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Vertical Integration Against Vs. Outsourcing In The Fashion Industry

Zara Apparel In Comparison To Gap And Uniqlo

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Vertical Integration Against Vs. Outsourcing In The Fashion Industry

Zara Apparel In Comparison To Gap And Uniqlo

Introduction

Combining distinct phases of the fashion business, which would typically function

separately within the sector, is an example of vertical integration. This kind of integration is

expected in the fashion industry. The definition of outsourcing is based on the implication of the

negative. The examples of Zara, Gap Inc., and Uniqlo will be used throughout this conversation

on the fashion industry. Research conducted on three different organizations reveals that none of

them is entirely integrated, nor does it use outsourcing. It would seem to be a question of

practicality. The circumstances determine the strategy that should be used.

Advantages

The use of vertical integration as a technique of business at Zara enables the company to

maintain its profit margins both upstream and downstream. This results from removing

intermediaries, which is typical of excellent operations management. This is especially the case

given that labor that was before done by individuals who supplied Zara with raw materials to

make a profit may now be conducted by Zara on its own. Doing so can keep the profit that would

have been lost to intermediaries under other circumstances. Vertical integration is used by Gap

Brand, just like Zara, which helps to broaden the company's profits. Even more compelling is the

case of Uniqlo, whose meteoric rise can be traced in large part to the company's adoption of

vertical integration throughout the bulk of its operations, most notably in supply (Arcuri and

Giolli, 2022).

Vertical integration at Zara has led to improved levels of cooperation across the

company. This is because the challenge of interacting with untrustworthy intermediaries such as
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suppliers has been effectively addressed. The same scenario played out with Zara's rivals using

vertical integration rather than outsourcing. However, it is essential to note that not a single one

of the businesses discussed here is entirely vertically integrated or outsources all of its operations

(Cameron et al., 2021).

Vertical integration makes joint ownership conceivable, which results in a significant

decrease in transportation costs owing to the geographical closeness that comes with vertical

integration. Vertical integration also makes it possible to integrate many vertically. The fact that

Zara, Gap, and Uniqlo all like to place their businesses near the sources of input they control

allows them to reap the benefits of this trend (Dumbrill and Wang, 2021).

Because Zara has higher control over the input, there is more possibility for distinction as

a consequence of this. Zara can experiment with various conceivable perspectives given the

number of raw materials, thanks to the fact that it controls the number of natural resources such

as textiles. There is a good chance that Gap Brand and Uniqlo will experience the same

advantage. However, each of the three fashion firms integrates their supply chains to a varying

degree, with Zara being the most vertically integrated at forty percent (Liao and Kong, 2021).

There is a possibility that vertical integration will result in advantages that are linked with

economies of scale. This is because a single management team oversees a large number of

operations. In the fashion business, for instance, this may translate into a decrease in the price of

individual firm items. This has been the situation with Zara, Gap, and Uniqlo (Lilac and

Yoshiteru, 2021).

Disadvantages

Vertical integration, as opposed to outsourcing, would result in a lack of specialization in

the operations of fashion businesses. Hence vertical integration is not recommended. Uniqlo's
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success can be directly attributed to the company's decision to outsource skilled labor. As a result

of this decision, the company is now better able to concentrate on the fashion needs of the

general public and respond to those needs with the utmost precision, without having to worry

about issues such as the supply of raw materials. In this scenario, there is a practical

specialization of labor and the workload division. In the case of a vertically integrated system,

such as the one exhibited by Zara and Gap Inc., the companies need to shift their attention to

making sure that all stages of the production process can be completed without necessarily

requiring skilled labor to guarantee that the undertaking will be successful (Su, 2020).

There is a high probability that vertical integration will result in monopoly power. Zara,

Gap, and Uniqlo might demand exorbitant fees for their items to pay the costs of executing the

vertical integration approach. This would preclude the possibility of other parties in the fashion

business somewhat fixing the market price for products. This may cause other fashion firms to

raise their pricing, making running a company unreasonably costly.

There is a possibility that, under some circumstances, coordination will be complex

because of variables such as a breakdown in communication. Even though there is no evidence

that anything like this has ever occurred in the fashion business, it is still possible it has.

Miscommunication will likely have the most significant impact on Zara because of the

company's prominent role in implementing the vertical integration plan. When a company

consolidates more of its operations under one management, there is a greater likelihood of

misunderstandings. Both Gap and Uniqlo follow the same line of reasoning (Xuejie, Chang, and

GuangHao, 2019).

If companies were to choose a vertical integration strategy rather than outsourcing, it

would be considerably more difficult for them to enter the fashion sector. This is especially the
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case because the fashion firm will now be responsible for tasks previously performed by other

parties such as suppliers. For instance, to put the vertical strategy into effect, Zara, Gap, and

Uniqlo had to sever their commercial links with a person they had previously done business with

as part of their outsourcing plan. Again, the monopoly of power addressed before might be to

blame for the high costs of doing business in the fashion sector, which in turn discourages new

companies from entering the market with any success (Yang, 2020).

When opposed to outsourcing, vertical integration is more likely to be linked with scale

inefficiencies that cost more money. Because a vertically integrated method entails consolidating

departmental activity to a central source shielded from outsiders' influence, this is a particularly

relevant instance. This indicates that the task that an individual from outside the organization

may otherwise accomplish is now entirely within the management's control.

