Inditex:
Strategy with a Focus on Human Resources and Competitive Advantage
Table of Contents
1. Corporate Strategy 1.1 Overview of Inditex group
1.2 Business Model Overview
Figure 1: Fashion Industry Value Chain Design Activities Manufacturing Logistics Retail Sale 1.3 Other Aspects of Corporate Strategy Store Locations eChannels Marketing 1.4 SWOT Analysis
2. Inditex’s Competitive Advantage: Pull Supply Chain Management 2.1 Pull Supply Chain Management: How It Works at Inditex
Customer Knowledge
Proximity to Demand
Just In Time Production and Demand Forecast
Fabric Purchased in Advance
2.2 Inditex SCM impact on Porter’s Five Forces
Threat of New Entrants
Threat of Substitute Products or Services
Bargaining Power of Buyers
Bargaining Power of Suppliers
Rivalry Amongst Existing Competitors
3. Human Resource Management
3.1 Overview
3.2 Selectivity in Recruiting
3.3 High Wages and Incentive Pay
3.4 Participation and Empowerment
3.5 Training and Skill Development
3.6 Promotion from Within
3.7 Assessment of HRM Strategy
4. Global Strategy 4.1 Overview Motives for Internationalization 4.2 Market Selection 4.3 Expansion Strategy Close Markets (1988-1990) Moderate Expansion (1990-1997) Aggressive Expansion (1997-Current) Asia Market Entry Mode Owned Managed Stores Franchises Joint Ventures 4.4 Inditex’s Forms of Adaptation, Aggregation, and Arbitrage (AAA) Adaptation Aggregation Arbitrage 4.5 Moving Forward
1. Corporate Strategy
1.1 Overview of Inditex Group
Industria de Diseño Textil, S.A. (Inditex) is a Spanish fashion retailer that operates over 6,000 stores in over 80 countries. The company started in 1963 as a small store making clothing for women. Today the group owns eight brands (see Table 1), most notably Zara, and has become one of the world’s largest fashion and clothing retailers. In 2013, the group made 16.72 billion euros in revenues and had over 125,000 employees.
Inditex’s strength has come from selling very fashionable products of high quality at affordable prices. This success started in Spain with the company’s first branded store, Zara, in 1975. Since then, the company grew across Europe to become a leading fashion retailer. Inditex thereafter started creating and acquiring different brands, which touched upon all of the customer segments (women, men, and children) and needs (clothing, accessories, and lingerie) in the fashion retail industry. Building on its success, Inditex grew globally, owning stores and sometimes franchising, in the Americas, Asia, Africa, and Australia. The company has also launched online stores for all its brands, such as the online Zara store in the US.
1.2 Business Model
Overview
Inditex’s success relies heavily on its flexible and integrated business model. The business model’s core concept, according to the company, is to sell “medium and high quality fashion clothing at affordable prices.” Inditex has discovered that realizing this mandate is dependent on achieving vertical integration and responsiveness to customer demand and behavior. Inditex’s business model spans the entire value chain of the fashion industry and most importantly keeps a high customer focus across all levels (see Figure 1).
Through its over 200 owned subsidiaries, Inditex oversees all areas of the value chain, which helps the company control its supply and its response to customer demands and trends. Additionally, the group owns companies that are responsible for store operations and real estate developments, which are usually located in central locations in big cities. Careful control of operations and real estate helps the company achieve sales through trendy stores in prime locations, often next to high-end fashion stores, which is a very important component of the group’s strategy.
Design Activities
The trendy and fashionable design of Inditex clothing and accessories has been a key component of the company’s
