The Unconventional Business Strategies of Zara: a Case Study

The Unconventional Business Strategies of Zara: A Case Study

Informational Technology and E-Business

BUAD 6800

February, 2013

INTRODUCTION

At first glance, La Coruna, Spain is a small, poor ship-building town in northern Spain; however, it houses a company, Inditex Corporation, which is a technological leader within the fashion industry. This small town houses “The Cube,” which is the command center for the fashion giant, Zara. Zara has distanced itself from conventional methods of the fashion retail model by utilizing a technology-enabled strategy that influenced design, manufacturing, and the marketing of products. Today, Zara remains a highly vertically integrated company by keeping most of the product production in-house. The luxury fashion director of LVMH has even called Zara “the most innovative and devastating retailer in the world” (p. 39). Zara is currently one of the fastest global expanding companies and has been able to triple in size between 1996 and 2000 and increase revenue from $2.43 billion in 2001 to $18.3 billion in 2011. In order to appreciate and understand the unique success of Zara, it is important to analyze both the positive and negative effects of utilizing unconventional methods and technology.

CONVENTIONAL WISDOM OF THE FASHION INDUSTRY

Conventional wisdom of the fashion industry emphasizes the operational side, the breakdown of design, manufacturing, and advertising as the critical elements of success. With the integration of technology-based strategy, the fashion industry is forced to change to stay current with the most up-to-date trends. However, most retailers are forced to place orders for a seasonal collection months in advance of the actual appearance in a store. Retailers must guess what customers want months in advance, which is tricky. There is a fine line between having too much and the right amount of a product, which can cost fashion retail...