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DOI: 10.1002/joe.21805

F E AT U R E

Zara vs. Uniqlo: Leadership strategies in the competitive textile and apparel industry Syed Tariq Anwar

Zara from Spain and Uniqlo of Japan are leading firms in the fast fashion sector of the textile and apparel industry. An analysis of their corporate history and operational strategies explains their success in a highly competitive global environment. Maintaining distinct competitive advantages in brand visibility and quality, they continue to prosper through their ability to respond to consumer tastes, seek economies of scale through their global value chains, cultivate supplier networks that contain prices, and keep pace with Web-based marketing platforms and online retailing trends. Their experiences offer valuable lessons in growth and international expansion.

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I N T RO D U C T I O N

Characterized by a variety of business models, competitive supply chains, and niche endeavors, fast fashion firms make up a major sector in the global textile and apparel industry. Two of these firms, Zara and Uniqlo, have capitalized on their ability to quickly manufacture clothing that reflect the latest trends at an affordable price to become major players in their field. Articles about each of the companies in The Wall Street Journal, published 10 months apart, attest to the firms’ quick internationalization, sustained competitive advantages, and well-formulated global strategies (Negishi, Mattioli, & Dezember, 2013; Roman & Kemble-Diaz, 2012). Along with their competitors in the fast fashion sector, such as H&M, Gap, and Benetton, (see Exhibit 1) Zara and Uniqlo have made significant strides in promptly responding to consumer needs and fashion movements. These include a new “paradigm change” in the apparel industry (Choi, 2011, p. 85) and efficient distribution systems (Gallien, Mersereau, Garro, Mora, & Vidal, 2015). Both Zara and Uniqlo employ business models that are staunchly competitive and oriented toward global growth.

2 | T WO C O M P ET I T O RS FRO M D I FFEREN T PA RT S O F T HE G LO BE Founded by Amancio Ortega Gaona in Arteixo, Spain, in 1974, Zara is part of Inditex, a Spanish multinational. In 2016 26

© 2017 Wiley Periodicals, Inc.

Forbes magazine ranked Ortega the second richest person in the world, with a net worth of $67 billion. Headquartered in Tokyo, Uniqlo’s history goes back to 1949. It is a subsidiary of Fast Retailing, which was founded by Tadashi Yanai. With a net worth of $14.6 billion, he is ranked the richest person in Japan (Forbes, 2016). Both companies have achieved remarkable success and visibility in an industry with complex global value chains (GVCs) and diverse markets, and they continue to grow globally. Exhibit 2 and Exhibit 3 (page 28) outline the firms’ development since their founding.

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Zara: Quick to go global

Throughout its expansion, Zara has remained competitive thanks to its fast-paced internationalization and niche-based supply chains, which include specialized and well-established suppliers in the textile and apparel industry (Gallien et al., 2015; García-Álvarez, 2015; Martinez, Errasti, & Rudberg, 2015; Tokatli, 2014; Zara, 2013−2017). In 1963, Amancio Ortega Gaona (founder and chairman of Inditex) entered the clothing business and grew his firm into a major brand in Europe. Zara’s first store was opened in 1974 in A Coruña, Spain. Between 1976 and 1984, Zara opened additional stores in various major cities throughout Spain. In 1985, Inditex took the form of an apparel industry holding company and from 1986 to 1987, the group focused on its Zara brand, developing an extensive distribution system aimed at efficient

wileyonlinelibrary.com/journal/joe

Global Business and Organizational Excellence. 2017;36(5):26–35.

ANWAR

EX HIBIT 1

27

Fast fashion and related brands in the global textile and apparel industry (2014–2017)

*American Apparel (US)

*Benetton (Italy)

*Bershka (Spain)

*Bestseller (Denmark)

*C&A (Belgium/Germany)

*Charles & Keith (Singapore)

*Charlotte Russe (US)

*Cotton On (Australia)

*8seconds (South Korea) *Forever 21 (US)

*Esprit (Germany)

*Comme ça ism (Japan)

*Gap (US)

*Giordano (Hong Kong)

*H&M (Sweden)

*H: Connect (Japan)

*Kiabi (France)

*Lolly Wolly Doodle (US)

*Mango (Spain)

*Metersbonwe (China)

*Miss Selfridge (UK)

*Mixxo (South Korea)

*New Look (UK)

*NewYorker (Germany)

*Next (UK)

*Peacocks (UK)

*Primark (Ireland)

*Pull & Bear (Spain)

*Rainbow Shops (US)

*Renner (Brazil)

*Riachuelo (Brazil)

*River Island (UK)

*rue21 (US)

*Shasa (US)

*Teddy (Italy)

*Topshop (UK)

*Urban Outfitters (US)

*Wet Seal (US)

*Uniqlo (Japan)

*Zara (Spain)

*Zalando (Germany)

Source: Caro and Martínez-de-Albéniz (2014), company websites, Financial Times (various issues), Ranker (2017); The Wall Street Journal (various issues).

