1. Is Zara's use of IT different from similar firms?
First, I would like to highlight Zara’s business model and their business practices which are different from its competitors, from which I will draw comparison on use of IT among these firms. Zara’s business model and business idea are different from many of its peers. As mentioned in the case - “The original business idea was very simple. Link customer demand to manufacturing and link manufacturing to distribution. That is the idea we still live by”. Accordingly, there are three major differences in practices can be seen from its competitors.
a) Zara believes that their target customers’ tastes in clothing are hard to influence. Accordingly, Zara wanted to be able to produce and deliver styles which are hot rather than relying on persuasiveness of marketing.
b) Zara’s collections were not conceptualized and designed by a small, elite team. Instead, collections were created, by teams of commercials each dedicated to a section of store.
c) Zara did virtually no advertising. Thus the marketing expenditures as percentage of revenue are very low compared to its competitors.
Zara’s approach to Information technology is consistent with its preferences for speed and decentralized decision making. Zara is using IT to have better linkages across the value chain – both internal and external. It has applications to prepare offers and to distribute it to stores, to receive orders and aggregate them, to keep track of ‘theoretical inventory’, to plan production, and to track SKU’s at the DC’s.
Most of the applications were developed in-house. There was no CIO and no formal processes for setting an IT budget. And according to the foot notes provided, Inditex’s 2002 IT spending is approximately 0.5% of annual revenue compared to average of 2% at other large retailers. Similarly, IT employees accounted for less than 0.5% of total workforce compared to average of 2.5%...