Report Title: Zara: IT for Fashion
Zara is a fashion company founded by Amancio Ortega in Spain in 1975. It is part of Inditex holding company, a large fashion retail chain that operates five other clothing brands. Since its inception, Zara has been financially very successful as it contributes the most to Inditex’s overall revenue. Also, Zara’s fast growth is represented by its massive global presence; it has stores all over the world from Americas to Middle East to Europe, its principal market. In my analysis, Zara’s competitive advantage lies in its ability to mass produce a large range of highly demanded latest designer clothes faster than its other competitors in the industry. By virtue of being first in the market, Zara is able to gain a larger chunk of the revenue pie than its competitors. However, Zara’s financial success and global brand recognition hides many structural inefficiencies and wastages across its business units. My analysis shows that Zara’s main problem stems from its inability to value the importance of having the right information at the right time. This is evidenced by Zara’s hesitance to invest in suitable technological infrastructure that collects, analyzes and interprets valuable data to make the most effective decisions. Furthermore, Zara’s organizational structure is plagued with disjointed business units that fail to understand the relationship between two separate units within the organizations. This faulty organizational structure has not only severely hampered Zara’s ability to garner synergies among its business units but also has become the source of lost revenue due to inefficiencies and wastages. Finally, the culture of making important business decisions within Zara by its management based off of gut feeling rather than a well analyzed business information, patterns and statistical method, greatly dangers Zara’s competitive advantages over its competitors. I would recommend Zara to tackle its two biggest problems– a) absence of modern technological infrastructure and b) lack of collecting, storing and sharing infrastructure needed to generate vital business information to make quality decisions. This recommendation entails the use of Windows based new POS system for all the Zara stores. Also, the use of cloud computing to collectively store all its data that could be used in generation vital business information. Furthermore, I would recommend the use of tablets instead of handheld computers to increase efficiency and communication capability in all of Zara stores. I would broadly divide the structural problems with Zara into two categories: 1. Outdated Technological Infrastructure
The biggest problem within Zara is that they lack appropriate technological infrastructures that aid in the decision making process. I absolutely disagree with Sanchez’s argument that Zara does not need to fix something, in this case its POS system, if it is not broken. He also argues that upgrading the POS systems would make it more complicated. In my analysis, Sanchez’s argument fails because he sees Zara’s current comparative advantage in various market segments as a permanent thing rather than something that is constantly changing. Secondly, by opting for simplicity, Zara is sacrificing efficiency and effectiveness. Ultimately, the absence of the suitable infrastructure that can collect, analyze and interpret data to aid Zara’s commercials, store product managers and store managers to make quality decisions, makes Zara vulnerable to fall behind its competitors. Below are the few examples, where Zara’s lack of advanced technological infrastructure hurts them and possible solutions. First, Zara’s outdated technological infrastructure is inhibiting its speed and decision making ability throughout the organization. Zara is a company that depends heavily on capitalizing on new fashion trends rather than on expensive advertising campaign. Thus, it is imperative for Zara to...
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