Cutting cost because they do not outsource any channel. Tbey tnay include vertical acquisitions, or intemal devdoient of supplying or distributing units, or otber means of extending firms control over outsiders. Swot analysis of zara zara swot analysis or internal. Zara is known for its fresh designs and for keeping the designs on rotation so that the customers always get new designs whenever they walk into the showroom. This strategy has led zara to create a climate of scarcity and opportunity as well as a fastfashion system. Zara s manufacturing strategy also created significant value and was. Aside from this, however, the company also has extensive control over raw material sourcing, design or product development, marketing and sales, and shipment or distribution. Zara vertical integrated supply chain case study solution. Vertical intergration zara essay sample sample essays.
Horizontal integration in the development strategy of mining companies. Strategic concentration is a key issue for manufacturing companies when designing a supply chain. How zara manage the strategy of distribution and vertical integration. Zaras strategic capabilities and value chain analysis. Here is the swot analysis of zara or its internal analysis. Vertical integration reduces a companys flexibility by forcing them to follow trends in the segments they integrated. Vertical integration potentially has the following disadvantages. As part of its vertical integration, zara maintains a very high control of its supply networks as a.
Vertical integration extends a firms competitive and operating scope within the same industry. With about 5 to 6 colours in most garments of five to seven sizes, zaras system has to deal with something in the realm of 300,000 new stockkeeping units skus, on average, every year. Zara vertical integration free download as powerpoint presentation. Unlike other fashion brands, which outsource their production, zara has successfully developed a vertical integration model including design, justintime production, marketing, and sales the economist, 2001. Cutting time, more faster, effective, and efficient. Theory what determines if particular activity have to make with a firm and which throught the market ronald cases answer was relative cost. Vertical integration is also a notable strategy of zara. Finally, we show that vertical integration either forward or backward results in a higher quality product sold at a lower retail price.
Vertical integration strategic management supply chain. This vertical integration allows zara to retain control over areas like dyeing and processing and have fabricprocessing capacity available ondemand to provide the correct fabrics for new styles according to customer preferences. Business strategy of fast fashion a case study of zara. Zara s vertical integration of design, justintime manufacturing system, delivery and sales. Our findings suggest that vertical integration has a negative impact on productivity, in contrast to recent studies based on u. Horizontal integration strategy stems from a desire to increase market share by an. What are the advantages and disadvantages of vertical. A vertically integrated firm is one that performs value chain activities along more than one stage. Zaras vertical integration of design, justintime manufacturing system, delivery and sales. Vertical intergration zara essay example for free newyorkessays database with more than 65000 college essays for studying. What is vertical integration and what are the benefits. Further reproduction prohibited without permission. Aside from this, however, the company also has extensive control over raw material sourcing, design or product development, marketing and sales, and. Numerous explanations have been created for vertical integration, and transaction cost economics tce provides a theoretical basis to.
Vertical integration, he argues, enables these organizations to link design and production closely to retailing which makes them more responsive. Forward integration is a business strategy that involves a form of vertical integration whereby business activities are expanded to include control of the direct distribution or supply of a. Strategic techniques that differentiate zara from other fashion brands. Vertical integration is a supply chain management style that many businesses decide to use. Effective and efficient techniques of zaras supply chain model. The phenomenon of vertical integration vertical integration is.
Vertical integration can help companies reduce their costs while improving efficiency and flexibility. Problem statement on which way can vertical integration of zara be an advantage for the company. Zaras manufacturing strategy also created significant value and was. Vertical integration is the expansion within a company to grow its business areas at different points along the same production and sales path. A rich set of models in industrial organization emphasize the use of vertical integration as a way to raise entry barriers in one or both of the associated markets.
A firm like zara vertical integrated supply chain must organize its management systems, processes, policies and strategies to fully utilize the resources potential to be valuable, rare and costly to imitate. First step of netflix vertical integration strategy. Pdf horizontal integration in the development strategy. Vertical integration and corporate strategy kathryn rudie. A combination agency will take two separate but related services and provide them both to. International strategies transnational strategy zara seeks to achieve both global efficiency and local responsiveness. Second, competitive strategy can be a key factor in vertical integration decisions. Drawbacks of vertical integration while some of the benefits of vertical integration can be quite attractive to the firm, the drawbacks may negate any potential gains.
Vertical integration and firm productivity li 2017. It also focuses on analyzing the competitive advantages and the challenges of implementing vertical integration for zara. With vertical integration, zara is able to meet consumer demands within a relatively short timeframe and respond to market trends quickly. Martin roll enables global clients to deliver business impact and drive longterm. Zara was thus able to maintain a very low 1% failure rate on new products compared to the average failure rates of the sector 10% reference exhibits in case study essentially offsetting the internal transaction costs by the value created through vertical integration.
We argue that in settings with poor corporate governance, vertical integration reduces firm productivity because it enables inefficient rent. The firm is able to be so responsive through a competitorcrushing combination of vertical integration and technologyorchestrated coordination of suppliers, justintime manufacturing, and finely tuned logistics. Vertical integration and zara retailing slideshare. The project is a study on how vertical integration as a supply chain strategy has worked for zara in emerging as a fast fashion system. This relative cost is composed by transaction costs costs of negotiating or monitoring and administrative costs costs of production and resource allocation. Zara is by far the largest, most profitable and most internationalized fashion retail chain. In the last 5 years, 1997 founded netflix, which started out as a postal dvd rental company, successfully implemented the first steps to its vertical integration strategy, no. Corporatelevel strategy corporatelevel strategy should allow a company, or its business units, to perform the valuecreation functions at lower cost or in a way that allows for differentiation and premium price corporate strategy is used to identify. Zaras success is based on a business system that depends on vertical integration, inhouse production, quick response, one centralized distribution centre and low advertising cost. Suppose a company acquired a retailer for their product and created an outlet store that carried the old merchandise as well. That retailers competition began using a new technology which boosted their sales. This study analyzes the business strategy of fast fashion through zara, a successful fashion brand from inditex spain. A type of agency which combines segments that are normally separate. One of the stores which gives marketers lessons on how to keep customers coming back is zara.
336 699 1622 296 1339 366 851 561 539 359 291 12 1567 484 774 936 101 969 905 1218 210 1535 9 1138 1070 1060 122 501 1453 1134 1269 417