SECTION A $[40$ MARKS$]$

Read the case study below and answer ALL the questions that follow.

Zara International $-$ Fashion at the Speed of Light

In this world of $$hot today, gauche tomorrow$,$ no company does fast fashion better than Zara International. Shoppers in a

growing number of countries $$ more than $7,000$ stores in $50$ countries across $96$ different markets $$ are fans of Zara$$s

knack for bringing the latest styles from sketchbook to clothing rack at lightning speed and reasonable prices.

In Fast Fashion, Moments Matter

Zara$$s parent company, Inditex, is known for year$-$on$-$year strong sales gains. Low prices and a rapid response to fashion

trends have pushed it into the top ranks of global clothing vendors. The chain specialises in lightning quick turnarounds of

the latest designer trends at prices tailored to the young $$ about $$27$ an item. Former Louis Vuitton fashion director, Daniel

Piette, described Zara as $$possibly the most innovative and devastating retailer in the world.$$

Inditex shortens the time from order to arrival using a complex system of just$-$in$-$time production and inventory management

that keeps Zara ahead of the competition. Their distribution centres can have items in European stores within $24$ hours of

order receipt, and in American and Asian stores in under $48$ hours. $$They$$re a fantastic case study in terms of how they

manage to get products to their stores so quickly,$$ said Stacey Cartwright, former executive vice president and CFO of

Burberry Group PLC$.$We are mindful of their techniques.$$

The firm carefully controls design, production, distribution and retail sales to optimise the flow of goods, without having to

share profits with wholesalers or intermediary partners. Customers win with access to new fashions while they$$re still fresh

off the runway. Twice a week Zara$$s finished garments are shipped to physical distribution centres that all simultaneously

distribute products to stores worldwide. These small production batches help the company avoid the risk of oversupply.

Because batches also contain new products, Zara$$s stores perpetually energise their inventories. Most clothing lines are not

replenished. Instead, they are replaced with new designs to create scarcity value $$ shoppers cannot be sure that designs in

stores one day will be available the next day.

Store managers track sales data with handheld devices. They can reorder hot items in less than an hour. Zara always

knows what$$s selling and what$$s not. When a look doesn$$t pan out, designers promptly put together new products. New

arrivals are rushed to store sales floors still on the black plastic hangers used in shipping. Shoppers who are in the know

recognise designs as the newest of the new$$ soon after, any items left over are rotated to Zara$$s standard wood hangers.

Inside and out, Zara$$s stores are designed to strengthen the brand. Inditex considers this to be very important because that

is where shoppers ultimately decide which fashions make the cut. In a faux shopping street in the basement of the

company$$s headquarters stylists craft and photograph eye$-$catching layouts that are emailed every two weeks to store

managers for replication.

Zara stores sit on some of the glitziest shopping streets $$ including New York$$s Fifth Avenue, near the flagship stores of

leading international fashion brands $$ which makes its reasonable prices stand out. It$$s all part of the strategy. $$Inditex gives

people the most up$-$to$-$date fashion at accessible prices, so it is a real alternative to high$-$end fashion lines,$$ said Luca

Solca, Managing Director of Luxury Goods with Sanford C$.$ Bernstein in London. That is good news for Zara as many

shoppers trade down from higher priced chains.

A Single Fashion Culture

The Inditex group began in $1963$ when Amancio Ortega Gaona, founder and former chairman of Inditex, got his start in

textile manufacturing. After a period of growth, he assimilated Zara into a new holding company, Industria de Diseno Textil.

Inditex has a tried$-$and$-$true strategy for entering new markets: start with a handful of stores and gain a critical mass of

customers. Generally, Zara is the first Inditex chain to break ground in new countries, paving the way for the group$$s other

brands, including Pull and Bear, Massimo Dutti, and Bershka.

Inditex farms out much of its garment production to specialist companies, located on the Iberian Peninsula, which it supplies

with its own fabrics. Although some pieces and fabrics are purchased in Asia, many of them are not dyed or are only partly

finished $$ the company manufactures about half of its clothing in its hometown of A Coru$$a$,$ Spain. Inditex CEO and

Chairman, Pablo Isla, believes in cutting expenses wherever and whenever possible. Zara spends just $0\mathrm{.}3\%$ of sales on

ads, making the $3-4\%$ typically spent by rivals seem excessive in comparison. Isla disdains markdowns and sales as well.

H&M$,$ one of Zara$$s top competitors, uses a slightly differe