4. (4 points) Zara outsourced about half of the initial collection for a season. Of the outsourced production, about 60 percent came from Europe and 30 percent from Asia, with the balance from the rest of the world. The make\buy decision was based on a number of considerations, including expertise, relative cost and. especially. time sensitivity. In general. garments with fashion styling tended to be manufactured in-house while basics and knits tended to be outsourced. In-house mamufacturing was reserved more for current (in-season) production. The in-house manufacturing entailed two basic steps: fabric procurement and garment assembly and finishing. Fabric procurement and cutting were mainly controlled by Zara. Sewing was subcontracted to a network of 400 smaller firms within Galicia and northern Portugal. Zara reserved time with its sewing subcontractors but was not limited in terms of garment specifications given in advance. a) What is the core competitive advantage that Zara can obtain from its outsourcing strategy? b) Why Zara's current outsourcing strategy will restrict its further expansion? c) How should this strategy change to mitigate the restriction? @) What are the risks associated with the strategy change proposed? Solutions: a) With its in-house design, patter-making and cutting capabilities, and its network of sewing subcontractors, Zara can go from start to finish on a style production within as little as 10 days. The ability to respond in season is Zara’s core competitive advantage. bv) Zara's expansion will be likely restricted by the local, vertically integrated production and outsourcing model due to capacity and cost constraints ¢) To obtain high capacity and to provide some cushion in its margins, Zara needs to increase its outsourced manufacture to take advantage of increased low cost production. d) However, being a fashion company, the long lead time and low responsiveness caused by oversea outsourcing may negatively impact Zara’s fashion-forward image, which is its competitive advantage that drove its margins