Specialized skills rapid information exchange and sub contracting assembly to

Specialized skills rapid information exchange and sub

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Specialized skills, rapid information exchange and sub-contracting assembly to small workshops that enhance locational advantages kept transaction costs low (Belussi, 1992). Benetton came to be seen as representative of small firms that were part of a vertically-disaggregated institutional setting that encouraged network growth and enabled many to capitalize upon the commodification of Italian ‘style’ (Taplin, 2006a). By avoiding price-sensitive products, firms could be innovative and focus upon niche markets rather than economies of scale for efficiency (Guercini, 2004). In other words, Benetton demonstrated that you did not need mass production or Fordist production methods requiring long production runs to gain the requisite cost, quality and distribution efficiency gains. Notwithstanding its early innovative logistical skills, Benetton recently lost touch with market trends for younger consumers and significantly over-expanded ( The Economist , 2012). Unable to accurately monitor consumer trends in the fast-changing
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255 GLOBAL COMMODITY CHAINS AND FAST FASHION fashion-basic segment, their clothes lacked the ‘trendy’ appeal and, despite their sensational advertisements (designed for shock recognition), it has lost market share to a new category of retailers that has been better able to combine cost, quality, fashion content and distribution speed. Benetton’s success was as a higher value- added but also relatively expensive fashionable producer; the new competition com- bined fashionability with low cost — something Benetton’s organizational model (and manufacturing) location could not match (Guercini, 2004). Companies such as Inditex (Zara), H&M, Top Shop and Forever 21 expanded the Benetton logistics and distribution model, refined the structure of throughput and product turnaround, and developed a better grasp of what consumers wanted (cheap stylish clothes) and when they wanted it (immediate gratification). In other words, they have been able to more systematically integrate supply and demand, providing a large variety of inexpensive fashion-basic garments. One company, Zara, has done this initially through a vertically-integrated production model, with local sourcing of production in Spain, Portugal and North Africa. Here, speed to market and lower inventory costs coun- terbalance higher manufacturing labour costs. H&M, on the other hand, relies upon a similar differentiation of fashion-basic garments, but with low costs derived from largely sourcing production via sub-contractor networks in Asia, most recently in Bangladesh. In the next section, I examine Zara and H&M: two companies that have been in the forefront of retailing innovations. Each was chosen because it is representative of a particular strategy in this transformation; has continued to see above-average returns on investment; and is seen as the embodiment of fast fashion by many con- sumers. Both have an abundant source of secondary information on them, especially their logistical operations, costing structure and basic strategic goals.
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