Discussing issues of vertical integration for ZARA... 1 answer below »

The ZARA case (see attached) illustrated and discussed issues of vertical integration. Under what circumstances might vertically integrated companies such as ZARA outperform the competitors? Transaction cost economics suggests that it might happen if the costs of organizing the transactions internally are less than the costs of organizing the same transactions externally (through the market interface). Part 1: Name two substantial “internal” transaction costs, and explain why they might be important (2 points) Part 2: Name a substantial “external” transaction cost, and explain why they might be important (1 point) Part 3: Discuss how Zara manages to minimize its internal transaction costs (7 points) Format:

Your answer should be in the range of 1,400 words