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
Further benefitof short supply chaininZarais able to manage its supply chain cost effectively even when it has workshops in Europe. It pays its worker around US$1,300 and also provides social contributions. The costs are higher compared to operating sweatshops however it saves time and money when coming up with new products. The quick response time isthe key to success so the closer the work
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 and product development are all important.
Strategy 4: IT strategy
Zarais using IT technology tointegrate its value chain, making it possible to
ZARA's Three principles
1. Close the communication Loop
InZara stores, customers can always find new products. But they’re in limited supply. There is a sense of tantalizingexclusivity, since only a few items are on display even though stores are spacious. Zara’s retail concept depends on the regular creation and rapid replenishment of small batches of new goods.
The "fast fashion"syste
are based on the most recent fashion trends presented at Fashion Week in both the spring andthe fall of every year. These trends are designed and manufactured quickly and cheaply to allow the mainstream consumer to take advantage of current clothing styles at a lower price. This philosophy of quick manufacturing at an affordable price is used in large retailers such as H&M, Forever 21, Zara, and