EX HIBIT 2

Zara vs. Uniqlo: Corporate and financial data

(2015–2016) Zara Name

Zara Expaña S.A.

Parent company

Industria de Diseño Textil (Inditex, Arteixo, Spain)

Country of origin/ headquarters

Arteixo, Spain

Year founded

1974

Founders

Amancio Ortega Gaona; Rosalía Mera

Revenue

$9.37 billion (Inditex: $22.09 billion)

Number of stores

2,169 (Inditex: 7,084)

Major competitors

Benetton (Italy); Gap (US); H&M (Sweden); El Corte Inglés (Spain); Uniqlo (Japan)

Uniqlo Name

Uniqlo Company Limited

Parent company

Fast Retailing Company (Tokyo, Japan)

Country of origin/ headquarters

Tokyo, Japan

Year founded

1949

Founders

Tadashi Yanai

Revenue

$4.20 billion

Number of stores

958

Major competitors

Benetton (Italy); Gap (US); H&M (Sweden); El Corte Inglés (Spain); Zara (Spain)

Source: Uniqlo (2013−2017), Zara (2013−2017), Financial Times (various issues), The Wall Street Journal (various issues).

operations. Additional stores were opened in Porto, Portugal; Paris; and New York. Between 1991 and 1997, the company acquired Pull & Bear (formerly New Wear, S.A.) and the Massimo Dutti Group, another apparel company from Spain.

In 1998, Zara launched Bershka, another clothing brand for young women and teenage girls. Additional Zara stores were subsequently opened in the United Kingdom, Turkey, Argentina, Venezuela, United Arab Emirates, Japan, Kuwait, Lebanon, and elsewhere (Zara, 2013−2017). In 2007, Zara established an online store and opened two distribution centers: one in Hubsin Meco outside Madrid and one in Onzonilla in the province of León, Spain. Zara’s new stores locations included Croatia, Colombia, Guatemala, and Oman. In 2010, the Zara Group operated in 77 countries with 5,000 stores and introduced a new strategic environmental plan, “Sustainable Inditex 2011-2015,” which was aimed at sustainable development, eco-friendly environmental practices, and related areas of sustainability and awareness. Zara went on to launch Uterqüe, a retailer of fashion accessories, and to open a new distribution center in Palafolls in the province of Barcelona. In 2013, Zara recreated and repositioned its image based on four principles: beauty, clarity, functionality, and sustainability. Additional stores were opened in Armenia, Bosnia-Herzegovina, Ecuador, Georgia, and Macedonia. In 2013, the total number of stores worldwide reached 6,000. Zara has been ranked among the top 40 brands in the world (Interbrand, 2016; MillwardBrown, 2016), and as of 2017, the company continues to expand in global markets and remains a successful fast fashion brand (Bonnin, 2002).

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A more cautious approach at Uniqlo

Uniqlo’s roots go back to 1949 with the founding of Ogori Shoji in Ube City in Japan’s Yamaguchi Prefecture. In 1963, Ogori Shoji Co., Ltd., had a capital of 6 million yen. An offshoot of Ogori Shoji, Uniqlo opened its first store in 1984, in Hiroshima. The following year, the Uniqlo store in Yamaguchi Prefecture was opened with great success and publicity.

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EX HIBIT 3

Timeline and selected corporate developments: Zara vs. Uniqlo

Year

Major Milestones and Developments

Zara (1963–2017) 1963–1974

Amancio Ortega Gaona (chairman/founder of Inditex, Spain) entered into the business of clothing industry. Inditex gradually grew into manufacturing and distribution in Europe.

1975–1984

Zara opened its first store in Coruña, Spain. Zara’s opened additional stores in major cities in Spain.

1986–1987

The Group put emphasis on its brand Zara; a well-planned distribution system was created.

1991–1997

Introduced Pull & Bear brand; acquired 100% of Massimo Dutti Group in 1995.

1999–2000

Inditex moved to Arteixo, Spain. Acquired the Stradivarius brand in the apparel industry.

2007

Zara opened online stores and two additional distribution Hubs in Meco (Madrid) and Onzonilla (León). The Group operated in 77 countries with 5,000 stores and implemented Strategic Environmental Plan (“Sustainable Inditex 2011–2015”).

