Essay on Zara Case

1442 Words Jan 26th, 2012 6 Pages
Case Questions:

1. How specifically do the distinctive features of Zara’s business model affect its operating economics?

The main concepts that can be taken away from Zara’s business model, which directly affect its operating economics, is low cost, high control, and quick turnaround. Zara is just one of six retail stores operated by, Inditex, the parent company. Inditex owns Comditel, a subsidiary, which manages the dyeing, patterning, and finishing of gray fabric and supplied finished fabric to external as well as in-house manufacturers. By owning this company, Zara is able to maintain low cost production while being able to finish fabric in a week. Zara has the ability to obtain its main raw materials as well as the final
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Zara is known for its ability to respond quickly to the demands of the market. The market segment that Zara is target is not very price sensitive, and therefore it does not compete on price but rather on fashion trends. The company has positioned itself so that it has the ability to design and have a finished good within four to five weeks for an entirely new design and two weeks for restocking/modifying and existing products. To put this concept into perspective, Zara’s competitors take about six months to do the same task. Given Zara’s quick response time, they have the luxury of following fashion rather than gambling on it. The short cycle time reduced working capital intensity and facilitated continuous manufacture of new merchandise, allow for Zara to commit to the bulk of its product line for a season much later than its key competitors. 3. How well does Zara’s advantage travel globally?

The current structure of Zara will prove to be advantageous as it continues to expand globally. With the current marketing setup, Zara has always promoted its products by way of their retail space. There is almost never a large marketing campaign for the new product line, which unlike their competitors allows Zara to decrease their costs. For every new store that is opened by Zara there is a centralized distribution center that is responsible for supplying the

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