...Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies. Shelly can supply 2000 pies each month for $4.5 each, netting $1.5 profit per pie with three part-time employees, however the demand is higher than what she can do, so eventually Shelly expanded her operations, borrowing money and increasing staff to four full-time employees. The production time increase to 8000 pies per month with profit soared to $12,000 per month. As per the chart showed within only six months the demands increased 4 times, and it promises to increase more in the next quarter. It brings challenges to Shelly to consider on these following three options: 1- Maintain current production levels and raise prices; 2- Expand the facility and staff while maintaining the current price; 3- Contract the production of the pies to a national restaurant chain, giving Shelly a percentage of profits with minimal involvement. Each options have particular challenge that She should consider seriously, the first option seam the best choice because it will help her to increase profit and do not cost more expense on employees or facility, however it will minimize her market segment, when the price raising only the high class can buy pie and other middle or lower class cannot then it will leading to supply over than the demand. Or another case when she increase the price then she cannot competitive with others. On the second option, It’s seem reasonable one because when...
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...1. How specifically do the distinctive features of Zara’s business model affect its operating economics? Specifically compare Zara with an average retailer with similar posted prices. In order to express all advantages/disadvantages on a common basis, you may find it convenient to assume that on average retail selling prices are about twice as high as manufactures selling price The main concepts that can be taken away from Zara’s business model, which directly affect its operating economics, is low cost, high control, and quick turnaround. Zara is just one of six retail stores operated by, Inditex, the parent company. Inditex owns Comditel, a subsidiary, which manages the dyeing, patterning, and finishing of gray fabric and supplied finished fabric to external as well as in-house manufacturers. By owning this company, Zara is able to maintain low cost production while being able to finish fabric in a week. Zara has the ability to obtain its main raw materials as well as the final product from external suppliers. With company having purchasing offices in Hong Kong and Barcelona, it gives them a considerable advantage with regards to their cost of goods sold as they can choose where to purchase based on the given prices. Considering how low the cost of labor is becoming in China, Zara may want to focus on buying more from China further reducing their cost of goods sold. Also, the current structure of the distribution warehouse allows for just-in-time production...
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...Case Questions: 1. How specifically do the distinctive features of Zara’s business model affect its operating economics? The main concepts that can be taken away from Zara’s business model, which directly affect its operating economics, is low cost, high control, and quick turnaround. Zara is just one of six retail stores operated by, Inditex, the parent company. Inditex owns Comditel, a subsidiary, which manages the dyeing, patterning, and finishing of gray fabric and supplied finished fabric to external as well as in-house manufacturers. By owning this company, Zara is able to maintain low cost production while being able to finish fabric in a week. Zara has the ability to obtain its main raw materials as well as the final product from external suppliers. With company having purchasing offices in Hong Kong and Barcelona, it gives them a considerable advantage with regards to their cost of goods sold as they can choose where to purchase based on the given prices. Considering how low the cost of labor is becoming in China, Zara may want to focus on buying more from China further reducing their cost of goods sold. Also, the current structure of the distribution warehouse allows for just-in-time production as they are closely connected with the retail stores. Using the sales information recorded by the stores, Zara is better able to recognize the customer’s needs and therefore can react quicker to their demands. With frequent shipments to the stores to restock...
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...................................................................................... 2 Issues ............................................................................................................................................... 2 3.1. 3.2. 3.3. 3.4. Cultural distance...................................................................................................................... 2 Administrative distance ........................................................................................................... 3 Geographic distance ................................................................................................................ 3 Economic distance ................................................................................................................... 3 4. 5. Business Model fit...
