it pursues a different business strategy. Rather than vertical integration pursued by Zara, H&M outsources all ofits production and operates a single format which increases operating expenses. Such choice of outsourcing all production is reflected in a relatively low PPE to sales ratio of 15.5% which contributes to higher capital turnover, andthereby, higher ROIC. On the other hand, Inditex whi
of people at La Coruna called "commercials" had great discretion in deciding what clothes would be designed and produced. And another group of commercials, called store product teams and served as sat in close proximity tothe product teams and served as La Coruna's maininterface with Zara stores around the world. They communicated what they had seen and heard tothe design teams, helping them k
in Numbers
Instead of more quantities per style, Zara produces more styles, roughly 12,000 a year. Thus, even if a style sells out very quickly, there are new styles already waiting to take up the space. To produce many styles according to customers’ demand, it keeps its lead time short. Thus, it means information technology, communications infrastructure, distribution management, and design a
inthe market and customers whose switching cost is very low. (Exhibit 1) Therefore, achieving the responsiveness to market needs/trends and distributing the products in time are the keys to survive in competition.
The Drivers ofZara’s Rapid Growth
“The middle-aged mother buys clothes at Zarabecause they are cheap, while her dauthter aged inthe 20s buys Zarabecause itis fashionabl
of planning, production, circulation, one producer manages all the process to reduce inefficiency. Also through mass production, they can pursuit efficiency, reduce cost of production, and cut the circulation step. GAP started SPA system. and H&M, ZARA, UNIQLO are famous SPA brands. Also MIXXO and Forever21 is getting popular. SPAO is one of SPA brandin Korea but it doesn't really get succeed ye