1) Topshop, a relatively new competitor to Zara, has created a fast supply chain
ID: 354017 • Letter: 1
Question
1) Topshop, a relatively new competitor to Zara, has created a fast supply chain that produces more new fashions than Zara, though for a higher price. A) True B) False 2) Despite historical success, Inditex's revenues have decreased in the several years leading up to 2014. A) True B) False 3)Which of these are external factors which influence the fashion manufacturing and retail industry? (select all that apply) A) Trends come and go quickly, leading to short fashion cycles B) Fluctuations in the global economy influence customers' price sensitivity Fluctuations in the global economy influence customers' price sensitivity C)Customer tastes are hard to predict D)The middle class in developing nations is growing rapidly; as a result, spending on fashion will continue to grow 4) Which of the following statements are true of Zara's pricing/cost structure? (select all that apply) A) Zara prices its products about 15% lower than their competitors B) Zara locates its stores away from luxury brands to save on location costs C) Zara outsources the manufacturing of the majority of their products to low-cost countries D) Zara manufactures clothes of lesser quality than their luxury peers For the exclusive use ot Y. Sherhan, 2018. VEV Publishing W15431 WHAT BUSINESS IS ZARA IN? wrote this case solely to provide material for class discusaiorn may have disgused certain names and other identyng digitized or othenwise repredueed in any form or by any means without the request penwission to reproduce materials, contact ivey Publishing, vey Business School, Weate or nefective handling of a managerial stuaion The author This publication may not be transmited, photocepied University London Ontaria Canada, NOG ON Ceoyigtt 2015 Richard Ney School of Business Fo 519 661320 (e)cases@vey.ca: www.veycases.com What would 2016 have in store for Inditex and its flagship brand Zara with its "fast fashion" business ycars for new competitors to build business models that could cffectively competc with Zara's approach. Many would recall the carly deference Why would anyone invest in a fashion manufacturer cost labour market of Spain (versus Asia), spe positioning high-end stores in chic retail districts competitors, manufactured clothes that were, arguably, of a kesser quality and finally, charged 15 per cent less at the cash register. competitive rctail fashion industry many had towards Zara and its counter-intuitive business model. and retailer who produced their elothes in the high- nt very little on advertising, ostensibly overspent on across Europe, carried substantially less inventory than was vicwed as a formula for disaster in the highly time, most obscrvers were just not forward thinking cnough to sce the valuc in Zara's approach model that enabled By all accounts, And, over time, Inditex took great pride in proving them wrong. By 2014, Zara was, by far, the mumber one fashion retailer in the world by many mcasures. It really was its unique basiness this astounding success Inditex, however, could not dwell on past successes, as the future was full of significant challinges upstart and copycat competitors who had infiltrated the market. These new enjoy a good degroc of suaccess. Disruptive innovations, such as Zara associated with the many new firms would, more than likely, also enjoy a good degroc of success. Disruptive innovations, such as Zaras business model, inevitably wcre copied. Examples of how industrics evolved around disruptive busincss models included Southwest Airlines leading the discount airline industry and Wal-Mart dominating the discount department store industry Perhaps it was time for Inditcx to ncinvent the industry business model, once again.Explanation / Answer
1) Topshop, a relatively new competitor to Zara, has created a fast supply chain that produces more new fashions than Zara, though for a higher price.
A) True
B) False
Explanation
Top shop
2) Despite historical success, Inditex's revenues have decreased in the several years leading up to 2014.
A) True
B) False
Explanation
Revenue increased from 5.67billion pounds in 2004 to 18.1 billion pounds in 2014. Especially in Asian markets
3)Which of these are external factors which influence the fashion manufacturing and retail industry? (select all that apply)
A)
Trends come and go quickly, leading to short fashion cycles
B)
Fluctuations in the global economy influence customers' price sensitivity
C)Customer tastes are hard to predict
D)The middle class in developing nations is growing rapidly; as a result, spending on fashion will continue to grow
Explanation
Fashion changes quickly and often. Old stock had to be replaced at discount prices if fashion changes at a rapid pace. But this also helps stores like Zara which are into fast fashion- they updae frequently and consumers also visit their stores frequently for buying
The apparel industry and its price points are significantly affected by global economic fluctuations as noticed during the recession of 2009
Customer tastes and preferences are easily influenced by celebrities’ fashion, friends and the urge to look different. It makes fashion more unpredictable
Both Indian and Chinese middle class are bound to increase dramatically. China will have 670 million in the middle class by 2021(Brookings Institute). This burgeoning middle class will lead to increased spending in the fashion industry
Commodity prices, changing demographics like the growing percentage of the aged population in developing countries, supply chain costs, technology innovation are other factors that influence the industry
4) Which of the following statements are true of Zara's pricing/cost structure? (select all that apply)
A) Zara prices its products about 15% lower than their competitors
B) Zara locates its stores away from luxury brands to save on location costs
C) Zara outsources the manufacturing of the majority of their products to low-cost countries
D) Zara manufactures clothes of lesser quality than their luxury
Explanation
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