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...1- With which of the international competitors listed in the case is it most interesting to compare Inditex's financial results? Why? What do comparisons indicate about Inditex's relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them. Background: Inditex is an international fashion retailer that designed, manufactured and sold apparel, footwear, and accessories for women, men, and children through Zara and other five chains around the world. The six retailing chains were organized as separate business units within an overall structure that also included six business support areas and nine corporate departments or areas of responsibility. They are separate in the sense that each chain is responsible for its own strategy, product design, sourcing, and manufacturing, distribution, and image, personal and financial results. Inditex was based in the northwest of Spain; it also operated about 20 manufacturing and distribution facilities in the region It is most interesting to compare Inditex with its largest competitor-Gap- as Gap have the highest market capitalization of all Inditex competitors, the highest operating revenues and largest no. of store locations worldwide. So when comparing the financial results of Inditex with Gap we find out that: Gap Vs Zara: Gap had achieved stellar growth and profitability in the last ten years; it was...
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...1- With which of the international competitors listed in the case is it most interesting to compare Inditex's financial results? Why? What do comparisons indicate about Inditex's relative operating economics? Its relative capital ef ficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them. Background: Inditex is an international fashion retailer that designed, manufactured and sold apparel, footwear, and accessories for women, men, and children through Zara and other five chains around the world. The six retailing chains were organized as separate business units within an overall structure that also included six business support areas and nine cor porate departments or areas of responsibility. They are separate in the sense that each chain is responsible for its own strategy, product design, sourcing, and manufacturing, distribution, and image, personal and financial results. Inditex was based in th e northwest of Spain; it also operated about 20 manufacturing and distribution facilities in the region It is most interesting to compare Inditex with its largest competitor-Gap- as Gap have the highest market capitalization of all Inditex competitors, the highest operating revenues and largest no. of store locations worldwide. So when comparing the financial results of Inditex with Gap we find out that: Gap Vs Zara: Gap had achieved stellar growth and profitability in the last ten years; it...
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...1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them. It is most interesting to compare Inditex with its largest competitor Gap. As Gap have the highest market capitalization of all Inditex competitors, the highest operating revenues and largest no.1 of store locations worldwide. So when comparing the financial results of Inditex with Gap I find out that: Gap Vs Zara: Gap had achieved stellar growth and profitability in the last ten years; it was one of the largest specialist apparel retailers in the world ahead of Inditex. It owned most of their stores but outsourced all production in contrast with Inditex. Although Gap and Zara follow the same business model, Zara's business model improved overtime, through the incorporation of technology as they have developed about 95% of the software it uses, Zara fast response to market changes gave them a competitive advantage in creating fashion and satisfying customers plus the fact that the company is getting larger and more global than it has been. For instance, Zara did not face the two basic barriers for going globally which are: Costs: that Zara did not incur when entering a new market, as the company does not...
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...ZARA: Fashion Follower, Industry Leader Business of Fashion Case Study Competition Amanda Craig, Charlese Jones and Martha Nieto Philadelphia University April 2, 2004 ZARA: Fashion Follower, Industry Leader Table of Contents Introduction………………………………………………………………….1 Financial Analysis and Comparison…………………………………………………….…………....1 Strategic Advantages………………………………………………………………...2-3 Strategic Drawbacks…………………………………………………………….….. 3-4 Possibilities for Failure…………………………………………………………………....…..4 Recommendations/Conclusion………………………………………………5 Calculations and Financial Statements……………………………………….……………….Appendix A Articles: The Recent Status of ZARA.……………………………………….…………………...Appendix B Works Cited Works Referenced The global apparel market is a consumer-driven industry. Also, globalization and new technologies have allowed consumers to have more access to fashion. As a result, consumers are changing, competition is fierce, and companies are evolving to meet these demands. Zara, a Spanish-based chain owned by Inditex, is a retailer who has taken a new approach in the industry. With their unique strategy, Zara has the competitive advantage to be sustainable. In order to maintain that advantage and growth they must confront certain challenges that face traditional retailers in the apparel industry. Financial Analysis and Comparison To prove Zara has the prospect of sustainable growth in the international apparel market, it is important to understand and compare the financial differences...
