Zara Case Study

CASE STUDY: ZARA

1401214056 Janry ZHANG

1401214004 Cecily LI

INTRODUCTION

Inditex (Industria de Diseño Textil) of Spain, the owner of Zara and five other apparel retailing chains, was a global specialty retailer that designed, manufactures, and sold apparel, footwear, and accessories for women, men, and children around the world. While Zara was the largest and most internationalized of Inditex’s chains. At the end of 2001, it operated 507 stores in countries around the world, with 488,400 square meters of selling area (74% of the total) and employing 1,050 million of the company’s capital (72% of the total), of which the store network accounted for about 80%. Zara can be said to be a special brand in fashion industry, because it created a fast fashion mode in the traditional top clothing brands and mass popular brand.

However, Zara’s share of the group’s total sales was expected to drop by two or three percentage points each year, it would continue to be the principal driver of the group’s growth for some time to come, and to play the lead role in increasing the share of Inditex’s sales accounted for by international operations. Its international operations had been steadily increasing its shares of those totals, but over a longer time frame, Zara faced several important issues regarding its international expansion.

ANALYSIS

1. PESTEL Analysis, the General Environment Analysis

The traditional PESTEL analysis is critical to identify the external environment.

Political environment

World trade in apparel and textiles continued to be regulated by the Multi-Fiber Arrangement (MFA), which had restricted imports into certain markets (basically the United States, Canada, and Western Europe) since 1974. Two decades later, agreement was reached to phase out the MFA’s quota system by 2005, and to further reduce tariffs (which averaged 7% to 9% in the major markets). As of 2002, some warned that the transition to the post-MFA world could prove...