Inditex Case Study

â€Å" INDITEX GROUP – ARE ITS â€Å"FAST FASHION† RESULTS SPEEDING UP AGAIN AFTER RECENT SLOW DOWNS ? † This case study has been written exclusively for use on the course Strategic Financial Management FINA 1035 at Greenwich University Business School and its partner institutions. It is to be used exclusively for this purpose. No part may be copied , emailed or reproduced for any other purpose other than stated above. Much of the data and material included in the case study is taken from the annual reports and accounts of the Inditex Group, its public statements and from its website . nditex. com. All other sources are shown in the case study. Author : Scott Duncan Lecturer Greenwich University Business School July 2010 INDITEX GROUP – ARE ITS â€Å"FAST FASHION† RESULTS SPEEDING UP AGAIN AFTER RECENT SLOW DOWNS ? Intr oduction Inditex Group – the owner of the Zara fashion chain and the world’s largest clothing and apparel group in te rms of sales – reported encouraging results for its first quarter of 2010.The Financial Times reported in June 2010 1) : â€Å"Inditex lent its weight to hopes of a recovery in European demand as the continent’s biggest fashion chain delivered forecast-beating first-quarter net profits and confirmed it would be moving its fast-fashion offer online later this year. Europe’s biggest clothing chain reported a 14 per cent increase in net sales to â‚ ¬2. 66bn ($3. 2bn) in the three months to the end of April 2010, as net income rose 63 per cent to â‚ ¬301m in response to, in particular, demand for its sharp-shouldered jackets and draped harem trousers. Sales rose 13 per cent from the beginning of February to June.The uptick comes after Hennes & Mauritz in April raised hopes of recovery in the European retail sector when it also beat net profit expectations in its first-quarter results and reported signs of improvement in the market at the start of the second q uarter. Inditex has been upbeat on prospects for the current year, with Pablo Isla, chief executive, predicting that same-store sales growth should turn positive again after a negative 2008 and virtually flat 2009. Mr Isla, who sells a third of all his clothes in Spain, was even upbeat about his home market on Wednesday. [The] reality in Spain is better than the perception you may have. I personally have a strong confidence in the dynamism of the Spanish economy going forward. † The gross margin, meanwhile rose to 59. 9 per cent against 56. 9 per cent. â€Å"[It is] likely to lead to consensus upgrades,† wrote Andrew Hughes, analyst at UBS, in a note. The shares rose 5 per cent to â‚ ¬46. 11. â€Å"Despite concerns of slower sales growth into the second quarter and as the year progresses, the first quarter beat [expectations] and stronger gross margin trends should more than compensate,† Mr Hughes added.Analysts also welcomed the news that Zara, which still ma kes a third of all its sales in Spain, would start trading online at the beginning of September in its main European markets: France, Germany, Italy , Portugal, Spain and the UK. â€Å"Online should act as a downward protection for trading news in the second half,† wrote Bernstein in a note. During the period, Inditex opened 98 stores in 29 countries, taking its footprint to nearly 5,000 stores in 76 nations around the world. Last month, it opened its first Indian shop in Delhi†.Histor y of Inditex Gr oup 2) Industria de Diseno Textil (Inditex) makes disposable chic fashions that are here today and gone tomorrow. The Spanish designer-cum-retailer uses technology and an armada of designers to master cheap chic. Inditex sells on a global scale, with over 4700 shops in 76 countries under eight different retail brands each offering different customer propositions : Stor e Br and Zara Zara Kids Pull and Bear Massimo Dutti Pr imar y Offer ing Mar ket 3) and Tar get Women†™s and men’s clothes.Childrens’ clothes Young women and men’s casual and â€Å"laid back† clothes and accessories Men’s and women’s clothes for the more â€Å"sophisticated† shopper. Also sells some children’s clothes Young women’s and men’s clothes . Stores have â€Å"cutting edge† look and are meeting points for fashion, music and street art Latest trends in young women’s clothes and accessories Women’s underwear, lingerie and nightwear Items for home eg home textiles, bedclothes, bathroom and table linen, glassware, cutlery and children’s bedding Fashion accessories eg handbags , footwear, leather goods and costume jewelleryBershka Stradivarius Oysho Zara Home Uterque The firm's stores answer to popular trends by telling designers in Spain what customers are asking for locally. Inditex responds in about two weeks with new designs. Amancio Ortega Gaona, Spain's wealthiest businessma n, founded Zara in 1975 and later created Inditex as a holding company. He got his start in the clothing business at the age of 13, when he went to work for a local shirtmaker in A Coruna , Spain, delivering the shop's goods, which included lingerie and dressing gowns.Ortega worked his way up to become an assistant manager, then shop manager, by the early 1960s. These positions gave Ortega experience not only in dealing directly with customers but also in purchasing fabrics and other materials for the shop's line of apparel. Working out of his sister's home, Ortega began developing his own designs. One day in the early 1960s, he hit upon the formula that was to become central to the operations of Inditex: that of reproducing popular fashions using less expensive materials in order to sell highdemand clothing items at lower prices.Ortega left his job and set up in business with just 5,000 pesetas (the equivalent of $25). Legend has it that Ortega's first project was to remake a popul ar but expensive dressing gown. Ortega cut the pattern himself, then, with the help of his brother and sister, began producing the dressing gown at his sister's kitchen table. Ortega's first customer was his former employer at the shirtmaker's shop. Before long, Ortega began supplying the dressing gown, as well as a growing range of housecoats and lingerie, to other clothing shops in A Coruna.By 1963, Ortega had saved up enough to open his first factory. From manufacturing, Ortega soon turned to retail, launching an initial format for his housecoats and lingerie in the early 1970s. In 1975, however, Ortega, then 39 years old, hit upon the formula that was to bring him his biggest success. In that year, Ortega opened a new retail store called Zara, which featured low-priced lookalike products of popular, higher-end clothing fashions. The store proved a success, and the following year Ortega incorporated his business under the name Goasam and began opening more Zara stores in Spain.De spite the stores' growing popularity, Ortega himself remained decidedly behind the scenes, avoiding the spotlight and developing a reputation for himself as a recluse–no photographs of Ortega were made publicly available until 2001. By the early 1980s, Ortega had begun formulating a new type of design and distribution model. The clothing industry followed design and production processes that required long lead times, often up to six months, between the initial design of a garment and its delivery to retailers. This model effectively limited manufacturers and distributors to just two or three collections per year.Predicting consumer tastes ahead of time presented inherent difficulties, and producers and distributors faced the constant risk of becoming saddled with unsold inventory. Ortega sought a means of breaking the model by creating what he called â€Å"instant† or â€Å"fast fashions† that allowed him to quickly respond to shifts in consumer tastes and to ne wly emerging trends. Ortega's dream remained unfulfilled, however, until he met up with Jose Maria Castellano. A computer expert, Castellano had worked in Aegon Espana's information technology department before becoming chief financial officer for a Spanish subsidiary of ConAgra.Castellano joined Ortega in 1984 and set to work developing a distribution model that revolutionized the global clothing industry. Under Castellano's computerized system, the company reduced its design to distribution process to just 10 to 15 days. Rather than placing the design burden on a single designer, the company developed its own in-house team of designers–more than 200 by the turn of the 21st century – who began developing clothes based on popular fashions, while at the same time producing the company's own designs.In this way, the team was able to respond almost immediately to emerging consumer trends as well as to the demands of the company's own customers – for instance by add ing new colors or patterns to existing designs. State-of-the-art production and warehousing procedures, as well as the installation of computerized inventory systems linking stores to the company's growing number of factories, enabled the company to avoid taking on the risk and capital outlay of developing and maintaining a large back inventory. The leaner, more responsive company – which adopted the name of Industria de Diseno Textil S.A. , or Inditex, in 1985 – captured the attention of Spanish shoppers. By the end of the decade, the company had opened more than 80 Zara stores in Spain. The company's fast fashion model, which completely rotated its retail stock every two weeks, also encouraged customers to return often to its stores, with delivery day becoming known as â€Å"Z-day† in some markets. The knowledge that clothing items would not be available for very long also encouraged shoppers to make their purchases more quickly. The success of the Zara model in Spain led Inditex to the international market at the end of the 1980s.In 1988, the company opened its first foreign store in Oporto, Portugal. The following year, Inditex moved into the United States. Success in that market remained elusive, however, and at the beginning of the 2000s, the company had opened just six U. S. stores. A more receptive market for the Zara format existed in France, which Inditex entered in 1990. The company quickly began adding new stores in major city centers throughout the country. Through the 1990s, Inditex added a steady stream of new markets. The company entered Mexico in 1992, Greece in 1993, Belgium and Sweden in 1994, Malta in 1995, and Cyprus in 1996.In the late 1990s, Inditex stepped up the pace of its international expansion, adding Israel, Norway, Turkey, and Japan (the latter in a joint-venture with a local partner) in 1997, then, in 1998, moved into Argentina, the United Kingdom, and Venezuela. While the bulk of the group's stores remained company owned, in certain markets, such as the Middle East, starting in 1998, Inditex's expansion took place through franchise agreements with local distributors. By 2000, Inditex had added another dozen or so countries to its range of operations, including Germany, the Netherlands, and Eastern European markets including Poland.At the same time as Inditex pursued its geographic expansion, it also began expanding beyond its flagship Zara retail format. The company launched the Kiddy's Class children's wear format as a subgroup of the main Zara concept in the early 1990s. In 1991, the company added an entirely new retail format, Pull & Bear, which began providing â€Å"urban† fashions. By the beginning of the 2000s, the Pull & Bear chain had grown to 300 stores in nearly 20 countries; it also produced its own offshoot format, Often, targeting the 20- to 45-year-old men's segment, in 2003.Inditex went upmarket in 1991 when it bought 65 percent of the Massimo Dutti group. Indite x took full control of Massimo Dutti in 1995 and began building it into a chain of nearly 300 stores in 23 countries. While Massimo Dutti appealed to a more sophisticated men's and women's fashions market, the company targeted the young female market in 1998 with the creation of a new format, Bershka. That retail chain quickly evolved into a network of more than 200 stores operating in 11 countries. Inditex continued adding new formats at the turn of the 21st century.In 1999, the company acquired Stradivarius, a youth fashion chain present in nine countries. In 2001, Inditex added its lingerie format, Oysho. In 2003, Inditex moved beyond the garment trade for the first time, launching its own home furnishings concept, Zara's Home and in 2008, launched its fashion accessories chain – Uterque. Meanwhile, Inditex had begun a corporate evolution as well. As Ortega approached retirement, and no members of his immediate family appeared likely to succeed him in the business, the com pany looked to the public market to ensure its future.In 2001, Inditex listed its stock on the Bolsa de Madrid, one of the most successful initial public offerings of the year. Ortega's sale of more than 20 percent of his holding in Inditex made him Spain's wealthiest man. In 2010, he still controls 59% of Inditex’s shares (see Annex 1) and was ranked by Forbes Magazine as the 9th richest man in the world in their annual list of billionaires – up 1 place from his ranking in 2009 – with a net worth estimated at $25 billion. He is now 74 