush2,ull
retailing model0 #93hibit 2$ Furthermore, fift. ,ercent of /ara6s ,roducts are introduced on
ongoing basis0 This is much more fre:uentl. than the t.,ical fashion retailer 4hich t.,icall.
introduces ne4 ,roducts based on the four seasons0 The reason that /ara can change turno+er
their in+entor. so ra,idl. is due to a +er. small lead time created b. an e3tremel. efficient
2
Data relating not strictl. to /ara and their ,roducts ie0 4orld e+ents, ne4s, etc0
European Business School
International University Schloss Reichartshausen
su,,l.;,roduction chain5 4hich can ,ut ,roducts into retail outlets in 1B da.s0 #93hibit -$
Further benefits of /ara6s efficienc. are reali)ed 4hen 4e consider their a+erage mar1 do4n
ratio and ,rofit margin0 Traditional fashion retailer6s mar1 do4n a,,ro3imatel. fift. ,ercent
of their ,roducts 4here as /ara onl. mar1s do4n about fifteen ,ercent of their ,roducts
#93hibit <$5 and reali)es a ,rofit margin of si3teen ,ercent com,ared to the se+en ,ercent of
traditional retailers0 *+erall, /ara has strategicall. built their com,etiti+e ad+antage on
situation a4areness and ha+e been successfull. created something no4 called fast fashion
retailing0
Conclusion
To conclude /ara is a com,an. that can res,ond :uic1l. to changing demand0 The. ha+e
succeeded in de+elo,ing a com,etiti+e ad+antage through strategic ,lanning of o,erations
management, "uman 'esources, mar1eting, and their financial structures0 The finall. most
im,ortant strategic 1e. to their success is the ,rocess of situation a4areness0 /ara benefits
from scale ,roduction and economies of sco,e 4ithin their cor,orate hierarch. sa+ing costs
4here+er ,ossible0 Furthermore, /ara has integrated technologies 4ell to hel, 4ith the
management of ra4 data as 4ell as com,uteri)ed cutting ,rocesses0 The combination of in2
house ,roduction and local sourcing has ,ro+ed to be a great success for /ara0 (e 4ould
e3,ect to see stead. gro4th of this strategicall. 4ell thought out firm0
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International University Schloss Reichartshausen
%,,endices
Ehi!it 1
Ehi!it 2
European Business School
International University Schloss Reichartshausen
Ehi!it "
/ara has a +er. small lead time? 1B da.s0
The first da., a st.list designs the ,attern he loo1s at customer needs and lu3urious clothes0
The third da., materials are com,uter guided cutting0
The ele+enth da., clothes are ma1e in a local subcontractor, and then the. come in ,arent
factor. for the coating0
The thirteenth da., ,roducts are freighted for4ard b. truc1s in 9uro,e and b. aircraft in %sai
or CS%0
Finall., the fifteenth da., ,roducts are sold in the stores o+er the 4orld0
Ehi!it #