Exam (elaborations)
BUS 5116 Unit 4 Discussion Assignment
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A guide to assignment on Zara's outsourcing strategy. The challenges it faces and the possible solutions.
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Based on Zara’s outsourcing strategy and physical distribution scheme described in thearticle, what do you think are challenges that the company will face to sustain its growth?
Zara is a well-known international fashion company that is part of the Inditex Group. Inditex
Group is considered a leading distribution group with eight brands including Zara, Pull&Bear,
Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Uterqüe (INDITEX, 2020). Zara
was created in 1975 to introduce fast fashion (Gosselin, 2021).
Zara has several unique traits that enabled it to meet the changing demand and become
successful. One of these traits is the ability to design, manufacture, distribute, and retail clothes
within two weeks of appearing on catwalks or red carpet (Berfield & Baigorri, 2013). This is
possible because of the integrated design and in-house manufacturing process. Additionally, the
factories reserve 85% of their capacity for seasonal changes (Quickbooks Commerce, 2018).
However, as Zara expands into new countries with diverse cultures and fashion tastes it would
pose a huge burden on the design and manufacturing process to meet these new demands.
From the fabric that is purchased to the final clothes that are produced have to pass through the
Cube. The Cube is the central command connecting all the stores, retail shops, and suppliers
(Berfield & Baigorri, 2013). Zara uses a centralized inventory system that minimizes the cost of
control. Consequently, the capacity of Zara to expand into new territories is limited by the
capacity of the Cube to manage the logistics and overall cost of inventory.
Additionally, because of the centralized inventory system, the expansion will increase the
associated inventory cost exponentially. Most of the marketing and sales happens at its stores
reducing marketing and advertising costs. However, as the business expands the distribution
costs will be significant, and penetrating a new market with just having beautiful stores in key
locations may not be enough.
Another concerning issue is related to sustainability including the issue of recycling. Zara wants
to adopt sustainability but the problem is for clothes to be recycled in large quantities the quality
of the material they are made of should be high (Deutsche Welle, 2020).
Briefly describe a strategy to address the most compelling challenge facing the
organization.
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