years old. Inditex moved to a new corporate headquarters in Arteixo, outside of A Coruna in 2000.In 2002, the company began construction on a state-of-the-art logistics center in Zaragoza. At the same time, Inditex continued adding to its array of international markets, opening stores in Luxembourg, Iceland, Ireland, Jordan, and Puerto Rico in 2001; Switzerland, Finland, El Salvador, and Singapore in 2002; and Hong Kong in 2003. I n the 6 years from 2004, Inditex has more than doubled its number of stores from just over 2000 in mid 2004 to over 4600 by 31 January 2010. Inditex’s financial year end is 31 January.In line with Inditex’s annual reports, this case study refers to its year ending 31 January 2010 as â€Å"Financial year 2009† or â€Å"2009†. Similar abbreviations are made for earlier years . Inditex Gr oup Stor e Number s and Locations in 2010 At financial year end for Inditex for 2009 – 31 January 2010 – Inditex had 4607 stores as follows: The analysis of Inditex’ s 2009 sales for each of its 8 store concepts was as follows : Within the total, 3983 were company managed stores and 624 were franchised – see Annex 2 for details. In 2009, 92% of sales were in company owned stores.Geographically, 1900 of the stores were in Spain, 1856 stores were in other European countries, 485 stores were in Asia and Africa and 366 stores were in North and South America – see Annex 3 for details. The Group opened 343 stores in 2009 and increased its retail network in all of Europe's major markets with noteworthy growth in Russia (37 new stores) and Poland (34). In Asia, Inditex continued its strategic push into the region’s top three markets, which posted significant growth, with 41 new stores in China, 12 in South Korea and 10 in Japan.Retail sales area increased by 8% in 2009 – see Annex 4 for details by store concept. During its first quarter 2010 from 1 February to 30 April , Inditex opened a further 98 stores as follows : This took the total number of stores to 4705 at 30 April 2010. The percentage of Inditex’s sales achieved in each geographical region for the last 3 financial years was as follows : 2009 31. 8 % 45. 7 10. 2 12. 2 2008 33. 9 % 44. 8 10. 7 10. 5 2007 37. 5 % 42. 4 10. 8 9. 4 Spain Europe excl.Spain Americas Asia The Mar ket The apparel retail industry consists of the sale of all menswear, wom enswear and childrenswear. The sector also includes footwear, sportswear and accessories. The menswear sector includes all garments made for men and boys. It includes both outer and under garments. The womenswear sector consists of the retail sale of all women's and girls' garments including dresses, suits and coats, jackets, tops, shirts, skirts, blouses, sweatshirts, sweaters and underwear .Both womenswear and menswear can be segmented by: – purpose or use of the clothing item eg casual wear, essentials, activewear, formal wear , special occasion formal wear and outerwear – age group – lifestyle eg â€Å"sporty†, â€Å"conservative † , â€Å"fashion conscious† , â€Å"hippie†, â€Å"urban†, â€Å"rural† – ethnic group styles eg Afro-Caribbean , African American , Asian or middle eastern or music group styles eg â€Å"rapper†, â€Å"reggie†, â€Å"punk†, â€Å"rocker† – price eg ranges from low price to expensive designer label to exclusive â€Å"haute couture† of Paris, Milan, London, Tokyo and New York or by a combination of these factors.The childrenswear sector is defined as sales of garments for children between the ages of 0-2 years. The socio-political environments coupled with the need for individual and group identity makes retail clothing essential to consumers. Style, however, is an abstract concept that defines individuals, is often an extension of personality and therefore highly individualized. Fashion, by its very nature, is unpredictable. The products are determined by trends in society, designers and creative industries and are subject to sharp and unpredictable changes.Where customer brand loyalty exists, it is more likely to be to the designer than the retailer, although this is usually towards the top end of the industry. Counterfeiting of brands is a problem in parts of the clothing and accessories industry. Mar ket in Eur ope T he European apparel retail industry grew by 2. 1% in 2008 to reach a value of â‚ ¬287. 7billion ($420. 9 billion). Its recent history per Datamonitor 4) was as follows : The consumer market for clothing and footwear in the European Union (or EU) has undergone important changes in recent years 5).Arguably, the greatest impact has come from market forces under the auspices of the World Trade Organisation (WTO) as a ten-year transitional Agreement on Textiles and Clothing (ATC) came to an end with the abolition of textile and clothing import quotas on 31 December 2004. With the removal of quotas, there was an initial increase in relatively cheap imports of clothing and footwear into the EU, mainly originating from China. For example, in the first 40 days after the end of the ATC, imports of trousers from China were 3. 3 times higher than during the whole of 2004 and imports of pullovers 4. times higher. A bilateral agreement between the EU and China (the so-called Shanghai Agreement ) on a further, transitional period during which the growth of imports of clothing could be managed through until the end of 2007 was agreed in June 2005. In addition to trade developments, consumer groups and other bodies are increasingly holding manufacturers and retailers accountable for ensuring that social standards and working conditions of their suppliers meet international labour standards. There are examples of retailers responding to this pressure.For example, in October 2007 the Inditex group signed an International Framework Agreement on corporate social responsibility with the International Textile, Garment and Leather Workers’ Federation (ITGLWF), which expresses the company’s commitment to respect fundamental rights at work throughout their entire production chain. Fair trade garment initiatives have also been taken, generally to ensure that a fair price is paid to producers who meet minimum social, and in some cases environmental, standards and that tra ding relationships between producers and buyers are more equal, rather than guaranteeing core labour standards.There has also been a response within the EU to concerns about environmental and safety issues. These concerns have predominantly focused on the use of chemicals (such as dyes, pigments or bleaches in the clothing manufacturing process) and on waste water discharge. On 1 June 2007, new legislation on chemicals and their safe use came into force across the EU. REACH (Registration, Evaluation and Authorisation of Chemicals) aims to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances.Within the EU 5) : – household expenditure on clothing and footwear accounted for 5. 7% of total household consumption expenditure in 2005 – The vast majority of this, almost three quarters, was spent on clothing garments – Spending on clothing and footwear tended to rise as a function of income, with the upper income 20 percent in the 27 countries of the EU devoting 6. 1% of their total household budget to these products, while those in the lowest income 20 percent spent 5 % – the share of total expenditure spent on clothing and footwear was generally much higher among households with dependent children, rising to 7. % of the household budget for those households comprising two adults with dependent children, compared with 4. 6 % of the budget for single persons. – Annual expenditure on clothing and footwear averaged â‚ ¬800 per person in the 27 countries of the EU in 2006, with national averages ranging from â‚ ¬100 per person in Romania to â‚ ¬1200 per person in Italy . See Annex 5 for details of 2000 and 2006 expenditure per person. – Over the period from 2000 to 2006 , the volume of clothing and footwear bought rose in most countries of the EU particularly in the United Kingdom and Poland where volumes increased by ov er 40%.In contrast , Germany and Italy reported declines in the volume of clothing and footwear bought (the only member states of the EU to do so). Details are shown at Annex 6 for the 6 countries which account for over 70% of the EU’s population – Germany, France, Italy ,UK, Spain and Poland . – Over the same 2000- 2006 period, whilst consumer prices for clothing and footwear declined by 0. 1% for the EU overall, there were substantial differences in the â€Å"Top 6† countries listed above.The UK recorded price decreases of over 20% , Poland of over 15% and Germany of over 2%, whilst price increases were recorded in Italy (over10%) , Spain ( over 13%) and France ( 1%) – see Annex 6. – Between 2007 and 2008 , the volume of clothing and footware bought in the EU overall declined by 0. 5% . France , Italy and Spain recorded declines of over 2% whilst Germany , UK and Poland recorded increases – see Annex 6. – In 2008 , UK househo lds spent less on average per week on clothing and footwear than at any time since 2001-02 6) – Early indications are that volumes also fell in 2009 versus 2008 in Europe.France reported a year on year decline of 3. 6% . a) Mar ket Segmentation by Gender and Age Womenswear sales dominated the European apparel retail industry in 2008 4) generating 54. 4% of the industry's overall revenues – â‚ ¬157 billion ($ 229 billion) . Menswear accounted for 30. 9 % – â‚ ¬89 billion ( $130 billion)- and Infantswear the remaining 14. 7%. Details of womenswear market growth and segmentation in Europe are shown at Annex 7 and of the menswear market in Europe at Annex 8. b) Analysis by Major Countr y Italy accounts for 19% of the European apparel retail industry's value , Germany 18. % and the UK 14. 4% . Shares for other countries are shown below: c) Mar ket Value For ecast The European apparel retail industry was forecast by Euromonitor to grow by only 1. 3 % in 2009 ver sus 2008 – including price changes. In 2013, the European apparel retail industry is forecast to have a value of â‚ ¬320 billion ($467. 6 billion), an increase of 11. 1% from 2008. Details are shown at Annex 9. d) Retail Sour ce of Pur chases Consumers in Europe are able to purchase clothing and footwear from a wide variety and large number of retailers, specialised and non- specialised.Specialist clothing and footwear retailers comprise chains (such as H, C or Zara) and independent clothes stores. Nonspecialist retailers include department stores (that have clothing and footwear departments), hypermarkets and supermarkets, as well as mail- order retailers. According to Datamonitor, 69% of purchases of womenswear and 55% of purchases of menswear in 2008 was in chains or independent specialist clothing, footwear and accessories shops . Purchases at hypermarkets, supermarkets and discounters accounted for 19. 5% of womenswear sales and 12. 1% of menswear with department stor es taking a 6. 9% of womenswear and 24. % of menswear in 2008 ( see Annexes 7 and 8). There are generally higher levels of retail concentration in northern Europe5). The overwhelming majority of clothing and footwear sales in Germany, France and particularly the United Kingdom are made in non-specialist stores. The popularity of independent clothing and footwear retailers is considerably higher in southern Europe. For example, in Italy and Spain, the highest proportion of clothing sales was among independent retailers (65% and 53 % respectively in 2004), and this tendency was even stronger in terms of footwear (76 % and 88 % respectively in 2003).Despite these differences, clothing markets in Europe are generally becoming more concentrated, as clothing chains, department stores and supermarkets/ hypermarkets selling clothing and footwear open additional outlets in many of the countries that have joined the EU since 2004. Indeed, the structural make-up of clothing retailers in the EU has changed considerably over the past 15 years, according to a 2007 report on ‘Business relations in the EU clothing chain’ carried out for and funded by the European Commission 5).The market share of independent retailers in the five largest EU markets (Italy, Spain, France, Germany and the United Kingdom, that together account for almost three quarters of the EU’s clothing market) declined from 46. 8 % of total clothing sales to 27. 1 % by 2007. In contrast, there was steady growth in the share of speciality chains (from 18. 7 % to 25. 1 %), hypermarkets and supermarkets (5. 1 % to 6. 8 %) and emerging formats such as variety stores and large sports chains (whose share of clothing sales collectively rose from 14. 0 % to 27. 2 %).A recent survey on consumer satisfaction 5) provides further information on the shopping habits of European consumers for clothing and footwear. More than half (55. 7%) of those surveyed in the EU in 2008 replied that they themselves or a member of their household had bought clothing and footwear in a retail chain store, a somewhat higher proportion than for small, independent clothing retailers (50. 2 %). Department stores (30. 7%), supermarkets/ hypermarkets (23. 0 %) and street markets (16. 