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 pyjamas 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 matter 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

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

world the sales staff use wireless handsets to communicate inventory levels to the store manager who

then transmits this intelligence back to Spain as a feed into the design order and distribution system. This

gives an up-to-the- minute idea of what is selling - and what isn't, so the stores can be highly 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

Instructions: - Your points / opinons should have supporting evidence from the case - Use your own words - DO NOT copy and paste Questions Part 1: 1. Evaluate whether the company uses a push / pull strategy - explain why and how using specific examples ( 5 marks). 2. Assess whether ZARA uses a radical or continuous innovation strategy. Explain using specific examples (5 marks). 3. Evaluate whether ZARA is preserving / destroying / developing its innovations. Please explain your answer ( 5 marks)