Zara

Cases
Strategy Documents C02/2011

Public Affairs

Zara: Managing chain of value and driving CSR with consumers
The fast fashion Spanish company Zara and its Inditex Group has become a milestone after revolutionizing its sector and has succeeded in becoming one of the few brands in the country which stands among the best in class in the world but, is it a responsible brand, has it been apioneer in the control of the supply chain or in the establishment of the ecological label?
There are several consumer trends in recent years which are especially influencing in a special manner the relationship that companies establish with their stakeholders, especially with their consumers and clients: • Convergence of middle class: exponential population growth and narrowing of social classes. •Low cost/free era: price is a key competitive factor. • Changes in behavior: adolescents are those who do not work yet, although they are more than 25 or 30 years old. • Sustainability: different use of natural, human, social, financial and productive resources. These trends are fixing FMCG brands behavior in the market, but especially this last one has forced companies to review their corporatepolicies, to reconsider the way in which they engage with their suppliers (a common source of problems for global brands, as in the famous cases of Nike, Nestle or Cargil) and, above all, with their clients. Consumers, in the opinion of Jose Luis Nueno, professor at the Marketing Department of IESE, ask companies to collaborate in the solution of social problems which, they consider, governmentscan no longer solve and, many of them, do not change their attitude nor their actions in relation to how consumer expect them to.

What is Zara’s secret
Zara’s strategy has always been to drive the creation of value for clients. Today it is one of the most profitable fashion businesses in the world. The leading fashion brand of Inditex Group opened its first store in La Coruna in 1975 and beganby designing and selling dressing gowns to be worn at home. Today, there are Zara stores in international cities such as New York, Paris, Tokio or Buenos Aires with a total of nearly five thousand. National barriers are not an obstacle for a globalized fashion culture such as Zara’s but, how did they achieve it? What is their secret? Zara is a brand which sells three types of fashion: basic, fastand seasonal. The model, actually, is based

Document prepared by Corporate Excellence with reference to, among other sources, the intervention of Jose Luis Nueno (professor in the Marketing Department at IESE) during the sessions of the Executive Education Program “Making Social Responsibility Work: The Cornerstone of Sustainable Business” organized by the IESE Business School in Barcelona inJuly 2011.

Managing chain of value and driving CSR with consumers: the case study of Zara

on attracting fashion traffic with copied designs placed on the market in a very short time, in order to sell fundamentally, basic and seasonal fashion. Inditex was one of the first manufacturers in the world which implemented in integrally the concept of vertical integration, based on logistics and thewhole of the operation. Most of the production is carried out in it completely automated factories and the tailoring is subcontracted to independent workshops, which allows for great flexibility to increase or reduce production according to demand.

Zara: Business Model
Young customers

Mobility

Global reports daily No advertising, presence at key places Causes new trends in fashionInnovation in product delivery Good Quality / Reasonable

Zara

Little or no stock

‘Consumers ask companies to collaborate in the solution of social problems which, they consider, governments can no longer solve.’
The stores are located in city center streets, are owned by the company, thereby having a total control on its image and sales data. The sores are the best display and advert for...