Inditex CSR strategy. Group 1

Inditex is the empire of Amancio Ortega which was born in 1975 in A Coruña (Spain) with its first shop. Currently, Inditex is one of the biggest retailers in the world with 5.402 stores located in more than 400 cities in Europe, America, Asia and Africa. The Inditex Group is made up of more than 100 companies operating in textile design, manufacturing and distribution which employs more than 100.000 employees worldwide.

Some keys of Inditex group are creativity, quality design, innovation and flexibility to adjust to changing market demands. For that, Inditex has diversified its fashion activities in eight store formats: Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Üterque. Nevertheless, Zara and Bershka are the stores with most value regarding sales, 65% y 10% respectively.

It is possible to find Inditex Group stores in countries so diverse such as Latvia, Kazakhstan, Oman or El Salvador. Increasing its presence around the world has been one of the most important point to overcome the economic crisis.

New stores in developing countries such as Russia (207), Turkey (114), South Arabia (100), China (143) and Brazil (30). Moreover, the entrance in new markets as India with 4 stores, compensates the decreasing of consumption in Europe for instance. In the last year Asian’s sales have passed from 15% to 17%.

International expansion and its business model management are Inditex’s main strategies, locating the company in a position of competitive advantage over other competitors.

That has allowed Inditex to make a profit of 2.900 millions € with one increasing of 12% during the first part of the year.

 

Inditex has the following main groups of interest: employees, customers, shareholders, business partners, suppliers, authorities and the society.

The company has a Code of Conduct in which the commitment with the stakeholders is developed in rules of behavior. These principles establish a framework for the activities of the company, its manufacturers and suppliers.

Interests:

Stakeholders What are their interest? What does Inditex need?
Employees Salary, participation,reputation, recognition,motivation Productivity, innovation,loyalty, motivation
Customers Satisfaction, social recognition, product availability Sales, loyalty, information
Shareholders Benefits, reputation Investment, loyalty,governance
Business Partners Profitable collaborations,benchmarking Profitable collaborations,benchmarking
Suppliers Sales, loyalty, information Satisfaction, social recognition, quality resources, delivery time
Authorities Law enforcement, creation of wealth and employment, tax receipts Regulation, subsidies,planning
Society Goods and services,employment, local impact,sustainability, transparency Recognition,recommendation, customers

Importance of the different satakeholders for the company:

Inditex’ main objective is, as any other company, to maximize its profits. To obtain it, its key business aspects are centered in the main stakeholders:

-Customer Orientation: The main driving force behind all Inditex activity is the customer. The customer’s demands are analyzed through daily sales analysis in stores and customer feedbacks among others and transformed in products that are sold in the shop the form of the latest trends in fashion twice a week and in the shop location and design aspects.

-Sourcing proximity and highly efficient logistics: Inditex’s suppliers and logistics centers are strategically placed around Spain (50% of its product is produced in Spain and Portugal, 15% in the rest of Europe and the rest in Asia and other parts of the world).

-Innovation, flexibility, based in a unique management model full of creativity and quality design oriented to the customers and it is really different to other business partners.

It is obvious that Inditex’s shareholders, employees and suppliers have a common interest in the success and growth of the business. However, business partners will maintain the same interest as long as it is profitable for their own business.

In the case of the local community and authorities, their interest will be aligned with Inditex’s prosperity if the company is involved in the community development. For customers the maintenance of their loyalty will depend on their satisfaction with the product.

On the other hand, Inditex’s profits will depend on the employees’ wages and the shareholders’ dividends, and if any of them is decreasing the profits can be lower.

Managers have an interest in organizational growth but it is possible that if the growth is not well managed the product quality and the recognition among the customers can be affected. Moreover this expansion of the activity can cause harms to the environment and society, which is forbidden by the authorities.

 

Inditex group claims to be a model for sustainable practices, covering strategically the three spheres of corporate social responsibility: social, economical, and environmental. Main principles of action are dialogue with stakeholders to meet their expectation and transparency toward society to be responsible of activities.

The approach has a inside-out focus: thanks to a conduct code the group is able to define basic values internally and transmit them externally to be applied in the whole value chain. As corporate responsibility doesn’t stop in the company’s wall, it expresses a strategic practice which allows to drive sustainability deeper into society while reducing the risk which the group cannot directly control: in a word, competitive advantage.

Unfortunately, social sustainability practices are not always implemented properly, as learned from the Brazilian child labor case: last year an investigation by Brazil’s Ministry of Labour has been reported involving the group’s retail fashion chain Zara after a contractor responsible for 90% of Zara’s Brazilian production was found to be using employees in indecent work conditions (12-hour shifts in dangerous and unhealthy sites, wages between US$156 and $290 a month, while the minimum in Brazil is $344. A statement from Inditex claimed that it could not be held responsible for “unauthorised outsourcing”, while offering to compensate the workers due to violation of Inditex code of conduct. Anyway, as the Brazilian authorities affirm, the company is responsible for its employees and it should know who is producing its clothes. In addition what about the partnership with the contractor?

Moreover, if we consider specifically the values promoted in the code of conduct as well as in the environmental plan, the group refers basically to law compliance, fair conduct, dialogue with interested parts, adoption of standards, emission reduction, and respect of human rights. That is very valuable in a corporation, but doesn’t mean that it represent truly strategic CSR: it comply satisfactorily with the responsibility that a company should guarantee as a further member of society; it comply with the fact that a company fully repay the license to operate and the possibility to pursue better its own interest with economic activities which respects what a society consider minimum requirements of modern civilization.

In addition, today’s complex society doesn’t allow doing differently: would be impossible to do bad business at the expense of others, as the mechanisms which bring failure are hardly controllable (for instance, think about the catastrophic risks in reputation likely to come from environmental NGO campaigns, as the one experienced by Nike in the nineties from Greenpeace).

Further responsibility concerns rise also economically speaking: analyzing deeply its annual report, it is possible to conclude that the company experience great liquidity to take care of current liabilities while no problem is rising regarding its capacity of solvency. When considering the ethical side of supplier negotiations situation is different: while the mentioned code is very positive to transmit values, practices of payment period doesn’t align to moral conduct: the collection period(cash received from clients) doesn’t surpass the 14 days; by contrast, Inditex doesn’t treat supplier the same way, as the ratio of supplier payment period rises up to 175 days.

  • Group opinion

To conclude, if the general commitment of the group toward sustainability can be considered more than satisfactory, strategic CSR is something different: it goes beyond compliance and strategies of risk reduction, it truly tries to understand basic need of communities where a company deploy activities in order to eliminate barriers from the satisfaction of them. If able to contribute to such a process, a company will find itself in a situation where possibility for success have been multiplied, as a healthier and more stable society will increase margins for profits. By adding value to a society, the value a company can receive from it, is bigger: competitive advantage is having more clients, more trustful relationships, more reliable supplier, more qualified personnel…and so on. More value created leads to more potential to take benefits from it.

Finally, elevated social fabric and environmental sustainability means also long-term continuance and prosperity.

 

 

 


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