Case Study Zara It For Fast Fashion Business Essay
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Zara, one of the largest clothing retailers, was founded in 1975 in La Coruna, Spain. With its innovative strategy, it achieves global expansion and becomes one of the most profitable brands. The company has grown nearly 550 stores around the world with almost half market in Spain and France. Zara has developed a business model based on quick response, short deadline and a great choice of clothes at reasonable price. Moreover, Zara always could provide new clothes with fashion every time.
The success of Zara is driven by its competitive advantages of quick response over its rivals. Obviously, Zara's fast fashion approach is quite different from other clothing retailers, which not only enables Zara to respond to the market demand with less time compared to its competitors, but also enhances Zara's capacity to anticipate the customers' trend. By following the trend, Zara is able to sell garments which are still hot and meet customers' desire without making advertisements. Moreover, trust given to its employees throughout the company largely increases autonomy, which in turn contributes to the success of the company. Employees have been given authority to specific decision making process; this allows staffs to work in teams which are more horizontal than hierarchical. For example, store managers could make tailored decisions on what garments would be on sale at their own stores and which items would be ordered, rather than relying on headquarters' decision. Their role is specifically designed to provide clothes only for a short period of time and follow the current trend.
In addition, these two main principals formed the company's basic core competencies. According to Prahalad & Hamel (1990), core competence of one corporation has three features. First, it provides potential access to a wide variety of markets. In this case, competencies of Zara's can be expanded to other markets worldwide, in another word, competency of Zara is a kind of strategy rather than a simple product; Second, it should make a significant contribution to the perceived customer benefits of the end product, Zara's competence make the company numerously profitable; Lastly, competence should be hardly to imitate for its rivals, Zara's quick response model is not easily to copy as it may result large costs to acquire such systems for other companies.
Also, Zara has key strengths over other areas, such as, high turnover rates of products and limited level of stock, which enable Zara to have a lead time of 4 to 5 weeks for new garments and 2 weeks to restore; skillful management and employees, high efficient distribution systems, innovation, location of stores, and etc. And these could be competitive advantages of Zara over competitors.
Zara has made extensive use of information technology to implement dramatic reductions in the time it takes in the design, manufacture, and distribution process. With the help of information technology, Zara could strengthen its competitive advantage of fast speed and decentralized decision making strategy. First, information technology can improve quick response approach to follow fast fashion by develop communication channels. For example, as fax is considered to take too long and very costly to deliver orders, every store equipped with identical handhelds, known as personal digital assistants (PDAs). Using PDAs via modern could save much time and thus speed up the communication process to headquarters. In addition, PDAs were also used for other tasks such as handling garment returns to DCs and transmitting information from headquarters to all stores. Second, information technology may also available for facilitating decentralized decision making strategy. Other large clothing retailers mainly rely on sophisticated mathematics forecasting to generate optimal plans and schedules. Executed by computers at headquarters, to determine which cloth will sell in each location and in which quantity, headquarters just push these clothes to stores without input of managers. By contrast, Zara's store managers, almost have entirely discretion over which cloth to order and based on local tastes and instant demand. From sharp difference between Zara's and other retailers' approaches, it can be illustrated that IT will not enviably lead to one best way to execute core processes (McAfee & Brynjolfsson, 2008).
From discussion between Salgado and Sanchez, it can be seen that current issue faced by Zara is whether it should upgrade the point-of-sale (POS) system throughout the Zara value chain. The current POS terminal which in use within every store runs on DOS operating system, it is no longer supported by Microsoft since 2003. But this DOS-based system meets the needs of the company; it had proved to be remarkably stable, effective and easy to maintain all over the time. Some people argue that as upgrade system would provide more functionality and convenience, and there is no need to sustaining the competency of fast fashion, we should upgrade the existing system. But it is very risky to do so, if the project goes wrong, it would blank out the global sales systems and would cost a lot of money. Moreover, it would add complexity to relative simple operating system, as DOS is very stable system and Zara almost have no problem to deal with it. What is most important, upgrading POS system has potential to deviate from currently extraordinary business model. For these reasons, I highly recommend that Zara currently maintain existing operating system unless changing is necessary.
When the company cannot run with obsolete system any more, suppose that hardware vendor no longer support ancient DOS system, Zara would have to develop new information systems (IS). When design and configuration of new information systems, it should be considered to work well and support peoples' work, not rather to make things more complicated (Kling, 1999). The expression requires understanding of how people work and what organization practices should be obtained. When use more advanced technology, we should consider whether it is faster or easier to use (Kling, 1999). What is more, we should determine the role of information technology in industry structure, analysis how IT might affect each competitive forces (Porter, 1985). Additionally, we should develop a plan for taking advantages of information technology (Porter, 1985). In the case of Zara, we should consider whether new IS still meet the company's competitive advantages and competencies, only in that way, information could help to improve growth of firm.
What is more, there are some areas that Zara could achieve improvement of its IT infrastructure. For example, there is a lack of connection of in-store network; employees have to copy daily sales on a disk first. The weakness of intra-communication should be filled when developing systems. Moreover, personal handhelds which used in every store could not connect to other stores or headquarters, it also should be considered at the time changing the system. Meanwhile, real-time inventory tracking could also been improved as currently Zara does not have ability to see other stores' inventory. What is more, Zara has to keep updating its information flow to forecast future trends; with efficient IS it could keep leadership of the industry. In a word, the change of Zara's IT infrastructure is absolutely unavoidable and necessary because Zara such a big company cannot run with obsolete technology, and an effective IS should help with company's growth.
In conclusion, IS are now integrated with almost every aspect of business which is in order to meet varied customer preference (Pearlson, 2004), we should using IS appropriately to improve competitive advantage and meet business needs. Only in this way, Zara could obtain leadership of clothing industry and has a better future.
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