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 fronts: shorter lead times and fewer inventories. Because the production was done in house and just in time, Zara was able to shorten its lead to less than a month compared to the 4-6 months of other retailers. Zarawas able to catch a...
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