INDITEX

Mariela Georgieva, 13114101

Kristina Boseva, 13114110

TABLE OF CONTENTS
I. Introduction, History and Background
II. Financial Performance
III. Brands
1. ZARA
2. Bershka
3. Stradivarius
4. Pull & Bear
5. Massimo Dutti
6. Oysho
7. Zara Home
8. Uterque
IV. Suppliers and Production
V. Retailing

VI. Swot Analysis

1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
VII. Porter’s Five Forces (Competitive Analysis)

I. Introduction, History and Background

Industria de Diseño Textil S.A., also known as The Inditex Group, is the world’s leading and
fastest growing fashion producer and retailer, headquartered in Arteixo, Spain. It began its
life in 1963 in a small workshop for women clothing. The founder of Inditex is Amancio
Ortega – the richest man in Spain and the world’s third richest man. The company started by
introducing a new concept of fashion design: instead of long-lasting pieces of clothing, they
offered a great variety of high quality products at affordable prices. Inditex has always been
focused on listening closely to its customers in order to offer them the fashion they desire.
This was exactly the reason that gave rise to Inditex to launch the Zara brand and open the
first Zara store in 1975 in La Coruña (Galicia, Spain). In the beginning, the brand Zara
became famous by offering clothing at low prices and then slowly worked its way up to
match the quality of today's best brands. The international expansion of the group began in
1988, with Inditex opening its first foreign store in Oporto, Portugal. Today, Inditex's stores
can be seen in places like New York's Fifth Avenue, Milan's Piazza Duomo, London's Regent
Street and Oxford Street, Frankfurt's Zeil, Shanghai's Nanjing West Road, etc.
In May 2001, Inditex turned into a publicly traded company, being valued at $8 billion.
The group Inditex possesses the following brands: Zara, Pull&Bear, Massimo
Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe. These brands sell high quality
fashionable clothes, accessories, cosmetics, etc. All products meet the most rigorous health
and safety standards and each store is created and managed under eco-efficient criteria. For
Inditex the customer service and the customers’ satisfaction are of greatest importance. For
that reason they have a workforce of about 137,000 employees and their logistics system,
which is centred in Spain, delivers new products twice per week to all of their stores around
the world in order to meet their customers’ needs.
The most important factor of the Inditex’s supply chain is the concentration of its suppliers.
They are all located near Spain and very close to the manufacturing plants, the Head Office
and the logistics platforms. Although most manufacturing is done in low cost countries like
Morocco, China and Turkey, much production continues in Spain and Portugal, particularly
for the Zara brand.
Nowadays, Inditex is present in 88 markets in five continents, with more than 6,680 stores.
The Group is committed to its customers and more than 128,000 employees are focused on
the customers in order to give them what they want and satisfy their needs.

II. Financial Performance

Inditex has had a very good financial performance in the past 8 years. The company has seen
a stable sales growth of around 10% each year from 2007 to 2014. The cash flows of the
company have also been steadily increasing during the same period of time. The company
has been taking care of its shareholders by paying them dividends, which have increased by
0.13 in 2007 to 0.208 in 2014. It is really important to consider the fact that the company has
been expanding and opening new stores in different countries all over the world. As a matter
of fact, the stores have almost doubled, from 3,691 in 2007 to 6,683 in 2014. Overall, paying
dividends and expanding by opening new stores shows continuous improvement in the
company's operations, which gives us an indication of continuous improvement and growth
in the future.
Inditex is an extremely healthy company with strong financials allowing continued self
funded expansion. Net sales for Inditex reached $18.1 billion in fiscal 2014, an increase of
10% from 2013.

