Zara

Introduction

ZARA, a Spanish fashion chain owned by Inditex, is a retailer who has taken a different strategy to expand and compete in the industry. The company uses an innovative design-on-demand operating model to deliver clothes from the fashion runways to store shelves faster than any of its competitors. Headquartered in Galicia, Spain, ZARA is expanding into global markets. A recent expansion has proven successful and further expansion in the United States is now being considered.

Issue

Zara has only a few US stores and is considering further US expansion. The issues to be considered include whether or not expand, and how to go about expanding should that avenue be followed.

Analysis

There are many factors influencing the expansion decision. Retail fashion is an extremely competitive industry with many players, most of whom are established brand names with a national presence and high advertising budgets to make sure consumers are aware of them. ZARA's policy is to do as little advertising as possible. But this will limit the rate of expansion, or limit the growth in sales volume at the new stores as word of mouth spreads.

ZARA's main competitive advantage is its lean just in time delivery system that allows their stores to have the newest and hottest fashions on their shelves before their competitors. This system can work, but it will limit how quickly the company will expand in a market the size of the United States.

ZARA's zero-inventory system poses specific challenges to expansion - namely that manufacturing and logistics networks must grow at the exact same rate as the company. To aide with this the company has a state-of-the-art information infrastructure to ensure a tight linking between retail sales and manufacturing.

ZARA is a known brand and even though it does not advertise its brand name can be leveraged for expansion. Press coverage for the upcoming stores will make people start talking and result in growing the anticipation