Zara Case Study Essay Sample

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a) Identify the stakeholders of the constellation in the diagram.

Supply Segment




Production Enterprises

ZARA is the flagship brand under the Indetex Group, which is known worldwide by its fast fashion products. Their core competitive strategy is developing the new product and getting it to stores within 15 days. The uniqueprocessing model ensures ZARA occupied the market advantage among the fashion industry. Subcontractors

Although ZARA manufacture approximately half of its products in their own factories, they use subcontractors for all sewing operations. These factories are managed as independent profit centers. There are about 500 sewing subcontractors close to La Coruña, and they work exclusively for ZARA. Under the closely monitors and sampling methodology controls by ZARA, the products quality can be guaranteed.


The remaining half of ZARA products are produced from 400 outside suppliers, 70% of which are in Europe, and most of the rest in Asia. Since the majority of suppliers are in Europe and many of them are based in Spain and Portugal, ZARA takes this geographical advantage to respond the orders in short time, which ensures its fast fashion products.

Social Segment

ZARA responds to government’s call actively, participating in social investment with collaborating organizations on community development, sponsorship and patronage. The company also donated money for emergencies situation such as Columbia Earthquake and Japanese Red Cross for people who are in need.


Inditex, the parent company of ZARA, committed to customers in their social responsibility policy that inspires all the activities from the store, where their requirements are noted; to the table of the designers, who transform those wishes into fashion proposals; and including the production processes to make the garments and the logistical distribution, carried out in accordance with the highest standards of safety.

The company also tries to help the sustainable developments of the society and the environments with which it interacts. They complete their commitment in many ways, such as recycling hangers, using paper or biodegradable plastic bags, introducing biodiesel fuel in transportation, etc.

Capital Segment


Financial liabilities, including trade and other payables, are initially recognized at fair valueless any transaction costs that are directly attributable to the issue of the financial liability. Based on the annual report of 2011, the Group’s financial liabilities are measured at amortized cost using the effective interest method.

LIABILITIES 31-01-2012 31-01-2011 CURRENT LIABILITIES 2,702,774
2,674,907 Trade and other payables 2,475,140 2,419,583 Financial debt 686 2,682 Other financial liabilities 22,880 39,274 Income tax payable 204,068 213,368 NON-CURRENT LIABILITIES 800,827 728,005 Financial debt 1,544 4,172 Deferred tax liabilities 182,531 172,648 Provisions 147,318 156,610 Other non-current liabilities 469,434 394,575


Inditex, the head office of ZARA, had 60,341 shareholders according to data from form X-25 which the company requested from Iberclear for the 2011 Ordinary General Shareholders Meeting. Of these 50,304 were individual shareholders and the remainder institutional investors. With the incorporation of significant holdings registered in the Spanish National Securities Market Commission, the approximate overview of shareholder structure is as follows:

Shreholder body Shares percentage Individuals 18,330,559 2.94%
Institutional investors 235,399,778 37.76%
Partler 2006 SL 57,872,465 9.28%
Gartler SL 311,727,598 50.01%
Total 623,330,400 100%

b) Provide at least one example for VA activities for each stakeholder of the supply segment

Design Modification

The designers will discuss the initial product drafts with their colleagues, which including market specialists, planning and procurement people for adjustments, especial aiming at the colors, weave and fabrics. After modifying the design and improving the details, it is also necessary to determine whether the design can be produced and sold at a profit.Then, with the adjusted model, the plan will transfer to the manufacture department.


ZARA imitated the Just-in-time system invented by Toyota Motor Corp. in early 90’s, and formed a vertically integrated business model for controlling most of steps on manufacturing. Internal manufacture was the primary responsibility of 22 fully owned factories, 18 of them located in and around Zara’s headquarters in La Coruña.It allows ZARA to merchandise is produced in-house, with an eye on leveraging technology in those areas thatspeed up complex tasks, lower cycle time, and reduce error.Comparing to ZARA’s competitors like GAP or H&M, ZARA has significantly decrease the producing time within 15 days from the draft of design to finish product in the store. ZARA is 5 to 6 times faster than the competitors which will need few weeks or even a season to complete this process.

c) Provide at least one example for KE/ VC activities between each possible combination of stakeholders along the supply chain.

Product Design

Zara has over 1,000 professionals devoted to the design and development of products. They are working for concentrating on correspond customer’s demand in the shortest time. During this process, the fashion observers will report the latest information from all kinds of fashion occasions, and the retail stores will also report the sales information to help in data collection. Then the designers will get the product final project based on the initial draft after arranging and analyzing the information from the database.

d) Choose an opportunity cost element to be reported for a selected unit of the “production enterprise”. Justify your choice from a business perspective.

Store Location

According to the ZARA marketing analysis, their store mostly considered to locate at the downtown area, no matter how expensive the rent will be, the cost can be covered by the customers’ consumptions due to the advantage of location attracts flows of people shopping in ZARA. However, for those people who living suburban are not accessible to ZARA, they have to go online shopping and miss the chance to try the clothes on.

e) Propose a reporting scheme (a blank report with appropriate headings) as to how you would like the opportunity cost to be reported. Discuss briefly how management would make use of the report during the relevant decision making process.

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