III. Mission Statement, Vision Statement and Values

1. Mission statement
” Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores
throughout the world. We are inspired by a responsible passion for fashion and, above all, by
our customers”
2. Vision statement
” At Inditex we are a team of over 128,000 critical-thinking professionals. Working on the
basis that there is always room for improvement is what enables us to continue to grow. We
are demanding and non-conformist. We see problems as opportunities and our most
important mission is to search for solutions to these issues. We have faith in every individual
and create a work environment in which everyone is heard and anyone can voice their ideas.
We believe that if we are to continue to evolve we must all have a say in how to do things
better. We like people who believe they can always learn something new”
3. Values
” Sustainability forms the basis of all our decisions. It is ever-present in all our processes,
inspired by our commitment to selling ethical, safe and community- and environmentally-
friendly products. We call this philosophy, which permeates everything we do, Right to
Wear, with capital letters. It constitutes our quality seal. Right to Wear is an ambition and an
everyday reality. Its purpose is to guarantee the quality and sustainability of all our products
and business activities. To this end it is subdivided into specific specialist initiatives:
Clear to Wear and Safe to Wear: These standards guarantee that all the products we sell
comply with the most stringent health and safety standards.
Teams to Wear: This sums up a corporate culture and philosophy that fosters business
ethics, respect for others and their diversity, honesty in everything we do, transparency and
professionalism.
Tested to Wear: A production process audit and monitoring methodology designed to ensure
that all our products are made upholding ethical criteria and human, labor and environmental
rights.
Social to Wear: Social investing initiatives with which we strengthen our ties with the
communities in which we do business.
Green to Wear: The strategy designed to ensure we make and sell environmentally-friendly
products.”

IV. Brands
1. Zara
Zara opened its first store in the town of La Coruña, Spain in 1975. Zara has over 2,000
stores strategically located in leading cities across 88 countries. Some people describe Zara as
“the most innovative and devastating fashion retailer in the world”. Zara has also been
described as a “Spanish success story” by CNN.
Zara provides a complete fashion solution for women, men and children. It offers lots of
different styles – from daily clothes to casuals and formals. The customer is at the heart of
Zara’s business model, which includes design, production, distribution and sales through an
extensive retail network. Zara’s designers and customers are interrelated, because customers
buy and give their opinions and in that way specialists receive a constant feedback, which in
turns inspires and gives new ideas to Zara’s creative team that includes over 200
professionals. Zara is always striving to meet the needs of its customers at the same time as
helping to inform their ideas, trends and tastes. The idea is to share responsible passion for
fashion across a broad spectrum of people, cultures and ages.
Zara’s business model is characterized by a high degree of vertical integration in comparison
to other models developed by its international competitors. It covers all phases of the fashion
process: design, manufacture, logistics and distribution to its own managed stores. It has a
flexible structure and a strong focus on customer in all its business areas.
Zara’s team of designers are continuously assessing the customers´ preferences, wishes and
demands offering each year 10,000 different models for sale in its stores. The availability of
the factories owned by the company and the wide range of highly experienced external
suppliers allow Zara to manufacture a model and to have it for sale in its stores worldwide
within the average term of approximately 14 days.

2. Bershka
Bershka was created in 1998 as a new brand of the Spanish group Inditex, with a new retail
format that responds to the demand of young people, who are interested in and highly aware
of new trends. The company has over 910 shops in more than 64 countries, with sales
representing 10% of the total revenue of the group Inditex. The company's business
encompasses the design, manufacture, distribution and sale of fashion in the shops.
In order to always have the latest trends at the shop, Bershka uses its flexible business model
to adapt to any changes occurring during the seasons, responding to them by bringing new
products to the shops within the shortest possible time. The models for each season are
developed entirely by their creative teams, who take as their main source of inspiration the
fashion trends prevailing in the market, through information received from the shops, as well
as the customers themselves.
The Bershka design team consists of more than 60 professionals who are continuously
assessing the needs, desires and demands of consumers, and offering more than 4,000
different products in their shops each year.
Bershka selects the best commercial sites in each city and positions itself in the most notable
areas of the main shopping centres. Music, screens, projections, modern graphics, fashionable
colours, contemporary furniture design, state-of-the-art lighting and so on, are all features
that turn Bershka into a shopping ‘experience’. All the shop’s elements are designed by the
Bershka image team and are updated every season.
Like Zara, Bershka attaches great importance to its windows, displaying the most important
items of the collection and the predominant theme to its public. The windows are constantly
being renewed every season and the garments match the style of the shop’s interior, reflecting
the trends of the whole season.
The area dedicated to women's wear is the most important. This section has two product
lines: Bershka and BSK. The first focuses on the latest fashion and includes the leading
trends. It has a wide range of jeans wear, eveningwear, casual wear and latest fashion-wear.
BSK is the brand for younger people, and always caters to the interests and needs of this
public by basing its collection on their taste in music, their idols, rock stars and so on.
The men’s section offers much more than fashionable jeans wear for young people. This
product line offers casual, sports and fashion wear as well.
In addition, apart from the wide range of clothing, Bershka also offers a wide range of
accessories and footwear.

