MARCH 12, 2003
Every Tuesday and Saturday, a big truck pulls up to the curb on the east side of Broadway between Price and Houston Streets to unload its cargo for the Zara store in SoHo, one of its four in Manhattan. Despite Zara’s fashionable reputation, the stacks of soft-colored dress shirts and elegant women’s jackets came from the 500,000 square-meter warehouse close to Zara’s ultramodern headquarters in Arteixo, close to La Coruña,1 in Galicia, the unfashionable green northwestern region of Spain. According to Vogue, the fashion magazine, even French customers of Zara’s 70 stores identified the firm as being of French origin. These and other fashion pages had shown Cindy Crawford joining Zara’s middle-class customers at a store in Canada, Chelsea Clinton visiting the store in Ankara, the children of the Spanish Royal Family buying regularly at the store on Madrid’s upscale Velazquez Street, and tourist buses stopping for sightseeing at the store on Paseo de Gracia in Barcelona.
Zara led the international expansion of its parent, Grupo Inditex, which had continued at an intense rate in the year 2000. In the last five years it had grown from 180 stores, mainly in Spain, to 1,080 stores in 33 countries in three continents. In the last year alone, 150 stores in 9 new countries had been added, “testing the capacity of our team to adapt to the differing characteristics of different markets,” according to Amancio Ortega Gaona (aged 65), chairman of Inditex. In spite of being one of the richest men in Spain, Mr. Ortega Gaona was known for his obsession with keeping a low profile; he projected an image of a simple, hard-working man who enjoyed being among his team of designers. In fact, the international expansion of the group meant that he was now an unrelenting traveler. Zara had achieved an impressive compound annual growth of 26% from 1995–2000, and sales abroad now made up 52% of total revenues, up from 30% in 1995 (see Exhibit 1 for summary financial performance data). It had experienced different fortunes and followed different strategies from some of its key rivals. The Gap and Hennes & Mauritz (H&M) had both experienced lower incomes, and others like Marks & Spencer were reducing their foreign operations. Zara still sourced 87% of its product from Europe, while the wider industry was globally served by hundreds of low-cost Asian suppliers. One London-based industry expert declared, “In the economics of consumption, vertical integration is passé, but Zara is an exception to the rule.”
1 Known locally and throughout Zara as A Coruña, the city’s name in the local gallego language. This case uses the Spanish name of La Coruña.
________________________________________________________________________________________________________________ This case was prepared by Professor Guillermo D’Andrea, Instituto de Altos Estudios Empresariales (IAE), Buenos Aires, Argentina, in collaboration with Professor David Arnold. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2003 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
This document is authorized for use only in MBA (Marcelo Rosatto) 2014-1 by Ana Carmenza Neira at Pontiﬁcia Universidad Javeriana from April 2014 to October 2014.
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