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
7,013
6,683
330
2015
6,340
343
2014
ΔΙΑΦΟΡΑ
6,009
331
2013
5,527
482
2012
483
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
production to all stores
worldwide
• Distribution takes place twice a
week
Each consignment
always includes new
designs
• Stores are constantly renewing
their offer
The time between
receiving an order in the
distribution center to
the delivery of goods in
the store is on average
• 24-36 hours for European shops
• 48 hours maximum for American
or Asian shops
Zara’s Business Cycle
Information
from stores is
constantly
transmitted to a
design team
( 200 professionals,
20.000 new designs
per year)
Small
productionScarcity effect.
Extremely
small lead
times
Daily analysis
of product sales
and company’s
performance.
Customer
feedback
“ZARA reacts to
revealed demand
immediately”
Central
distribution,
shipment to all
store 2ice per
week, 24-48hr
delivery
ZARA’s strategy: hybrid and focused ?
Differentiates from
traditional garment
making.
• Instant fashion at
rather low prices
• Targeted at young
people
Mission
• “Give
customers the
fashion they
want”
Global reach
Economies of
scarcity
• Standardized
fashion
• Continuous
shelf renewal
No traditional
advertising
• Dependent
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 demandlatest 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 offerings
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
Accusations
Although the firm does
not admit it, a lot of its
products’ design is
“strongly influenced” by
very expensive brands
• A team of 200 designers
creates versions demanded
“Zara is a fashion
imitator”
(Businessworld
magazine ).
Zara’s Capabilities
Which
cannot
Which
are
“dynamic”?
be imitated?
Which of
them add
value?
Zara …“possibly the most innovative
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
resources
Reconfigured value chain: a central 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