Case Study - Zara International

Zara takes a no bells and whistle approach to the technology used outside of the manufacturing (ex. use of technology in the fabric cutting) side of their business. They have been very successful with their reactive supply chain process and do not have to rely of tends and forecasting because of their Corporate Mandate to produce low quality (10 wears) high fashion garments. I believe this is a very unique approach to business and would not be applicable or appropriate anywhere. This business practices would not function well in an environment where customers want a reliable products that last nor would it not work for companies who’s stagey to purchase large quantities

This theory was made possible when Inditex accomplished correlating situational demands to a certain management style. The tactic for Zara is to interact with its environment and transition suppliers into consumers and to create systems to keep track of time production as well as reporting of inventory.

The case study is upon on the resource based view. First, the firm resources were divided into three major parts: tangible resource, intangible resource and human resource as Grant suggested. The main body of the essay will also be divided into three parts according to the resource classification. Then, a VRIN test would be carried after listing different types of resources to inspect whether they are able to provide a sustainable competitive advantage for Zara. Finally, Zara’s dynamic capabilities will be discussed to state how Zara used the resources based on their organizational culture.

Benefit: The current IT infrastructure has enabled Zara to report a net profit margin of 11.02% in 2002 and also has helped reducing the operating cost by efficient utilization of its supply chain. The up gradation of current IT system will enable Zara further improve its efficiency thereby increasing its revenue. It will enable improve its inventory management system because rapidly growing market may make it difficult for the current old IT system to maintain the same level of efficiency.

E-business can transform the way a company does their business. There are plenty of benefits of this form of business for both the company and the customers. It gives customers an unlimited access to your products at every time of the day while most traditional brick shops would only be opened for a limited time. Secondly it makes expansion into foreign markets much easier as you can always sell your products abroad as customers can see all the products with a mouse click

This speed makes everything possible- updated pricing, the most relevant designs to customer desires, re-ordering or stocking the store, and more. Salespeople at the stores use PDAs to send customer feedback directly to headquarters multiple times a day; their PDAs show how items rank by sales (Investile). They try to talk with the customers and find out what they like or do not like about a product, and track the items that are tried on but left in fitting rooms. They also have a Point of Sale system which sends record of products that are sold or returned also directly to the headquarters (Strategic). This data is helpful not only in assessing which products are good and bad, but also what to re-order or mark up, how many clothes they need to be shipped in the next batch, and take note of the type of clothes that the store in that particular geographic area sell best to ensure they are sent the clothes that will sell best in that location. Each store manager has weekly conversations with store managers and market specialists. The store managers also send all of their collected information multiple times a day to be used for future designing and pricing, but they are empowered to do the ordering themselves (Zhelyazkov); this empowerment makes for more invested managers who are happier and care more about the success of the company. Clearly Zara makes it a top priority for their customers to be heard as soon as

Multi-brand strategy refers to the development and marketing of two or more competitive products by the same firm under different brand names. Zara has created a multi brand strategy through brand acquisitions such as Massimo Dutti for quality and conventional fashion, Pull and bear for casual clothes, Berksha for avant-garde clothing, Stradivarius for trendy clothing, Oysho for lingerie etc allowed Inditex to target different segments more effectively which were built within the domestic market first and launched for international markets.

The unit of analysis is the Zara Group, which belongs to the Spanish company Inditex. It is a very global company which has been selected due to it does an intensive application of ICTs in its processes, mainly manufacturing and distribution ones, as well as its logistical processes. Because of this, it can stand out among its competitors. (María Teresa GARCÍA-ÁLVAREZ, p.998)

Zara is one of the Inditex’s largest international fashion brands. The company first opened in La Coruna in 1975, still lives by the simple idea of Amancio Ortega to link customer demand to manufacturing, and link manufacturing to distribution. Castellano and Ortega shared the same beliefs that quick response to customers, use of computers, and disintegrated decision-making were important to build the business. It has built distribution and information system which allows to keep latest design in stores in just one or two weeks. Its supply chain has made it so successful and popular among its customers (Zhang, 2008).

Second, Zara’s ability to forecast and analyze its performance under various market situations is handicapped by its old infrastructure. Most businesses that are successful take into account and analyze all the possible scenarios that can affect them before making critical decisions. Usually called event-driven analysis or simply, what if analysis; it gives a business a sense of all the possible opportunities and threats out there in the market. However, a business mostly requires a large amount of data that they need to analyze in order to conduct a successful what if analysis. In Zara’s case, they lack that data gathering and sharing ability because of their old infrastructure. So for example, Zara has no clue how their revenue is going to be impacted if Benetton opens up a hundred new stores in Madrid. This is serious problem for Zara because it may be losing market share but they have no accurate way of verifying it.

Q1. With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics?

Key Elements Which Will Determine Zara’s Profit Growth in the Next Three To Five Years

The classical approach to management is the oldest school of thought dating back to the late 1890’s and losing favor by the 1940’s. The contributions to the classic school of management included increasing productivity of the organization, and that of the worker, as well as providing the framework for management of diverse organizations. This methodology was a marriage of scientific, administrative, and

The classical or traditional approach to management was generally concerned with the structure and the activities of formal organization. The utmost importance in the achievement of an effective organization were seen to be the issues such as the establishment of a hierarchy of authority, the division of work, and the span of control.

According to the data acquired by the company’s website, evolution and origin of Zara can be seen as follows,