Zara Case Study

Introduction

This paper will define Zara’s key strengths and competencies in reference of its business model. Role of information system is also evaluated within its business operations, strategies and processes. In the end, consideration of upgrading the information system of Zara will be addressed. Strengths and Core Competencies of Zara With an increase of competition, companies started the assessment of core products, technologies and markets, which were close to their future and current capabilities of growth.

Prahalad and Hamel (2003) stated that key strategic focus of firms was on the identification and exploitation of core competencies. Zara has been successful to bring people from different functions for information sharing about the markets and develop more innovative products. It impressively takes a short time p for transforming the ideas into their store offerings. Information technology is the main player in the success of Zara, which manages every aspect of the product design, production and distribution.

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Core “fast fashion” system also depends on the information exchange considering every aspect of supply chain system of Zara. The information flow is constantly managed in every department. Zara keeps the logistic as an essential capability for supply of products to merchandise at the right time. Additionally, Zara’s strategy of providing “fast fashion” to customers has also diversified it from other competitors. Once the garment has been made, it is delivered to one warehouse and shipped to the stores within a week. Zara’s strategy is supported by the competencies in the design, IS and supply chain management (Hill and Jones 2008).

Employees of Zara do not face hurdles of communication, instead, they use the enterprise data efficiently to increase the pace of coordination, get fast respond and speedy decision-making. Role of Information System in supporting Zara's operations IS is the core system for inventory management, tracking of sales, product pricing, products’ selling, and customers’ services. By coupling the IS with communication features of internet, Zara holds out strength to improve the effectiveness of the company for customers’ value creation.

Zara is a fast responder to demands of young, and fashion related dwellers with their quick changing tastes. Zara involves the people of different functions for new products development through information sharing (Cravens and Piercy 2009). Analysis of Zara’s SCM provides the evidence that how the IS is compatible with the decision making, fast response and emphasizes on the different phases. Information collected from customers is saved in the database at headquarter. The feedback from customers and record sales is integrated with design, manufacturing data and distribution functions.

Designers check the information collected about the feedback of products and use this information to modify or produce new products. Designers have real time access of the information on fabric price, cut and points of new product’s price. In this way, Zara spots trends earlier and adjusts the stock within days of the week. Through the strong IS, Zara has been able to manage thousands of trim and fabric specifications (Motiwalla 2009). This explains why Zara can be so market-oriented and identify its potential markets and customers accurately.

Information System of Zara improves its competitiveness According to Porter and Miller (1985), the information technology encompassed all those information, which businesses create and use all linked technologies for information processing. Although the IS of Zara makes a useful connection between distribution centers, store keeping units and conveyor belts, it requires human assistance for transferring the garments from conveyor belts into boxes. This is the important opportunity for Zara to reduce the human intervention and improve the process flow for distribution centers.

Other features of IS, which add value for Zara include the standardization of information about clothing, accurate and correct design preparation, inventory management, decision making and less involvement of humans in distribution facilities. For instance, it is integrated with optical reading tool that can sort more than 60000 pieces per an hour. Consideration in new design of Zara’s Information System From the analysis above, it is reasonable to argue that there remain several advantages of keeping the current information system running.

On one hand, the system is stable, simple to operate and easy to maintain, thus it is able to support the company to respond quickly to customer needs. On the other hand, based on Zara’s business strategy, time is regarded as the most valuable resources. The system upgrading will call for a large amount of expenditure in operating, employee training and maintenance, which, could be risky to ZARA. However, ZARA is building an increasingly large company on an increasingly outdated operating system. The financials of Inditex stated that during 1996-2002, the ROA fluctuated around 12% and ROE stayed at 22%.

Minor annual increment indicates slow development in ZARA. The underlying reason is that since the Microsoft does not support DOS based systems completely and Zara does not have a POS software that works with its POS hardware. Besides, the lack of network equipment in stores results in a loss of efficiency. Last but not the least, employees have not been given enough ability to check up the inventory balance in both their own and other stores, which is not beneficial to improve their participation or communication. Possible solutions are provided here.

For further development, there is a need in modification of the existing POS system based on DOS, or alter it to the Intuit-HP Retail Solution. The retail solution is the industry proven software, which will provide a robust solution to Zara in order to manage inventory, track customers’ demands, and getting the business insights. What’s more, in-store network should be built, especially the wireless, which is cheaper and will facilitate the statistics of sales information. Lastly, it would be wise for the C-suites to authorize employees to look up the inventory and transaction information in store.

In this way, employees can have more access to order information. They know what items sell well and they can adjust the strategy even more quickly. In the meantime, a higher level of participation will contribute to the enthusiasm and satisfaction among employees, promoting them to work efficiently. Before upgrading the system, Zara requires the update of network infrastructure. The new software will be initially installed on headquarter and then on POS. However, the current system of Zara should be kept in running until the new system works fully with reliability and confidentiality (Mcafee, Dessain and Sjoman, 2004).

Conclusions

In concluding remarks, the performance of Zara is the result of a proper combination of IT and business. Role of Information System at Zara is also analyzed with reference to competitive advantages in the market. Alteration or modification in the design of the new information system is also worth considering due to changing business requirements and technology advancement. (1140 words) References Cravens, D. (2009). Strategic Marketing (8th Ed. ). Tata McGraw-Hill. Hill, C. , and Jones, G. (2008).

Strategic Management

1. Houghton Mifflin Company. Mcafee, A. , Dessain, V. and Sjoman, A. (2004).
2. ZARA: IT for Fast Fashion. Boston: Harvard Business School Publishing. Motiwalla, L. , and Thompson, J. (2009).
3. Enterprise Systems for Management, Dorling Kindersley (India) Pvt. Ltd. Porter, M. , and Miller, V. (1985).
4. “How Information Gives You Competitive Advantage”, Harvard Business Review. Prahalad, C. and Hamel, G. (2003).
5. “The Core Competence of the Corporation”, Harvard Business Review

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