Case Study -ZaraManufacturing doesn’t get much older than thetextile and clothing industry. Since the earliest days when welived in caves there’s been a steady demand for something to wraparound us to keep warm and to protect the more sensitive bits ofour anatomy fromthe worst of the elements. What began with animalhides and furs gradually moved into a more sophisticated activitywith fabrics woven from flax or wool –and with people increasinglyspecializing in the business.In its early days this was very much acottage industry –quite literally people would spin wool gatheredfrom sheep and weave simple cloths on home-made looms. But theskill base–and the technology –began to develop and many of thefamily names we still have today –Weaver, Dyer, Tailor, for example–remind us of the importance of this sector. And where there weresufficient cottages and groups of people with such skill we beganto see concentrations of manufacturing –for example the Flemishweavers or the lace-makers intheEnglishMidlands.Astheirreputation–andthequalityoftheirgoods–grewsothebasisof trading internationally in textiles and clothingwasestablished.The small-scale nature of the industry changeddramatically during the Industrial Revolution. Massive growth inpopulation meant that markets were becoming much bigger while atthe same time significant developments in technology (and thescience underpinning the technology) meant that making textiles andclothing became an increasingly industrialized process. Much of theearly Industrial Revolution was around the cotton and woolindustries in England and many of the great innovations andmachinery –such as the spinning jenny –were essentially innovationsto support a growing international industry. And the growth of theindustry fuelled scientific research and led to developments likethe invention of synthetic dyes (which allowed a much broader rangeof colour) and the development of bleaching agents.There’s apattern in this in which certain manufacturing innovationtrajectories play a key role. For example, the growingmechanization of operations, their linking together into systems ofproduction and the increasing attempts to take human interventionout through automation. Of course this was easier to do in somecases than others –for example one of the earliest forms ofprogrammable control, long before the invention of the computer,was the Jacquard punched-card system which could control theweaving of different threads across a loom. But actually makingmaterial into various items of clothing is more difficult simplybecause material doesn’t have a fixed and controllable shape –sothis remained increasingly a labour-intensive process.By thetwentieth century, the industries had become huge and wellestablished, with growing international trade in raw materials suchas cotton and in finished goods. The role of design becameincreasingly important as basic demand was satisfied and certainregions –for example, France and Italy –began to assume strongreputations for design. Branding became increasingly important in aworld where mass communications began to make the telling ofstories and the linking of images and other elements intoadvertising, which fuelled demand for clothing as much more than abasic necessity purchase.©2013 Joe Tidd, John Bessant, KeithPavitt2Mass production methods and the scientific managementapproaches underpinning them diffused rapidly and, in the case ofclothing assembly which remained a labour-intensive process, led tothe quest for lower-wage-cost locations. So began the migration ofclothing manufacture around the world, visiting and settling inever cheaper locations across the Far East, through much of Africaand Latin America to its present home in China.Today this is aglobal industry embracing design activities, cutting and processingoperations, assembly, distribution and sales –all fuelled by a hugedemand for differentiation and personalization. This is an industryin which price is only one element –non-price factors such asvariety, speed, brand and quality matter. And it’s an industrydominated by the need for high-frequency product innovation–fashion collections no longer run along the old seasonal trackwith winter and summer collections. In some cases the range ischanged every month and innovation in information andcommunications technology means that this cycle is getting shorterstill.All of this has shaped an industry which is highly networkedacross global ‘value chains’ and coordinated by a few majorplayers. Much of the ‘front’ end of the industry is about majorbrands and retail chains while the ‘backroom’ operations are oftensmall-scale subcontractors often in low-wage-cost areas of theworld.Like so many industries it has become somewhat footloose andwandered from its origins –leaving behind only a small reminder ofits original dominance. Compared with countries like India andChina today’s European clothing industry is a small player on theglobal stage. There are some exceptions to this –and they underlinethe power of innovation and entrepreneurship.Just because thedominant trends lead in one direction doesn’t mean that there isn’tscope for someone to spot and deploy ways of bucking this trend.One such player was a young clerk working in a small clothingretailing business in northern Spain. Frustrated with his careerprospects Amancio Ortega Gaona decided to strike out on his own andin 1963 invested his savings –the princely sum of US$25 –into asmall manufacturing operation making pyjamas and lingerie. Inclassic fashion he peddled (and pedalled –his earliest transportwas a bicycle!) his wares around the region and built the businessover the next 10 years and then decided to move into retailing aswell, opening his first shop in the