1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency?
Even though H&M follows a strategy which differs significantly from Inditex’s approach it is the closest competitor from the financial point of view. H&M differs from Zara because it outsources all of the production, it is more price oriented and spends more money on advertising. But both companies are based in Europe, are fashion forward at lower price retailers, and have a strong international expansion strategy. Exhibit 6 indicates that the financial results of Inditex and H&M seem to …show more content…

Specifically, compare Zara with an average retailer with similar posted price. In order to express all advantages /disadvantages on a common basis, you may find it convenient to assume that on average, retail selling prices are about twice as high as manufacturer’s selling prices. Zara’s competitive advantage is a result of an efficient production at low costs, good quality and a quick response to market demands. An examination of different parts of the strategy will help to explain what makes the company more profitable than its competitors Zara’s business model, which directly affects its operating economics, can be broken down into Sourcing and Manufacturing, Distribution and Promotion. 1. Sourcing and Manufacturing:
The most vital factor of Zara’s unique business approach is an in-house production system. The company fully owns 20 factories. It only outsourced the production of high labor intensive processes but maintained in house some other capital intensive processes protecting as well the knowledge and know-how. By taking direct control of fabric supply, marking, cutting and final finishing Zara navigates its production throughout the entire value chain. The capital intensive vertical integration model into manufacturing combined with a highly labor intensive one has given Zara a competitive advantage.
Inditex, the parent company owns a subsidiary (Comditel), which