3. Stradivarius
The brand Stradivarius was created in 1994 in Sabadell, Spain and in 1999 was acquired by
the group Inditex. The brand has an innovative concept in fashion targeting young women
between the ages of 20 and 35.
Stradivarius designs thousands of garment and accessories in Spain that they distribute
exclusively in their 871 stores in over 57 countries worldwide. They believe that one inspired
girl can change the whole world. The brand has a workforce of more than 7,300 employees
who work passionately and give their best putting their personal mark on the Stradivarius
brand.

4. Pull & Bear

Pull&Bear started up in 1991 with a clear international mission and with the intention of
dressing young people who are engaged with their environment, who live in the community
and relate to each other. Young people who have a casual dress sense, who shun stereotypes
and who want to feel good in whatever they are wearing. To meet their needs, Pull&Bear
takes the latest international trends, mixing them with the influences that are seen on the
street and in the most fashionable clubs, and reworks them according to their style thus
turning them into comfortable and easy to wear garments, always at the best prices.
Pull&Bear evolves at the same pace as its customer, always watching out for new
technologies, social movements and the latest artistic or musical trends. All of this can be
seen reflected not only in its designs but also in stores. Inspired by the legendary Californian
city of Palm Springs, the product lines are constantly being updated. All stores worldwide
receive new merchandise twice a week.
Pull&Bear brings the latest international trends to the street in the form of easy, comfortable
and casual clothes. The Pull&Bear collections are conceived with the idea of dressing men
and women with a young mindset, taking into account that age is not an obstacle when
choosing our wardrobe.
The textile collection is backed up by the footwear, accessory, jewellery, fragrance,
headphones, long skates and sunglasses lines.
In only 23 years, Pull&Bear has opened 853 stores in the main streets and shopping centres
in 63 markets (plus a further 5 markets where it operates exclusively online). A trend towards
fashion globalisation that Pull&Bear has included in their new collections has facilitated the
rapid growth in points of sale. All of this is thanks to a young team of over 9400
professionals who, with their enterprising spirit, involvement and enthusiasm, have
succeeded in making Pull&Bear a reality.
Turnover at the close of 2013 stood at 1191 million euros, a 10% rise over the figure for
2012. More than 79 million items were sold in total, including over 21 million T-shirts.

5. Massimo Dutti
Massimo Dutti was founded in 1985 and was acquired by the Group Inditex in 1991.
Nowadays, it has over 770 stored in more than 70 countries.
Massimo Dutti offers more tailored, sophisticated clothing that targets men and women in
their mid-20’s and higher. This brand occupies smaller prime retail locations, and is the
group’s most upscale format with a strong emphasis on design and quality fabrics. Despite its
comparitively higher price point, the Massimo Dutti concept adheres to the same flexible
distrbution model as the other Inditex brands.
The brand was originally aimed at men’s fashion. Starting in 1992, women’s fashion was
launched in all its dimension: from the most urban lines to the more casual. With this,
Massimo Dutti has consolidated at all levels as a group with national and international
growth, which today has over 4,000 employees.
In 2003, the brand launched a children’s fashion range under the trade name Massimo Dutti
Boys & Girls. This line is being implemented progressively in stored in several countries,
where the stored are large enough to house its specific space.
Since September 2006, the company has been fully designing and marketing the following
lines:
Men: Men’s wear, accessories, soft, personal tailoring, fragrances
Women: Women’s wear, accessories, soft, fragrances
Boys & Girls

6. Oysho
Inditex opened their lingerie and loungewear retail format “Oysho” in 2001, now with more
than 530 stores in 35 countries. Oysho has slowly started to also offer casual outerwear,
accessories, and sportswear. As part of the Inditex Group, Oysho shares the same
fashion management strategy and philosophy and collections are renewed as fast as
trends, thereby providing customers with a quality design product. At our head offices
in Tordera (Barcelona), a team of designers of different nationalities, who are
specialist in their product segment, work each season to develop new collections for
women and girls. At Oysho customers can find fun, sexy and feminine underwear,
casual clothing, comfortable and informal clothing and original accessories.

