Competing on

Capabilities

Professor S. Lioukas
2016 Update:
 Zara is the world's largest fashion
retailer, present in 88 countries,
with a network of over 5.000
stores in privileged locations of
major cities
• 66 % international sales

Its international presence is a

testament to the idea that
national borders are no
impediment to “sharing a single
fashion culture”.
 Retail shops
ΑΡΙΘΜΟΣ ΚΑΤΑΣΤΗΜΑΤΩΝ Linear (ΑΡΙΘΜΟΣ ΚΑΤΑΣΤΗΜΑΤΩΝ)
ΔΙΑΦΟΡΑ Linear (ΔΙΑΦΟΡΑ)

7,013
6,683
6,340
6,009
5,527

330 343 331 482 483

2015 2014 2013 2012 2011

 Zara- important events (1975-2014)
1975: Amancio Ortega opens the first Zara store in a central
street of La Coruña (Spain)
1988: Opens the first Zara store outside Spain, in Porto
(Portugal).
1989-1994: Opens stores in other countries
New York (1989), Paris (1990), Mexico (1992), Greece
(1993), Belgium & Sweden (1994).
2001: Inditex group is listed in the stock market
2013: Zara opens its first store in Algeria. The Group continues
to expand its brands online in new markets such as Canada
and Russia.
2014: Global online sales launches reach 27 markets.
 Zara’s Value Chain
Vertically integrated
• The tight integration of design, planning, merchandising and
production in La Coruna enables the company to respond
quickly to any market need
• more integrated than others manufacturers, who are “highly-
labor” intensive

Manufactures 60% of its own products

• Zara has resisted the industry-wide trend towards
transferring fast fashion production to low-cost countries
• Only garment making is sub-contracted in 350 small sewing
units in Spain
 Distribution & Logistics
A central distribution
center channels all • Distribution takes place twice a week
production to all stores
worldwide

ofer
Each consignment always • Stores are constantly renewing their
includes new designs

The time between Asian shops

receiving an order in the • 48 hours maximum for American or
distribution center to the
delivery of goods in the • 24-36 hours for European shops
store is on average
 Zara’s Business Cycle
Information from Daily analysis of
stores is product sales
constantly and company’s
transmitted to a performance.
design team Customer
( 200 professionals, feedback
20.000 new designs
per year) “ZARA reacts
to revealed
demand
immediately”

Small Central
production- distribution,
Scarcity efect. shipment to all
Extremely small store 2ice per
lead times week, 24-48hr
delivery
ZARA’s strategy: hybrid and focuse
?
Diferentiates from
traditional garment Mission
making.
• “Give
• Instant fashion at rather
low prices
customers the
• Targeted at young fashion they
people want”

Economies of No traditional
Global reach
scarcity advertising
• Standardized • Continuous • Dependent
fashion shelf renewal on word of
mouth
 Economies of Scarcity
Strengthen the sense of “now-or-never’”
• Regular customers know that the new products are introduced every
two weeks and most likely would not be available tomorrow
• Selling more items at full price (little left over for sales)

Increase of visits
• a typical ZARA customer visits the store 17 times per year (c.f. 3
time/year for a high-street store in Spain)
Better stock management
 Key Capabilities
Recognition and identification of fashion on demand-
latest trends
• Ability to react quickly rather than predict
• 85% of the production is done through the season

Unmatched speed from design to stores

• Between 2 weeks (modified design) and 5 weeks (new design)

Abundance of choices for customers

• 11.000 designs per year
• Quick product life cycle, greater customer satisfaction through high
turnover in oferings
 Key Capabilities
Renewal of store layout (every three-four days)

Accurate demand forecasting

• Accurate demand forecasting enables mass production

leading to well managed inventories, lower markdowns,
higher profitability and value creation for shareholders in the
short and long term

“Zara is a fashion imitator”
(Businessworld magazine ).
Accusations
Although the firm does not
admit it, a lot of its
products’ design is “strongly
infuenced” by very
expensive brands
• A team of 200 designers creates
versions demanded
 Zara’s Capabilities

Which Which
cannot are
be imitated? “dynamic”?

Which of
them add Zara …“possibly the most innovative
value? and devastating retailer in the world”
Daniel Piette, Fashion Director, Louis Vuitton
 Distinctive Capabilities
Key capabilities Distinctive elements
(according to J. Kay)
Architecture Relations with stores
Relations with 200 designers
Relations with 350 small sewing units to
which garment making is sub-contracts

Reputation Fashion clothes at affordable prices

Technical scarcity: “now or never”
Innovation 11000 designs per year (competitors:
2000 – 4000)
85% are designed during the season
(competition 6 months in advance)
Strategic assets Location of stores in central positions
5
 Dynamic Capabilities
Categories of DC Distinctive elements
Reconfigure / recombine Reconfigured value chain: a central
resources distribution center (1986) and two new ones
(2002 and 2003)
Even manufacture on shore (in a ship)…Kept
speed of delivery despite addition of outlets
Integrate / coordinate Integrates design, manufacture, distribution
and sales at high speed
 the cycle from design to store between 2
(modified design) to 5 weeks (new design)
Learning Capability to recognize trends in fashion,
interpret, adapt and satisfy fashion needs of
millions (unmatched by competitors)
Stores become a source of information for new
designs
5
The INDITEX Group (1991-2014)
Zara is the leader in the group
INDITEX Group 2015
Performance data
Financial results of the Inditex Group
thanks