Abstract: International Competitiveness and Technological Innovation in the Fashion Market: The Case of Inditex Holding, 1988-2007

Luis Alonso Álvarez

Abstract

The Spanish firm Inditex, specially known for its brand Zara, has been listed among the three bigger corporations of the fashion industry in the world market. It held the second position in profits after the Swedish Hennes & Moritz, and the third one in sales levels after the North American Gap or H & M itself. During the last known fiscal year, Inditex exported 60.2 percent of its output, although the bigger part of its sales (40.6 percent) were focused in the European Union, excluding the domestic market. This paper analyzes how the technological innovation improved by the firm contributed to a higher level of flexibility in its production and distribution processes and therefore helped to improve its international competitiveness. In the first part the identification of the best competitive advantage of the firm, flexibility and just-in-time policies, are treated. Associated with these we find knowledge of consumer preferences, vertical integration from design to the commercialization of final outputs, offer segmentation in several international brands, and heterodox customer fidelization through sophisticated marketing techniques. This last one includes specially the establishment of the so-called social audits among its suppliers, mainly in developing countries but also in developed ones, which monitor the fulfilment of a series of rights regarding workers and customers. In the second part of the work, main technological innovations promoted by the firm are identified. These allowed the firm to improve competitive advantage and promoted it among the leading ones in the fashion business in the world market. Among the main innovations those associated with Information and Communications Technology (ICT or IT) must be emphasized. In this case, commercial and financial information transfers provide the firm with real-time knowledge of its financial highlights. Innovations in the fields of logistics and robotics are also analyzed. Except for the last one, which implies a high investment, the rest of the innovations are paradoxically associated with huge cost savings.