Sourcing is a topic on every managers' plate.
Once you have decided to enter a market you will have to determine where and how you will allocate your resources.
Inditex and H&M are two companies with a leading position in retail clothing industry.
The companies have been compared in various studies; " Zara fashion follower, industry leader," which details some differences:" H&M differs from Zara because they outsource all of their production, spend more money on advertising, and is price-oriented.
" (1) This article focuses only on one difference: the one of sourcing.
H&M has outsourced all its production to nearly 700 suppliers (2).
This difference is more important than nearly any other differences between the two companies if you compare strategic choices.
The choice to fulfill your own production.
The second analysis report mentioned above also discusses the difference in organizational purpose.
This can either be the shareholder value perspective or the stakeholder perspective.
Not mentioned in the abstract (2) but a plausible contribution to the stakeholder focus of Inditex is this very fact of own production.
This bears in mind the employment factor.
Part of the strategy of Philips consumer products is to outsource the production and to focus merely on (new) design.
This seems similar to the strategy of H&M.
With one difference: both Inditex and H&M are followers and not leading in design.
H&M is because of the strategy to outsourced much more flexible than Inditex.
There is also much more knowledge where they can profit from when working with 700 suppliers, a knowledge that Inditex will miss.
The experience to manage a broad network of suppliers is another differentiator.
This contributes to the reason that H&M is focusing more on "related industries" as a way to expansion where Inditex's it's growth path is more regional.
The related industries option could be the result of a too broad management focus where management gets influenced by the possibilities offered from of all those suppliers, rather than on pursuing their own path.
Who is managing who in such a situation? This is a risk factor for a company that chooses flexibility; more flexible on one hand by outsourcing but also more vulnerable because of depending on the input of others.
(1) http://www.
philau.
edu/SBA/News/ZaraReport.
pdf (2) [http://www.
grin.
com/en/preview/69290.
html] © 2007 Hans Bool