Zara Fast Fashion Case Analysis

1. Compare Compare Inditex's Inditex's financi financial al results results with the other other retailers retailers referred referred to in the the case. What do the comparisons indicate about Inditex's relative operating economies and its relative capital efficiency?

Gap

ROE

Proftai!it" E'ien'" (e)era*e +ixed ,et  /rno)er  /rno)er Ratio

0.0026 5 0.0005 8 1.816% 6$ 2.522% $#

H&M

Beneto n Inditex

0.2484 0.0568 0.2288 85 14 02 0.0#60 0.0$05 0.1046 41 4% 15 1.#555 0.$4%$ 1.24$6 66 08 01 1.%2%0 1.082# 1.$5%0 % 1$ 28

%.0%2# 5.#$06 1.6611 1.8560 4% 2# 24 82

 A du pont analysis indicates that among the ara!s "rofitability is the highest among amon g the entire brand due to the fact of brand mystificati mystification on because of the promise of fast fashion. #hough $%& depicts superior operational efficiency than ara it is pummelled by the fact that outsourced production increased its lead time and the time for  its product to maret. (wning )*+ of the manufacturing in house Inditex deploys higher fixed asset thus its ,(- is driven by the low inventory holding business model which cuts the current assets and improves the efficiency of  the firm . $ow specifica specifically lly do the distinctiv distinctive e features features of ara's business business model model affect affect its operating economies? $ow would you compare ara /in terms of advantages0disadvantages advantages0disa dvantages with an average retailer with similar pricing? Comparing ara to various different competitors in maret Inditex $%& 2ertical 2e rtical Integration causing short lead (utsourced "roduction causing longer times lead times $uge number of designers maing new 3ignificantly less number of designers products increasing speed to maret employed (nly one distribution Centre resulting in &ultiple distribution centre increasing the better inventory management and lower cost cost 2ery 2e ry fast expansion strategy 2ery 2e ry slow expansion strategy #hus ara gains competitive advantage over $%& by developing new designs faster and maing them reach to the maret faster. A lower cost of inventory management also is a huge advantage.

Inditex

4enetton

2ery fast expansion strategy through 2ery franchisee system5 company owned stores and 6oint venture

slow expansion strategy through licenses

ara competitive edge over 4enetton was the reach to the consumer maret Inditex

7ap

2ery fast expansion strategy

slow expansion strategy only 8 countries (utsourcing caused long lead times

2ertical integration resulting in short 2ertical lead times

Inditex!s competitive advantage lied in the freshness of design of the apparel due to fast design production and distribution system. It i s because of the in9house design and production facility it was able to offer the latest fashion at its store.  A change change in the design5 assortment assortment and the very display of of merchandise in a less than ) wees increased footfall in its i ts stores and compelled consumers to buy the product as it made them scarce by changing them. $ence the consumer had to buy and close the sale if she lied something. 4ecause fashion was positioned as fast and dynamic 5 it made people to wal into A,A store to chec out merchandise and significantly bring down the cost of advertising its merchandise.

:. $ow does ara's ara's choices choices about about how9to9comp how9to9compete5 ete5 particula particularly rly the ones related related to its ;uic9response capability5 capability5 affect its operating economies? $ow do these choices create competitive advantage? ara!s choice to reach maret at pace has a lot of emphasis of better inventory management. Its whole idea is to maret its inventories before it needs to be sold 5 ie rather than incurring inventory holding cost and locing up precious space in retail5 it is able to sell all its inventory and get critical feedbac of people!s taste to emulate in its next design. #his forges a strong brand recall for the people and increases foot fall in store which is critical for any bric mortar store. #he scarcity causes brand mystification and compels consumer to shell better price for its product fearing a loss of opportunity to buy if purchase decision is postponed. It reflects in superior profitability of the store. ). $ow sustainable do you thin ara's competitive advantage is? ara over a period of time has developed a strong brand name as the apparel brand in fashion. Its ability lies in the small inventory that it holds for each stoc which maes the brand very desirable and adding imagery value to the product itself. #he

supply chain is very robust and has a far reach in many marets than its competitors. #hus innovation in design and being first to maret has been its principle strength helping it go gain this position.