Several years ago, Inditex managed to catch a mistake in time and has been reaping the succeeding benefits ever since. In class, we learned that a company’s stock value jumps up and down in accordance with the investors’ perception of the company’s strategy and how they think the company will perform in the future.
According to the press releases in the Inditex website, “Inditex opened 560 new stores, 441 [of which, were] outside Spain” in FY2007. In the final quarter or 2006, however, Inditex reported that it had increased “the staff… that operated Inditex’s distribution centre in Zaragoza” by 30%.
The company drastically increased the international demand for its clothes, but only expanded its distribution centres in Spain. This, in turn, cost Inditex a 54% decline in stock price between late 2007 and late 2008. This was, by far, the greatest slump that Inditex felt in its existence, but the company developed a much stronger strategy from it. Inditex formed a new way of producing clothing in which rather than spreading itself too thin, it reduced distribution costs by building its distribution centres close to its consumers. This is a strategy which they later shrewdly applied to Zara.