3 %) were also popular places for buying clothes and footwear – see Annex 10.Furthermore, compared with a number of other products, a relatively high proportion of European consumers used mail or phone order (8. 0%) or the Internet (6. 1 %) to purchase clothing and footwear. When purchasing clothing and/or footwear in 2008, 10. 9 % of EU consumers reported facing at least one problem 5). The most common complaint was product quality (69% of unsatisfied customers) followed by problems returning unwanted goods (9. 2% of respondents) then quality of service provided (8. 8% of respondents). Details are shown at Annex 11.This data also provides an insight into consumers’ priorities when purchasing clothing and foo twear . Mar ket in USA Americans spent almost $326 billion on clothing and footwear in 2009 equivalent to only 2. 98% of disposable personal income – the lowest ever in U. S. history. Spending on clothing as a share of income has fallen in 20 out of the last 22 years, from 4. 78% in 1988 to less than 3% in 2009 – see Annex 12 for details . Quality, variety and availability have all improved over the years . The same applies to footwear.Since 1992, prices in general have risen by 57%, while prices for clothing have fallen by 8. 5% – see annex 13. With significantly falling prices in real terms, clothing has become more and more affordable almost every year, requiring smaller shares of US household income. This has freed up disposable income that can now be spent on other consumer goods (eg electronics, travel, entertainment, etc. ). Mar ket in Asia Pacific 7) The Asia-Pacific apparel retail market has been growing at a robust pace for the last few years. The Asia -Pacific apparel retail industry generated total revenues of $224. million in 2008, representing a compound annual growth rate (CAGR) of 4. 1% for the period spanning 2004–08. The performance of the industry is forecast to improve further and to reach a value of $259. 6 million by the end of 2013. Key Retail Competitor s Inditex’s key competitors in Europe include : Hennes and Mauritz ( H ) Levi Strauss ( via franchised and company managed stores and third party retailers) Adidas sportswear ( including Reebok ). In the UK, key competitors include Primark ( a division of Associated British Food) , Next, and Marks and Spencer . ASOS. com is a major retailer of men’s nd women’s clothes and accessories via the internet and is now the UK’s largest independent on-line fashion retailer. Worldwide, key competitors also include Gap and â€Å"Fast Retailing† (Japanese parent company of Uniqlo and Asia’s biggest clothing retailer). In terms of s ales value, Inditex overtook Gap in 2009 and is now the world’s largest clothing and apparel retailer. Summary financial profiles of Hennes and Mauritz, Levi Strauss , Primark and Gap are shown at Annexes 14 ,15 and 16. A recent article about the current prospects for â€Å"Fast Retailing† is shown at Annex 17. Manufactur ing Sour ces – Gener alKey suppliers to the retail clothing industry are clothing manufacturers and wholesalers, with retailers able to source from both. Recently, significant increases in power cost, dyes & chemical cost and rapidly rising cotton cost have strengthened supplier power in an industry that relies on the availability of raw material. The wholesale and clothing manufacturing sectors in most countries, however, are fairly fragmented. As international trade liberalizes, clothing manufacturers in the developed regions such as Europe and America face substantial competition from manufacturers in low-wage regions such as Asia eg from Ch ina. Apparel manufacturing is almost always labor intensive, due to the difficulty of automating processes such as the sewing of garments. ). Key issue for clothing retailers in selecting its suppliers include : – price and quality – volumes – the ability of its suppliers to cope with sudden changes in demand in an industry susceptible to changes in fashion – social, political and environmental pressures to ensure that suppliers in developing countries meet minimum international ethical standards for working, social and environmental conditions.Many major retailers such as Inditex, Gap and Primark now undertake regular audits of their suppliers to ensure that such standards are met and maintained and report their findings as part of their corporate social responsibility in their annual reports. Manufactur ing Pr ocesses The key processes used in garment manufacture are as follows: Cloth manufacturing ( eg cotton or wool) – spinning – weaving – dyeing – pattern printing – finishing. Certain aspects are labour intensive eg sewing . Garment manufacturing from the finished cloth: – cutting – sewing and assembly – buttons and accessories attachment.There have been many technological developments in materials used over recent years including non-iron shirts, washable silk and man- made fibres. Key Aspects of the Inditex Business Model 3) A) Over view The Inditex business model has a high degree of vertical integration compared to other models developed by its international competitors. It covers all phases of the fashion process: design, manufacture, logistics and distribution to its own managed stores and has a strong customer focus in all its business areas.The key element in the organisation is the store, a carefully designed space conceived to make customers comfortable as they discover fashion concepts. It is also where Inditex obtains the information required to adapt the offer to meet customer demands. The key to this model is the ability to adapt the offer to customer desires in the shortest time possible. For Inditex, time is the main factor to be considered, above and beyond production costs.Vertical integration enables Inditex to shorten turnaround times and achieve greater flexibility, reducing stock to a minimum and diminishing fashion risk to the greatest possible extent. B) Design The success of Inditex’s collections lies in the ability to recognise and assimilate the continuous changes in fashion, constantly designing new models that respond to customer desires. Inditex uses its flexible business model to adapt to changes occurring during a season, reacting to them by bringing new products to the stores in the shortest possible time.The models for each season -over 30,000 in 2009 – are developed in their entirety by the creative teams of the different chains. Over 300 designers -200 for Zara alone- take their main inspiration from both the prevailing trends in the fashion market and the customers themselves, through information received from the stores. C) Manufacturing A significant proportion of production takes place in the Group’s own factories, which mainly manufacture the most fashionable garments.The Group takes direct control of fabric supply, marking and cutting and the final finishing of garments, while subcontracting the garment- making stage to specialist firms located predominantly in the North-West of the Iberian peninsula. The Group’s external suppliers, a high percentage of which are European, generally receive the fabric and other elements necessary for making the clothing from Inditex. The number of garments produced and available for sale at Inditex’s stores has grown as follows from financial years 2005 to 2009 :On 31 January 2010, Inditex had a network of 1,237 suppliers with which it maintains stable relationships and which are governed by its External Manufacturers and Workshops Code of Conduct. This code describes the minimum ethical, working practice, quality, safety and environmental standards expected of its suppliers and must be accepted to maintain commercial relations with the Group. Further details of Inditex network of suppliers is shown at Annex 18. Inditex audits its network of suppliers regularly and ceased using 145 suppliers in 2009 and 175 in 2008 because of their non-compliance.In 2008, the manufacturing sources in terms of volumes of garments produced for Inditex were as follows : 46% 11% 36% 5% 2% European Union Non –EU Europe Asia Africa Americas D) Logistics All production, regardless of its origin, is received at the logistical centres for each chain, from where it is distributed simultaneously to all the stores worldwide. The distribution takes place twice a week and each delivery always includes new models, so that the stores are constantly refreshing their merchandise and offer.The logistics system, based on soft ware designed by the company’s own teams, means that the time between receiving an order at the distribution centre to the delivery of the goods in the store is on average 24 hours for European stores and a maximum of 48 hours for American or Asian stores. Inditex logistics centres are located in Arteixo (A Coruna), Naron (A Coruna), Zaragoza, Meco (Madrid), Tordera, Palafolls and Sallent de Llobregat (Barcelona), Leon and Elche (Alicante).Together, their surface area exceeds one million square metres. Further details are shown at Annex 19. In 2008, 700 million garments were distributed by 5000 employees at Inditex logistics centres. E) Stor es In Inditex, the point of sale is both the end and start of its value adding processes, as the stores act as market information gathering terminals, providing feedback to the design teams for each of the 8 formats and reporting the trends demanded by customers. As retailers, the stores constitute the chains’ main advertising medi um.Their chief characteristics include: – Preferred locations in the world’s main shopping streets – Meticulously designed window displays – Unique internal and external store design – Tailored coordination and display of the product – Excellent customer service. The main development strategy for the Inditex sales formats is the opening of stores managed by companies in which Inditex is the sole or majority shareholder. In 2009, 86% of stores were own managed. In smaller or culturally different markets, the Group has extended the store network through franchise agreements with leading local retail companies.The main characteristic of the Inditex franchise model is the total integration of franchised stores with own managed stores in terms of product, human resources, training, window- dressing, interior design and logistical optimisation. This ensures uniformity in store management criteria and a global image in the eyes of customer around t he world. F) Other Aspects of Mar keting 1) Internet Each of Inditex’s 8 store formats has its own website and these are constantly updated with the latest fashion offerings. In 2009 , the store websites were launched and included in social networking websites. 2) Affinity cardThe Intitex Affinity Card is the Group’s payment and loyalty card valid for its holders in any Group establishment: Zara, Massimo Dutti, Bershka, Pull and Bear, Stradivarius, Oysho, Zara Home and Uterque. Available in Spain for more than 15 years, the Affinity Card is also held by customers in Mexico and Greece where it was launched in 2007, and in Portugal where it has been available since 2008. Currently there are more than a million Affinity Card holders in these four countries. All of them have a card that offers financial advantages and methods of payment based on the holders’ needs. Inditex Financial Per for manceA summary of Inditex’s financial performance over the last 6 yea rs is as follows : Details of Inditex’s : – P for 2006 to 2009 are shown at Annexes 20-22 – sales and contributions by store format are shown at Annex 23 – balance sheets for 2006 to 2009 at Annexes 24 and 25 – 2006 to 2009 cash flow statements at Annexes 26 and 27. Details of Inditex’s 1st Quarter financial results for 2010 are shown at Annexes 28 and 29. Boar d of Dir ector s Shareholders approved the 2009 report at Inditex’s July 2010 Annual General Meeting including the proposed dividend of â‚ ¬748 million – up 13% on the previous year.Inditex’s share price closed at â‚ ¬51. 20 on 29 July 2010 – up 38% on its price of â‚ ¬38 a year ago – see Annex 30. The board of Inditex consisted of 9 Directors as at 31 January 2010 – 3 Executive Directors and 6 Non Executive Directors. The Executive Directors are : Amancio Ortega Gaona ( Chairman) Pablo Isla Alvarez de Tajera ( CEO and 1st Deputy Chai rman. Appointed to board in 2005) – Antonio Abril Abadin ( Board Secretary and General Counsel). Their total remuneration was â‚ ¬4. 35 million in the year ended 31 January 2010. The senior management of Inditex who are not executive directors is shown at Annex 32.Their total remuneration was â‚ ¬10. 9 million in the year to 31 January 2010. Details of the board including the 6 non executive directors are shown at Annex 31. – Employees Inditex is a multi-cultural and multi-racial company with 92,301 employees at 31 January 2010 representing more than 140 nationalities. On-going training plays an essential role, particularly that of store staff. This training, which also includes basics in customer service, focuses on specialist knowledge of fashion trends and the ability to seize and interpret the information that store staff receive from customers every day.The number of employees has grown as follows : The largest percentage are employed in the stores as follow s : Inditex directly owns 13 textile manufacturing companies in Spain and 12 logistic companies including one for each of its 8 store formats. Inditex also has its own in-house building contractor and several companies to manage its store and other properties. These companies are wholly owned by Inditex and their financial results and employee numbers are fully consolidated in those of the Inditex group. In 2009 : – 81. 