1. Is Zara’s business model scalable ?
No, Zara’s business model is not scalable
Though Zara is able to do well in a dynamic market, most of the sales of Zara come from Spain (46%) and from women’s segment (73.3%). Hence it becomes very difficult for Zara to scale it up to other countries and other segments. Zara follows decentralized model where store managers have lot a of power – It is very difficult to find such efficient people once we they scale up their business
Vertical integration which helps is reducing the lead times and also introduction of new items work only under current scenario. Once Zara scales up, the costs would increase greatly in order to follow this model.
Currently Zara does not spend much on marketing and spends a lot on stores. But once Zara scales to tier II cities, Zara would have to increase is marketing budget.
2(A). Should the company upgrade the POS terminals to a modern operating system?
YES, ZARA must upgrade its POS terminals to a modern operating system.
Advantages of new system:
Upgrading increases the functionality and networking capability
It helps in handling the increased operations of the company and future growth vision of the company
It will be technologically in sync with all other stakeholders, like suppliers and distributors, of the company.
New POS will help in building or extending new capabilities into the system
It will lead to centralization of data and help in analyzing/finding trends.
It will help in collecting real time data
2(B). Should the company build in-store networks?
Yes Company should build in-store network
Employees will no longer have to use floppy disks to transfer daily sales data from one POS terminal to another. The transfer of information with-in the store would become more convenient and less time-consuming for employees with in-store networks
Wireless networks were also a much cheaper option to install and use within a