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...1. Inditex financial results compare to competitors. The four companies shown above have very different business models. Inditex owned much of the production and most of its stores. Inditex is thus a vertically integrated company. This made Inditex gain a competitive advantage, which is quick response to the market requirements. On the other hand, The Gap and H&M have a different business model. They owned most of the stores, but outsourced all the production. Benetton had a third business model. It invested heavily in the production, but licensees ran its stores. The most interesting company to compare Inditex is The Gap. Although The Gap has much higher revenues than Inditex (almost five times Inditex), it incurred a net loss, as opposed to Inditex, which achieved a 23%, return in investment. This is due to the extremely high costs of good sold for The Gap. This could be caused -at least partially- by the complete outsourcing of the production. They do not have enough control over the production costs. Although The Gap has larger market share than Inditex and has equity almost double that of Inditex, Inditex is much more profitable. 2. How specifically do the distinctive features of Zara business model affect its operating economics? Specifically, compare Zara with an average retailer with similar posted prices. 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...
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...ZARA - zara owned by inditex; posted net income eur340m on revs eur3.250m in 2001 - inditex ipo may 2001; oversubscribed; stock increased by over 50% - 76% of equity value implied stock price was based on future growth expectations (higher than an estimated 69% for WMT) - global apparel chain; buyer driven global chain - branded marketers and manufacturers served as brokers in linking overseas factories with markets - production; very fragmented (individual apparel firms on avg employed a few dozen ppl) - about 30% of apparel production was exported (developing countries had very large share, nearly 50% of all exports)...cheaper labor + inputs - proximity also important bc it reduced shipping costs - china was export powerhouse but greater regionalization in 90s led turkey, north africa, eastern euro countries to be major suppliers to US - MFA (multi fiber arrangement) regulated apparel and textile industry (restricted imports of US, canada, west europe since 1974); agreement to phase out quota system by 2005 and further reduce tariffs (avg 7-9% in major markets) - cross border intermediation; trading co's played primary role in orchestrating physical flows of apparel btwn exporters and importers - retail; large retail played leading role in promoting QR (quick response); targeted at improving coordination between retailing and manufacturing (increase speed and flexibility of responses to market shifts) - QR led to significant compression of cycle times enabled by...
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...Extreme Business-Models in the Clothing Industry - A Case Study of H&M and ZARA Kristianstad University The Department of Business Studies FE6130 Bachelor Dissertation International Business Program December 2007 Tutors: Håkan Phil Timurs Umans Authours: Susanne Göransson Angelica Jönsson Michaela Persson Abstract In the clothing industry firms compete successfully by applying different businessmodels. H&M and ZARA are two extremes in the clothing industry. H&M’s business-model mainly focuses on outsourcing and ZARA’s business-model mainly focuses on in-house production. The problem is that the existing theories alone cannot explain why two firms competing in the same environment under the same conditions choose different business-models. The purpose of this dissertation is to further expand the idea of why the two clothing firms H&M and ZARA chose different business-models. Our set of Complementarities for H&M and ZARA are based on the information derived from studying theories, the EU clothing industry and the two firms. Finally, Complementarities were analysed by conducting interviews. Our Complementarities partly explain why H&M and ZARA chose different business-models. However, our analysis is applicable for H&M and ZARA since the Complementarities are based on characteristics found in these two firms. The value of Complementarities can be used by other firms if they find their specific characteristics. Keywords: business-models, internalization, governance...
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...THE CASE OF ZARA: PLANNING AND STRATEGIC CONTROL Alexandra Iacob University of Huelva HUELVA, SPAIN 2015 Abstract Zara is a retail company belonging to the Spanish company Inditex Group. Currently, Zara has 1,808 stores in 86 countries. This paper will analyse Zara’s business model, based on innovation and flexibility, as well as logistics chain and the various tools used to recognize the continuous changes in fashion trends and turn them into a product marketable within a few weeks. Compared with the competition, Zara has three distinctions: vertical integration to achieve a faster turnaround time; rapid expansion; and use of the store as the main tool for promotion, with low spend on advertising. This company offered a product design and quality, low price. In addition, resources and competences have allowed develop a different business model, where all processes from product design, to manufacturing, distribution and sales are carried out within the same organization. Key words: Strategic Management, Strategy, External Environment, Michael Porter’s Generic Strategies, Vertical Integration, Balanced Scorecard, Globalization Culture Introduction Company Background Four letters that make up a fashion brand known around the world. Zara is a Spanish brand of clothing and accessories and the foundation of Inditex’s success as well as their first retail format. Inditex S.A. is a Spanish multinational group of textile manufacturing and distribution established in 1975 in...
