Zara Case Study
Zara is one of the leading fashion retailers of the world. It was founded by Amancio Ortega in 1975 as a family store that had successfully developed as the international brand having more than 500 outlets in 2001. Zara is successful because of its fast Fashion Business model. Speed and flexibility are the major components of the business model of Zara. It believes in changing the designs and fashion quickly to respond to the market needs where, the flexibility is induced in the decision making process. The store management and product designers are allowed to take decisions for what is needed to be placed in the store and what changes in designs are required. For its fast fashion business model, Zara has been involved in IT use (Ruddick, 2014). The paper is aimed to discuss the current IT infrastructure of Zara and its impact on the business to analyze the problems and issues in the existing IT system in terms of either the change is needed or not.
The framework to analyze Zara’s IT system
McFarlan & McKenney – The Strategic Grid model
McFarlan & McKenney – The Strategic Grid model is going to use to analyze the current IT system of Zara in aligning with its needs and future requirements. The model is based on four quadrants include support, turnaround, factory and strategy. These quadrants can be seen in the picture below (Walton, 2012):
The model is very helpful in analyzing the IT use of the company. McFarlan & McKenney have designed the model to answer the questions that what is the importance of the current IT system in the company and what are the future developments required or feel by the company in IT development (Corboy, 2007). The paper is aimed to answer both of these questions about Zara, therefore, the model is appropriate to use. The model is also going to use to identify the required position and strategy of IT for Zara for the effective results both in current and future business.
The Value Chain Model
Value Chain Model is also going to utilize in the paper to understand the impacts of information technology system of Zara on its value chain process in terms of information system as it is very important for the successful business process and activities. Value chain model determines both primary and support activities of the business where, the application of It system can help to improve to the process of information between the primary and support activities. The model is useful to analyze the use of IT of Zara in between different activities of value chain process.
Current IT infrastructure of Zara
Applications and Systems
Based on business objectives, strategies and business model, Zara had developed its IT system. Rather than ordering for the IT applications and systems, Zara has developed its own information system department for designing the applications use for the Zara’s operations. IT structure of Zara has developed directly to support daily operations and activities of the business. La Coruna is the IS department of Zara, from where; all the IT supports for the outlets around the world is being provided. IT system of Zara supports operations, factories, distribution and stores (McAfee, Dessain & Sjoman, 2007).
La Coruna uses multiple IT systems and applications for different activities. One application is used to take orders and to aggregate them. Another application is used to compare the combined orders with the inventories available to highlight the point of equilibrium between supply and demand (McAfee, Dessain & Sjoman, 2007). It helps the company to maintain the balance between supply and demand and to take quick actions and decisions when the demand exceed from the supply. It aligns the IT structure of Zara with its business strategy model of providing fast fashion services.
Moreover, managing the demand and supply helps the company to effectively manage the cost of the business that is very important for the success and improved performance of the firm (Thirtle & Ruttan, 1987). According to the study, the organizations must be able and flexible to change and exceed their supply in case when demand change. The applications in factories of Zara are also implemented to simply support factory managers in terms of providing quantitative data rather than involved in scheduling and planning. Moreover, some other applications are used for cutting and fabric maintaining. Moreover, at distribution level, the applications are used to combine the garments and their shipments (McAfee, Dessain & Sjoman, 2007).
Support to the Business with the application of Models
Based on the support of different applications of IT system of Zara, its system can be placed in one quadrant of the McFarlan & McKenney model. Zara IT system is not supportive as support means IT has both low current and low future role, however, the IT system of Zara is highly relevant to the current business process. Furthermore, it is also not laid in turnaround category as it means to have low current and high future importance, where, the focus of Zara is mainly based on the current practices and performance, rather than future. Therefore, Zara’s IT system lies in factory quadrant because it means the IT system that is very important for day to day operations but there is a lack of involvement in future developments and needs that may fundamentally change the nature and process of the business. For the future development, it is very important for the organizations to develop their existing IT systems, however, from the case study, it is clear that Zara is consistent with its IT system for the existing operations as the current system is well supporting the operations and providing significant outcomes.
In stores, Zara had faced various problems such as late and delay in ordering that had resulted in the frustrations throughout the process, therefore, the management has realized the need of IT system in stores. Zara has implemented personal digital assistant and POS Systems in the stores. It shows that the Zara has taken initiative to understand the need of IT, analyze the problem, design the application internally, developed system and implement in the operations of stores. It has resulted in rapid improvements in the store operations and process. However, Zara is still consistent with the initial system rather than developing with time. The systems and POS terminals that were placed in stores have remained unchanged over the period of time (McAfee, Dessain & Sjoman, 2007). However, the system helps the employees to simply insert the data and information that would be used later for opening another store. The maintenance of the system is only based on upgrading the devices such as color screens etc.
