Global Strategic Analysis Of
Milestone Three: Peer Review
Muhammed Yusuf AY
Globalization and internationalization made it clear that changed conditions in the global market necessitates a business strategy that is more responsive and compatible to innovations and differences. According to its website, Zara is one of the largest international fashion company owned by Inditex, one of the world’s largest distribution groups, manufactures, distributes and markets clothing and accessories for man and women. Zara opened its first store in 1975 in the northwest of the Spain. Today Zara has more than 2,000 stores located strategically in 85 countries. At the same time the parent company is in business in more than 88 countries with more than 6,400 stores and 128,000 employees. Inditex has created eight successful brands which all of them operate in fashion industry: Zara, Bershka, Pull and Bear, Massimo Dutti, Stradivarius, Oysho, Zara Home, and Uterque. It has 3000 in-house designers located in its headquarter in the region of A Coruña, Spain, which design over 40.000 items per year among which only 10.000 are selected for production. (Li, 2009).
According to the parent company’s 2013 annual report, the parent company made sales across its 86 markets of $21.13bn and net profit calculated $2.91bn. Same report indicates that $16.69bn of the sales (78%) came from outside of the Spain. During the last twenty years Zara tripled its profit and stores and today is ranked the third biggest retailer world-wide. (Zhang, 2008)
The parent company of the Zara chain said net profit fell 2.4% to €928 million ($1.17) billion) between Feb. 1 and July 31, from €951 million a year earlier, slightly ahead of market expectations. Inditex, the largest fashion company in the world by sales, said revenue grew 5.6% to €8.09 billion (Bjork, 2014).
H & M Hennes & Mauritz:
Zara’s biggest rival in Europe H&M is a Sweden-based retailer of fashion apparel, clothing, accessories and shoes for both women, men. Their product line includes items for teenagers and children. The business is operated from leased store premises, through internet and catalogue sales and on a franchise basis. H&M operates more than 3,100 stores in 53 countries, franchising used in some markets. The company’s revenues calculated $19,732 million in the fiscal year of 2013, an increase of 6.4% compared to fiscal 2012. Its net income was $2,633 million in fiscal 2013, compared to a net income of $2,589 million in the preceding year (Marketline, August 2014).
The Gap, Inc.: American multinational retailer, Gap, sells clothing, accessories and personal care products for men, women, children and babies through its stores in the US, Canada, the UK, France, Ireland, Japan, China and Italy. At the end of the fiscal year of 2013 Gap owned 3,095 retail stores and franchised 312 stores around the globe. The company recorded revenues of $16,148 million in the fiscal year ending January 2014, an increase of 3.2% compared to fiscal 2013. Its net income was $1,280 million in fiscal 2014, compared to a net income of $1,135 million in the preceding year (Marketline, 2014). The company’s brands are Gap, Banana Republic, Old Navy and Athleta.
Strategy Tripod Part One: Industry Conditions
Zara’s most important market is the European market from the sales aspect. The company makes nearly 65 percent of its sales in Europe, including its own country Spain. The European apparel retail industry had total revenues of $429.8bn in 2013, compound annual growth rate (CAGR) calculated 1.1% for four year between 2009 and 2013. Comparing the German and UK’s apparel industries grew with CAGRs of 1.4% and 2.2% respectively in the same period. (Marketline, 2014)
The removal of all import quotas in the textile and clothing industry from January 2005, involving the unrestricted access of all members of the World Trade Organization (WTO) to the European, American