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...INTERNATIONALISATION OF THE SPANISH FASHION BRAND ZARA Carmen Lopez Ying Fan Brunel Business School Journal of Fashion Marketing and Management (2009), 13:2, 279-296 INTRODUCTION Zara is one of the world’s most successful fashion retailers operating in 59 countries. However, there is little research about the firm in English as the majority of publications have been written in Spanish. This paper seeks to address this gap in the literature by examining the internationalisation process of Zara. This study adopts an in-depth case approach based on extensive secondary research. Literature published in both English and Spanish has been reviewed, including company documents such as annual reports. The paper starts with a brief overview of the global textile and clothing industry, followed by the case study of Zara. The main part of the case examines the key aspects in the internationalisation of Zara namely: motives for internationalisation, market selection, entry strategies, and international marketing strategies. In the final section, comparisons are made between Zara and two of its main competitors, H&M and Gap. The global textile and clothing industry The removal of all import quotas in the textile and clothing industry from January 2005, involving the unrestricted access of all members of the World Trade Organization (WTO) to the European, American and Canadian markets is considered a key driving force in the development of the clothing sector (Keenan, et al., 2004). This...
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...Fashion Industry Analysis From the Perspective of Business Model Dynamics Author: Lisa Gockeln University of Twente P.O. Box 217, 7500AE Enschede The Netherlands ABSTRACT The fashion industry is a dynamic and volatile place, continuously exposed to macro-environmental factors that trigger fashion business models to change. The fast fashion model is currently at the forefront of the apparel market casting questions on whether its underlying philosophy is about to change as well. Therefore, the purpose of this study is to identify external drivers that might lead to such dynamic changes in the fast fashion model. Moreover, it will be investigated whether these may allude to a possible convergence to the newly emerged slow fashion model which is currently trying to penetrate the fashion market. The international retailer Zara has served as fast fashion representative for this analysis and has been examined for business model adjustments, which might have been triggered by macroenvironmental factors. It was found that especially social, environmental and technological factors have influenced developments in the fast fashion model and that it has indeed adopted slow fashion principles in some of its building blocks to respond to such emerging trends. The future of the fashion industry appears to be tailored by such externalities, continuously reshaping the fast fashion model to eventually arrive at a version that brings a long-lasting competitive edge. However...
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...INTERNATIONALISATION OF THE SPANISH FASHION BRAND ZARA Carmen Lopez Ying Fan Brunel Business School Journal of Fashion Marketing and Management (2009), 13:2, 279-296 INTRODUCTION Zara is one of the world’s most successful fashion retailers operating in 59 countries. However, there is little research about the firm in English as the majority of publications have been written in Spanish. This paper seeks to address this gap in the literature by examining the internationalisation process of Zara. This study adopts an in-depth case approach based on extensive secondary research. Literature published in both English and Spanish has been reviewed, including company documents such as annual reports. The paper starts with a brief overview of the global textile and clothing industry, followed by the case study of Zara. The main part of the case examines the key aspects in the internationalisation of Zara namely: motives for internationalisation, market selection, entry strategies, and international marketing strategies. In the final section, comparisons are made between Zara and two of its main competitors, H&M and Gap. The global textile and clothing industry The removal of all import quotas in the textile and clothing industry from January 2005, involving the unrestricted access of all members of the World Trade Organization (WTO) to the European, American and Canadian markets is considered a key driving force in the development of the clothing sector (Keenan, et al., 2004). This...
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