Essay on Zara Fast Fashion Case Study Solution

Decent Essays
1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency?
Even though H&M follows a strategy which differs significantly from Inditex’s approach it is the closest competitor from the financial point of view. H&M differs from Zara because it outsources all of the production, it is more price oriented and spends more money on advertising. But both companies are based in Europe, are fashion forward at lower price retailers, and have a strong international expansion strategy. Exhibit 6 indicates that the financial results of Inditex and H&M seem to
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One Year Change in Market Value
Inditex: 47% H&M: 8%

Another factor which is interesting to examine is the One Year Change in Market Value. Inditex is on top position compared to all competitors with an impressive growth rate of 47%. H&M has the closest result and is the only company besides Inditex whose market value has been growing in 2001.
Inditex’s efficiency is the result of a more profitable investment strategy. By owning all the stores and manufacturing sites it is able to achieve control over all production processes and costs. The high number of stores may be also traced back to the increasing value of the property because Zara only buys stores in strategic areas (shopping malls, shopping arcades, pedestrian districts etc.) where competition boosts rents. Therefore total assets of Zara increase as well.
To sum up from the given information Inditex is more efficient in managing its finances. Its strategy of investing into high quality equipment such as a just-in-time manufacturing system, a huge warehouse close to its headquarter and an highly advanced communication system has lead to a Return on Investment rate of almost
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