Zara IT Case Study - page 1
Keywords: SWOT Analysis , Zara's Business Model , Does Zara need to upgrade its IT sysytems?
By Charlie on 02/10/2011
Level: Master's degree (MA, MBA, MSc, MEng, MRes, MPhil etc)
Page Number: 1 of 6 pages: 1 2 3 4 5 6ZARA IT Case Study
Table of contents
1 Business model 1
1.1 Weaknesses in business model 2
1.2 Competitor analysis 3
2 Information requirement 4
3 IT Approach 5
4 IT weaknesses 7
5 Point of Sale (POS) system 8
6 Advantages of upgrading system 8
7 Disadvantages of upgrading system 9
8 Recommendation 9
References 10
Appendices
Appendix 1
Appendix 2
Appendix 3
Appendix 4:
Appendix 5:
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1 Business model
Inditex (the parent company of Zara) CEO, Jose Maria Castello once quoted “This business is all about reducing response time. In fashion, stock is like food. It goes bad quickly”. Zara’s business model is made up of three basic components: concept, capabilities, and value drivers.
Figure 1. Zara Business Model
Concept: Zara’s fundamental concept is to achieve quick response to shifts in consumer trend by focusing on design, production, and distribution. It incorporates short lead time to keep up with fashion, scare supply to reducing stock obsolescence risks and more styles to achieve more hits than misses.
Capabilities: Zara supports these concepts by exercising tight control over production processes, 80% of which are done in-house. Furthermore, the whole manufacturing process is localised around its headquarters (in La Coruna, Spain) for consistent operational effectiveness. With their efficient resource and capabilities Zara produces over 12000 new design lines every year constantly understanding and adapting to the shifts in consumer demand. By producing in small quantities and constantly renewing its supplies, Zara creates an environment of scarcity and customers are attuned to the “buy now” philosophy as the products might not be available on next visit. A strong distribution network enables the delivery of new supplies to stores within 24-48 hours.
Value Drivers: Zara drives value by adopting a hybrid model which incorporates human intelligence and simple IT applications. Store managers are given significant autonomy in both determining the products to display in their stores and decision power what to place on sale, and also feeding back market research to the headquarters. Also Zara does not outsource and spends very negligible amounts on advertising and marketing.
Zara’s success is rooted in its commitment to rapid response in customer trends in fashion.
. Zara as Disruptive Model
• Industry has a modular approach to developing better quality and predicting customer tastes (6 – 12 months lead)
• Zara adopts an integrated reactive strategy to meeting customers taste, with emphasis on speed and not quality.
• Industry ignores Zara as high cost base, inferior quality attract low margins.
• Zara achieves more hits than misses, satisfies customers’ needs and increases profitability.
• Competitors try to adjust an entrenched business model.
By focusing on “sensing and responding” to trends and not
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