The first example supports the A.Chandler’stheses about the importance of a company’s structure based on the company’sstrategy and dividing top management from daily operating managers: Inditex group, founded in 1963 as a familybusiness, today is one of the largest fashion retailer, the owner of 8 brands(Zara, Pull, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home,Uterqüe)1 offers its products in 7504 stores on 94 markets of fivecontinents. The company’s businessstrategy is to provide customers fashion goods as fast as possible leads tocreating the structure that supports the group’s strategy: Each of the group’s brand is organized as aseparate business unit inside the group. Each unit has a support area(manufacturing plants, logistics, raw materials, marketing and sales, realestate, international expansion), operates independently and responsible forits decision making, manufacturing, fashion design, distribution and financialperformance. The top management of the group is acentralized “strategic controller”, involved in setting corporate strategy andapproving business strategy of each of individual chains, and monitors theircapabilities, but not involved in the operational process. Next example shows a positive outcome ofusing the vertically integrated structure:”Zara”, the most successful global fastfashion leading brand of Inditex group, who broke a tradition production cycleof the fashion industry, is a vertically integrated retailer and its businesssystem looks like following: the companybuys fabric in limited to 4 colours and all other necessary manufactoryproducts on the base of demand. Zara has an advanced communication system thatconnects production, supply and sales locations, and headquarters.
Almost 50% of the products are manufacturedat home in Spain, 25% in Europe, therest in locations in Africa and Asia. Production took place in small batches,with vertical integration into the manufacture of the most time-sensitiveitems. Both internal and external production flowed into Zara’s centraldistribution center.
2 Production delivered from the distributioncenter to primarily-located mostly owned stores twice a week. Verticalintegration reduces “bullwhip effect”3 increasing swings ininventory in response to shifts in customer demand as one moves further up thesupplier. Contact the customer feedback helps to react fast to each demandedchange. The last example is a try to linkChandler’s theories to actions of a multinational technology conglomerate”Cisco” which was founded in 1984 as a private company in the California, USAand became public in 1990. Nowadays the company is the market leader, has thebiggest network in the world that designs and sells a broad range of Internettechnologies, cloud services, and security systems (the company generates 59%of revenue on Americas’, 25% on EMEA and 16% on APJC markets).4 According to Chandler’s definition:”Strategy .
.is.. the determination of the long-term goals and objectives of anenterprise and the adoption of courses of action and the allocation ofresources necessary for carrying out these goals”.
5 Today’s quickly changeable businessenvironment demands from big companies to be flexible and capable to setthoughtful action plans and apply strategies that can be easily changed andadapt according to market’s conditions. Chandler suggests that for success acompany needs to achieve scale and scope by expanding, leveraging, allocatingresources and bold investments. “Cisco” managed to standardize basic tasksacross the whole company’s network, that helps to save operational costs forthe company and its clients. The company is focused on acquisitions with theaim to expand market or add new market entries.
Acquired companies bringvarious types of technologies and knowledge to “Cisco” (from the 1993 year”Cisco” has acquired over 190 companies), the company invests carefully andalways stays away from risky deals and buys only solutions, that can bedeveloped and implemented quickly. Results of acquisition help to reach scope,but apart from a broader range of products and services for the clients, thecompany gains the growing number of competitors. Thus elements of Chandler’s theories can befound in today’s business world highly influenced by timeand high market competitiveness.