BUSINESS ADMINISTRATION, YEAR III

STRATEGIC MANAGEMENT

ZARA AND ITS MANAGEMENT

Salcu, Iulia Maria

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 ZARA
Zara is a great company that has motivated me to talk about it because of its great growth in such a
short time. A company that started in a small town and developed so much that now it is an
international brand known by many.
Inditex is the largest fashion distributor and retailer in the world, with eight brands: Zara,
Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterque. The figures
around the company are massive, with 7,475 stores present in 96 markets, 49 online markets and
directly employing 171,839 people.
Inditex has its origins in 1963 as a small family business manufacturing women’s apparel in La
Coruña, a small town in Galicia northern Spain. In 1975, Amancio Ortega decided to launch its first
brand Zara which is Inditex flagship. Zara was a pioneer in the fast fashion model, completely
disrupting the traditional fashion industry.
Fast fashion describes low-priced but stylish clothing that moves quickly from design to
retail stores to meet trends, with new collections being introduced continuously. Innovations in
supply chain management among retailers make fast fashion possible.
Zara’s original business proposition was to create similar copies of high-end lines at an
affordable price. Which later transformed into instant fashion, Zara can react to new trends with
amazing speed and come up with new lines for their retail stores in a very small amount of time.
The fashion industry traditionally works with a seasonal model with huge production runs, at the
end of each season, the clothes that did not sell goes on sale.
Its logo is this, a simple and minimalist logo that denotes luxury, and its slogan is:
"Love Your Curves."

Six men and two women are at the helm of the stores. All of them are, to a greater or lesser extent,
people of full confidence of Amancio Ortega, the founder of the company, and together with 13
other executives, they form the top management of the giant from A Coruña.
For our brand there are 3 great directors, at the head is Óscar Pérez Marcote, brother-in-law of
Amancio Ortega, who took the reins in 2011, coinciding with the arrival of Pablo Isla to the
presidency of Inditex, and in Zara Home we have Lorena Mosquera, who was also responsible for
Zara Woman.
The main shareholder is one of its two founders, Amancio Ortega, with almost 60% of the shares,
through his investment companies, Pontegadea Inversiones S.L. and Partler 2006. His daughter,
Sandra Ortega, indirectly owns 4.5% of the company.

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Zara's evolution was very fast, it expanded worldwide and was very successful.
The evolution In 1988, the company began its international expansion by opening its first store
outside Spain in Porto, Portugal. In 1989, it entered the United States, and then France in 1990.
During the 1990s, it expanded to Mexico (1992), Greece, Belgium and Sweden (1993). In the early
2000s, it opened its first stores in Japan and Singapore (2002), Russia and Malaysia (2003), China,
Morocco, Estonia, Hungary and Romania (2004), the Philippines, Costa Rica and Indonesia (2005),
South Korea (2008), India (2010), and South Africa and Australia (2011).
And, in 2010, the first Zara online store was created where they shipped to a few countries but soon
after also began to have more success and expand their shipments.

 SWOT ANALYSIS.
SWOT Analysis of a brand is a study of its Strength, Weakness, Threat, and Opportunities.
Let’s get into the details:
1. Strengths of Zara
 Pioneer Advantage: The focal point of instant fashion is to design, produce and sell at a
fast rate. Conventionally, this procedure is lengthy; but for Zara, it is only a matter of 3
weeks. As pioneers, Zara has the most developed, strategic practices in supply network
management.
 Stores: Zara has the most fashion retail stores in the world, with 2249 locations.
 Supply Chain: Zara’s supply chain updates its online and retail collections twice a week.
Zara’s ten logistic centres deliver within 48 hours to any region on the planet. Inditex also
has an in-house software development team that is working to increase the company’s order
fulfilment speed.
 Investing in Online Retail: Inditex is investing $3 billion to boost its online sales. The
money will go into creating a fun online shopping experience and integrating the current
physical infrastructure. By 2022, the corporation wants to generate a quarter of its income
from online sales.
Zara’s success can be attributed to her mastery of the fast-fashion game.
2. Weaknesses of Zara
Zara’s commitment to revising its collection every three weeks sets it apart from other fashion
houses. However, all of this comes at a cost.
 Instant-fashion Trends: Zara’s issue is to find a way of balancing sustainability with
instant fashion, which is becoming more popular among buyers and policymakers.
 Ethical Workplace Standards: Inditex works with 1520 different suppliers across 7108
different plants. Although Inditex deserves respect for developing a strict code of conduct,
there is a significant gap in its enforcement. This gap is highlighted by an article in
Buzzfeed about the treatment of employees in Myanmar.