4% of Inditex’s employees were female – 18. % were male – 40% of employees were full time – 60% were part time. Inditex’s Str ategy At his presentation at the July 2010 AGM, Inditex’s Deputy Chairman and CEO, Pablo Isla underscored confidence in the Inditex business model and its clear strategic focus on international expansion, currently targeted at European and Asian markets. He confirmed that Inditex has earmarked about â‚ ¬570 million in capital expenditure to open between 365 and 425 new stores in its financial year 2010 of which approximately 95% will be in Inditex’s international markets outside Spain.Some 70% of the appropriate contracts have been signed although in some cases openings may be delayed until 2011. The planned increases by store format are as follows: â€Å"Our priority is to focus growth in Europe and Asia,† said Isla. â€Å"We see significant opportunities in Eastern Europe and the Russian Federation, and there is a great potential to expand profitably in Europe for many years, as our market share is below 1% in most countries. † He said the main areas of growth for Asia are China, Japan and South Korea. â€Å"We see huge long-term potential for Inditex in Asia markets,† he said.Over the next three years, the company expects to see space growth of between 8% and 10%. Isla was asked earlier by analysts why they aren't paying out an even bigger portion of net income in dividends given the group's huge cash balance. â€Å"Our main priority is t o invest in the future growth of the business. We always want a high level of flexibility – we always wanted more steady growth in the dividend, rather than big jumps,† he said. He also confirmed that Zara will start online sales in France, Germany, Italy, Portugal, Spain and the UK on 2 September, 2010.Key Issue to be Consider ed Is Inditex’s current strategy likely to succeed . If so why ? Or do you conclude that the strategy needs to be adjusted in light of your analysis of this case study ? If so, what changes do you propose and why ? References : 1) 2) 3) 4) FT article 9 June 2010 Answers. com 2010 Inditex Press dossier 2009 Datamonitor â€Å"Apparel retail in Europe† August 2009 . The industry value is calculated at retail selling price (RSP), and includes all taxes and levies. The data for Europe includes Russia, Poland, Czech Republic, Hungary, Romani and Ukraine.All currency conversions in the Datamonitor report and forecasts have been calculated at constant 2008 annual average exchange rates. 5) European Commission report â€Å" Consumers in Europe† 2009 published by Eurostat 6) UK Office for National Statistics January 2010 7) Datamonitor report â€Å"Apparel retail in Asia Pacific† August 2009 Shar eholdings of Dir ector s in Inditex as at 31 J anuar y 2010 Annex 1 Annex 2 Annex 3 Page 1 Annex 3 Page 2 Annex 4 Sales Ar ea by Stor e Concept – Squar e Metr es Totals 2,180,889 1,914,493 EU Expenditur e on Clothes and Footwear – â‚ ¬ per head 000 Countr y EU (27 countries) 700 Belgium 700 Bulgaria N/A Czech Republic 200 Denmark 800 Germany 800 Estonia 200 Ireland 900 Greece 600 Spain 600 France 700 Italy 1100 Cyprus 800 Latvia 200 Lithuania 100 Luxembourg1100 Hungary 100 Malta 500 Netherlands 800 Austria 1100 Poland 200 Portugal 600 Romania N/A Slovenia 400 Slovakia 100 Finland 600 Sweden 700 United Kingdom 1000 Memo : Turkey 300 Iceland 1100 Norway 900 Switzerland 900 2006 800 800 N/A 300 N/A 8 00 400 900 800 700 700 1200 900 N/A 400 1100 200 400 800 1100 200 N/A 100 500 200 800 N/A 1100 300 1100 N/A 900Annex 5 Source : â€Å"Consumers in Europe† 2009 edition published by Eurostat , the statistical office of the European Commission Pr ice and Volume Changes within Household Expenditur e on Clothing and Footwear – EU Aver age and Selected Countr ies (a) Annex 6 Germany France Italy UK Spain Poland EU Average (b) Cumulative Percentage Price Increase/(Decrease) 2000-6 (2. 6) % 0. 1 10. 4 (23. 5) 13. 3 (15. 7) 0. 1 % Cumulative Percentage Volume Increase/(Decrease) 2000-6 (1. 7) % 5. 8 (8. 3) 44. 5 2. 7 44. 3. 5 % Percentage Volume Increase/Decrease) 2006 -7 2007 -8 3. 1% 1. 7 0. 1 2. 7 4. 5 4. 5 2. 0% 1. 4 (2. 1) (2. 6) 4. 4 (2. 5) 11. 2 (0. 5)% (a) = The 6 countries account for over 70% of total EU population (b)= over the 27 member countries Eur opean Mar ket for Womenswear Annex 7 Annex 8 Eur opean Mar ket for Menswear Eur opean Appar el Mar ket Value For eca sts Annex 9 Page 1 Eur opean Appar el Mar ket Value For ecasts Annex 9 Page 2 EU Clothing and Footwear Sour ces of Pur chase 2008 Annex 10Note that these figures relate to trips made by consumers purchasing clothing and footwear, and they do not reflect the average expenditure or value of sales made in each retail format Customer Complaints – Pr oblems faced by Consumer s when Pur chasing Clothing or Footwear in the EU in 2008 Per centage shar e of those exper iencing pr oblems (multiple answer s allowed) Annex 11 Source: ‘Retail satisfaction survey’, IPSOS for the European Commission, August/September 2008 USA Clothing and Footwear Mar ket Annex 12 Annex 13USA Mar ket – Consumer Pr ice Index Changes Annex 14 Summar y Financial Pr ofiles of Selected Appar el Retailer s H – 1738 stores in 33 countries as at November 2008 Levi Strauss Gap Latest results for Gap for its financial year ended 31 January 2010 (â€Å"Fiscal Year 2009†) are shown in next annex . At average 2009 calendar year exchange rates of US $ 1. 3948 = â‚ ¬1 , Gap’s net sales totalled â‚ ¬ 10,179 million in 2009 – some â‚ ¬900 million lower than Inditex’s sales of â‚ ¬11,083 million for the same period ended 31 January 2010 .January 2010 average exchange rate was US$ 1. 4272 = â‚ ¬1 Exchange rate source : Banque de France Annex 15 Source : The Gap Inc. annual report and accounts Annex 16 Number of stores : 191 Number of stores opened in year : 12 – 5 in Spain -4 in the UK – 1 in each of Netherlands, Germany and Portugal ( first Primark stores in each country) Planned store openings in next year : 11 ( including first store in Belgium) Selling space : 5. 9 million square feet – an increase of 9% versus prior year Pr imar k – Key Data for Year Ended 12 September 2009Revenue for year : ? 2314 million ( ? 1933 m in prior year) Year on year sales growth : 20 % – partly increase in selling sp ace – partly like- for- like sales growth of 7% Operating profit for year : ? 252 million ( ? 233 million in prior year) Source : ABF annual report and accounts Annex 17 Cur rent Prospects for Uniqlo’s parent â€Å"Fast Retailing† Tadashi Yanai – the president of Fast Retailing, Japan’s wealthiest man (net worth $9. 2bn), has seen the value of his 27 per cent holding in the Uniqlo parent fall by more than a quarter this year.That’s a slump three times worse than the benchmark, making Asia’s biggest clothier the worst-performing retailer across the region. Having watched new lines like polo shirts and jeans fail to fly off the shelves, even after steep price cuts, Yanai-san is now betting big on camisoles, leggings and Silky Dry, a summer version of its blockbuster heat-trapping underwear. This is no ordinary lean spell sales growth slowed the most in four years in the three months to May, causing Fast Retailing to trim its net income estimate for the year ending August by 5 per cent.Nimbler rivals such as United Arrows (up 22 per cent since the beginning of the year) and Honeys (+143 per cent), both between 30-40 times smaller by market capitalisation, will want to ensure Uniqlo’s discounting continues. For all its determination to build overseas – this year it added stores in China and Russia to its UK, US, France and South Korean portfolios – the company is on course to get 95 per cent of this year’s operating income from anaemic Japan. It remains a hard stock to divest, though.Not only are Fast Retailing’s returns on invested capital consistently about 50 per cent better than peers’, it is that rare thing in Japan: a stock worth a fifth more today than it was ten years ago (over which period the Nikkei has shed more than two-fifths). BACKGROUND NEWS Japan’s Fast Retailing on Thursday cut its annual outlook for the first time in three years after the breakneck p ace of growth at its Uniqlo budget fashion chain came screeching to a halt in recent months, reports Reuters.Fast Retailing enjoyed strong sales last year even as other retailers were hit by weak consumer spending, attracting thrifty shoppers with hit products like heat-trapping underwear and savvy marketing. But Uniqlo’s same-store sales have been on the decline in the second half of the current financial year to August 31st, which some analysts see as a sign that the recent round of robust growth has run its course. Source – FT article Published: July 8 2010 Annex 18 Details of Inditex Suppliers Key supplier countries include Bangladesh, India, Turkey, Morocco , Spain, Portugal and Cambodia (Source : 2008 annual report)Annex 19 Inditex Logistics Centr es in 2009 Inditex Pr ofit and Loss Account for Financial Year s 2009 and 2008 Annex 20 Notes refer to details in Inditex annual report for 2009 – see Inditex. com/investor relations/annual reports/2009 Operating Expenses consisted of 2009 – â‚ ¬m 2008 – â‚ ¬m 2007-â‚ ¬m 2006- â‚ ¬m Staff costs 1,791 1,703 1,473 1,251 Store property 1,134 1,028 855 718 rental costs Other Store 1,027 976 898 831 operating costs, logistics and general overhead costs a) 3,953 3,708 3,226 2,800 a) = Including transportation of merchandise from logistic centres to stores Annex 21Details of â€Å"Financial Results† shown in Inditex P& L â€Å"Financial Results† shown in the consolidated P& L consist of ( â‚ ¬000) : And for 2007 and 2006 : Inditex Pr ofit and Loss Account for Financial Year s 2007 and 2006 ( in â‚ ¬000s) Annex 22 Net Sales Cost of merchandise Gross Profit Operating Expenses Other net operating expenses & income Oper ating Pr ofit (EBITDA) Amortization and Depreciation Oper ating Pr ofit (EBIT) Financial Results Equity Accounting Losses Income Befor e Taxes Income Tax Net Income Net income attributable to minority interests Net Income Attr ibutable to t he Par entEarnings per share (â‚ ¬cents) Notes refer to details in Inditex annual report for 2007 – see Inditex. com/investor relations/annual reports/2007. Details of Operating Expenses and â€Å"Financial Results† are shown in earlier annexes Sales and Pr ofit Contr ibutions by Stor e For mat 2007- 2009 Store Format No. of Stores at 31 Jan 2010 1608 626 497 651 515 392 261 57 4607 Net Sales in Financial Year 2009 â‚ ¬m 7077 771 790 1177 702 280 243 44 11084 Annex 23 Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque TotalsOperating Profit EBIT in 2009 â‚ ¬m 1105 101 117 196 149 38 25 (2) 1729 Store Format No. of Stores at 31 Jan 2009 1520 583 470 591 456 374 239 31 4264 No. of Stores at 31 Jan 2008 1361 519 426 510 381 290 204 0 3691 Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque Totals Store Format Net Sales in Financial Year 2008 â‚ ¬m 6824 720 722 1026 633 242 2 22 17 10407 Net Sales in Financial Year 2007 â‚ ¬m 6264 614 696 925 521 213 201 0 9434 Operating Profit EBIT in 2008 â‚ ¬m 1067 119 108 155 144 21 14 0 1628 Operating Profit EBIT in 2007 â‚ ¬m 1091 99 106 154 119 40 16 0 1625Zara (incl Zara Kids) Pull and Bear Massimo Dutti Bershka Stradivarius Oysho Zara Home Uterque Totals Inditex Balance Sheets for Financial Year s 2009 and 2008 Annex 24 Notes refer to details in Inditex annual report for 2009. The share capital of Inditex amounts to â‚ ¬93. 5 million divided into 623. 3 million shares each with a par value of 15 Eurocents – fully subscribed and paid – at 31 January 2010 . This has remained unchanged since Inditex’s financial year 2006 Inditex Balance Sheets for Financial Year s 2007 and 2006Annex 25 Notes refer to details in Inditex annual report for 2007 Inditex Cash Flow Statements for 2009 and 2008 Annex 26 Annex 27 Inditex Cash Flow Statements for 2007 and 2006 Inditex Gr oup P& L for 1st Qua r ter s 2010 and 2009 Annex 28 Annex 29 Inditex Gr oup Balance Sheet for 1st Quar ter s Ending 30 Apr il 2010 and 2009 Inditex Shar e Pr ice fr om August 2009 to J uly 2010 Annex 30 Source : Inditex. com/ Investor Relations Annex 31 Boar d of Dir ector s of Inditex as at 31 J anuar y 2010The 6 Non Executive Directors are : – Flora Perez Marcote ( representing Gartler S. L. , the holding company controlled by Mr Ortega Gaona and owning just over 50% of Inditex’s shares) – Carlos Espinosa de los Monteros Bernaldo de Quiros ( board member from 1997) – Francisco Luzon Lopez ( board member from 1997) – Irene Ruth Miller ( board member from 2001) – Juan Manuel Urgoiti Lopex de Ocana ( board member from 1993) – Jose Luis Varquez Marino ( board member from 2005) Senior Management of Inditex as at 31 J anuar y 2010 Annex 32

