Zara Case Solutions Essay

1651 WordsDec 14, 20137 Pages
IE4906 ZARA CASE ASSIGMENT SOLUTIONS 1- The companies mentioned in the case study seem to have quite different business models in terms of their production and stores. Since Inditex is a vertically integrated company, it owned much of the production and most of its stores. On the contrary, H&M and The Gap companies outsourced almost all the production but owned most of the stores. Benetton had a completely different strategy that it invested a lot to its key production facilities but third party owned stores ran the business (except new company-owned mega stores in big cities). When comparing the financial results of the companies, it can be said that The Gap Company is the largest competitor among others for Inditex. The Gap has the highest net operating revenues which is around five times Inditex numbers. Therefore, I think The Gap is the most interesting international competitor to compare. Despite the fact that it has the highest revenue, The Gap had a massive decline in its stock prices in 2001 and as a result the company incurred a net loss of 9 million euros. On the other hand, Inditex has achieved net income of 340 million euros in 2001 with relatively such small revenue. This could be explained by the fact that complete outsourcing of the production caused a limited control over the production and long lead times made the company less responsive to market changes. However, since Inditex owned much of its production facilites, production took place in small batches and thus fast response to market changes gave Inditex a competitive advantage. Thus, it can be concluded from the financial results of two companies, Inditex is more profitable despite that The Gap has the largest operating revenues. 2- Zara has many distinctive features that affect its operating economics. Firstly, Zara was aware of that short lead time is quite important in fast

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