MGT510 Zara Critical Thinking Scope of The Modern Company

MGT 510 SEU ?Zara Critical Thinking Scope of The Modern Company Paper

Critical Thinking: Scope of the Modern Company (105 points)

In this module, we looked at the boundaries of companies on the expanding size and scope of companies, in addition to vertical and multinational expansion.

For this week’s assignment, you will review Zara: Super-Fast Fashion, Case 15 (pages from 546 to 553 ). Remember: A case study is a puzzle to be solved, so before reading and answering the specific case study questions, develop your proposed solution by following these five steps:

*Read the case study to identify the key issues and underlying issues. These issues are the principles and concepts of the course area which apply to the situation described in the case study.

*Record the facts from the case study which are relevant to the principles and concepts of the course area issues. The case may have extraneous information not relevant to the current course area. Your ability to differentiate between relevant and irrelevant information is an important aspect of case analysis, as it will inform the focus of your answers.

*Describe in some detail the actions that would address or correct the situation.

*Consider how you would support your solution with examples from experience or current real-life examples or cases from textbooks.

*Complete this initial analysis and then read the discussion questions. Typically, you will already have the answers to the questions but with a broader consideration. At this point, you can add the details and/or analytical tools required to solve the case.

Case Study Questions:

1- What are the main activities in the value chain for fashion clothing (from raw material to retailing)?

2- Which activities are undertaken by the companies that own the leading brands of fashion clothing?

3- Why do mass-market fashion companies mostly outsource manufacturing?

4- What is Zara’s strategy? What role does vertical integration play in this strategy?

5- How sustainable is Zara’s competitive advantage?

6- What changes in Zara’s strategy or its management systems, if any, would you recommend?

Your well-written paper should meet the following requirements:

Be 5 to 6 pages in length, which does not include the required title and reference pages, which are never a part of the content minimum requirements. Use Saudi Electronic University academic writing standards and APA style guidelines. Support your submission with course material concepts, principles, and theories from the textbook and at least two scholarly, peer-reviewed journal articles unless the assignment calls for more.

*Important note: please link your writing with the course material concepts, principles, and theories (such as the corporate strategy concept, the scope of the firm, and vertical integration decisions) that found in chapter 10 (page 251) in the textbook.

Case 15 Zara: Super-Fast Fashion, Case 15

With sales of €25.3 billion in the 12 months to January 31, 2018, Inditex, based in Arteixo, Galicia, in the north-west corner of Spain, was the world’s biggest apparel supplier. Its founder and controlling shareholder, Amancio Ortego, was estimated by Forbes to be the world’s sixth richest person (after Jeff Bezos, Bill Gates, Warren Buffett, Bernard Arnault, and Mark Zuckerberg). Inditex is famous mainly for its biggest business, Zara, which accounted for 66% of the Group’s sales in 2017. In January 2018, there were 2251 Zara stores—the great majority company-owned and operated—in 96 different countries. The Group’s other businesses (ranked by sales) were Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Zara Home, and Oysho. Except for Zara Home (furnishings and tableware), all the businesses are engaged in the design, manufacture, and retailing of fashion clothing (together with footwear and accessories), although each operates independently with a distinctive brand personality and a different target customer segment. As well as being the core business of Inditex Group, Zara is also the primary exponent of Amancio Ortega’s unique approach to the fashion clothing business. Zara’s strategy defies most of the fashion world’s conventional wisdom: it spends almost nothing on advertising, employs no super-star designers, seeks no celebrity endorsements, and undertakes most of its manufacture in Spain rather than offshoring it to low-wage locations. Instead, Zara has created a unique business system that is quick to recognize and exploit emerging fashion trends through a vertically-integrated supply chain that supports unparalleled speed and market responsiveness. A Brief History1 Amancio Ortego was born in Galicia in 1936. He left school at the age of 11 and by the age of 13 was working for a local shirt-maker. In his early 20s, he began producing copies of popular designer garments using inexpensive fabrics; at age 29, he opened his first Zara store selling modestly-priced, fashionable women’s clothing. Here, Ortego introduced the novel idea of a continuously changing collection of garments, in contrast to the two-season per year collections that were traditional in the clothing business. As Ortego opened additional stores, he developed his “instant fashion” model involving designers replicating emerging trends, then using close integration of factories, distribution centers, and retail stores to compress the design-to-store cycle. The first Zara store outside Spain was in Portugal in 1988, and in 1989, Zara entered the United States. By 2000, Zara had created a business system unlike that of any other fashion brand. Zara’s designers, based at Inditex’s Arteixo headquarters, sourced design ideas from fashion shows, celebrities, streetwear, and—most of all—feedback from the stores. Fabrics for Inditex brands were purchased by its subsidiary, Comditel, which also undertook most dying and printing of the fabric Initially, most of Zara’s garments were produced in-house. As its product range and volume grew, the proportion of Zara’s sales produced by third-party manufacturers increased to about half. Zara’s distribution center, at Arteixo, served Zara stores throughout the world with twice-weekly deliveries, each taking a maximum of three days. Garments were shipped with price-tags attached, on rails, ready for immediate display within the stores. Each store’s shipment would comprise only 3–5 units of each size and each design. Zara’s stores featured a uniform design and product presentation. Store managers oversaw ordering and providing weekly feedback. Prices were determined centrally and varied between countries according to transport costs and what the market would bear. Compared to Spain, Zara’s prices were 70% higher in North America and 100% higher in Japan. Zara’s international expansion involved setting up new stores in prime locations. Zara’s initial entry was often through joint venture—in Italy and Japan, joint ventures helped gain access to prime real estate; in Germany and India, joint ventures gave access to local market knowledge. However, joint venture partners were usually bought out at a later stage—according to Inditex’s head of corporate development: “We don’t mind investing in joint ventures to learn but prefer to go alone.”2 The time from a product’s design to its arrival in a retail store could be as little as two weeks. Figure 1 shows Inditex and Zara’s growth from 1996 to 2017.