Cloud Computing Essay

Is cloud computing a new rage, just a fad, a nebulous idea or a far-reaching trend? Cloud computing has become a buzz word in working and learning environments around the globe. Newsstands and Internet pages everywhere are inundated with articles, whitepapers and websites dedicated to defining the many facets of cloud computing such as hosting a website on the cloud, building a cloud infrastructure, cloud security, vulnerabilities, capabilities, pros and cons and cost. IEEE.org (IEEE CLOUD COMPUTING) has dedicated pages on their website to reference nothing but articles of interest and white papers surrounding cloud computing. The barrage of information can be daunting. Jon Oltsik (Oltsik) eloquently discusses industries’ bewilderment with cloud computing when he writes: When discussing cloud computing, I often think of Joni Mitchell’s haunting lyrics from the song,Both Sides Now (jonimitchell.com). In Mitchell’s world, clouds can be wonderful â€Å"ice cream castles in the air† or annoying disturbances that â€Å"only block the sun.† This duality prompts Mitchell to declare, â€Å"It’s clouds illusions I recall, I really don’t know clouds at all.† Joni’s cloud confusion mirrors current industry bewilderment over cloud computing. Like many other industry initiatives, cloud computing has a number of meanings.   Finally, industry confusion is no more. A guideline has been prepared by the National Institute of Standards and Technology (NIST). NIST is responsible for developing standards and guidelines, for all agency operations and assets for use by Federal agencies. In the guideline entitled, The NIST Definition of Cloud Computing, cloud computing (Mell and Grance) is defined as follows: A model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model is composed of five essential characteristics, three service models, and four deployment models. In the guideline, NIST goes on to define the essential characteristics of cloud computing which include: On-demand self-service – where consumers access computing capabilities automatically without interaction with the cloud provider. Broad network access – where the ability to use common computing devices such as mobile phones, tablets, laptops, and workstations over the network is easy and accessible. Resource pooling – the provider is able to dynamically meet the computing resource needs of the customers no matter the demand. Rapid elasticity – computing capabilities appear to be unlimited to the customer and can be appropriated in any quantity at any time. Measured service – metering capabilities automatically control and optimize resource use (e.g., storage, processing, bandwidth, and active user accounts). Monitoring, controls, and reporting are provided for both the provider and consumer of the utilized service. Microsoft offers a variety of cloud solutions for businesses and individuals. My favorite Microsoft solution is called One Drive (Microsoft), a solution to provide any user any time free online storage to share and store online pictures, video, documents in one place online. Simply create an online email account with Microsoft and through that account you can access all the tools you need to perform essential functions for work, home and play. One place for everything you need in your life. Google also offers a similar package called Google Drive (Google Drive). Google Drive’s slogan is – One safe place for all your stuff. Upload photos, videos and any documents that are important to you. Google Drive also offers free blog and wiki sites for any user, any time, any place. Use most any device with Internet access to create a place to share thoughts and ideas. Google Drive access begins just like Microsoft’s One Drive with the creation of a Google email account. Of course, one of the primary focuses is cloud computing for businesses. Hundreds upon hundreds of businesses are jumping on the band wagon to help businesses migrate from traditional networking to cloud computing. Is cloud computing here to stay? I would say, definitely, YES! Although cloud computing may not be for all businesses, it is available for both large scale and smaller businesses. I personally worked for a startup electrical business where I created cloud capabilities where technicians up and down the east coast could login remotely using a laptop or smartphone and enter time worked onto timesheets, collaborate with the home office, retrieve  technical documentation on the road and accept payment from customers on demand. Cloud computing seems to be a niche market at the moment and served well the small startup business from whom I worked. As for larger established enterprise networks, I believe they may not yet be ready to jump on the band wagon. I also worked for a lar ge corporation supporting a federal agency and they are not yet ready to migrate. It is a possibility cloud computing may be an answer in the future but as of today, the federal agency I supported, is not yet ready for cloud computing. Works Cited Google Drive. March 2014. 2 March 2014 . IEEE CLOUD COMPUTING. Cloud Computing Research Articles, Periodicals, & Technical Papers. December 2013. 28 Febraury 2014 . jonimitchell.com. Both Sides Now and The Circle Game. 21 January 1968. 2 March 2014 . Mell, Peter and Timothy Grance. The NIST Definition of Cloud Computing. September 2011. 25 February 2014 . Microsoft. One Drive. 2014. 28 February 2014 . Oltsik, Jon. Nebulous cloud computing. 17 December 2008. 28 February 2014 .

Case: Lancer Gallery Essay

I. Market Situation Analysis: Lancer galleries are in a very exclusive business. Although their number of competitors has increased over the past few years, the number of competitors is relatively few. This is an advantage. Disadvantages are far more. For one, replicas and fakes are becoming a problem in the market. This poses a threat to Lancer, as many people are only purchasing artifacts for gifts and decorative items, not caring about the historic value, and would rather pay a cheaper price for practical purposes. Second, obtaining artifacts from over seas has proven harder over the past several years because of political situations and other reasons that limit supply. This makes true artifacts harder to get, therefore more expensive. Lastly, because of the recession and economic issues, buying African and South American artifacts is not as common. II. Key Problem Lancer Galleries must decide whether it will be a smart decision, but ethically and financially, to take the deal that was offered to them by a mass merchandise department store. The contract presents the opportunity to add $4 million in additional sales annually, however they would have to triple the amount of replicas they sell. They are torn by the opportunity to make more money, but the potential to ultimately cheapen the value of their business by selling fakes. III. Analysis of Options/Alternative Strategies Lancer Galleries has two options. They can either take the deal proposed by the department store, or they can decline and continue to conduct business as they always have. If they accept the proposal they have the opportunity to increase sales by 4 million annually (depending on consumer acceptance). The company would buy product at 10% below the company’s existing prices and its initial purchase would not be any less than $750,000. However, in order to accomplish this, Lancer Galleries would have to triple the amount of replicas they sell in order to have enough merchandise to sell. By increasing the replica sales, Lancer would be redefining the business, as  they have always prided themselves on finding the most pristine and legitimate artifacts available. Lancer faces the dilemma of more money, versus sacrificing business values. IV.Recommendation I recommend that Lancer does not accept the contract that was proposed. Right now their one advantage is that they don’t have many competitors. This is because they only sell legitimate artifacts and people trust that when they buy from them, they are getting a solid product. While upfront it may seem that they would be making more money, I believe that overall they would be cheapening their business by tripling the amount of replicas sold.

Shortcomings of the healthcare system in the U.S Assignment

Shortcomings of the healthcare system in the U.S - Assignment Example Measurement must be both comprehensive and innovative to entail the data domains of processes, outcomes, cost and patient satisfaction (Stanhope & Lancaster, 2012). Stanhope and Lancaster, in Chapter one of the book, present some evidences of how the healthcare system has transformed. They argue that an ideal system should focus on every patient while prioritizing population health to improve and manage epidemic conditions such as heart diseases, obesity and diabetes (Stanhope & Lancaster, 2012). In providing improved patient outcome, translational biomedical research should be included in an ideal healthcare system, and constant research is thereafter required to establish the clinical interventions outcomes in the best patient outcomes. Additionally, the movie â€Å"Opening Doors: Public health Nursing in its 100th years† directed by Stephen Longstreth highlights public health nursing profession that involves nurses reaching-out to homes and communities they are serving. Thi s documentary educates nurses on the importance of population-centered healthcare in the community. Nurses’ commitment to the community and families in which they live is significant in the prevention of illnesses (citation). According to the movie, nurses should be involved in tackling issues such as teen pregnancy, healthcare counseling, and substance abuse for people who have a limited access to social and healthcare services. This is because their direct participation in addressing health care problems, in their communities, is a crucial role for nurses. Better System Performance In simpler terms, an ideal healthcare system should be systems-oriented. This implies that patients must enter into an experience, which is established around them and... Shortcomings of the healthcare system in the U.S This paper, therefore, provides descriptions and characteristics of an ideal healthcare system that is consistent with the current Healthcare Reform Movement. It then compares nursing practices with the concepts of population focused nursing that are presented in the text â€Å"Public Health Nursing: Population-Centered Health Care in the Community† and movie â€Å"Open Doors† (1990). An ideal healthcare system offers three key principles, which include better system performance, better patient outcome and better professional development. The main goal of such a system is to ensure that all American citizens have an equal access to quality healthcare services at a reasonable cost. Better Patient Outcomes: An ideal healthcare system should focus on population and patient outcome. Better outcomes are acquired through care that is family and patient –centered, preference sensitive and evidence centered. Chapter one and two of the reading describe â€Å"Perspectives in health care and population-centered nursing† and â€Å"Influences on healthcare delivery and population-centered nursing†. In simpler terms, an ideal healthcare system should be systems-oriented. This implies that patients must enter into an experience, which is established around them and in-line with their needs. This experience should, therefore, be longitudinal, cross-departmental, will center and interdisciplinary on patient and their families through a healthcare journey.