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  Prediction Aided by AI Systems: Zara is actively working with AI and Big Data
companies to develop an AI-enabled market trend prediction system. On the other hand, the
current system is still being tested. Once such a system is in place, Zara will have an
unrivalled ability in forecasting and satisfy client wants.

3. Opportunities For Zara:

Zara is in a good position to take advantage of upcoming changes because of this edge. These are
some of the opportunities:
 Rapid Cycle: Zara currently creates a trend from start to finish in about two to three weeks.
The brand should be able to continue these cycles even further in the future.
 Customization: Thanks to AI, collecting data and segmenting the client base after
evaluating it is easier than ever before. This enables clients to receive customized
recommendations. Zara should use this technology to its advantage.
 Sustainability: More than a third of Millennials and Gen Z look for “sustainable” and
“environmentally friendly” labels on clothing, according to the Sourcing General. The two
groups together account for half of the population. As a result, Zara must pay attention to
and respond to this expanding need.
 Influential Marketing: Influential marketing is the most effective technique for promoting
lifestyle companies, according to Unbox Social. Zara’s #DearSouthAfrica campaign, which
involved 60 micro-influencers, reached an audience of 8 million people. This should serve
as a blueprint for the future.

4. Threats For Zara

 Competition: Shein, the world’s largest apparel shop with an entirely online presence, is
China’s fast-fashion behemoth. The Shein app received 10.3 million downloads in September while
Zara got only 2 million downloads in the same period, spelling danger for the brand’s future.
 War of Prices: Zara’s core niche is fast-fashion, which offers the latest runway trends to
clients swiftly and at a low cost. Imitators are conducting pricing wars to drain off Zara’s line, but
the sector is vulnerable.
 COVID-19 Pandemic: Inditex reported a 44% reduction in revenues in the first quarter of
2020. According to Inditex’s report, the closure of 88% of its outlets due to the Coronavirus was the
primary cause of the reduction in sales.

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 COMPANY LIFE CYCLE:

Zara is in the mature stage.

In my opinion, we can see how there are
differences in the evolution of each of the other
stages. We can see them clearly, from the
future growth of the company and objectives to
the low profits they had before.

Zara is in the mature stage as I already

mentioned, we use all their past to talk about
their great evolution until today, they have
great profits and great competences.

 BUSINESS STRATEGY:
The mission statement: “Through its business model Zara aims to contribute to the
sustainable development of society and that of the environment with which we
interact”

Zara's strategic objectives can be seen as its sustainability goals, which it recently announced and
can be seen as:

- Elimination of Chemical Hazards from its supply chain ecosystem.

- Proper and effective disposal of all of its apparels by collecting them from stores.

- Usage of cellulosic fibre in the garments, which are 100% sustainable.

-Carry out a change in the use of paper and plastic for online orders, i.e. use recycled paper
and as little as possible for each order.

- Zero waste from Zara facilities to be send to landfill.

- Use of 80% of renewable energy at its stores (Holgate, 2019).

We would need more financial resources, i.e., we would use part of our profits to reach our
objectives. We would spend more money on recycled paper, on study staff to have everything well
organized and made possible and training for all employees.

