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Management Essay

1401 words - 6 pages

Much of the success is due to Zara's unusual structure. Unlike competitors such as Gap Inc. and Sweden's Hennes & Mauritz AB, which operates the H&M clothing chain, Zara produces more than half of its own clothes, most of it at its ultramodern complex here in northwestern Spain. Zara makes 40% of its own fabric -- far more than most of its rivals -- and the pieces are sewn together at 400 cooperatives run by local seamstresses.

At its base here in Spain, Zara also operates its own world-wide distribution network. Controlling the whole chain of production gives the company flexibility that competitors like Benetton SpA of Italy don't have. It also enables Zara to operate with almost no ...view middle of the document...

About 2,800 skirts were sent out during the night to some of Zara's 449 stores world-wide -- just enough to test the waters. The results are clear: The skirt is a hit.

With a mix of intelligence gathering, fashion instinct and technological savoir-faire, Ms. Padin is setting in motion something unique in the clothing trade: just-in-time low-cost fashion. Within days, Zara stores in Europe, Asia, and North and South America will be stocked with the khaki skirt. Such a quick response enablesZara to offer the latest fashions at reasonable prices in such upscale locales as the Champs-Elysees in Paris and Lexington Avenue in New York.

Created in 1975, Zara is the largest and most profitable unit of Inditex SA, the Spanish clothes manufacturer and distributor whose 2.3 billion euro ($2.03 billion) initial public offering earlier this month quickly became one of the biggest and most successful in Europe this year. Zara accounts for 78% of Inditex's retail sales, which totaled 2.6 billion euros last year.

Much of the success is due to Zara's unusual structure. Unlike competitors such as Gap Inc. and Sweden's Hennes & Mauritz AB, which operates the H&M clothing chain, Zara produces more than half of its own clothes, most of it at its ultramodern complex here in northwestern Spain. Zara makes 40% of its own fabric -- far more than most of its rivals -- and the pieces are sewn together at 400 cooperatives run by local seamstresses.

H&M, in contrast, has 900 suppliers and no factories. "We think the way we have structured our organization gives us a competitive edge," H&M spokeswoman Annacarin Bjorne says. "Our suppliers have factories with different specialties, which enables us to give customers the broad variety of clothes we have in our stores."

At its base here in Spain, Zara also operates its own world-wide distribution network. Controlling the whole chain of production gives the company flexibility that competitors like Benetton SpA of Italy don't have. It also enables Zara to operate with almost no costly inventories; stores get deliveries twice a week and items rarely remain on the shelves for more than a week. "Zara is a strong competitor which we greatly admire," Benetton spokeswoman Emma Cole says. "We are two apparently similar groups, though in reality we have greatly differing projects and characteristics."

Zara takes only four to five weeks to design a new collection and then a week to make it. With its team of comercials sniffing out new fashions while keeping in constant contact with store managers, the company can spot and react to trends quickly, including taking something stylish off a music video.

Other retailers, in contrast, need an average of six months to design a new collection and then another three months to manufacture it, according to Inditex Chief Executive Jose Maria Castellano. "Fashion expires, much the same way yogurt does," he says. "Being so quick allows us to reduce to a minimum the risk of making...

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