What is a value chain? Which activities do you think are typically included in the value chain of a clothing manufacturer such as Zara or Gap? Your answer should be between 75 and 90 words in length.
Provide one reason why Zara decided to vertically integrate its manufacturing and design activities. Your answer should be between 75 and 90 words in length.
Provide one reason why Gap decided to outsource its manufacturing activities. Your answer should be between 75 and 90 words in length.
Do you think Gap should try to emulate Zara and pursue vertical integration? Justify your answer. Your answer should be between 90 and 120 words in length
Value chain refers to a business model or set of activities that an organization operating in a certain industry performs to deliver apposite services or products. In a clothing manufacturing industry such as Zara, the common type of value chain activity is inbound logistics which includes functions such as managing inventory, receiving, and warehousing of products (Aftab et al., 2018). Another activity is operations which describe the process of converting raw materials into finished products. Similarly, Zara would include marketing and sales as part of the value chain activities whereby it identifies the most desirable market.
The reason why Zara opted for vertical integration in the manufacturing and design of its products was to increase market control. Being a multinational company, Zara has been compelled to open store outlets in different locations to effectively reach its potential clients (Commerce 2018). With vertical integration, Zara has been able to merge with producers and manufacturers hence controlling the type and size of products. This option was also considered since it would guarantee Zara a huge amount of control over its competitors.
GAP decided to outsource its manufacturing activities since it encourages innovation. When ideas are brought to life speedily and with ease, one becomes inspired as well as motivated. These emotions can open one’s mind to more novelties and allow clarity on original and pioneering ideologies that can drive one’s business forward (Inc 2018). The management of the company understands the procedures required to make change an idea from concept to reality. This initiative has enabled Zara to quickly as well as efficiently creating functioning prototypes that can be put to test and adapted accordingly.
GAP should follow Zara’s value chain activity of utilizing vertical integration in its operations. The process will not only aid the company to increase market control but also cut costs in the production process. By rationalizing the manufacturing process or purchasing large quantities of raw materials, Zara will be able to reduce per-unit costs and utilize its savings to support other operations (Commerce 2018). Also, vertical integration will make GAP independent from suppliers who tend to change the market price of raw products. Having a good inventory will help GAP to increase efficiency by reorganizing the process of acquiring supplies for the desired products, manufacturing them, then selling the finished products to a ready market.
Aftab, M. A., Yuanjian, Q., Kabir, N., & Barua, Z. (2018). Super responsive supply chain: The case of Spanish fast fashion retailer Inditex-Zara. International Journal of Business and Management, 13(5), 212.
Commerce, Q. (2018). Zara supply chain analysis – the secret behind Zara’s retail success. Tradegecko.com. Retrieved from https://www.tradegecko.com/blog/supply-chain-management/zara-supply-chain-its-secret-to-retail-success.
Inc, G. (2018). Three Ways Gap Inc. is Using Scale to Speed Up its Supply Chain | Gap Inc.. Gap Inc. Retrieved 16 March 2021, from https://www.gapinc.com/en-us/articles/2018/09/three-ways-gap-inc-is-using-scale-to-speed-up-its-.