Today this is a global industry embracing design activities, cutting and processing operations, assembly, distribution and sales - all fueled by a huge demand for differentiation and personalization. This is an industry in which price is only one element - non-price factors such as variety, speed, brand, and quality matter. And it's an industry dominated by the need for high-frequency product innovation - fashion collections no longer run along the old seasonal track with winter and summer collections. In some cases, the collection is changed every month and innovation in information and communications technology means that this cycle is getting shorter still.

One such player was a young man working in a small clothing retailing business in northern Spain.

Frustrated with his career prospects Amancio Ortega Gaona decided to leave the company and start on his own and in 1963 invested his savings - the princely sum of US$25 - into a small manufacturing operation making pajamas and lingerie. He built the business over the next 10 years and then decided to move into retailing as well, opening his first shop in La Coruna in 1975.

Things have moved on somewhat since then. Industria de Diseno Textil - Inditex - the holding company which he established - is now worth around US$21 billion, double the sales of less than a decade ago, and employs over 150,000 people. With over 7,000 stores in nearly 70 countries this textile and clothing business has 8 key brand groups, each targeted at particular segments or product types - for example,

'Pull and Bear' for children, 'Massimo Dutti' for older men and women or 'Oysho' in lingerie. Best known of these is 'Zara' - a global brand with a strong design and fashion identity running through both the clothes and the stores in which they are sold.

Its clothes combine stylish designs with a strong link to current high fashion themes with moderate prices. 'If you want a classic, Italianate look in tune with current styles and at a reasonable price go to Zara.' Zara's successful growth is not simply a mater of low cost or of standardization but rather of innovation, based on the idea of 'fast fashion'. The company have become leaders by exploiting some of the key non-price trends in the industry - for example, variety and product innovation. For example, over 18 000 different clothing models are created and sold every year - this is most certainly not a case of 'one size fits all' or of long-lasting product types Ortega has taken the entire system for creating clothes and built a business - and originally did so in an area which did not previously have any textile tradition. At an early stage in the development of the manufacturing business he moved back into textile finishing operations to make sure that the colors and quality of the material he used to make the clothes Were up to quality. Not only did this give better quality control but it also opened up the road to offering exciting and different fabric designs and textures. There are now 18 textile-designing and - finishing operations in the group as well as the clothing manufacturing.

A major part of the company's success comes from a strong commitment to design - they employ over 350 designers and make extensive use of this commitment. It's a theme which doesn't stop with the clothes themselves but also extends to the presentation of the stores, their window displays, their catalogues, Internet advertising and so on. Part of the headquarters building in Arteixo La Coruna, Spain contains 25 full-size shop windows with display platforms and lighting which allow the team to see what real store windows would look like - not only under normal conditions but also on rainy days, at night and so on. Another key aspect of Zara's success is the flexibility which comes from having a very different model for manufacturing. Around 2500 employees work directly in manufacturing operations - but behind them is a much larger workforce spread across villages and small communities in Spain and northern Portugal.

Once the new design has been approved the fabric is cut and then distributed to this network of small workshops - and these represent an outsource capability delivering a high degree of flexibility. Pre-cut pieces and easy-to-follow instructions are given to workers in what is still largely an informal economy - and their output then flows back into the massive Zara distribution centre. (This is not a small operation

- the centre has around 200 kilometers of moving rails on 5 which the products flow. Highly automated and with extensive in-line quality checking, the process transfers the incoming pieces into production lots which are then allocated to a fleet of trucks for fast shipment, mostly by air from the nearby airport at Santiago de Compostela.) This places significant demands on a highly flexible and innovative coordination system which Zara have developed in-house. In this way they make use of a model which dates back hundreds of years (the idea of industrial districts and clusters) but use twenty-first-century technologies to make it work to give them huge flexibility in both the volume and variety of the things they make.

Where competitors such as H&M and Gap must start planning and producing their new lines three to five months before goods finally make it to the stores, Zara manages the whole process in less than three weeks! Their flexibility is also based on rapid response and extensive use of information and communication technologies. At the end of the day as the customers leave their 950 stores around the Word the sales staff use wireless handsets to communicate inventory levels to the store manager tern. then transmits this intelligence back to Spain as a feed into the design order and distribution systeriy This gives an up-to-the- minute idea of what is selling - and what isn't, so the stores can be highny responsive to customer preferences - which colors work, which themes are popular, which designs aren't hitting the spot. But it's not just following the market - Zara also push the game by making sure that no model is kept on sale for more than four weeks - no matter how well it is selling. This has a strong impact on their brand - they are seen as very original and design-led - but it puts even more pressure on their ability to be agile in design and manufacture. For example, an idea for a coat with a high collar and a metal ring to fasten it was born in Zara's design studio in the small city of Arteixo. Five days later the draft sketches, themselves a result of feedback from store managers about fashion trends they were seeing, had been converted into a physical prototype.

A second pattern maker then took over and working with a team of seamstresses and cutters worked the next 13 days to produce a batch of 8000 coats. Their final 6 days in manufacturing were spent being ironed, tagged, quality checked and prepared for dispatch, moving from the logistics centre in Zaragoza to Barcelona airport. By the next day a truck was taking them from J.F. Kennedy airport to downtown New York to be sold in the Fifth Avenue Zara store, selling at $189. Total cycle time, including transport and distribution, 25 days. This is not unusual, their fast fashion model has been able to move from idea to store in as little as 2 weeks! Another is exclusivity; their model is geared around small batch production in which only a small number - for example, 25,000 of the coats - will be made. Selling out of stock is not a problem since Zara store managers need to keep making space for newer items which arrive twice a week from Spain. As one analyst commented, 'think of Zara not as a brand but as a very speedy chameleon that adapts instantly to fashion trends'

Instructions:

• Your points / opinions should have supporting evidence from the case
• Use your own words - DO NOT copy and paste

Questions

1. Analyze which factors do you think influence the timing of entry of ZARA into its markets.
2. Relate your knowledge of the § curve to Zara's need for innovation in its collections.