Global Apparel Industry

1) How did globalization change the ‘rule of the game’ in the apparel industry? What it means for a company like Zara? Traditionally, national retailers outsource apparel production, via global brokers, to thousands of small apparel makers. Globalization created options for countries and companies in the apparel industry. Improving technology, sourcing, and production systems let innovative apparel makers compress cycle time. Shortening process time increases efficiencies and boosts profits. Zara applied its innovative strategy to reset the standards of operational efficiency in the global apparel industry. Zara’s adept coordination of the overlapping activities among its designers, plants, storefronts, and salespeople testifies to the power of its strategy. 2) What are the competitive advantages of Zara in comparison with the Gap and H&M? Unlike Gap and H&M, Zara employs nearly 20000 people, distributed across 23 factories, to make about 50 percent of its finished garments. Their vertical integration make them to have short lead time. Zara engages many designers, so it originate designs in a few weeks. Also, Zara has one distribution center, so they have better survey over inventory, as well as low cost. Gap nor H&M can design, make, ship, and sell fashion as speedilyy as Zara.

Case 8: Value Chains
1) What sorts of conditions and motivations best explain how MNEs in the West traditionally develop value chains? Do these same principles apply to decisions made by emerging markets MNEs? 2) Looking out over the next decade, estimate the likely standards of value creation. How would you advise a company like IBM or Cisco to configure and coordinate its value chain? Would you give the same advice to a company like Tata or Safricom? First, cost cutting is a good starting point. Many companies spend way too much money without even knowing it. For example, not everyone has to fly in business class, especially on domestic flights. Also corporate functions can be toned down. Second, to promote growth, these companies should really seek to expand overseas. The BRICs nations are going to lead the way in the future. Their economies are much healthier and are much better position in terms of debt. Third, they may want to see if they can win government contracts for infrastructural ventures.

Advanced economies are not dead and IBM and Cisco know how to operate in these markets. Historically advanced market operational models were modified to apply to emerging markets. Now IBM is a perfect example of a truly global value chain benefiting from all types of markets. Developing a global view that can operate in advanced and emerging markets benefits IBM or Cisco. Tata and AirTel developed models that operate in emerging markets and can be applied to other emerging markets. As they grow and potentially compete in advanced markets, the models will need to be evaluated. The configuration and coordination of value chains respond to changes in customers, competitors, industries and environments. Designing and delivering a strategy is an ongoing struggle for companies.