The Spanish retail chain Zara has unique supply chain management practices that enable it to gain a competitive advantage over other fashion retailers in the industry. Zara’s rapid response time enables the firm to quickly respond to changing fashions while deliberately under producing products. This strategy, which is supported by competencies in logistic management, design and information systems, allows the company to maintain less inventory and higher profit margins and is a key factor to Zara’s success. The firm should continue to add value by seeking new opportunities to expand in the retail market and maintain their sustainable growth.
Being aware of a company’s financial health and profitability of its competitors is highly essential for everyone interested in engaging in business with Inditex. In this part of the paper, through analysis of 4 key ratios and return on invested capital, we are going to discover some of the company’s drivers of sustained competitive advantage. The 4 key ratios will focus mainly on company’s liquidity, activity, solvency and profitability, while ROIC will show how well the company manages the capital invested in operations of the business.
In order to measure ability of Inditex to meet its short term obligations and to assess liquidity, it is important to calculate current ratio. As shown in exhibits section below, in 2001, Inditedx had 1.02 million in current assets, while Gap and H&M had 1.48 and 3.4 million Euros in current assets for every Euro in short-term debt. This indicates that Inditex’s main competitors demonstrate greater ability to meet current payments of debt; therefore liquidity is not one of the company’s success drivers.
When it comes to comparing company’s sales to various assets categories it is significant to take a look at the total assets turnover. This ratio indicates how efficiently assets are being used to support sale. From 1999-2001, this ratio
References: AmosWEB. (2001). AmosWEB is Economics: Encyclonomic WEB*pedia. Retrieved March 2011, from AmosWEB: http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic+competition Ghemawat, P., & Nueno, J. L. (2003). ZARA: Fast Fashion. Harvard Business School .