7. Zara Home
In 2003 Inditex made its first move outside of fashion retail when it launched Zara Home.
Zara Home sells constantly updated home décor and linen reflecting the latest trends in more
than 440 stores in 48 countries. Inditex’s intention was to capitalize on its existing flexible
sourcing model to introduce more “fashion” into a traditionally slower moving market. Stores
are laid out such that different areas display different themes rather than different product
categories, making shopping more about a complete vision of trends and styles. Zara home is
constantly refreshing its product range throughout the year.

8. Uterqüe
Uterqüe was set up in 2008 with a clear aim: to restore accessories to their rightful place in
women's wardrobes. It is a Latin word that means "one thing and the other" or "both", and
which nicely sums up the philosophy that accessories are the perfect complement to a well-
rounded look.
Since it was created, the company has evolved to include a carefully selected Ready-to-wear
collection in which quality materials and attention to detail are of the most importance.
Limited-production collections, and a manufacturing process that is controlled from start to
end, result in garments that are made to stand the test of time and are destined to become
must-have items for any woman who values quality above all else.
Since 2008, Uterqüe has been consolidating its position in the domestic and international
market with more than 100 stores in 19 countries. The company also has an online boutique
with a presence in 11 countries.

V. Suppliers and Production

Inditex's supply chain is uniquely concentrated and over 50% of production takes place in
close proximity to the Group's' head offices and logistics platforms in Spain. This hallmark
flexibility extends to Inditex's suppliers, which have grown hand in hand with the company.
This concentrated group of suppliers located near to Spain, is the most important component
of a supplier base that numbers over 1,500. The remaining suppliers are based in various
global markets and this diversity provides the Group with a variety of textile manufacturing
specialties. All of the Group's suppliers are bound by the social and environmental
responsibility values that define Inditex and are enshrined in its Code of Conduct for
Manufacturers and Suppliers.
However the company’s efforts go beyond mere compliance, a sustainable and robust supply
chain is only achieved with constant improvement, which can solely be articulated through
social dialogue and coordination with the company's different stakeholders. In Inditex this
dialogue is developed through its own tool, the clusters or groups of suppliers, and also
through the Framework Agreement with IndustriALL Global Union, the industry's
international association of unions, which gives rise to numerous joint actions. This is
complemented by Inditex's active participation in international platforms such as the Ethical
Trading Initiative and the United Nations Global Compact.

VI. Retailing

Business Model

Inditex’s success is based upon its refined and fast supply chain responsible for providing its
eight retail formats with a high turnover of fashionable clothing and accessories at affordable
prices and in low quantities. Through this process, Inditex avoids large inventory and risk,
and promotes frequent buying. The fashion items found in most of Inditex’s retail formats are
highly imitative of designer styles, which Inditex scouts on runways in Paris and Milan and in
high-fashion catalogues. Inditex does not employ well-known designers but instead draws
from a team of 300 to come up with products that mirror these trends in more affordable
fabric, which it manufactures through a partially vertically integrated process that occurs
largely in close proximity to headquarters. Franchising is not a part of Inditex’s overall
corporate strategy, and it is only utilized in markets with strict foreign regulations. The
company currently owns 88% of its retail stores. Inditex is also unique in that it has no
advertising budget. While Gap, H&M, and the industry spend 5, 4, and 3.5 percent of
revenues storefronts in chic locations and lets this strategy do the signalling to customers,
supporting a high-end image despite their lower price point.

The Inditex corporate strategy is to provide general back-office support to its retail concepts,
and assist with international expansion and new concepts in existing markets. Each retail
format capitalizes on the fast fashion model, while every concept is managed independently
and has control over its own design, purchasing, and logistics. Each of Inditex’s eight retail
brands targets a different customer demographic. This segmented marketing approach allows
Inditex to capture a larger share of the consumer market, while each individual format can
specialize. The store offerings and décor of each brand vary, and are tailored to appeal to
different age groups and styles.
Supply chain management and a perfect logistics system are the key to Inditex’s business
strategy and success. The secret of fast fashion retailing is the ability to generate quick
turnover of merchandise in the stores. Inditex creates new products regularly and makes
deliveries of small batches of new goods frequently. New fashion designs are shipped at a
rapid rate, there are few basics and reorders are rare. The customer knows that he/she should
buy an item he/she likes when he/she sees it, because it may not found it later. The amazing
thing about the brand is that it needs only two to three weeks do design and manufacture a
new product and then to distribute it to the stores all around the world. Designers develop
new models daily – sometimes three or four a day – which are then reviewed and are put into
production. It is no wonder that versions of new designs by fashion designers in Paris are in
Zara stores within a very short time of appearing on the runway. To work well, this fast
fashion system depends on a constant exchange of information throughout every part of the
supply chain – from customers through managers to designers and buyers of raw materials.

