[SOLVED] When Amancio Ortega, a former Spanish bathrobe

When Amancio Ortega, a former Spanish bathrobe maker, opened his first Zara clothing store, his business model was simple: sell high-fashion look-alikes to price-conscious Europeans. After succeeding in this, he decided to tackle the outdated clothing industry in which it took six months from a garment’s design to consumers being able to purchase it in a store. What Ortega envisioned was “fast fashion”—getting designs to customers quickly. And that’s exactly what Zara has done, using technology and an army of designers! The company has been described as having more style than Gap, faster growth than Target, and logistical expertise rivaling Walmart’s. Zara, which is owned by the Spanish fashion retail group Inditex SA, recognizes that success in the fashion world is based on a simple rule— get trendy, desired products to market quickly. Accomplishing this, however, isn’t so simple. It involves a clear and focused understanding of fashion, technology, and their market, and the ability to adapt quickly to trends. Inditex, the world’s largest fashion retailer by sales, has eight retail brands: Zara, Zara Home, Pull and Bear, Massimo Dutti, Stradivarius, Bershka, Oysho, and Uterqüe. The company has more than 7,300 stores in 93 countries, although Zara pulls in more than two-thirds of the company’s revenues. With a large global presence, Zara is tweaking its strategy to focus more on flagship (bigger) brick-and-mortar stores and an online expansion. Despite the struggles facing the retail fashion industry, Zara has outperformed rivals even in a challenging market environment. What is Zara’s secret to excelling at fast fashion? It takes approximately two weeks to get a new design from drawing board to store floor. And stores are stocked with new designs twice a week as clothes are shipped directly to the stores from the factory. Thus, each aspect of Zara’s business contributes to the fast turnaround. Sales managers at “the Cube”—what employees call their futuristic-looking headquarters—sit at a long row of computers and scrutinize sales at every store. They see the hits and the misses almost instantaneously. They ask the in-house designers, who work in teams, sketching out new styles and deciding which fabrics will provide the best combination of style and price, for new designs. Once a design is drawn, it’s sent electronically to Zara’s factory across the street, where a clothing sample is made. To minimize waste, computer programs arrange and rearrange clothing patterns on the massive fabric rolls before a laser-guided machine does the cutting. Zara produces most of its designs close to home—in Morocco, Portugal, Spain, and Turkey. Finished garments are returned to the factory within a week. Finishing touches (buttons, trim, detailing, etc.) are added, and each garment goes through a quality check. Garments that don’t pass are discarded, while those that do pass are individually pressed. Then, garment labels (indicating to which country garments will be shipped) and security tags are added. The bundled garments proceed along a moving carousel of hanging rails via a maze of tunnels to the warehouse, a four-story, 5-million-square-foot building (about the size of 90 football fields). As the merchandise bundles move along the rails, electronic bar code tags are read by equipment that send them to the right “staging area,” where specific merchandise is first sorted by country and then by individual store, ensuring that each store gets exactly the shipment it’s supposed to. From there, merchandise for European stores is sent to a loading dock and packed on a truck with other shipments in order of delivery. Deliveries to other locations go by plane. Some 60,000 items each hour—more than 2.6 million items a week—move through this ultrasophisticated distribution center. And this takes place with only a handful of workers who monitor the entire process. The company’s justin- time production (an idea borrowed from the auto industry) gives it a competitive edge in terms of speed and flexibility. With all the things Zara excels at, we can’t ignore that there’s a dark side to the fast fashion segment of retail. Zara (and other fast fashion retailers like Mango, H&M, Next, and Walmart, to name a few) depend on garment workers to sew those garments that will be sold. These workers (mostly women) often are exposed to dangerous labor conditions. In April 2013, more than 1,100 garment workers died when their factory building collapsed in Bangladesh. Many powerful companies whose products are produced by these overseas garment workers pledged to improve the safety of the work conditions these workers face . By increasing their monitoring of the factories that make their products and aggressively pushing for stronger labor protections, progress is being made, albeit slowly. When an unscrupulous factory owner in Turkey shut down, laborers were not paid. A group of those unpaid workers walked into a Zara store in Istanbul and attached tags saying, “I made this item you are going to buy, but I didn’t get paid for it.” Although Inditex (Zara’s parent company) maintained that it had met its obligation to the factory, it was the laborers who suffered by not being paid. Inditex, along with the other companies that had paid this unethical factory owner what was owed, responded by saying they were in the “process of creating a ‘hardship fund,’” to pay the unpaid laborers. However, no money has made it into the hands of the workers who made the garments that Zara sold in stores. Despite Zara’s success at fast fashion, its competitors also are working to be faster. But CEO Pablo Isla isn’t standing still. To maintain Zara’s leading advantage, he’s introduced new methods that enable store managers to order and display merchandise faster and added new cargo routes for shipping goods. And, as mentioned earlier, the company is continuing to invest in online retailing, having recognized the untapped market of consumers who don’t live in close proximity to a Zara store.
Question#1
How is strategic management illustrated in this case story?
Question#2
How might SWOT analysis be helpful to Inditex executives? To Zara store managers?
Question#3
What competitive advantage do you think Zara is pursuing? How does it exploit that competitive advantage?
Question#4
Do you think Zara’s success is due to external or internal factors or both? Explain.
Question#5
Has Zara met its obligations to the workers who create their garments that are sold in their stores? In your assigned group, discuss the social responsibility issues that Zara (and other fast fashion retailers) face. What obligations DO they have, and how can they best meet those obligations?

Question: When Amancio Ortega, a former Spanish bathrobe

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