Well, more than spending, it would be investing in a better home, wouldn't it?

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 This strategy could be implemented in an 'easy' way. And I put easy in quotes because it
really is a big job for all employees.

As a first step, we must make managers and senior managers aware of the change we should make.
From this basis, the starting point begins.

All senior managers would start to study ways and means to make it happen. And what is my way
of doing it? It is this:

- We could contact a company that is dedicated to nothing more and nothing less than
recycling paper. We negotiate and decide to become partners since our company needs a large
part of what they manufacture.

- While everything is going on, we train each employee. Our style of packing and working has
changed, and the employees need the best training.

- We can set a trend with new advertisements, new advertising where we draw the attention of
each of your customers. Zara and the big change, the change that will improve our planet.

- And, while the marketing staff takes care of this penultimate step, the whole study process is
finished.

- Online orders can be placed with recycled paper bags, where the same paper produced by
our partners has to be thrown away in special waste bins just for that. From there it would be
taken back to our company for recycling.

- Clothing orders will come with very little paper, there are no more individual plastic bags
and their material will be made of cellulose, 100% degradable.

- For normal stores, all hangers will be recycled and none will be thrown away, just as the
bags will be made of the same recycled paper or the shopping voucher will be sent by email or
can be found in the store's app.

As an idea, we can also put up an advertisement something like this:

'IF YOU BRING YOUR OWN BAG, YOU GET A 10% DISCOUNT ON YOUR ENTIRE
PURCHASE.'

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 CONCLUSION:

In conclusion, the company continues with its expansion in going to Belarus and launching online
sales in India. In total, they opened 60 stores in the first three quarters of 2017. With excellent
financial health and expansion plans in execution, despite any controversies, Zara’s model has been
incredibly successful. And if the management keeps the good practices administrating Zara’s
complex fast-fashion and logistics operations, the company will continue to have prosperity in the
future. However, they should be more proactive in fixing their labor issues among others, in order
to potentially avoid a crisis that might hurt the company.

But what about this strategy I have just explained?

As a conclusion to this new strategy, I see that there would be very good results.

In my opinion, Zara is a role model for big and small brands or for people who dream to have a big
company and be as successful as Amancio was and is.

This new strategy would create a new movement among all stores and brands worldwide, can you
imagine?

Zara would be the model to follow for any other brand as it would create even more trend. All the
new generations are looking to save our planet, our home, the same home that everyone else in the
past destroyed. We want to live without wearing chemical masks, we want to take our children to
the zoo and see all the animals that I can still see but not for long because there are so many
endangered animals. We can't imagine such a future because it seems incredibly sad to us.

Past generations destroyed everything thinking or believing that it was not going to have
consequences, and new generations are just looking for solutions to deal with all these problems.

We look for how to go to another planet and not become extinct, they give thousands and millions
of euros or dollars to find out which planet is habitable, but what about our planet? Can't we look
for different solutions rather than exploiting everything it has and look for another planet?

Of course there are more solutions! and Zara or big brands should start with these strategies to make
people even more aware of what is happening. The big brands and big companies are the ones that
make all this work, we recycle and one by one we collect a lot, but they are the most responsible!

Zara is a big company and their influence is very big too. They should, well no, they need to make
this change now, for them, for marketing, and for us and our home.

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 REFERENCES:

Who we are - inditex.com

Quiénes son los directivos de las marcas de Inditex: de Zara a Oysho | Business Insider España
(Please, if you read the article, translate it to English).

Bloomberg. 2020. Zara Owner’s Lean Business Model Helps It Cope With Pandemic [Online].
Available at: https://www.businessoffashion.com/articles/news-analysis/zara-owners-lean-business-
model-helps-it-cope-with-pandemic

Brătianu, C., & Bălănescu, G. V. (2008). Vision, mission and corporate values. A comparative
analysis of the top 50 US companies. Management & Marketing, 3(3), 19-38.