Individual Assignment 1
Zara: Fast Fashion

1. + 2. Zara’s business and operating model is focused on speed and the need for fast fashion, I think a word that would classify it is mass customisation. It is targeted at young fashion and price conscious urban dwellers and is built on a vertically integrated system focussed on demand and supply. Zara is constantly updating its design and production base to deliver exactly what the client wants based on their buying habits and the latest trends. They have limited outsourcing and produce almost everything all in house. Zara is very close to its customers and provides them exactly with what they want, making Zara sell a trend value proposition at affordable prices. They can achieve this because of their integrated verticle supply chain; production time of a new product (estimated at under 5 weeks) and re-production and delivery of an existing product (estimated at under 2 weeks).

Following this brief introduction it would be best to compare Inditex’s financial results with H&M as they are competing in very much the same markets and although their products and value chains are different their target consumer has the most overlap. Also GAP and to a lesser extent Benetton do not follow the fashion precisely but predict and produce in advance in bulk.
Inditex despite being present in 39 countries, compared to H&Ms 14, and having over 50% more stores than H&M, they still manage to have considerably lower operating expenses. Their operating expense is only 30% of their operating revenue, compared with 38% for H&M. Operating profits are 22% for Inditex and only 13% for H&M.
It is interesting to observe that despite Inditex’s much more complex operating system that it manages to keep costs low and improve margins. These figures show that Inditex is actually cutting costs by producing in small