The CEO of Inditex - Jose Maria Castellano Rios, says the following: “The original business
idea was very simple. Link customer demand to manufacturing, and link manufacturing to
distribution. That is the idea we still live by.” Inditex’s founder, Amancio Ortega, saw the
great importance of having retailing and manufacturing closely together in the apparel
industry and from his view. At the heart of Inditex's success is a vertically integrated business
model spanning design, just-in-time production, marketing and sales combined with a strong
focus on the customer. This gives the group more flexibility than its rivals have to respond to
fickle fashion trends. Unlike other international clothing chains, such as Hennes & Mauritz
(H&M) and Gap, Inditex makes more than half of its clothes in-house, rather than relying on
a network of disparate and often slow-moving suppliers. The company has been able to
achieve excellent financial status due to its core competencies that provide the chain with a
competitive advantage over traditional retailers in the industry.
Starting with basic fabric dyeing, almost all Inditex's clothes take shape in a design-and-
manufacturing centre in La Coruna, with most of the sewing done by seamstresses from local
co-operatives. Designers talk daily to store managers, to discover which items are most in
demand. Supported by real-time sales data, they then feed repeat orders and fresh designs into
the manufacturing plant. This, in turn, ships the desired items directly to the stores twice a
week, eliminating the need for warehouses and keeping inventories low (see chart).
The result is that Inditex can make a new line from start to finish in just two to three weeks,
against an industry average of nine months.
The secret to Inditex’s success is the vertical integration – from design through manufacture
to retail. Unlike companies like Gap and H&M that purchase their clothes from suppliers,
Inditex makes most of its own. 60% of its goods are made in house. This helps the company
manage its inventory with extreme efficiency. It also allows the company to respond to
seasonal and fashion changes very quickly. While Gap and H&M may take up to nine months
to introduce a new line of clothing, Zara can do it in two to three weeks. The firm can
respond quickly to any market contingency.

Twice a week, a store managers send an order to HQ, which is based on the sales data for the
store but also on the customer feedback about what they like and don’t like. The commercial
team will then compile the order, adding in new products and balancing out demand with
other stores, before sending it to Inditex’s manufacturing hub. Within two days, the order has
reached the store.

At the same time, the commercial team is a liaising with the in-house designers, who they sit
next to in the offices at Inditex HQ. When sales trends are identified – either from evidence in
stores or the catwalk – the commercial team will work with the designers to develop new
products to meet the trends. New fashions are then produced in relatively small batches, so
flops can be disregarded after their first appearance and hits can be followed quickly by
similar incarnations.

Logictics
Inditex takes advantage of its centralized logistics and the ability to make decision in a very
coordinated manner. All of Inditex's logistics centres, which in turn manage all shipments to
all stores around the world, are located in Spain, close to the head offices of each of the
Group's brands. Inditex controls and optimizes across different steps of the supply chain, not
within them, even though it may increase costs at some steps. Inditex ara sticks to a deep,
predictable and fast rhythm, based around order fulfilment to stores.
Each outlet sends in two orders per week on specific days and timing with shipments from
Spain, which are prepared during the night. Trucks leave at specific times and shipments
arrive in stores at specific times. Garments are already priced and have labels depending on
the county of destination. Deliveries arrive one to two days after ordering and typically it
takes the company up to 24 hours to deliver products in Europe and up to 48 hours in the
USA and Asia.
As a result of this clearly defined rhythm, not only every stage of the supply chain – from
design to procurement, production, distribution, and retail – know their activities. Even
customers know when the shipments arrive and when to visit the store for new fresh designs.

