Zara: Fashion Follower, Industry Leader
By: Tasha • Case Study • 1,548 Words • November 26, 2009 • 1,674 Views
Essay title: Zara: Fashion Follower, Industry Leader
ZARA: Fashion Follower, Industry Leader
Business of Fashion Case Study Competition
Amanda Craig, Charlese Jones and Martha Nieto
Philadelphia University
April 2, 2004
ZARA: Fashion Follower, Industry Leader
Table of Contents
Introduction………………………………………………………………….1
Financial Analysis and
Comparison…………………………………………………….…………....1
Strategic
Advantages………………………………………………………………...2-3
Strategic
Drawbacks…………………………………………………………….….. 3-4
Possibilities for
Failure…………………………………………………………………....…..4
Recommendations/Conclusion………………………………………………5
Calculations and Financial
Statements……………………………………….……………….Appendix A
Articles: The Recent Status of
ZARA.……………………………………….…………………...Appendix B
Works Cited
Works Referenced
The global apparel market is a consumer-driven industry. Also, globalization and new
technologies have allowed consumers to have more access to fashion. As a result, consumers are
changing, competition is fierce, and companies are evolving to meet these demands. Zara, a
Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry.
With their unique strategy, Zara has the competitive advantage to be sustainable. In order to
maintain that advantage and growth they must confront certain challenges that face traditional
retailers in the apparel industry.
Financial Analysis and Comparison
To prove Zara has the prospect of sustainable growth in the international apparel market,
it is important to understand and compare the financial differences of Inditex, its parent company,
and its major competitor. The most interesting of Zara’s competitors for comparison is Hennes
and Mauritz (H&M), who as the case study states, “was considered Inditex’s closest competitor,
[with] a number of key differences” (Ghemawat 5). H&M differs from Zara because they
outsource all of their production, spend more money on advertising, and is price-oriented. The
key similarities for comparison between Zara and H&M are that they are European based
companies, are fashion forward at lower price retailers, and have a strong international expansion
strategy (1; 5).
Just looking at Exhibit 6 from the case it is easy to see that their financial status is are
comparable (24). Their net operating revenues are closer to each other than that of Benneton or
the Gap, as is their net income. The best way of comparing Inditex and H&M’s financials is by
using ratios and not merely a visual assessment of the financial statements given. The current
ratio1 shows that for every euro in short-term debt, Inditex has 1.02 million euros in current
assets. H&M however, has 3.40 million euros in current assets for every euro in short-term debt.
From this we can infer that Inditex is less liquid, possibly because they have more fixed assets
and turn their inventory over quickly. To support this inference, the