After finishing up the macro final, I decided to head home to take the Strategy final from the comfort of my home, in the presence of Mr. Porter and some other competitive strategy research papers. I know you are not supposed to use outside knowledge in these finals (course policy) but it helps me when doing strategy. 15 minutes into the drive, I had a flat tire! Roadside assistance took about an hour to arrive, and by the time I was patched up, there was no time left to take the 45 minute trip home. So I decided to step into the local Starbucks, that mercifully had a fast and free WiFi, and waited for the professor to upload our case.

Hello Zara!

The case was on Zara’s emergence in the apparel and accessories market, over and above GAP and H&M. After reading through the 6 page case, I set about answering the 4 questions from Prof. Rui de Figueiredo : 1) Provide a brief overview of the determinants of industry profitability as suggested by a Five Forces Analysis, 2) Characterize Zara’s competitive position and some of the distinct choices that the firm is making. Examine the extent to which these choices are mutually reinforcing of the firm’s competitive position, or possibly working in conflict with one another, 3)  Assess the sustainability of Zara’s apparent competitive advantage, and 4) Zara has chosen to engage in a high degree of vertical integration. Explain the rationale for this and consider whether this full ownership approach is superior to alternative governance mechanisms. We had 3 hours 30 minutes to write a response to these questions. I spent about 45 minutes reading the case, 35 minutes on question 1, 60 minutes on question 2, 30 minutes on question 3 and 33 minutes on question 4. I uploaded the completed exam into bspace at 5:58pm with 2 minutes to spare.

The first question was relatively easy and in hindsight, I feel I should have saved some time on it. I drew up the Five Forces table, and came to the conclusion that the industry has high barriers to entry, moderate rate of substitution, moderate buyer power, low supplier power and highly intense rivalry. Gasp. I added some data from the case to support my conclusions (thankfully). I spent an awful amount of time on the second question but really enjoyed answering it. I drew up Zara’s competitive position as having dual advantage compared to competitors that varied from the industry average, successfully differentiated and one that is successful low-cost. The advantage stems from low cost inputs into the production cycle, using local coops without contractual obligations for stitching, using subsidiaries for making dye purchases, to being differentiated at the product level, with unique and locally customized apparel, limited production runs and data gathering models used in stores. I was left with an hour to answer the remaining two questions, and proceeded to draw up the data I had from the case in a tabular format to help me model the response. Finally, on to question 4! I did not have much gas left in the tank at this point, so it was a strained effort at best, but I managed to put up a decent picture of the advantages of vertical integration.

I was exhausted at this point, and the small table-hard chair combo at Starbucks, was a reminder to the unlucky turn my day had taken. But I was thankful for having finished both my exams on the same day. Wow, what a feeling: First year is over!