Zara Case Study

2748 Words 11 Pages
Register to read the introduction… The time between receiving an order at the distribution center and the delivery of the goods to the store was, on average, 24 hours for European shops and a maximum of 48 hours for American and Asian stores. Moreover, Zara shipments were 98.9% accurate with less than 0.5% shrinkage, partly due to the practice of having all items prepriced and tagged. Also, most items were shipped hung on racks so that store managers could put them on display the moment they were delivered, without having to first iron them (Ferdows et al., …show more content…
It was reported that Zara bought 40% of its fabric from another Inditex firm Comditel (Inditex accounted for almost 90% of Comditel’s total sales); and manufactured complicated products in-house (tolerating lower capacity utilization if necessary) and outsourced the simple ones such as sweaters in classic colors (Ferdows et al., 2004). Inditex fully owns Comditel that manages dyeing, patterning and finishing of grey fabric of Inditex’s chains, and finished fabric to external as well as in house manufacturers. This gives Zara another competitive advantage. Zara also has external suppliers in various parts of the world. This gives Zara a competitive advantage on the cost of goods sold, as it can purchase from both Europe and Asia according to the prices. Buying more from China in future might reduce even more the costs of goods sold. Vertically Integrated System of Production: Zara’s business model of manufacturing to retailing makes it more profitable than any other retailer. We know that the retailer gets a good share from the price of the commodity sold. So by playing both the role of the manufacturer and the role of the retailer, Zara is definitely much more profitable than the average retailer with similar posted …show more content…
Why might Zara “fail”? How sustainable would you calibrate its competitive advantage as being relative to the kinds of advantages typically pursued by other apparel retailers? Ans. Although Zara was described by Louis Vuitton fashion director Daniel Piette as "possibly the most innovative and devastating retailer in the world" there might be some limitations which can be thought of in its long term strategy and which possibly be an obstacle in its fast paced growth. There are limitations in Zara’s Spain centric, just-in-time manufacturing model (80-90% production in Europe and 60-65% of that in Spain – Multimedia Case). By moving most of the firm’s deliveries through just two locations, both in Spain, the firm remains hostage to anything that could create a disruption in the region. Firms often hedge risks that could shut down operations - think weather, natural disaster, terrorism, labor strikes, or political unrest - by spreading facilities throughout the globe. If problems occur in northern Spain, Zara has no such

Related Documents