E-business Essay Example | Topics and Well Written Essays - 4000 words - 3

E-business - Essay Example It has been apparently observed that despite facing various challenges and ethical issues associated with the e-business practice of enterprise system, this particular system contributes significantly in organisational management, which is further identifiable in terms of improved management decision-making and effective utilisation of the accessible resources. The prime intention of this report is to analyse an electronic business system, having a noteworthy contribution to organisational management. Theoretically, the notion of electronic business system, also acknowledged as e-business, is regarded as a set of innovative technologies, tools as well as systems that assist in conducting business through online or internet (Macmillan Publishers Limited, n.d.). The application of internet medium for conducting business online is typically viewed as one of the biggest forces, which has contributed in changing the 21st century business scenario drastically. It is worth mentioning that the notion of electronic business system not only deals with buying as well as selling of products through online but also plays a decisive role in serving customers globally, irrespective of geographic and economic hindrances and most vitally, collaborating with business partners effectively (Durbhakula & Kim, 2011). In this modern day context, wherein the enti re business environment is identified to be changing rapidly, the conception of electronic business system or e-business is observed to gain immense significance in the corporate world. It is widely embraced in various industry sectors making the business process smoother and effective (Alter, 2002; Braithwaite, 2002). It would be vital to mention that the notion of e-business has gained its momentum in this present day context amid the marketers due to its innovative features that extend beyond the traditional business functions. In this similar

Tourism and Hospitality Marketing case study Essay

Tourism and Hospitality Marketing case study - Essay Example As a result, most of the entrepreneurs in this recent age desire to cope with the changing needs and requirements of the customers as well as marketing ideas. Nowadays, social media or online marketing is used for attaining the products and services of their choices. It is mainly due to the high craze for information technology within the target customers of the recent age. So, it is accepted as the most vital way of promoting any product or service of any organisation. Thus, from this it may be analysed that each and every generation or age group presents a unique style, experiences, values and demographics, thereby offering a high level of influence on the buying behaviours (Pires, 2006). In this regard, most of the companies of this age are targeting to approach multi-generational consumers so as to understand their behaviour and demands. Multi-generational or generational marketing acts as the practice of understanding the needs, style, values and behaviours of individuals within one or more than one particular group. This is done by the entrepreneurs or marketers to analyse the demands of the consumers, tailored according to their age groups. By doing so, a specific segment of customers is focused on by the organisation entirely based on the demographic and psychographic factors. As a result, the total sales of the organisation might be increased and result in amplification of its profitability and ROI in the long term. Concurrently, positioning of brands in the minds of the customers of an organisation might be effective. Consequently, the brand image and reputation might also be enhanced to a significant extent, which is extremely essential to sustain in the long run (Williams, 2006). Hence, due to these above mentioned advantages, the generational approach is adopted marketing in this recent age so as to remain competitive in the market among other rivals. At the same time, the level of reliability and trust within the minds of the customers also enhanc es, resulting in reduction of the switch-over rate. However, the generational approach to marketing comprises certain disadvantages as presented below. Always interested in the technologically advanced products or services The interest rate or demand for a particular product or service is extremely short term based Not at all loyal to the brands or the product lines of an organisation Switch-over rate is extremely high Highly influenced by word of mouth that is short-termed Highly influenced by friends’ or peers’ views and ideas Desires to experience innovative products and services of different organisations Therefore, due to all these disadvantages mentioned in the above paragraph, it may be inferred that the generational marketing approach is both advantageous and detrimental for an organisation in the long run (Cho & Woods, 2006). Answer 2 Sydney is the capital of the state of New South Wales, Australia. It is one of the most populous cities within Australia. It is located on the south eastern coast of the Tasman Sea. Sydney comprised a population of approximately 4.6 million in 2010. Besides, the city of Sydney also experiences a pleasant climate with a mild winter and warm summer along with frequent rainfall throughout the year. For this reason, the city remains cool in the entire year presenting a very good atmosphere to the

Ostia antica Essay Example | Topics and Well Written Essays - 500 words

Ostia antica - Essay Example During the early Augustan period, a monumental theatre was constructed by Agrippa along with an adjacent rectangular double-colonnaded portico3 with a large space in the center to offer the audiences a retreat as they reached the interval or the end of the show4. In the second half of the second century, a trade center was made out of this structure that was further divided into several parts that appear to be the offices of traders. There was a unique mosaic in each office, revealing different kinds of commodities that the overseas clients purchased5. The Temple of Rome and Augustus is one of the landmarks which have preserved the Augustan period over the centuries. Roman sculptors carved its Italian marble faà §ade6, which not only reveals the building’s significance but also the amount of skill needed to achieve it. The horrea warehouses were the commercial buildings of extreme importance in Ostia. Ostia was like a bridge in Rome, which was used for different types of commodities, which imparted a need to store the imported goods. Commodities received in Ostia were numbered and catalogued before they were sent for Rome7. The audiences can also have a view of the imperial Roman lifestyle from the Bath buildings that provided the slaves and working men and women with retreat as they had a place to get together in a good environment8. The most common example of the Roman architecture of all time is the Roman tabernae. It is a very flexible and ordinary architectural unit often in the form of a single room that appeared like a â€Å"tall, deep, barrel-vaulted chamber open in front almost to its full width†9 in its enhanced form. Tabernae served many purposes that included but were not limited to frontage of apartments, market-places, and street shops. Owing to the constructors’ liking for the pattern and texture of it, brickwork was frequently employed in the decoration of the concrete buildings10. â€Å"In urban architecture it was

Zara Strategy Essay Example | Topics and Well Written Essays - 3250 words

Zara Strategy - Essay Example Economic In spite of the eurozone crisis and economic recession, UK’s GDP has reduced to a mere 0.2 % compared to the overall industry growth, which has dropped by 0.6%.N According to eminent economists, the unemployment rate will increase to 9% in the coming two years. Around two million people will remain unemployed. The retail clothing market of UK is constantly increasing. According to Key Note report (2012), the UK market showed a 3.3% increase in 2011, and sales reached 43.1 billion pounds. Women’s garments were the largest sector in terms of sales revenue followed by men and children’s sector (Chakrabarti, Subramanian, Meka, & Sudershan, 2012). Social There has been a 7% rise in age group which represents the working population. Because of this, more people are now including formal clothing as their daily wear. This means that in future, Zara may also be required to change its portfolio, in order to match the growing needs of this ageing population. Due to the current economic crisis and budget deficit, the purchasing capacity of the consumers has reduced. Now, sustainable and normal living standard has become a challenge for the local people. To get rid of the difficult financial condition, the UK government has taken the policy of managed migration.... Technology Latest technological advances such as RFID, electronic data exchange and ERP, are used by most of the retailers in UK to decrease operation costs and enhance the value chain process (Pettigrew, 2006). According to the Science and Innovation Investment Framework (2013), there has been only 2% increase in investment in technological advances. This has made the investment condition in UK very inflexible Environment In order to meet the environmental norms, set by Kyoto Protocol, the industries need to reduce the percentage of carbon emission to a minimum of 9% from the present rate. According to the government protocol, the foreign countries in UK need to decrease their Carbon footprint to a minimum of 20% in the coming two years (Unfccc, 2013). Thus, in order to sustain in the market, Zara will have to follow the protocol in its value chain. Legal According to the economic freedom journal’s index, UK has been ranked seventh in terms of free economy (Index of Economic Freedom, 2013). It has also been praised by Wall street Journal for its business and economic sustainability. To solve any labour related issues, the country strictly follows the rules and regulations of European Union Labour Law. This indicates a necessary change in the HR policies and regulations of Zara’s business process to comply the EU Guidelines. Porter Analysis The major categories of apparent industry in UK are men’s wear, children’s wear, and women’s wear. The industry value can be calculated by using Retail Selling Price (RSP). Total Revenue of the Industry CAGR Women’s wear Men’s wear Children swear $54,495 million (2011) 2.1% 59.2% 26.9% 13.9% (Source: Marketline, 2012b) Growth potential of

Business Negotiations Essay Example | Topics and Well Written Essays - 1000 words

Business Negotiations - Essay Example In American English, there exists two communication maxims, all under the quantity umbrella, which requires that whenever one speaks, then the information relayed should as much information as possible, while on the other side; the information relayed should not exceed the required informative levels. The amount of information in a communication remains essential in every communication and as such, superfluous information need to be avoided during communication in ensuring that communication meets its intended purpose.Considering the fact that maxims of conversation entail the unwritten rules of governance pertaining to how people speak to each other in some polite conversations, it is, therefore, a significant aspect that a maxim of communication acts in place of a command, directing the manner in which different people engaging in conversation carries out themselves. According to the Japanese culture, the maxims of conversation in Japanese discourse involve a number of aspects. Exp ression of feelings or emotions is critical to every human. In business, either a loss or profit is expected for any transaction done. Whenever either happens, it is expected that an individual expresses the feeling through emotions. As a contributory aspect of the diverse nature of societies and cultures, verbal behavior of the American team and that of the Japanese seem to have significantly different aspects with a realization that indeed the generalizations put in such societies are indeed very wrong.

The novel Oliver Twist Essay Example for Free

The novel Oliver Twist Essay The novel Oliver Twist was written in 1867 by Charles Dickens, a social reformer and also a philanthropist. Dickens had a particular aim in writing the novel. He wanted to show the reality of underclass criminals, traditionally glamorized in fiction. He was motivated by writing such personal experiences as his obsession with grinding poverty was intense. Dickens was middle lower class. His father was jailed for debt and with know one to maintain him, he was sent to work in a blacking factory. The labour force incorporated urchins and rough working class lads, here he was forced to accept the reality of poverty. Bill Sikes is one of the main characters in Oliver Twist he is essential to Dickens aim because he illustrates criminality and poverty. Critics stated that Sikes had no redeeming features, but the truth is he has. it is TRUE every man who has watched these melancholy shades of life must know it to be so. And because it is so unrealizable that people like Bill do exist Dickens offers the reality to poverty, hypocrisy, crime and hunger. Dickens use of superlatives shows us how he tries to paint a picture of the exactness of underground criminals. To paint them all in their deformity and wretchedness. Bill is the archetypal villain in Oliver Twist, his actions ruin the life of prostitute Nancy who saves Oliver because she doesnt want Fagin and Sikes to corrupt his life just like they corrupted hers. Sikes is manipulative and he knows what he is capable of. Dont speak to me its not safe. When we first meet Bill, Dickens describes him as a stoutly built fellow of 35 with a bulky pair of legs and large swelling carves. This automatically gives the reader an impression of Bill Sikes power. It looks as if he intimidates people with his body size, he not only uses his body but his eyes also give a sense of extortion two scowling eyes. Although Sikes has a subdue attitude, he tries to impress people by wearing expensive clothes that dont quite make the grade. A black velveteen coat, a brown hat and a dirty belcher handkerchief around his neck, his solid drab breeches remind people of his criminal dealings. Sikes often wipes the beer from his face on to his velveteen coat and it is distinctly confirmed in the quote that his handkerchief is filthy. This shows us that in spite of the fact him wearing costly garments he doesnt meet the standards by reason of grubbiness. Dickens characterizes Sikes as a ruffian, his voice is griff due to him not speaking proper standard English. Growled his engaging ruffian.

