Zara Fashion :: essays research papers

ZARA Fashion 1)  Ã‚  Ã‚  Ã‚  Ã‚  With which of the international competitors listed in the case is it most interesting to compare Inditexà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial results? Why? What do comparisons indicate about Inditexà ¢Ã¢â€š ¬Ã¢â€ž ¢s relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them? The four companies shown above have very different business models. Inditex owned much of the production and most of its stores. Inditex is thus a vertically integrated company. This made Inditex gain 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. Benetton had a third business model. It invested heavily in the production, but licensees ran its stores. The most interesting company to compare Inditex is The Gap. Although The Gap has much higher revenues than Inditex (almost five times Inditex), it incurred a net loss, as opposed to Inditex, which achieved a 23%, return in investment. This is due to the extremely high costs of good sold for The Gap. This could be caused -at least partially- by the complete outsourcing of the production. They do not have enough control over the production costs. Although The Gap has larger market share than Inditex and has equity almost double that of Inditex, Inditex is much more profitable. 2)  Ã‚  Ã‚  Ã‚  Ã‚   2) How specifically do the distinctive features of Zaraà ¢Ã¢â€š ¬Ã¢â€ž ¢s business model affect its operating economics? Specifically, compare Zara with an average retailer with similar posted prices. In convenient to assume that on average, retail selling prices are about twice as high as manufacturersà ¢Ã¢â€š ¬Ã¢â€ž ¢ selling prices. Zara sources fabric, other inputs, and finished products from external suppliers. It has purchasing offices in Barcelona and Hong Kong. This gives Zara a competitive advantage towards the costs of goods sold, as it can purchase from both Europe and Asia according to prices. Buying more from China in the future might reduce even more the costs of goods sold. Inditex fully owns Comditel that managed dyeing, patterning and finishing of grey fabric of Inditexà ¢Ã¢â€š ¬Ã¢â€ž ¢s chains, and supplied finished fabric to external as well as in-house manufacturers. This gave Zara further competitive advantage, in terms of both cost and control. Inditex also fully owned 20 factories for internal manufacture. These factories apply just-in-time production (JIT). Again, this gave Zara further competitive advantage, in terms of both cost and control.