NU 12 - 2 - by Marta Fretheim Philippine version of Zara

Dear Professor,

Here is my first NU 12 #2:

NU 12 – 2

New business idea: Tara clothing and accessories

I have been visiting some of the many malls here in the Philippines I noticed there are some international fashion company`s. So I had a look at Zara and it didn't take long before realizing that it was actually more expensive than in Europe. I started asking myself why is this? I would have thought the other way around that production costs are lower here and therefor it would be cheaper. Since this is not the case, I see two possible answers to my question: 1: the branding is different, could be that the brand image is sold as more expensive and exclusive being a European company. 2: Zara produce their apparel in Europe and there are more costs related to selling in the Philippines, such costs could be import taxes, shipment etc.

As I googled the Internet I found out that Zara produces most of their products in Europe. A Philippine version of Zara would entail lower production costs, lower costs related to salaries, lower costs related to garments and also there would be no shipping costs or import/export taxes (since Tara is produced and sold in The Philippines). That's why I think there is a potential of a cheaper version of Zara here in the Philippines.

One of the success factors of Zara is their delivery time of new products, innovation and the fact that they control most of their value chain. It is said that it only takes Zara 2 weeks to develop a new product and get it in the stores. For Tara to become successful I think this is would also have to be one of their goals. Tara also needs to stay tuned in on the fashion development and have nearby clothing factories, like Zara where most of their factories are stationed in Spain and Portugal. Tara would be a fashion imitator, they would not try to predict the next season's fashion but focus on understanding their customer's needs and preferences and then delivering them.  I think the costs could be lowered significantly on the products and also the product margins. Being cheaper Tara would also target a bigger market segment while staying up to date on fashion and quality.

This business idea would imply a lot of investments. The clothing would in the beginning be produced at an external factory, as this would not be as resource-intensive as starting up an own factory. To pursue this Idea I would start with a convincing and appealing business plan. I would then start looking for investors, fashion executives, cheap factories, a marketing manager, garment suppliers and a good location to open up the first store.  To get publicity in the start I would try to get on national TV, promoting myself as an exotic innovator from the west trying to support the economy and creating thousands of jobs here in the Philippines. This will also help on getting investors. 3.5

By Marta Fretheim