Technology
Information and communications technology is at the heart of Inditex’s business. Information
of customer needs and demands flows daily and is fed into a database at head office.
Designers check the database for these dispatches as well as daily sales numbers, using the
information to create new lines and modify existing ones, thus designers have access to real-
time information when deciding with the commercial team on the fabric, cut, and price points
of a new garment. In order to make the product design and approval process, Inditex
warehouses the product information with common definitions allowing it to quickly and
accurately prepare designs, with clear-cut manufacturing instructions. Inditex’s state-of-the-
art distribution facility functions with minimal human intervention.
Inditex spends only 0.5% of its total revenue for Information Technology systems. The
company uses the VMI (Vendor-Managed Inventory) – a model for optimizing Supply Chain
performance in which the manufacturer is responsible for maintaining the distributor’s
inventory levels. The manufacturer has access to the distributor’s inventory data and is
responsible for generating purchase orders. In the case of Inditex, which is vertically
integrated, the information about inventory level is transmitted from stores to headquarters
and distribution centres. The head office receives electronic data (usually through EDI –
Electronic Data Interchange) that tells them the sales volume and stock levels. The head
office can view every item that is sold as well as true point of sale data. Through the VMI
system, stores automatically send their orders and after that professionals from the head
office analyse the data and calculate what will include the next shipment. These calculations
are based on sales, inventory levels and each SKU available.
Inside the factories, IT is used for the production of goods such as large computer-controlled
cutting equipment that cuts fabric in pattern using the most of all the fabric available.
Distribution centres uses much of automation and computerization as well. Orders that come
into the distribution centres are process by computers which locates the products in the
warehouse and supplies such orders. Applications used in the distribution centres were
created by the IT department exclusively for the use of Inditex.

Advertising
Inditex uses no advertisement strategy. Instead of spending money on promotion and
advertising, the company focuses heavily on their product, place and pricing. It turns out that
Inditex’s products are what keeps customers coming back to the stores. Products are
advertising themselves alone. The company, however, believes that its shop windows are all
the advertising its needs. The philosophy seems to have worked. The company's success is a
proof that it is still possible to build a massive brand by doing no more than meeting
customer’s needs and satisfy them.

VII. SWOT Analysis

1. Strengths
The success of Inditex as the world’s leading fashion retailer is built upon the parent
company’s numerous strengths, which also make it a formidable opponent within the market.
 Vertical Integration
The fast fashion industry is highly competitive. Product life is short and must be
differentiated from competitors in order to build brand image. Firms in this industry also
largely compete on price, which intensified as companies began to utilize low cost
outsourcing. Today, competition has shifted and is also dependent on quick response time.
Therefore, the vertical integration of Inditex gives it an advantage in implementing processes
that shorten the production cycle. Competitors more highly dependent on third party
negotiations are less nimble and flexible in their response time. Inditex employs over 1,000
people in its central product department, has 13 textile manufacturing subsidiaries in Spain,
11 logistics subsidiaries, eight distribution centers, and 6,009 retail stores. This means that
Inditex staff is involved in each step of the value chain, spanning design to retail.
 Brand Name
The high investment in the Zara brand name is an asset for Inditex, as well as their other
retail formats through association. For example, customers who correlate Zara with desirable,
affordable, must-buy products are more likely to shop at Zara Home when searching for
home décor because of the positive name association. While Inditex only spends 0.3% on
marketing, its high investment in real estate and storefronts with uniform Prada inspired
layouts gives the Zara brand a unique image as high-end despite its lower price point.
Signaling, word of mouth, and free publicity due to the company’s rapid success have
continued to generate brand strength. The name Zara itself generates a buzz among shoppers
who return frequently, with loyal customers even referring to delivery day as “Z-day.” In
some ways, Inditex has not only created a strong brand name with Zara, it has created a
culture.
 Reach
Inditex has a broad reach, both globally and within the industry. With stores currently in 86
countries, Inditex captures a wide range of global shoppers. This global reach also minimizes
the risk associated with regional economic fluctuations.
 Real-time Data and Communication
Inditex maintains a strong link between product teams and store staff. Each retail format’s
head office is home to a product team of designers, merchandisers, and store liaison managers
that work together to develop new products and analyze current sales data. Designers use a
variety of information about customer preferences, including scouting runway shows in
Milan and Paris to develop new products. Store employees are then tasked with soliciting
feedback from shoppers about what they’d like to see more of, done differently, in different
colors or necklines, and so on. Stores send daily sales totals, customer feedback, and detailed
information about what items sold broken down by color and size to headquarters twice a
week. Store managers place orders twice weekly based on what they feel will be successful in
their specific store, and designers review both formal and informal feedback daily. Because
Inditex monitors its sales at the store level and adjusts accordingly, each individual store
could end up with different product offerings at the end of a season. In this way Inditex again
reduces inventory risk, and makes customer decisions and ideas the central element of its
supply process. By exactly matching supply to changing and varied customer demands,
Inditex’s business model is noted as being the “democratization of fashion.” While Inditex is
heavily reliant on such communicative feedback and data analysis, it keeps its technology
simple, “even a little old fashioned.” Managers make decisions about suppliers and external
providers informally, without the need for supply chain software, and no permanent networks
link stores, headquarters, factories, and distribution centers. Inditex has honed a highly
efficient technological response system that produces results, while spending five to ten times
less on IT costs than its rivals.

