Zara Case Study

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Q1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Ans. The four companies shown given in the case have very different business models. Inditex owned much of the production and most of its stores. Inditex is thus a vertically integrated company. This gave Inditex a competitive advantage, which is quick response to the market requirements. On the other hand, The Gap and H&M have a different business model. They owned most of the stores, but outsourced all the production. And Benetton had a third business model. It invested heavily in the production, but licensees ran its stores.…show more content…
This gives Zara a competitive advantage of efficient and speedy logistics and distribution system. The employees play a crucial role in creating, extending and modifying the products to become a fast fashion follower and create a competitive advantage. Thus, speed to market is the benchmark by which Zara operates and the whole company is geared towards getting affordable designer-look fashions to its stores with the minimum risk. Shorter lead times: Shorter lead times led to more accurate short term forecasts about what and how much would sell. As a rule of thumb, marketers believe that by reducing the lead time by half, the forecasting error is reduced by roughly the same amount (Stalk and Hout, 1990 cited in Lo et al., 2004). Short lead times not only dealt with inventory obsolescence, thereby lowering sale mark-downs, but also made possible the postponement of fabric dying, ultimately contributing to larger profit margins. Shorter lead times also enabled Zara to deliver new items to stores twice a week, a rate of delivery which might have been ‘common in the grocery business, but . . . was unheard of’ in fashion retailing (New Yorker, 2000, 74; Ferdows et al.,2004). Inditexalso fully owns 20 factories for internal manufacture. These factories apply just-in-time production (JIT). Again, this gives Zara further competitive advantage, in terms of both cost and control.

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