I. Zara: Fast Fashion
1. What is the traditional business model in fashion clothing? What strengths and weaknesses does this model embody?
2. What is Zara business model? How do the distinctive features of Zara’s business model affect its operating economics? What does this business model accomplish in terms of positioning Zara compared to “traditional” fashion clothing companies?
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 Inditex’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.
Zara’s business model makes it more profitable then any other retailer. We already know from marketing that the retailer gets almost half 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 prices.
3. Graph the linkages among Zara’s choices about how to compete particularly ones connected to its quick-response capability, and the ways in which they create competitive advantage. What does the exercise suggest about such capabilities as bases for competitive advantage?
Zara does not compete on price. The usual Zara customer is not price sensitive. Zara rather competes on fashion and...