Vertical Integration

Question 1

McKinsey How to Succeed as a Global Retailer

Answer 1

1. choose your silver
2. get comfortable partnering
3. invest in intangible assets (brands and reputation)
4. keep expenses and capital requirements low
5. exploit opportunities to arbitrage

Question 2

Zara Integration

Answer 2

Vertical backwards integration

Question 3

Zara Vertical Integration Pros

Answer 3

1. Shorter cycle time
2. Internal manufacturing of time-sensitive items
3. Brand image
4. More control

Question 4

Zara Vertical Integration Cons

Answer 4

1. Labor costs / stringent regulations
2. Capitally intensive
3. Not a core competency
4. Slow growth

Question 5

How does Zara make up for cost disadvantages

Answer 5

1. Stay on top of market trends
2. Quick shipping
3. Loyal customers
4. Low inventory and infrequent discounts
5. Stores are in proximity to high end retailers

Question 6

Drivers of Zara Quick Response

Answer 6

Design
Manufacturing
Management
Distribution
Store

Question 7

Zara Design

Answer 7

Zara had a large design team that prioritized speed to the market

Question 8

Zara Management

Answer 8

Prioritized investment in IT and maintaining an open line of communication throughout the value chain

Question 9

Zara Store

Answer 9

Stores located at high traffic areas with strong variation of products

Question 10

Zara Manufacturing

Answer 10

Zara is vertically integrated and maintains long term relations

Question 11

Zara Distribution

Answer 11

Zara distribution helps it maintain small batches as it is in close proximity to manufacturers and receives small but more frequent shipping