Zara Case Analysis

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Zara is a retailing chain of Inditexthat specializes in high-fashion at reasonable prices. In the last 12 months, Inditex’s stock price has increased by 50% despite bearish market conditions. The 50% increase is due to the investor expectations of Inditex’s growth. Inditex’s growth can be contributed to the decisions it has made in creating a vertically integrated centralized process. The centralization of its vertically integrated operations in Europe provided it with its competitive advantage; however, I believe it will also make it fail if it decides to grow substantially into other markets. Financial Analysis compare to competitors In comparing Inditex financial performance against its competitors, it is apparent that Inditex is performing extremely well compared to its competitors in terms of productivity of its workforce, net revenues and cost of goods sold. Their return on investment is also significantly higher than others. Success Factors The vertical integration of Zara was successful because of the following key tactical decisions: Ownership and control of production: Unlike many of Zara’s competitors, Zara decided not to outsource most of its production. Instead the majority of the production was performed in Europe. By having operations in close- proximity to its headquarters allowed for better and faster communication between functional areas for faster decision making. It also provided an added sense of quality to the product as the tags would be labeled with“made in Europe” rather than “made in China”. More importantly, Zara owned many of the fabric dying, processing and cutting equipment that provided Zara added control andflexibility to adopt new trends on demand. The added flexibility helped Zaraon two ...

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...o the creative nature and providing designs that meet each markets needs. Lastly I believe the teams will be able to leverage many of the fashion designs across countries as fashion is starting to converge with globalization to a certain degree. In conclusion, Zara has done an excellent job of creating a highly vertically integrated businessin which they are able to control the quality of the product, and be able adapt quickly to market trends and customer wants through highly affective operations. Zara should continue to expand its operations in Europe as they understand the market the best and can leverage their existing architecture. Entering the Asian and U.S. markets will be a more difficult and cause severe stress on their current centralized vertically integrated system. They will likely have to decentralize their production operations to adapt to the markets.

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