Strategic Analysis Of Nestle Company Management Essay

Strategic Analysis Of Nestle Company Management Essay The purpose of this paper is to critically evaluate the strategic decisions that have occurred over the corporate history of Nestle mentioned in the case and to what extent has Mergers and Acquisitions and Strategic Alliances played a role in NESTLEs strategy in that period. In order to evaluate these strategic decisions, the paper shall outline Nestlà ©s historical strategic decisions; give a brief description of each decision and how mergers and acquisitions contributed to the growth of the company. The paper goes on to explain the current strategies of Nestlà © and how sustainable these strategies may be in the future. It explains the rationalisation of these current strategies and the new strategies that ought to be developed. The paper then looks at the future strategies of Nestle to outline the issues that are likely to be faced when these strategies are implemented .Likely actions are then suggested which may help give solutions to problems faced by Nestle on implementation of its future strategies. The strategic decisions involve new product development, extensive research development and entry into new product category which were mostly achieved through mergers and acquisitions. The current strategy was noted as unsustainable in the long term due to the fact that most of the products of Nestlà © cannot be classified as healthy .The suggestion made was that Nestle should come up with strategies that will make them healthier than their competitors. Nestlà ©s future strategies were also scrutinized and possible solutions given to overcome some of the strategic implementation issues the organization is likely to face. 1.  Ã‚  Ã‚   Evaluate the strategic decisions that have occurred over the corporate history of NESTLE mentioned in the case and to what extent has Mergers and Acquisitions and Strategic Alliances played a role in NESTLEs strategy in that period?    Expansion According to Bell and Shelman (2009), Nestlà ©s sales expanded rapidly across Europe a few years after its inception. The company started developing an international reputation, and in 1905 it took the strategic decision of acquiring its main competitor, the Anglo-Swiss Condensed milk company (Bell and Shelman, 2009). The Federal Trade Commission refers to this as a horizontal merger where a firm acquires a former competitor allowing for a consolidation of companies in the same industry (Barney, 2011). As a result, Nestle in the early 1900s began positioning itself as a powdered milk, and infant food company. Furthermore, the combined companies through the Nestle brand name continued to grow through product and market extension mergers. Barney (2011) describes a product extension merger as one which adopts a complementary product through an acquisition, as seen in the case of Nestle which aligned product adoption in categories such as sugar, milk, cocoa and coffee. Nestlà © further undertook market extension mergers which involve gaining entry into complementary markets through acquisitions (Barney, 2011); whereby Nestle entered the confectionary, coffees, cereals, soft drinks, ice cream, water and prepared foods markets (See Ansoff Matrix below). Ansoff (1965) would argue that Nestlà © uses four different approaches to grow its products and markets. To explain the reasoning behind Nestlà ©s past MAs they can be assigned into these categories of growth which include: market penetration, product development, market development and diversification (See Ansoff Matrix above). During the 1920s, Nestle diversified its portfolio from infant formula to include Milo. This was its first powdered drink not created for infants. Spanning from 1938 to 1948, Nestlà © made the decision to enter into coffee and tea sector with the launch of Nescafe and Nestea. Nestle also diversified into the confectionary market, prepared foods, water, pet foods, energy bar and weight loss markets with the acquisitions of Peter, Cailler, Kohler Swiss Chocolate Company, Maggi, Vittel, Friskies, Powerbar and Jenny Craig respectively. Diversification outside the food and drink industry to enter pharmaceuticals and cosmetics was executed in the 1970s when it became a minority shareholder of LOreal (25%) and later acquired Alcon Laboratories. Barney (2011) highlights that acquiring new companies leads to reduction in production or distribution costs through economies of scale and vertical integration. Mergers and Acquisitions are also beneficial In increasing market share For industry know how and positioning For Financial leveraging (See appendix 3) Reasonable for this industry To improve profitability and EPS (See exhibit 2 for EPS 2006 and 2007) Source: Lasserre (2012) According to Lasserre (2012), MAs can also create several types of values for a company. He argues that they are justifiable if the economic value of the two entities is worth more combined than the sum of independent values before the merger (2012). Thus, the businesses must create shared economic values through synergy by increasing revenues whilst decreasing costs. Lasserre assumes these created values can be both short-term (one-off value) and long-term (synergistic effects). Diversification and global reach were the main values created for Nestlà © in its acquisitions. For example, Carnation enabled Nestle to extend not only in its product range but also to reach new areas around the world. The following table outlines the values created through Nestlà ©s MAs. Nestlà ©s MAs Value created Anglo-Swiss Condensed Milk Company  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Consolidation Maggi  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification Acquisitions in canned and frozen foods, water, ice cream and pets food  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification Alcon Laboratories  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Options (to monitor the evolution of the technology) Carnation  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Global reach  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification Ralston-Purina  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification Jenny Craig  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Diversification Novartiss Gerber  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Global reach  ·   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Options (to monitor the evolution of the technology) Table: Nestlà ©s MAs and their value created. Source: Authors own creation based on information from Bell and Shelman (2009) and Lasserre (2012). Furthermore, the relationship between Nestle and LOreal developed further when they created two joint-ventures: Galderma and Laboratories Inneov. According to Barney (2011), joint ventures are undertaken in order to manage risk, share costs, and enter into new markets and industries. It is assumed that Nestle saw the benefits of alliances rather than acquisitions into the cosmetics market due to its lack of knowledge on the industry. Once Nestlà © diversified its portfolio, they followed-up by expanding brands through what Ansoff (1965) refers to as market penetration. In order to utilise its current resources, and take advantage of the market opportunities created by Milo and Nescafe, Nestle developed new brands such as Nesquik and Nespresso (Bell and Shelman, 2009).   Additionally, Nestlà © acquired more brands consistent with its presence in the water and pet foods market: e.g. Vittel and Friskies.   Ã‚   According to Ansoff (1965), market development is the introduction of existing products into new markets. This can be seen through Nestlà ©s acquisitions of Stouffer, which enabled the company to sell its food products to different markets: frozen prepared meals. Lastly, Nestle used product development to introduce new products such as Buitoni, Carnation, and Kit Kat to grow within its existing market of food, powdered drinks and confectionary. Nestlà ©s diverse portfolio provides it with a competitive advantage, and has enabled the company to become the worlds largest food and Beverage Company (Bell and Shelman, 2009). However, it seems that some product diversifications through mergers and acquisitions led to the downfall of its profits; especially visible in the years leading up to Mauchers administration (Bell and Shelman, 2009). Barney (2011) suggests that mergers and acquisitions between strategically unrelated businesses do not necessarily create significant economic profits. Thus, it can be assumed that Nestlà ©s strategically unrelated acquisition of Alcon and partial acquisition of LOreal between 1974 and 1977, contributed to a decline in profits between 1978 and 1981. Supply Chain Rationalisation As Nestle grew and entered new markets, they worked towards horizontally integrating their supply chain. According to Christopher (2005), companies such as Nestle seek to spread geographically, whilst reducing costs through economies of scale by prioritising manufacturing and operational processes. This can be seen throughout the 1900s as Nestle invests in its value chain by: opening processing plants within the U.S., Britain, Germany and Spain; manufacturing in Australia; warehouses in Singapore, Hong Kong and Bombay; and factories in the U.S. and Brazil (Bell and Shelman 2009) (See Nestlà ©s value chain). Firm infrastructure Decentralized organization Executive Committee consists of the CEO and 12 top managers The company is structured through 43 regional organisations reporting to directors of three geographic zones (zone Europe, Asia/Oceania/Africa and zone Americas). Country managers are given a large degree of autonomy when dealing with customer matters. Nestlà ©s Value chain Human Resource Management Focus on developing local management Investment in training and providing cross experiences People start from the bottom and move their way up in the organisation Unique culture/ focus on long term results Developing people from acquired companies. Technology Development Strong RD platform/ open innovation model Big investment in RD (investment to support pharmaceutical businesses and food, nutrition, health and wellness) Creating an innovation acceleration team to support rapid product introductions. Initiating a common technology infrastructure/ a comprehensive information system named the GLOBE. Margin Procurement Purchasing some raw materials instead of processing them in-house. 60% of materials purchases from emerging economies Direct sourcing -In developing countries agricultural commodities are bought from local markets and often directly from farmers- rather than on the world market Service Jenny Craig -personal nutrition counselling / Jenny Direct website and phone /Home delivery. Personalized services 24/7 service though telephone and internet help line for Nestlà ©s premium products. Marketing sales Positioning the company as healthy Strong brands product and brand differentiation. Dealing directly with consumers. Medical nutrition: market to professionals Outbound Logistics Synchronization of data between manufacturing and retailers- through the GLOBE system. Introducing new distribution channels for some brands (e.g. Nespresso corners, boutiques and home delivery) Inbound Logistics Ware- Housing Operations -Manufacturing, food processing plants -Producing locally -About half of the factories are in developing countries/ production for the local market. -Partnership with local farmers -providing advice and support -Implementing quality control processes. Moreover, Nestle made the strategic decision of establishing local supply chains which meant deploying its agricultural capabilities down to  the farm level through strategic alliances. This is referred to as their milk district model which allows farmers to supply milk to the company directly and in exchange Nestle provides its resources and know-how, such as providing storage and chilling facilities (Nestle, 2012). This highlights the fact that Nestle was seeking to establish its value chain activities, or Global business system, earlier on in its history (See value chain above).   According to Hill and Hill (2009), this type of model has the capability of reinforcing a companys competitive advantage as it is able to overcome barriers to integration, better respond to delivery speed, simplify sharing of information and reduce costs of production (Bell and Shelman, 2009). Adapting to a Global Role Nestle recognised that for it to sustain its competitive advantage it needed to establish a global technological platform to capture data, manage information and create knowledge (Bell and Shelman, 2009). Consequently Brabeck made the strategic decision of initiating the GLOBE system. Using this common technological infrastructure, it would be able to share information amongst all Nestlà ©s businesses and allowed for a synchronization of data in its supply chain (Bell and Shelman 2009). Refocused Strategy: Nutrition, Health and Wellness Nutrition has always been an integral part of Nestlà ©s vision, dating back to its first nutritious infant formula. However, due to Nestlà ©s realisation of consumers being increasingly aware of the link between food, health and personal wellbeing, there has been more of a shift away from a technology and processing-driven image towards health and wellness (Bell and Shelman 2009). Under Brabecks tenure, a Nutrition Strategic Business Division was created, along with the acquisitions of Proteika, Musashi (nutrition business), Jenny Craig (diet centres) and Novartis Medical Nutrition (Bell and Shelman 2009). Restructuring of Research and Development Unit Nestlà © also made a strategic decision of restructuring its RD unit to satisfy customer needs and internal growth. This was by shifting away from small decentralized units set up globally to limited large resource-intensive centres. This was done to renovate old brands by finding multiple uses for its product. Under Brabecks tenure, a 60/40 preference rating system was introduced where products were either discontinued or sold if they did not achieve the 60% level. This was done in order to ameliorate the companys performance and market orientation (Bell and Shelman, 2009). 2.  Ã‚  Ã‚   To what extent is the current strategy of NESTLE competitively sustainable in the future? How should it be rationalised and what new strategies ought to be developed in the future? Current strategy Nestlà ©s current strategy was to achieve worldwide sustainable competitiveness through four strategic pillars: low cost, efficient operations, renovation and innovation of the Nestle product line, universal availability and improved communication with consumers through better branding. They also had a vision of transforming the company from a technology-and processing-driven food and beverage company towards a vision of nutrition, health and wellness. (Bell and Shelman, 2009, p.3). Nestlà ©s current strategy of reorganizing its operations did come as an advantage as in some cases moved away from its agricultural and processing roots to buying the ingredients from outside suppliers (Bell and Shelman, 2009). This can be argued on the basis of Nestlà © reducing the steps of its value chain activities as Brabeck explained some of these activities could not add value to some businesses. An example would be the fact that Nestlà © exited from cocoa roasting but still carried on producing chocolate. This in turn reduced the costs and made the value chain more efficient. In fact, in terms of strategic operations, Lasserre (2012) argues that making fundamental changes in the value chain can lead to developing new products and services which can help a company sustain its innovative advantage. Moreover, to enhance the reliability of its suppliers, Nestlà © implemented a strategy of forming partnerships with its suppliers by creating direct links with them and providin g them with support and technical advice. This helped the company cope with the volatility of the supply market and enhance its operations.   