Zara Business Strategy

In: Business and Management

Submitted By lintomlins
Words 1628
Pages 7
ZARA
- zara owned by inditex; posted net income eur340m on revs eur3.250m in 2001
- inditex ipo may 2001; oversubscribed; stock increased by over 50%
- 76% of equity value implied stock price was based on future growth expectations (higher than an estimated 69% for WMT)
- global apparel chain; buyer driven global chain
- branded marketers and manufacturers served as brokers in linking overseas factories with markets
- production; very fragmented (individual apparel firms on avg employed a few dozen ppl)
- about 30% of apparel production was exported (developing countries had very large share, nearly 50% of all exports)...cheaper labor + inputs
- proximity also important bc it reduced shipping costs
- china was export powerhouse but greater regionalization in 90s led turkey, north africa, eastern euro countries to be major suppliers to US
- MFA (multi fiber arrangement) regulated apparel and textile industry (restricted imports of US, canada, west europe since 1974); agreement to phase out quota system by 2005 and further reduce tariffs (avg 7-9% in major markets)
- cross border intermediation; trading co's played primary role in orchestrating physical flows of apparel btwn exporters and importers
- retail; large retail played leading role in promoting QR (quick response); targeted at improving coordination between retailing and manufacturing (increase speed and flexibility of responses to market shifts)
- QR led to significant compression of cycle times enabled by improvements in IT
- markets and customers; in 2000 spending on retail clothing roughly eur900bln worldwide; europe (west) 34%, US 29%, asia 23%
- mckinsey identified 5 ways for retailers to expand across borders: choosing a sliver of value instead of competing across the entire value chain: emphasizing partnering; investing in brands; minimizing investments (tangible); arbitraging…...

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