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Outsourcing Versus Vertical Integration in the Fast Fashion Apparel Industry: A Case Study of Inditex , H&M, and G

Outsourcing Versus Vertical Integration in the Fast Fashion Apparel Industry: A Case Study of Inditex , H&M, and Gap Presented by Emily Zhang- Economics Mentor: Dr. Gang Sun, Textile and Clothing Department. Special thanks to the MURALS Program and Dr. Hope Medina . Presentation outline.

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Outsourcing Versus Vertical Integration in the Fast Fashion Apparel Industry: A Case Study of Inditex , H&M, and G

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  1. Outsourcing Versus Vertical Integration in the Fast Fashion Apparel Industry: A Case Study of Inditex, H&M, and Gap Presented by Emily Zhang- Economics Mentor: Dr. Gang Sun, Textile and Clothing Department

  2. Special thanks to the MURALS Program and Dr. Hope Medina

  3. Presentation outline • Definition • Company introduction • Financial data analysis • Conclusion • Further study direction

  4. Definition

  5. Raw Material Networks Components Networks Production Networks Distribution Retail Brand Name Companies Logistics Natural and Synthetic Fibers Natural and Synthetic Fabrics Clothing Manufacturing Inditex, H&M, Gap Retail Stores, Outlets, Catalog, E-commerce The Apparel Industry Value Chain Source: Appelbaum and Gereffi (1994) A value chain is a chain of activities for a firm operating in a specific industry. Each additional activity along the chain adds more value to the final products.

  6. Definition Continued Fast Fashion: A contemporary term used by fashion retailers to acknowledge that designs move from catwalk to store in the fastest time to capture current trends in the market. Vertical integration: A strategy of production management control, to gain ownership of companies or activities along the business’ value chain. Backward integration: A fashion retailer establishes ownership of a clothing factory. Forward integration: A clothing manufacture establishes ownership of a fashion store.

  7. Company introduction

  8. Company introductioninditex CEO: Pablo Isla Founder: AmancioOrgega Founded in 1963 No.5 richest man worldwide

  9. Company INTRODUCTIONH&M CEO: Karl-Johan Persson Founder: ErlingPersson His son: Stephan Persson is the No.7 richest man worldwide Founded in 1947 H&M, COS(timeless and distinctive trends), Monki(creativity&expression), Weekeday, and CheapMonday

  10. Company introductiongap CEO: Glenn Murphy Founder: Donald Fisher and Doris Fisher Founded in 1969

  11. Company introductionComparison

  12. Company introductionComparison Inditex has a more diversified market strategy with more brands targeting at different countries and customer groups

  13. Inditex, store growth rate: 105% Company introductionComparison Gap, store growth rate:6% H&M, store growth rate:109%

  14. Financial data analysis

  15. H&M

  16. H&M, average:13.60% Inditex/Zara, average: 11.61% Gap, average: 5.75%

  17. Conlusion • Vertical integration is not necessarily a profiblestrategyfor Gap, because H&M and Gap both outsources nearly 100% of their production to factories in Asia and Europe, however, H&M is two times profitable than GAP and is expanding rapidly. • What is wrong?

  18. Design AND VARIETY& Pricing stretegy $60 $80 $25 Gap’s clothing line is considered “dull,” yet pricy.

  19. Further direction In-depth study on the factors that drive H&M profitable and efficient when it outsources 100% of its production Questions? Thank you!

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