Conclusion

Given that the three chain shops utilize a way of operation that is more or less

comparable to one another, it is safe to say that there is not much of a difference between them.

The absence of significant variances may be because none of those above organizations are

focused on a particular operations management criteria. They outsource certain manufacturing

activities while maintaining a degree of vertical integration in some of their operations. This may

suggest that none of the two can be used in a given situation. For instance, outsourcing would be

the best choice when there is a need for labor that is too highly specialized. In such a case, a

vertical strategy is the one that should be used.

Part – 2 Corporate Social Responsibility Of Zara

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Corporate Social Responsibility Of Zara is a part of Zara's business model. Operations

and procedures at Zara are created such that they do not interfere with people's and the

environment's well-being but rather enhance it. Additionally, these methods and designs help

businesses expand. A well-structured approach to Zara's operations ensures long-term success by

lowering potential risks and fostering a strong sense of community among employees and

customers (Allam, Scagnelli, and Corazza, 2020).

In today's economic climate, companies like Zara are implementing CSR measures to

ensure long-term viability. For CSR initiatives, ZARA sought to impact the environment in

which its stores were located. Zara has established CSR targets since it has several outlets in

various places (Cui and Fan, 2021).

Zara's first step is to reduce energy use in all shops by 20%. This would enable Zara to

lower the environmental impact of its shops' carbon emissions or carbon footprints.

Zara's second attempt is to reduce its use of plastics and synthetic fibers. The company has

installed an automatic recycling hanger system that takes up processing and plastic components

from its retail locations.

In my opinion, Zara's green efforts have a more significant impact on the community as a

whole and the environment as a whole. Zara needs to pay attention to its workers since they are

also part of the company's corporate social life.

We need Zara to put more effort into projects that assist workers in its shops and the

factory where its clothing is made. Zara should follow my recommendation, which is to pay its

factory employees more than the minimum wage so that they can perform much better, produce

better-quality clothing, and get it to shops on time so that Zara can fulfill consumer demand

(Sitaro, 2020).
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Zara's products would be more natural, and the company's CSR objectives would be more

likely to be met if it purchased its organic resources, such as cotton and organic fibers, from

farmers and paid them fairly. Suppliers also benefit by receiving a fair price and raising their

living standards.

The Advantages And Disadvantages Of Pursuing A Sustainable Fashion Model

Zara sustainably has pros and cons. As people become more aware of how and where

their garments are made, a sustainable fashion firm may gain customer loyalty and confidence.

Ethical and fair-trade business models are also promoted to demonstrate that you care about your

own company and] how employees in impoverished nations are treated when they produce your

products. Good publicity might also be gained by showing your commitment to sustainable

fashion as a business. Zara's business strategy is founded on a high turnover rate, and the

company releases more than 10,000 designs yearly. Thus, there are certain dangers (Seo and Suh,

2019).

That is why it is unsustainable since to make it completely sustainable, the whole

company model would have to be changed, which would result in an economic loss. You may

lose market share and negative publicity if you do not establish and promote sustainable

behavior. There will be blowback from the UN and the government since you will not be

contributing to the achievement of the. Compensation expenses, legal challenges, and increased

scrutiny from organizations focused on long-term viability are likely outcomes.

Final Thoughts And Suggestions

Even though Zara has made a lot of progress in this area, it is still possible to make a

clothing company that is more ethical and less harmful to the environment. Fewer new things are

made, which is good for the environment. It also means that clothes are worn for longer, which is
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also good for the environment. Because they have a very high turnover rate, their business plan

cannot work in the long run. It isn’t good for people's and the environment’s health to encourage

them to consume more than they need to. Zara has become the industry standard for how

clothing companies should treat the environment. Since new styles come out every two weeks, it

would have made more sense to offer four different seasonal variations throughout the year.

Recycling and clothing lines that care about the environment are not enough to stop what is

called a "throw-away culture,"

It is essential to improve consumer education to eliminate the things that stop people

from buying items in these new ways. Suppose the fashion industry chose to focus on durable

clothes and accessories instead of ones that can be thrown away. In that case, it might be possible

for the business to cut the amount of material it makes without losing money. If certain practices,

like repair and remanufacturing, are used, profits can go up without the amount of material flow

going up simultaneously.

Shortly, it may be possible to refresh clothes without washing them. This would reduce

the amount of CO2 released into the environment and the amount of potentially harmful

chemical dyes that end up in lakes and streams. New ways to recycle fibers and cleaning

chemicals that only need to be heated to a low temperature

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Part – 3
For a better understanding of what makes a product valuable, the Harvard Business Review
established The Elements of Value. Customers' purchasing decisions are influenced by a set of
30 fundamental "building blocks" of
value, according to the study. A wide variety of exterior and internal demands that customers are
looking to satisfy are included.
Functional Product Values: Level 1
Having functional aspects is a must, even if the other three value categories are equally
significant.
Emotional Product Values: Level 2
If you want your customers to buy your goods, you will need to include emotional value factors
into your marketing strategy.
Life-Changing Product Values: Level 3
The promise of a personal change is implied when your offering has life-changing value aspects.
Social Impact Product Values: Level 4
You are at the top of the pyramid when you are offering value that affects a wider audience than
just your customers.
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Arcuri, A. and Giolli, L. (2022). The relationship between upstream vertical integration and
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Cameron, K., Al-moukadem, S., Boutilier, M., Hamilton, M., Jeffcoat, A., Lee, M., Martina, M.
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