Beatriz Salcines Cobo U53088141
Professor Roger Warburton
Spring Semester 2010
The Inditex Group is considered to be one of the most important and influential groups in the textile sector, if not the most important one. The group was created by Amancio Ortega in A Coruña in 1975, chairman of the group today.
The Firms ismainly engaged in the industry and distribution of textile articles whose success lies in their marketing strategy and their quality products at low-medium prices accessible to the costumer, leaving aside the model of the great fashion clothing firms consisting on selling their products at a very high price backed by the brand.
The Inditex group is composed of 8 fashion chains like Zara (themost important and representative shop of the group), Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, Kiddy's Class and Uterqüe, developed as a vertical business structure that includes all phases (design, distribution and sale), and achieves economies of scale, enabling the manufacture in real-time (just in time) avoiding a high level of inventory (except in Southern Conecountries where the seasons are Contrary to the rest of the world). This is an important point in the group's strategy, as its way of operating in all fields, allows the elimination of stocks making possible an easy adaptation to any market and any situation. Fashion is now a universal phenomenon and tastes are relatively consistent, so the level of adaptation has to be minimal and can save aconsiderable amount of costs.
Inditex has been growing exponentially and throughout its existence and its career seems unstoppable. The expansion began in Spain, specifically in A Coruña, in the 80's there were already opened 82 Zara stores throughout Spain, but its international expansion begins in the 90s, which certainly marks a turning point in the firm development. Today Inditex opens an averageof one store a day, disposes of 2034 stores functioning and its workforce is over 40,000 employees. Its business volume is increasing every year and enjoys the best market share in the textile sector driven away important competitors such as H&M or Gap.
Galician textile group Inditex increased its profit in the first nine months of 2007 by 30 percent to 825 million Euros. The giant of theSpanish fashion business increased sales in the first nine months (February-October 2007) 17 per cent to 6.633 million Euros thanks to the opening of new stores and the steady pull of consumption in the domestic market. Comparing these data with that of 2003 with a 2% increase in net profit compared with 2001, reaching 446.45 million Euros from 4.599 billion Euros in sales, we realize its strong andundeniable success.
2. THE BUSINESS MODEL:
It is said that Inditex is the only company that is vertically integrated in a very high proportion, but today may not be entirely accurate since both the production and distribution are delegated occasionally to outside firms, although in comparison with some competing companies such as Benetton and H&M it is true that the level of centralization isvery high.
The president of Inditex, Amancio Ortega, wanted to integrate first design and manufacture, and afterwards, in order to complete the circle, distribution and sales in their own stores, making the customer as a source of inside information and not as a mere recipient of a good. Inditex is interested in what the customer wants and needs, and is willing to do adapt all the productionprocess to his demands.
Zara is considered to be the heart of Inditex business, its success is based on giving the customer what he wants, in a sector where is very difficult to differentiate among competitors, this means giving fashion, continuously renovated, at a reasonable price, with an excellent image and in privileged locations.
The process that defines the business model of Zara is...