MODEL OF STRATEGIC ANALYSIS

Appropriate Model Of Strategic Analysis: Clothing Industry

Appropriate Model Of Strategic Analysis: Clothing Industry

INTRODUCTION

When Inditex offered a 23 percent stake to the public in 2001, the issue was over-subscribed 26 times raising €2.1 billion for the Industry. At the end of 2001, Clothing Industry operated 507 stores outside of Spain generating 54% of the total revenues with a total selling area of 488,400 meters; including Spain the total selling was 659, 400 square meters. Clothing Industry, which contributes around 80% of group sales, concentrates on three winning principles:

Lower inventories -creates scarcity

Short lead times to keep up with current fashions -freshness of offering

More styles and more choices for the customers coupled with an attractive store ambience

INDUSTRY SITUATION

The current state of affairs within the Industry and relative to its marketplace The global apparel market is a consumer-driven industry. Globalization and new technologies allow customers increased access to fashion. As a result, consumers' tastes are constantly changing, competition is fierce and companies are forced to respond rapidly in meeting these demands.

Although Clothing Industry produces apparel and accessories for men, women and children their overall target customers tend to be fashion-conscious, female, young and middle to upper middle class. The apparel is modeled after current “fashionable” trends instead of “classically” designed clothing.

As a retailer, Clothing Industry embarked on a unique strategy to expand and compete within this fickle and frenetic industry. The Industry sought an innovative design-on-demand operating model to deliver clothes from concept to store racks faster than any of its competitors. Clothing Industry's success sprang from its vertically integrated business model. Clothing Industry is more agile than its rivals in responding to sudden fashion trends and its unique approach to product development is instrumental to their success. Rather than pursue economies of scale, Clothing Industry manufactures and distributes products in small batches over the selling season. Instead of outsourced partnerships, the Industry manages all design, warehousing, distribution, and logistics functions itself. The result is a highly responsive supply chain tailored to Clothing Industry's strategic goals. The internal manufacturing process, as well as, local partnerships that Clothing Industry maintains with manufacturers in Europe allow for shortening the throughput time of a product to 4-5 weeks for new designs and 2 weeks for modifications of existing products, in comparison to the industry standard, which is 6 months. The Industry designs and cuts its fabric in-house and acquires fabrics in grey to keep costs low. Clothing Industry delays dyeing and cutting patterns until close to manufacturing, thereby reducing waste and minimizing the need to clear unsold inventories(Bohlinger, 2001,, 41).

PROBLEMS: Issues the Industry is encountering

The major problem facing Clothing Industry is an unrealistic international growth strategy. Inditex's plans for 2002 included an addition of 55 to 65 Clothing Industry stores, 80% of them outside of Spain . Clothing Industry accounted for two-thirds of the total sales across all its chains in 2001; decisions about Clothing Industry's expansion would have important group-level implications. Clothing Industry's ability to offer new products quickly is strength in ...