2011

The Group created its multichannel retail strategy that aimed at online stores (including all brands).

2013

Zara recreated its image based on four principles: beauty, clarity, functionality and sustainability. Total stores reached 6,000 in global markets.

2016–2017

Zara continues to grow and expand in global markets.

Uniqlo (1949–2017) 1949

Ogori Shoji started a men’s store in Ube City, Yamaguchi Prefecture.

1963

Ogori Shoji Co., Ltd. was established and had a capital of 6 million yen.

1984

Uniqlo opened its first store in Hiroshima.

1991

Ogori Shoji Co., Ltd. changed its name to Fast Retailing Co., Ltd.

2001

Uniqlo opened its first store in London, UK.

2004

Uniqlo opened its first large-format store in Shinsaibashi, Osaka that provided 1,600 square meters of floor space to consumers (store closed in 2010).

2006–2010

Uniqlo’s New York Soho store opened its doors and became the company’s first global flagship store. Uniqlo Oxford Street Store in London (UK) opened its operations and was designated the second global flagship store.

2016–2017

The company continues to seek expansion in global markets.

Source: The Economist (various issues); Financial Times (various issues); Uniqlo (2013-2017); The Wall Street Journal (various issues); Zara (2013−2017).

In 1991, Ogori Shoji Co., Ltd. changed its name to Fast Retailing Co., Ltd. In 1999, Fast Retailing listed its shares on the first section (for large companies) of the Tokyo Stock Exchange. In response to its growth and in search of longterm opportunities, the company moved its headquarters to Tokyo in 2000. During the same year, Uniqlo started to sell its products online. Three years later, the company opened its first large-format store in Shinsaibashi, Osaka, with 1,600 square meters of floor space (Fujimura & Ozasa, 2011; Uniqlo, 2013−2017). Located in spacious facilities, such stores typically generate sizable sales. In 2006, Uniqlo opened a shop in New York’s Soho. and in 2007, Uniqlo’s Oxford Street Store in London was designated the first global flagship store. Between 2009 and 2010, Uniqlo opened stores in Singapore, France, Malaysia, and Russia. In 2011, the company embarked on a global alliance with the United Nations High Commissioner for Refugees (UNHCR), which established an “All-Product Recycling Initiative.” As part of this undertaking, Uniqlo recycled and donated clothing to refugees and displaced citizens throughout the world. In 2012, Fast Retailing acquired J. Brand Holdings, LLC, a major fashion brand from Los Angeles and opened

additional stores in the Philippines. As of 2017, the company continues to expand, and it is considered one of the world’s major fast fashion brands (Choi, 2011; Heffernan, 2011; Huang, Kobayashi, & Isomura, 2014; Uniqlo, 2013−2017). Throughout its growth, Uniqlo has been selective in seeking its international outposts. This cautious approach in global expansion aims at reducing risks and failure (see Exhibits 4 and 5).

3 | C HA N G ES I N A G LO BA L I N D U S T RY Ranging from small cotton growers to multinational manufacturers, firms in the global textile and apparel industry have become heavily intertwined. The industry has been described as “a matrix of interconnected structures and activities that provide multiple venues for marketing, merchandising, designing, producing, and distributing textiles and apparel” (Kunz and Garner, 2007, p. 35). The most pervasive form of commerce in the world, “this business provides employment for more people than any other business segment, directly

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EX HIBIT 4

29

Internationalization and global operations of Zara and Uniqlo (2017) Africa:

Egypt, Morocco, South Africa, Algeria

Asia-Pacific:

Indonesia, Macau, Sout h Korea, Thailand, Kazakhstan, China, Taiwan, Japan, Hong Kong

Oceania:

Australia

Americas

Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras , Mexico, Panama, Paraguay, Peru, Dominican Republic, USA, Uruguay

Europe:

Andorra, Denmark, Spain, Estonia, Croatia, Ireland, Latvia, Luxemburg, Monaco, Norway, Portugal, Switzerland, Slovenia, Finland, Turkey, Austria, Greece, Bulgaria, Belgium, Germany, Canary Islands, France, Hungary, Ital y, Lithua nia, Malta, Netherlands, Poland, Romania, Serbia, Slovakia, Sweden, UK, Czech Republic, Cyprus, Russia

Middle East:

Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, UAE

Asia-Pacific:

Japan, China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand, Philippines, Indonesia

Oceania:

Australia

Europe:

France, UK, Germany, Belgium, Spain, Russia

North America:

USA, Canada

ZARA

UNIQLO

Source: Uniqlo (2013−2017); Zara (2013−2017).

