Zara has achieved excellent financial status thanks to its core competencies that provide the chain with a great competitive advantage over traditional retailers and other competitors in the industry. In general, retailers outsource a major portion of their production by focusing on retailing and marketing products. This is because the apparel industry is “labour-intensive” globally and not capital-intensive. Fashion retailers and clothing manufacturers are always trying to reduce costs by outsourcing production to developing countries that offer the lowest labor rates. In contrast, Zara has developed a diverse and rich method of doing business in the fashion industry. Zara operates across the entire value chain and is very vertically integrated and capital intensive. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay Vertical integration, a distinctive feature of Zara's business model, has helped the company develop a strong advertising strategy. This strategy allowed Zara to create an environment of scarcity, opportunity, and a fast fashion system. Zara produces over 60% of its own products. Because Zara owns in-house production, flexibility in the variety, frequency and quantity of new styles produced has proliferated. Furthermore, 85% of this production is carried out throughout the season, which allows the chain to constantly provide its customers with trendy and up-to-date products. Traditional retailers don't have this level of flexibility. Traditional retailers are required to place production orders with overseas manufacturers at least 6 months before each particular season. Instead of pushing its factories to maximize production, the company deliberately leaves in extra capacity. Instead of pursuing economies of scale, Zara produces and distributes products in small batches. Instead of depending on external partners for manufacturing and logistics, the company manages all design, distribution and warehousing functions itself. Its daily operating procedures also differ from those of traditional operators. Their retail stores follow a strict timetable for placing orders and receiving stock. Price tags are placed on items before shipping, rather than at the final stores. Large areas are left empty in its expensive retail stores. They tolerate, and even encourage, occasional stockouts. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay The logic behind Zara's production in small batches works brilliantly in creating a sense of exclusivity. Customers need to make quick purchasing decisions as there is always a high possibility that the stock will run out the other day. Therefore customers visit Zara stores to see new products more often. This creates a huge amount of traffic and revenue. Each of the product development teams has its own designers, procurement, sales and production planners, just like in cellular manufacturing. This helps Zara to significantly simplify internal communication. As Zara believes in time-based competition, automation is the vital component that helps in increasing the speed and accuracy of their operations.