Free essay: how is zara organized with respect to its vertical integration and outsourcing decisions what governance structure does it appear to follow.
Compared with the competition, zara has three distinctions: vertical integration to achieve a faster turnaround time rapid expansion and use of the store as the main tool for promotion, with low spend on advertising.
Zara’s vertical integration allows the company to constantly introduce new items into the marketplace with very short lead times the company can design, produce and deliver a new garment and put it on display in its stores with a 15 day turnaround. For students of supply chain zara is an icon, relying on a contrarian strategy of vertical integration in retail apparel to introduce dramatically more new items each year the virtuous circle this approach sustains includes more frequent shopper visits to stores, fewer sales on markdown and faster cash conversion cycles.
Vertical integration is the control of multiple levels of a product’s supply chain in a three-tier model – manufacture, wholesale and retail – vertical integration occurs if a firm controls two or more levels. Vertical integration zara designs as well as manufactures a majority of the apparel that customers buy in its stores this is very much in contrast to the traditional high-volume fast-fashion companies, which outsource most of their manufacturing to contract manufacturers. Zara is all about staying on top of the hottest trends, and exuding an exclusive feel, but its supply chain is the real star of the show these rockstar-level logistics take it from being just another fashion retailer to an industry example of fast fashion done right. In apparel, a vertical manufacturer is one who produces and sells their own stuff companies like gap, victoria’s secret, old navy, zara etc are all vertical operations in a perfect world, vertical integration is considered ideal because it reduces your operating costs. Zara locates themselves in central business districts with as many outlets as possible overall about vertical integration zara defies most of the current conventional wisdom about how supply chains should be run in fact, some of zara's practices may seem questionable, if not downright crazy, when taken individually.
What is vertical integration 9 january 12, 2010 zara etc are all vertical operations in a perfect world, vertical integration is considered ideal because it reduces your operating costs if you don’t have to buy corn from a farmer because you’re producing corn on land you own or lease, your supply costs are lower theoretically. Zara’s overarching strategy is achieving growth through diversification with vertical integrations it adapts couture designs, manufactures, distributes, and retails clothes within two weeks of the original design first appearing on catwalks.
Vertical integration a distinctive feature of zara’s business model, has allowed the company to successfully develop a strong merchandising strategy this strategy has led zara to create a climate of scarcity and opportunity as well as a fast-fashion system.