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ZARA

Introduction:
Zara is the oldest and most successful brand from Inditex group. Since 1975, Zara has
expanded the number of stores to 1808 in 86 countries and has constantly surprised with its up-to-
date fashion design. This fashion brand relies heavily on customers’ feedback in order to “give
shape to the ideas, trends and tastes developing in the world”. In 2012, Zara has experienced an
18% growth in sales and is striving for further expansion in emerging markets.

Outsourcing Strategy:

Zara’s Business model is characterized by a high degree of Vertical integration compared to


other models developed by their International competitors. It covers all phases of the fashion
process:

 Design
 Manufacture
 Logistics and
 Distribution

Sourcing is done from all around the world (Outsourcing). Less expensive material resembling
the high end materials are used hence provide them at lower prices. Fabric purchased is gray so
that designs can be easily added.
Garments, both the in-house manufactured and mainly those purchased from external
suppliers, arrive at the hubs Zara has in Spain, from there they are dispatched to the stores
worldwide. Clothes are dispatched twice a week, and this frequency allows a continual renewal of
our fashion offer.
It has a flexible structure and a strong customer focus in all its business areas. Vertical
integration enables them to shorten turnaround times and achieve greater flexibility, reducing stock
to a minimum and diminishing fashion risk to the greatest possible extent.

Distinguishing Feature:

Zara distinguishes itself by a number of clever business model building blocks that reinforce
each other. At its heart the company is building on a vertically integrated demand and supply chain,
while most other textile chains rely on outsourcing and cheap labour in China.
Zara studies its customers demand in the stores and tries to instantly deliver. This allows them
to have a particularly appealing value proposition: A collection that is in line with the very latest
fashion.
HENNES & MAURITZ (H&M)

Introduction:
The history of H&M brand begins in 1947 with one store opened in Sweden. Now the store
network accounts for 3100 stores in 53 countries. It comprises six brands: H&M, COS, Monki,
Weekday, Cheap Monday and & Other Stories. The business concept of H&M is to offer “fashion
and quality at the best price”. As for the values, this fashion giant relies on teamwork, as
fundamental driver for performance with strong believe in members’ empowerment.

Outsourcing Strategy:
H&M has used globalization as part of their business model to spread their company
around the world, using outsourcing and offshoring to make their business larger and more
profitable in the global market.

- Outsourcing:
H&M outsources its production activities, i.e. it does not own any production plants.
Instead, it has around 800 selected suppliers located mainly in Asia and Europe. The suppliers
have their own subcontractors and all the overall amount of manufacturer units adds up to 2700.
These include particularly low-wage countries like Turkey, Bangladesh, Indonesia, India etc.

- Offshoring

In order to maintain some degree of control over production activities, H&M has set up
about 20 production offices in selected countries. Production Offices help the company maintain
an effective Information and Communication Technology (ICT) Network. They take care of the
key issues of time, quality and quantity; they make sure that the right quantity of merchandise is
manufactured and distributed to stores at the right time, stressing on superior quality at all times.

Outsourcing
Offshoring

Distinguishing Feature:
The distinguishing feature here for H&M is that, it does not own any of their factories, it
outsources all its production. Despite this, H&M maintains good control over their outsourced
production phases. H&M has 22 production offices in Asia, Europe Africa and Central America.
H&M purchases garments from over 800 suppliers as mentioned above and 60% of production
takes place in Asia and the remainder in Europe.

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