Therefore, in terms of operational efficiency, Nestlà © can be seen to be sustainably competitive. Secondly, Nestlà ©s current strategy was focused on renovating and innovating its product line through reorganizing its RD.   Lasserre (2012) suggests that organizations such as Nestlà © could be trying to gain a critical mass advantage. He further explains that in order to achieve this, a minimum amount of resources needs to be mobilized for an activity to perform efficiently and effectively. Hence, Nestlà ©s shift from decentralized units of RD to few large resource-intensive centres. As a result of its RD centralization, Nestlà © was able to reinvigorate old brands; an example was finding multiple uses of the Nesquik brand from not only being a powder but to also present it as syrup and into ready to drink varieties. However, this strategy came at a disadvantage to Nestlà © as they lost the benefits of decentralization. These benefits include proximity to markets which gives a firm the ability to create products that fit local customer specificities, gaining access to geogr aphical clusters of knowledge creation and development access to good-quality scientists and the capability of a firm to learn from different market and cultures (Lasserre, 2012). Therefore, in terms of its RD strategy, it could be argued that Nestlà © will have trouble sustaining its competitive advantage in the future since part of its future strategy is to expand to other markets. Thirdly, with the introduction of GLOBE in the mid-2000s, Nestle initiated an era of capturing data by tying all of Nestlà ©s entities together under a common technological platform. This led to the company standardizing its data to manage its vast information and create and share knowledge among its Strategic business units, manufacturers and retailers. The main idea was to use shared knowledge to enhance the collaboration between all the different units of the company which can reduce costs and produce value all over the organisation. Bauwens (2012) outlines this as a social innovation where knowledge is shared and can be used by others. A good example would be the fact that the Globe system allowed for a synchronization of data leading to an improvement in order fulfilment between manufacturers and retailers. This has allowed Nestlà © to sustain its competitive advantage by adapting much faster to change and delivering value to customer (Lasserre, 2012). Therefore, knowledge sha ring has the potential to play a big role in helping Nestlà © maintain its competitive advantage.    Nestlà ©s final strategic pillar of improving communication between the organization and consumers through better branding could signify the companys efforts to differentiate its products. Barney (2011) would argue that Nestlà © could be trying to alter perceptions of current and potential consumers by altering its product features. In fact, Nestlà © focused on reducing fat and calories as well as incorporating healthy and natural ingredients into a wide range of products. It could be argued also that better branding is linked to its vision of moving from a food and beverage company to a wellness, health and nutrition company. This could also be Nestlà ©s way of differentiating its products by taking advantage of its reputation in the marketplace as a leading company in its industry. Therefore, customers would, in the long term, respond positively to the companys efforts of producing healthier products. Thus, if Nestlà © actually succeeds in changing peoples perceptions and posi tion itself as a health driven company, it can manage to maintain its competitive advantage in the future. It is through these four strategic pillars that Nestlà © derives its current model, the Nestlà © model, which refers to the companys long term of objectives of organic growth (target of 5% and 6% each year), continuous yearly improvement in EBIT and improve capital management which determines the assets of the company against the profit it generates (Bell and Shelman, 2009). The company seems to be achieving its objective as it has slightly improved its earnings before interest and taxes as seen in exhibit 6; it has slightly made progress in its capital management through its improved return on capital employed as seen in Appendix 2; and it has been able to achieve its objective of organic growth between 5% and 6% except for 3 years between 1996 -2007 years also indicated in Exhibit 6. Therefore, it is safe to assume that Nestlà ©s current strategy is competitively sustainable in the present however it remains to be seen if it can be successful in the future with its new vision . This is due to the fact that Nestlà © is possibly trying to implement both product differentiation and cost leadership strategies. Porter (1980) defines such firms as stuck in the middle (Barney, 2011). On the one hand, three of its strategic pillars indicate the companys intention of becoming a cost leader through low cost operations, restructuring its product line and efficiently managing its knowledge. On the other hand, it wants to differentiate its whole portfolio of products and services by changing the product features or by diversifying their products. Porter (1980) cited in Barney 2011 further explains that if a firm tries to implement both strategies then one of them will fail. He continues to add that for a firm to be economically superior in a single industry then they need to sell   at a high price and have small market share (product differentiator) or sell at a low price and gain significant market share (cost leader) therefore Nestlà © needs to decide which of the two it wants to become . As a result, a lot of their organizational requirements such as organizational structure and management control systems are stuck in the middle for example the fact that certain products need to be managed globally especially in the nutrition division while others are locally managed. Nestlà ©s current strategy could be rationalized by foregoing their vision of being a nutrition, health and wellness organization. Instead they should focus on being more of a healthier food and beverages company as a cost leader with its current Nestlà © model. First of all, if Nestlà © was to pursue a health, nutrition and wellness strategy Nestlà © would then have to restructure its product portfolio by getting rid of its unhealthy products such as Hot Pockets, and Kit-Kat. In exhibit 8 it can be seen that these products do not deliver growth to the company yet in exhibit 9 they seem to have a higher market share. This shows that the unhealthy products are in fact the cash cows of Nestlà © which indicate that they are the foundation of the company. It should try and follow Unilevers example of focusing on its core products. Therefore, Nestlà © should frame new strategies and make changes to its vision. Instead of holding on to unrealistic goals, the company could reposition itself in the market as becoming healthier than the competition. In fact, Nestlà © has already implemented this approach in the past with several products by introducing some nutritional improvements. As an example, Nestlà © reduced ice-cream fat by 50% and calories by 30% for Dreyers Slow Churned ice-creams and added healthy ingredients to some chocolate snacks (Bell and Shelman 2009). This indicates that the company has the resources needed to deploy this repositioning strategy. The company should also revaluate its SWOT analysis in terms of switching its vision to Health, Nutrition and Wellness. (refer to Appendix 2) Indeed, the strong RD platform enables Nestlà © to produce more healthy products while maintaining its taste. Moreover, Nestlà © has the capabilities of doing so with its open innovation model (global network with 5,000 scientists and technologists as well as RD centres worldwide) which enables the company to maximize its chances of coming up with new and innovative products. 3.  Ã‚  Ã‚   With regards to future strategies what are the strategic implementation issues likely to be faced by the company and what actions should they take to overcome them? Future strategies One of the future strategies of Nestlà © is to grow internally instead of growing through mergers and acquisition. Implementing this strategy could be catastrophic for the company as its growth has been largely relying on acquisitions and joint ventures. Nestlà © would also lose the benefits of using joint ventures, strategic alliances and acquisitions (Appendix 4). This would then imply that Nestlà © would have to use its own resources and core competencies to expand thus placing a greater risk on the business. It can also have a negative impact on the liquidity position of the company. A way in which this issue could be overcome is by applying both strategies. By applying both strategies, the company would be able to spread its corporate risk and share its costs as its return on capital employed still continues to generate profits for the company. Additionally, Nestlà © has managed to build strong foundations through mergers and acquisitions which has led it to improve its financial position. As seen on Exhibit 4, the acquisition of businesses has increased from 447 million in 2006 to 456 million in 2007 which has improved its cash flow. Therefore, in order to maintain a strong position, Nestlà © should carry on with mergers and acquisitions as well as growing internally. Another of the future strategies initiated by Bulcke is to shift the structure of Nestlà © from an organisation by country to an organisation by business through sharing best practices using GLOBE (Bell and Shelman 2009, p.10). He argues that this would enable Nestlà © to start managing its operations globally instead of adapting to every market. However, using the McKinsey 7s framework, many issues can be foreseen as seen on the table below. Factor Strategy Produce variety of quality products, wide variety of brands. Focus on nutrition, health and wellness. 4 strategic pillars (low cost, efficient operations, renovation and innovation of the Nestle product line, universal availability and improved communication with consumers through better branding) (Bell and Shelman, 2009, p. 3) Structure Decentralised and relatively flat organisational structure which helps to cater for local needs thus increasing flexibility. organized by country/ every country is like a small kingdom It has operations worldwide through strategic business units. System Comprehensive information system:   the GLOBE Employees move from the bottom up in the organisation. Style Democratic leadership style: managers are given autonomy to take decisions.   As such, they feel a sense of belonging in the organisation Staff Nestlà © maintains local companies with regional staff in local markets as they better understand the needs of customers. 43 regional organisations. More than 275,000 employees. It has a pool of experts- its staff consists of scientists, technologists from top universities (Bell and Shelman, 2009, p. 6) Skills Nestlà ©s competitive advantage is its RD. It has a high level of technology (23 Product Technology Centres), and  a network of experts around the world. (Bell and Shelman, 2009, p. 9). Shared Values Deliver long term value to shareholders. Focus on long term results. Unwritten culture strong personal culture (Bell and Shelman, 2009, p. 8). Although the change in the structure and the strategy was supported with a change in systems by adapting the GLOBE, other elements of the framework have not been adapted. For instance, the style used by Nestlà © was a democratic leadership style where management in the different countries are given a great deal of autonomy. By changing to a more centralized and global management style some internal resistance from the people can emerge.   The different markets are used to operating as small kingdoms (Bell and Shelman 2009, p.10). Therefore, given that country managers in the different countries were used to be given a great deal of freedom especially when dealing with issues related directly to the customer, this new strategy can produce some internal problems for Nestlà ©. To overcome this issue, other elements of the 7s framework have to be adapted. The main element that links everything together is shared values. Nestlà © has to work on making changes to its internal culture by introducing new shared values between its people. Implementing the GLOBE is not enough to implement the new strategy, a culture of sharing information and best practices should also be introduced and reinforced. Nestlà © should teach its people to move from a management style of taking control and matters into their own hands to a style of sharing control and producing decisions globally and collectively. The implementation of this approach may differ across countries due to the cross-cultural differences between countries. According to Lasserre (2012), country specific cultural values influence managerial values and assumptions in an organisation. As an example, Lasserre (2012) illustrates that western countries are more individualistic while Asian countries are collectivists which heavily impacts how business is done in these countries. In terms of implementing a culture of sharing, it can be assumed that Asian countries would respond more positively to the change than western countries.   Ã‚   Nestlà © intends to achieve its future growth by implementing four platforms for growth which are health, nutrition and wellness (to be the centrepiece), emerging markets, out of home consumption and premiumisation of existing products. (Bell and Shelman, 2009).The aforementioned strategy for growth is expected to double Nestlà ©s sales in the next 10 years. (Bell and Shelman, 2009)   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Bulcke emphasized that the priority should be on health, nutrition and wellness to implement the vision into every product segment and every country. This vision is in line with Brabecks strategies of going beyond food to Nutrition, Health and Wellness (Bell and Shelman, 2009). The total sales for Nestlà © Nutrition segment has significantly increased from 5,964 million in 2006 to 8,434 in 2007, which represents an improvement of 41% as shown in Exhibit 11. Although total sales have increased, most products that have led to this increase in sales were unhealthy. So, in order to maintain its vision as a Health, Nutrition and Wellness, Nestlà © should give up its unhealthy products in the long term. However, this would negatively impact on the financial position of the company as these are its core products. Moreover, making the same products available in every market might not be adapted to the needs of every customer in terms of tastes, preferences and nutritional value so Nestlà © should make sure at least every different product are tailored to the needs of every different market.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Regarding emerging markets, Bulcke found out that these markets are growing at a faster pace and therefore Nestlà © should integrate further into it as there is a high potential for growth. The implementation of popularly position products (PPP), a strategy designed for low income earners so they can afford good nutrition products on a daily basis, is ex