2. Weaknesses
 Underdevelopment of non-Zara Brands
Currently, Zara accounts for 65% of Inditex’s total revenue, and the company’s other 7 retail
formats make up the rest. The company’s next biggest sales generator is its Bershka brand,
accounting for approximately 10% of sales. However, while there are roughly twice as many
Zara stores as compared to Bershka stores, Zara generates about 6.5 times more sales. While
the Zara brand has become well known globally, the other 7 are more limited in this regard.
At this point it appears that Inditex has bet much of its success on one concept, and while this
strategy doesn’t currently seem problematic given Zara’s prominence and success, the
fashion world is fickle and can change quickly.
 Overdependence on European and Domestic Markets
All of the company’s manufacturing and logistics centers are located in Spain, and the
“proximity” sourcing which allows its retailers to respond so quickly to changing demands is
based on proximity to its Spanish headquarters and distribution centers. Inditex ships clothing
to its stores either by truck or plane in under 48 hours, and the costs of shipping to different
continents so quickly are higher, a cost which the consumer will partially share, making price
points less competitive. As Inditex continues to pursue non-European markets, it is moving
more of its business transactions further from this central location, though it is this centrality
that generated much of Inditex’s success. As the pace of its global expansion away from
Europe quickens, Inditex must be acutely aware of the effects this distance will have on its
costs and speed of distribution.

3. Opportunities
 Online Sales
Inditex is continuing to increase its online presence, with both Zara and Zara Home having
presence in about 20 key markets. There is still much room for continued roll-out, especially
in the Americas for Zara, and further development of the other retail brands. All of Inditex’s
additional online platforms such as YouTube channels, apps, social media, and newsletters
are intended to both facilitate online retail and allows customers to explore look books and
product ranges.
 Expansion
A study by Deutsche Bank concluded that 6% to 9% growth in Inditex’s retail space should
be sustainable for the next 10 years, given the company’s financial strength, little debt, and
strong cash reserves.
Inditex is currently favoring expansion within China. CEO Pablo Isla claims “going into
China is like beginning again in Europe for Inditex.” The company opened 179 new stores in
Asia in 2011, 156 of which were in China. By the end of 2012, Inditex had increased the
number of Chinese stores to 400.

4. Threats
While the state of the European and Spanish economies continues to pose an overarching
threat to Inditex due to its strong dependence on these markets for the majority of revenue,
there are three more Inditex specific threats to be mindful of.
 Fast Fashion Fatigue
Fashion is fickle, and trends can change overnight – trends that not only influence the
clothing that we buy, but also how we buy it. In the industry, fast fashion has been referred to
as “McFashion,” or “throw away fashion,” and criticized for promoting “today’s treasures,
tomorrow’s trash. ” Today’s young consumers are part of a generation highly concerned with
sustainability, the environment, and green values, and are slowly becoming aware of how
their fashion choices can support sustainable progress as well
 Increased Competition
The success of the Inditex business model has created increased competition as other retailers
adjust their own processes to more closely resemble the quick time-to-market and just-in-time
delivery utilized by the industry leader. H&M, the second largest global retailer for example,
has been incorporating three-week turnaround items into their more traditional seasonal lines,
and their trendy, low-priced products draw some of the same core demographic as Zara,
Bershka, and Stradivarius
 Growing More Quickly than the Business Model
As Inditex continues to expand outside of Europe, they are moving farther away from their
centralized design, logistics, and distributions centers as well as their suppliers. The
company’s record setting time-to-market, rapid response to real-time data and feedback, and
just-in-time deliveries upon which its success was built were made possible by sourcing 50%
of materials and labor locally and keeping design close to distribution. As Inditex continues
to target foreign markets, it seems to be growing without also growing its successful business
model.

VIII. Porter’s Five Forces (Competitive Analysis)