Identification of Issues: Top management at Inditex, Zara’s parent company, must make the decision whether or not to upgrade the current IT system that they utilize, specifically their Point of Sales (POS) terminals in which they utilize in all their stores. Currently, the system that they use is based on a DOS operating system. In comparison to current technologies, DOS based applications are considered to be antiquated, although still in use by some organizations. Zara’s terminal vendor has assured them that they are not likely to make any internal changes that will affect their support for Zara’s DOS based system, but the terminal maker will not give any assurances by contract with Zara. The vendor also informed Zara that they are the vendor’s only customer still running DOS based applications. Store managers at Zara also utilize handheld PDA for inventory purposes and for ordering new inventory, the use of which are not necessarily as effective as alternate technologies.
There is a risk that the terminal vendor will make changes in the future and as such, they will no longer make terminals that are DOC compatible, leaving Zara to face obsolescence in the technology in their current stores, and any new stores that they may open.
The IT managers must decide if it is advantageous to upgrade to the newer software applications and hardware. The must weigh the cost benefit associated with an upgrade, and question whether or not an upgrade will make Zara more competitive, and allow them to also expand their customer reach via the internet. The final decision narrows to whether to upgrade or not, and if so, if it will be economically feasible.
Importance of Key Issue: Currently, less than 0.5% of Zara revenue is spent on IT, where their competitors spend 2% of their total revenues on IT development. From a strategic perspective, it is obvious that Zara has not allowed themselves to grow technologically, but has reached a plateau and remained there, while their competition has by far surpassed them. It is essential that Inditex design and promulgate a corporate strategic plan, and in conjunction with the plan, incorporate a plan of analysis in regarding their indecisive and unknown technological future. The key issue isn’t necessarily whether or not Inditex should upgrade Zara stores, but the question is whether or not Zara stores are effectively exploited. Subsequently, in question is whether or not Inditex should upgrade Zara stores, and if they should, the question is then directed as to which plan of technological upgrade they should consider.
Key Stakeholders: There are many key stakeholders both internally at Zara, and externally, who are currently affected, and would be directly affected by any changes that Inditex may make in regards to technology upgrades for Zara. Key stakeholders are Zara’s: management, employees including store managers, vendors, suppliers and customers. Managers are affected by changes because ultimately, they are the decision makers, and are held accountable for decisions made at the corporate level. The employees, including store managers are stakeholders because they are directly affected by any decisions that are made at the corporate level by upper management. Although the store level employees may be able to give feedback to upper management, but ultimately, employees are directly influenced by upper management’s decisions. Vendors and suppliers rely on Zara for business, and are accordingly stakeholders in the company. Since their livelihood may partially depend on the business they do with Zara, depending on the vendor/supplier’s customer base, any changes made by Zara that affects their purchases may financially impact the vendors and suppliers harmfully. Customers are the most important stakeholder for Zara because it is the customer’s investment at Zara that are sine qua non.
Causes of the Issue: The main cause of the issue that Zara is having with their IT system is...
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