Zara Case

Zara Memorandum To: Amancio Ortega, Chairman, Inditex Group From: ft23810 Subject: Expansion in the USA Date: 17/10/2010 USA is a huge market for a fashion house, both in terms of the buyer’s purchasing power and the scope of expansion. Until now Zara’s unique strategy in operations, supply chain, organizational structure and marketing has helped the company differentiate itself from others and the results are evident. The question to address is whether Zara can leverage this strategy to expand further into the USA, whether it needs to tinker with its strategy or should the company drop the idea of expansion in the USA. Industry Analysis The fashion industry is a competitive. Zara’s main competitors were H&M and C&A. Both H&M and C&A fortunes were on a decline especially in Europe. As of 2000, 52% of Zara’s sales came from stores outside Spain, and there is a clear growth trend. As far as USA was concerned, H&M had 20 functional stores whereas Zara had 6. H&M had planned to expand to 83 stores by 2003, which was an indication of its success in the US market. In terms of pricing and consumption USA provided a clear opportunity to a fashion house (refer Exhibit 1). Moreover, the European market was getting saturated, with the industry functioning in a mature phase. The US market provided growth opportunities. Operations and Supply Chain Zara operates closer to the information side of the operations triangle. The company heavily relies on information (market demand) to minimize inventory. The company follows a JIT system by continuously adapting to new designs and releasing new products in a very small time window. Through this the company builds the customers anticipation. Each store will

have a limited quantity of a particular design and the design turns over very quickly, making the next design highly anticipated by the customers. To track the demand, the company relies on information from the store managers, who use the hand held devices to send the...