TASKSYou have been employed as an International Management Consultant by Inditex and have been asked by the Senior Vice President to prepare a briefing paper that addresses the following tasks:Answer both tasks in your 2,500 word briefing paper.
1. Identify and critically evaluate the original and present core competencies that has enabled the founder and Chairman of Zara, Amancio Ortega, to transform a single women’s clothes store into a global fashion brand.50 marks
2. Taking into account the macro-economic environment outline and critically evaluate Zara’s present and future international management strategy with respect.50 marks
MARKING SCHEMEDraw on specific examples you have read, or know about, when responding and make sure that you justify your answers with theoretical support. Within each question you should relate relevant academic concepts and theories and professional practice to the way the organisation operates. You should approach this in a critical and informed way, and with reference to key texts, articles and other publications, and by using a range of organisational examples for illustration and contrast.Credit will also be given for innovative or original suggestions, if relevant or justified in terms of their potential value to an organisation.Task 1Identify Zara’s original core competencies Identify Zara’s present core competenciesCritically evaluate Zara’s original and present core competencies with respect to its success in international marketsTask 2Outline the contemporary macro-economic environment (PESTEL) that Zara operates withinCritically evaluate Zara’s present international management strategy Critically evaluate Zara’s future international management strategy
CASE STUDYZara Case StudyAt Zara, speed and responsiveness are more important than cost. Other brands churn out fast fashion; Zara, which is based in Spain and is owned by the distribution group Inditex, attempts the mind-spinningly supersonic. The founder, Amancio Ortega, founded Zara in 1975 in order to better understand world markets for his fashion merchandise. A decade later, he formed Inditex as a parent company for Zara, as well as several other retail concepts and suppliers that he had built. While Zara originated in Spain, it has stores in 86 countries today – in Europe, the Americas, the Middle East, and Asia. In 2016, Inditex reported total sales of US$79.5 billion, with Zara representing 66 percent of total sales.The brand is renowned for its ability to deliver new clothes to stores quickly and in small batches. Twice a week, at precise times, store managers order clothes, and twice a week, on schedule, new garments arrive. The company produces about 450 million items a year for its 6000 stores in 86 countries. To achieve this, Zara controls more of its manufacturing and supply chain than do most retailersZara’s overarching strategy is achieving growth through diversification with and vertical integrations. It adapts couture designs, manufactures, distributes, and retails clothes within 2 weeks of the original design first appearing on catwalks. The company owns its supply chain and competes on its speed to market, literallyembodying the idea of “fast fashion”.
The retail giant delivers fashionable and trendy numbers catered for different tastes through a controlled and integrated process – just in time. Zara keeps a significant amount of its production in-house and makes sure that its own factories reserve 85 percent of their capacity for in-season adjustments. In-house production allows the organization to be flexible in the amount, frequency, and variety of new products to be launched. The company often relies heavily on sophisticated fabric sourcing, cutting, and sewing facilities nearer to its design headquarters in Spain. The wages of these European workers are higher than those of their developing-world counterparts, but the turnaround time is industry-leading.Zara also commits six months in advance to only 15 to 25 percent of a season’s line.And it only locks in 50 to 60 percent of its line by the start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the season. If a certain style or design suddenly become the rage, Zara reacts quickly, designs new styles, and gets them into stores while the trend is still peaking.
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