EX HIBIT 5

Sales of selected firms in the fast fashion sector (2015–2016) 25

Sales (in US $ billion)

20 15 10 5 0 Inditex (Zara)

H&M

Gap

Uniqlo

Beneon

(Color figure can be viewed at wileyonlinelibrary.com.) Source: The Economist, Financial Times, The Wall Street Journal (various issues).

affording a livelihood to many people in every country in the world” (Kunz, Karpova, & Garner, 2016, p. 2). The members of this industry are diverse in size, valueadded activities, and GVCs, which affect other business sectors and entire countries worldwide (Browne, 2016; Gimet,

Guilhon, & Roux, 2015; Kapelko & Lansink, 2015a, 2015b; Rivoli, 2009; Seyoum, 2007; The Economist, 2012, 2016). In 2015, the $3 trillion global textile and apparel industry accounted for 2% of global GDP (Business2Community.com, 2015). Massive in reach and impact, the industry is strongly influenced

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by its complex supplier networks and regulatory standards (Amador & Cabral, 2016; Gereffi & Luo, 2015; Gereffi & Lee, 2016; Los, Timmer, & de Vries, 2015; Mudambi & Puck, 2016; Timmer, Erumban, Los, Stehrer, & de Vries, 2014). Historically, the global textile and apparel industry has been affected by various countries’ labor and other regulatory policies and multilateral agreements from the European Union, the World Trade Organization, the World Bank, and other organizations (Ahmed & Peerlings, 2009; Saliola & Zanfei, 2009). Divided into men’s wear, women’s wear, and children’s wear sectors, the apparel industry’s sales are based on the retail selling price of the manufactured garments. With total revenues of $633.9 billion, the women’s wear segment is the most profitable—in large measure because of ever changing fashions and aggressive marketing worldwide (Kunz, Karpova, & Garner, 2016; MarketResearch.com, 2013). Suppliers’ resources, locations, infrastructure, and networks are critical to the industry. Exhibit 6 provides an overview of the textile and apparel industry’s GVCs. There are four key players in the supply chain. •

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Textile mills. These include fiber, yarn, and thread mills, as well as fabric manufacturers. There are also fabric finishing and fabric coating mills. Textile product mills. These encompass designers, finishing mills, and product mills (for nonapparel textile products, such as towels, sheets, and related items).

EX HIBIT 6

•

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Apparel manufacturers. These include apparel knitting mills; facilities that design, cut and sew apparel; and those that manufacture accessories. Retail outlets and marketing firms. These include department stores, specialty stores, mass merchandisers, discount stores, off-price retailers, and miscellaneous retailers (Oyson, 2011).

Because of the involvement of a wide variety of firms in the manufacturing process and retail operations, supply and value chains in the apparel industry can be complicated and interrelated. This affects pricing, delivery procedures, quality standards, and country-specific policies and regulations (Hassler, 2003, 2004; Kadarusman & Nadvi, 2013; Kaplinsky & Farooqi, 2010; Kunz & Garner, 2007; Kunz, et al., 2016; Su, 2013; Wenting & Freken, 2011).

4 | I N T ERN AT I O NA LI ZAT I O N S T RAT EG I ES AT ZA RA A N D U N I Q LO The literature of global strategy reveals that the internationalization process is dynamic because of multinational firms’ diverse markets and businesses (Anwar, 2015, 2016). Leading to new markets and further opportunities for growth, global strategies, and orientation are essential to long-term

Global value chains in the textile and apparel industry

I. Textile Mills *Fiber, Yarn & Thread Mills

*Yarn Spinning Mills *Yarn Thread Mills

*Fabric Mills

*Broad Woven Fabric *Narrow Fabric Mills *Nonwoven Fabric Mills *Knit Fabric Mills

*Textile & Fabric Finishing & Fabric Coating Mills

II. Textile Product Mills *Textile Furnishing Mills

*Carpet & Rug Mills *Curtain & Linen Mills

*Other Textile Product Mills

III. Apparel Manufacturers *Apparel Knitting Mills

*Hosiery & Sock Mills

*Cut & Sew Apparel Manufacturing

*Cut & Sew Apparel Contractors *Men’s and Boy’s Cut Sew Apparel Manufacturers *Women’s & Girls Cut & Sew Apparel Manufacturers *Other Cut & Sew Apparel Manufacturing

*Sheer Hosiery Mills *Other Apparel Knitting Mills

*Outwear Kn itting Mills *Underwear/Nightwear Knitting Mills

*Infants’ Cut & Sew Apparel Manufacturers *Fur & Leather Apparel Man...