Case Study Description of INDITEX: Outsourcing in Tanger
Centers on the Inditex Group (Industria del Diseno Textil), a Spanish corporation that ranks among the world fashion industry leaders along with companies such as GAP, Nike, Benetton, and H&M. Inditex owns several brands, including Zara, Pull and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home, and Kiddy's Class. To respond to repeated attacks by NGOs, the company had initially pursued a reactive corporate social responsibility (CSR) strategy. However, it was now actively working on the implementation of a CSR plan that spanned its whole production and sales processes, focusing on working conditions at the company's manufacture outsourcing shops. Its strategy addressed profound structural changes undergone by the industry and the company itself. While in 1980 all production operations were based in Spain, by 2003 Inditex had expanded to include production centers as well as certified suppliers in the Americas, Africa, Europe, and Asia. On the other hand, the initially family-owned company had gone public at a world level. At the time, several NGOs had begun to look into and report on the overall textile sector in the midst of a campaign against labor exploitation, child labor, and corporate social irresponsibility at large. This situation posed new challenges for the company, especially regarding labor, and workers' social and economic conditions. In order to face these challenges, a Corporate Social Responsibility Department and a Social Council were created to ensure that corporate actions reflected the company's social responsibility and commitment and to communicate sustainability values and respect for human rights across the board.
Swot Analysis of "INDITEX: Outsourcing in Tanger" written by Alfred Vernis includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Inditex Social facing as an external strategic factors. Some of the topics covered in INDITEX: Outsourcing in Tanger case study are - Strategic Management Strategies, Social responsibility, Strategy and Global Business.
Some of the macro environment factors that can be used to understand the INDITEX: Outsourcing in Tanger casestudy better are - – wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing commodity prices, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies,
geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of INDITEX: Outsourcing in Tanger
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in INDITEX: Outsourcing in Tanger case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Inditex Social, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Inditex Social operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of INDITEX: Outsourcing in Tanger can be done for the following purposes –
1. Strategic planning using facts provided in INDITEX: Outsourcing in Tanger case study
2. Improving business portfolio management of Inditex Social
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Inditex Social
Strengths INDITEX: Outsourcing in Tanger | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Inditex Social in INDITEX: Outsourcing in Tanger Harvard Business Review case study are -
Ability to lead change in Global Business field
– Inditex Social is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Inditex Social in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Inditex Social are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Inditex Social in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Inditex Social has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study INDITEX: Outsourcing in Tanger - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Inditex Social is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Alfred Vernis can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Inditex Social
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Inditex Social does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Inditex Social has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in INDITEX: Outsourcing in Tanger Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Inditex Social has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Inditex Social to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Global Business industry
– INDITEX: Outsourcing in Tanger firm has clearly differentiated products in the market place. This has enabled Inditex Social to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Inditex Social to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Inditex Social in the sector have low bargaining power. INDITEX: Outsourcing in Tanger has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Inditex Social to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Inditex Social has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in INDITEX: Outsourcing in Tanger HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Inditex Social is one of the most innovative firm in sector. Manager in INDITEX: Outsourcing in Tanger Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses INDITEX: Outsourcing in Tanger | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of INDITEX: Outsourcing in Tanger are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study INDITEX: Outsourcing in Tanger, it seems that the employees of Inditex Social don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the INDITEX: Outsourcing in Tanger HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Inditex Social has relatively successful track record of launching new products.
Aligning sales with marketing
– It come across in the case study INDITEX: Outsourcing in Tanger that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case INDITEX: Outsourcing in Tanger can leverage the sales team experience to cultivate customer relationships as Inditex Social is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As INDITEX: Outsourcing in Tanger HBR case study mentions - Inditex Social takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
No frontier risks strategy
– After analyzing the HBR case study INDITEX: Outsourcing in Tanger, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Alfred Vernis suggests that, Inditex Social is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Products dominated business model
– Even though Inditex Social has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - INDITEX: Outsourcing in Tanger should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Inditex Social products
– To increase the profitability and margins on the products, Inditex Social needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study INDITEX: Outsourcing in Tanger, is just above the industry average. Inditex Social needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study INDITEX: Outsourcing in Tanger has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Inditex Social 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Inditex Social, firm in the HBR case study INDITEX: Outsourcing in Tanger needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities INDITEX: Outsourcing in Tanger | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study INDITEX: Outsourcing in Tanger are -
Learning at scale
– Online learning technologies has now opened space for Inditex Social to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– Inditex Social has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Inditex Social can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Better consumer reach
– The expansion of the 5G network will help Inditex Social to increase its market reach. Inditex Social will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Inditex Social can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Inditex Social can use these opportunities to build new business models that can help the communities that Inditex Social operates in. Secondly it can use opportunities from government spending in Global Business sector.
Using analytics as competitive advantage
– Inditex Social has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study INDITEX: Outsourcing in Tanger - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Inditex Social to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Inditex Social to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Inditex Social can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. INDITEX: Outsourcing in Tanger suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Inditex Social can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Inditex Social is facing challenges because of the dominance of functional experts in the organization. INDITEX: Outsourcing in Tanger case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Inditex Social to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Inditex Social to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Inditex Social has opened avenues for new revenue streams for the organization in the industry. This can help Inditex Social to build a more holistic ecosystem as suggested in the INDITEX: Outsourcing in Tanger case study. Inditex Social can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats INDITEX: Outsourcing in Tanger External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study INDITEX: Outsourcing in Tanger are -
Shortening product life cycle
– it is one of the major threat that Inditex Social is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Inditex Social in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Inditex Social will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Inditex Social high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Inditex Social needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Inditex Social can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Consumer confidence and its impact on Inditex Social demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Inditex Social with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Inditex Social needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study INDITEX: Outsourcing in Tanger, Inditex Social may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Regulatory challenges
– Inditex Social needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Inditex Social in the Global Business sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Increasing wage structure of Inditex Social
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Inditex Social.
Weighted SWOT Analysis of INDITEX: Outsourcing in Tanger Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study INDITEX: Outsourcing in Tanger needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study INDITEX: Outsourcing in Tanger is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study INDITEX: Outsourcing in Tanger is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of INDITEX: Outsourcing in Tanger is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Inditex Social needs to make to build a sustainable competitive advantage.