north-western town of La Corunain 1975.Things have movedon somewhat since then. Industria deDiseno Textil –Inditex –the holding company which he established–is now worth around US$8 billion and has just opened itstwo-thousandth store in Hong Kong. Active in nearly 70 countriesthis textile and clothing business has 8 key brand groups, eachtargeted at particular segments or product types –for example,‘Pull and Bear’ for children, ‘Massimo Dutti’ for older men andwomen or ‘Oysho’ in lingerie. Best known of these is ‘Zara’ –aglobal brand with strong design and fashion identity runningthrough both the clothes and the stores in which they are sold.Itsclothes combine stylish designs with a strong link to current highfashion themes with moderate prices. The company have becomeleaders by exploiting some of the key non-price trends in theindustry –for example, variety and product innovation. For example,over 10 000 different©2013 Joe Tidd, John Bessant, KeithPavitt3clothing models are created and sold every year –this ismostcertainly not a case of ‘one size fits all’ or of long-lastingproduct types! Ortega has taken the entire system for creatingclothes and built a business –and originally did so in an areawhich did not previously have any textile tradition.At an earlystage in the development of the manufacturing business he movedback into textile-finishing operations to make sure that thecolours and quality of the material he used to make the clotheswere up to scratch. Not only did this give better quality controlbut it also opened up the road to offering exciting and differentfabric designs and textures. There are now 18 textile-designing and-finishing operations in the group as well as the clothingmanufacturing.A major part of the company’s success comes from astrong commitment to design –they employ over 200 designers andmake extensive play of this commitment. It’s a theme which doesn’tstop with the clothes themselves but also extends to thepresentation of the stores, their window displays, theircatalogues, Internet advertising and so on. Part of theheadquarters building in Arteixo La Coruna, Spain contains 25full-size shop windows with display platforms and lighting whichallow the team to see what real store windows would look like –notonly under normal conditions but also on rainy days, at night andso on.Another key aspect of Zara’s success is the flexibility whichcomes from having a very different model for manufacturing. Around2500 employees work directly in manufacturing operations –butbehind them is a much larger workforce spread across villages andsmall communities in Spain and northern Portugal.Once the newdesign has been approved the fabric is cut and then distributed tothis network of small workshops –and these represent an outsourcecapability delivering a high degree of flexibility. Pre-cut piecesand easy-to-follow instructions are given to workers in what isstill largely an informal economy –and their output then flows backinto the massive Zara distribution centre like tributaries to afast-flowing river. (This is not a small operation –the centre hasaround 200 kilometres of moving rails on which the products flow.Highly automated and with extensive in-line quality checking, theprocess transfers the incoming pieces into production lots whichare then allocated to a fleet of trucks for fast shipment, mostlyby air from the nearby airport at Santiago de Compostella.)Needlessto say this places significant demands on a highly flexible andinnovative coordination system which Zara have developed in-house.In this way they make use of a model which dates back hundreds ofyears (the idea of industrial districts and clusters) but usetwenty-first-century technologies to make it work to give them hugeflexibility in both the volume and variety of the things they make.Where competitors such as H&M and Gap have to start planningand producing their new lines three to five months before goodsfinally make it to the stores, Zara manages the whole process inless than three weeks!Their flexibility is also based on rapidresponse and extensive use of information and communicationtechnologies. At the end of the day as the customers leave their950 stores around the world the sales staff use wireless handsetsto communicate inventorylevels to the store manager who thentransmits this intelligence back to Spain as a feed into the designorder and distribution system. This gives an up-to-the-minute ideaof what is selling –and what isn’t, so the stores can be highlyresponsive to customer preferences –which colours ‘work’, whichthemes are popular, which designs aren’t hitting the spot. But it’snot just following the market –Zara also push the game by makingsure that no model is kept on sale for more than four weeks –nomatter how well it is selling. This has a strong impact ontheir©2013 Joe Tidd, John Bessant, Keith Pavitt4brand –they areseen as very original and design-led –but it puts even morepressure on their ability to be agile in design andmanufacture.
Case Study Questions
1.Is the Zara model sustainable? What would you do to preservetheir edge over the next 5–10 years, given that many other playersare now looking to follow their example? If you don’t think it cansurvive, give your reasons for why you think the model isunsustainable and will fail.
2.You have been hired as a consultant to a small clothingmanufacturer who wants to emulate the success of Zara and Benetton.She wants advice on an innovation strategy which takes the keylessons from these successful firms. What would you offer?
3.Zara Home has just opened using the same basic business modeland deploying the same innovative approach as there s tofthebusiness but in the home goods field.Do you think it might succeedand why?
