Vertical Integration vs Outsourcing
Vertical Integration vs Outsourcing of Zara
Written by
Mohd Rahman
October 04, 2014
“The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by”
-- Jose Maria Castellano Rios, Inditex CEO.
1
Introduction to Zara
Zara is an icon in the fashion world and largest international fashion designing and manufacturing company. Zara is the flagship chain store of Inditex Group owned by
Spanish tycoon Amancio Ortega, Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores throughout the world (Ref-1). Headquarter of the group is in Coruña, Spain where the first store of Zara was launched in 1975.
This paper will analyse the company and try to link its activities with supply chain strategy of vertical integration and outsourcing. Later will come to a conclusion that Zara is vertically integrated with justification and made recommendation for further improvement. Definition of Vertical Integration
In strategic management, the term vertical integration describes a style of management control, when a company expands its business into areas at different points of the same production path. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or services, and the production combine to satisfy common need. In the following paragraph I will try to highlight the organization and decision-making process of ZARA in short
Brief Organization and Decision-Making Process of ZARA
The followings are the most critical factors of Zara’s operation:
Decision Making: The decision making process is based on judgement of employee instead of relying on small set of decision makers; the majority of decisions are made by store managers and designers
Target market: Zara’s target market is very broad because they do not define
Written by
Mohd Rahman
October 04, 2014
“The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by”
-- Jose Maria Castellano Rios, Inditex CEO.
1
Introduction to Zara
Zara is an icon in the fashion world and largest international fashion designing and manufacturing company. Zara is the flagship chain store of Inditex Group owned by
Spanish tycoon Amancio Ortega, Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores throughout the world (Ref-1). Headquarter of the group is in Coruña, Spain where the first store of Zara was launched in 1975.
This paper will analyse the company and try to link its activities with supply chain strategy of vertical integration and outsourcing. Later will come to a conclusion that Zara is vertically integrated with justification and made recommendation for further improvement. Definition of Vertical Integration
In strategic management, the term vertical integration describes a style of management control, when a company expands its business into areas at different points of the same production path. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or services, and the production combine to satisfy common need. In the following paragraph I will try to highlight the organization and decision-making process of ZARA in short
Brief Organization and Decision-Making Process of ZARA
The followings are the most critical factors of Zara’s operation:
Decision Making: The decision making process is based on judgement of employee instead of relying on small set of decision makers; the majority of decisions are made by store managers and designers
Target market: Zara’s target market is very broad because they do not define