Issues in Zara’s IT System and Strategy
Issues in IT system
Although, current IT system of Zara is supportive and offering significant outcomes, however, it has number of issues and challenges. According to the case study, Zara is using the most oldest and traditional IT system in the stores operations that can any time be replaced by the vendors. Zara has no policy and strategy to deal with the changes in IT systems and applications in future as, in case, if the machines and hardware will be changed by the vendors, where Zara will stand for its store operations (McAfee, Dessain & Sjoman, 2007). Moreover, the users of the system, means the store managers and workers are not connected with the IT developers that create the number of problems for the users either to communicate the changing needs or the problems in the existing system.
The POS and PDAs systems placed in stores of Zara cannot be used by the other stores to determine the remaining stock in the particular SKU and the staff at the store is needed to communicate the information via telephone (McAfee, Dessain & Sjoman, 2007).
Application of Models to analyze the issues
According to the value chain model, information technology is one of the most important factors to achieve competitive advantage through improved business process. Although, Zara has developed its information technology system and strategies in and between all the processes and activities of the businesses however, its system is still failed to some of the problems in terms of transfer of information between the buyers, employees, suppliers and IT developers. As it has mentioned that staff of the store is needed to communicate using telephone with the staff of another store, it means that the IT system rather than reducing the cost, is increasing the cost of the business. The value chain model using information technology system should lead the business process towards cost reduction to achieve the competitive advantage. Therefore, Zara should focus on improving its IT system for improving the business process in terms of information, cost controlling and achieving competitive advantage.
It is important to improve the information process using Information technology because the information is one of the most critical factors in the value chain process. Using IT system, the information can be transferred from one location to various very inexpensively and instantly (Coelho, 1999). Zara, although, is successfully sharing information to manage the inventories and store operations, however, store to store operations and information is needed to be improved.
According to the model of McFarlan & McKenney, the companies must design appropriate strategies either placed in any quadrant of the strategic grid. As Zara is placed in Factory quadrant, therefore, it must have a proper plan for how to deal with the failure of the system or emerging developments in IT systems. The study has found multiple reasons for why IT strategy is important. The major reason is that IT system and process is involved in high cost. It means that in case of failure and development of IT, the company can face the high cost to the business that will directly impact the financial performance of the company. IT systems are very crucial and important for achieving competitive advantage in the competitive business environment. Furthermore, the external factors also impact the needs and development of IT strategies. The strategy of IT is also needed to design because it impacts the management personnel of the company at all level (Corboy, 2007). Therefore, Zara should develop the proper IT strategies to deal with the potential issues and challenges in future rather than simply focusing on the success of existing process and operations.
In line with this analysis, Zara can change its IT system based on such strategies that will place it in the quadrant of Strategy. As IT plays essential role in the current and future success of the firm, therefore, strategic importance of Zara’s IT system will help it to focus strongly on both current and future process, operations, developments and need.
It is concluded from the analysis of Zara’s IT infrastructure and systems from the case study that although, the current IT system of Zara is useful and effective for the business process, however, it is needed to be developed and improve for the future strategic needs and business performance. IT system is become one of the most critical factors in the success of the corporate, therefore, it should involved both in current process and future developments for the success of the company in present and future as well. Therefore, Zara should develop its IT system to place in Strategic quadrant of McFarlan & McKenney model and should plan the strategies and systems for the future strategic direction of the company and reduce the risks of failure, high cost and huge loss.
List of References
Coelho, E. (1999). Impact of information on the value chain of an enterprise in the new economy. South African Journal of Information Management, Vol. 1, No. 1.
Corboy, M. (2007). Strategic planning models. Available from http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/Strategic%20planning%20models.pdf [Accessed 12 January 2016]
McAfee, A., Dessain, V. and Sjöman, A., (2007). Zara: IT for fast fashion. Harvard Business School.
Raho, L.E., Belohlav, J.A. and Fiedler, K.D., (1987). Assimilating new technology into the organization: an assessment of McFarlan and McKenney's model. MIS Quarterly, pp.47-57.
Ruddick, G. (2014). How Zara became the world's biggest fashion retailer.Telegraph. Available from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11172562/How-Inditex-became-the-worlds-biggest-fashion-retailer.html[Accessed 12 January 2016]
Thirtle, C.G. and Ruttan, V.W., (1987). The role of demand and supply in the generation and diffusion of technical change (Vol. 21). Taylor & Francis.
Walton, J. (2012). Management & Information Systems. Available from http://www.iuc-edu.eu/group/sem1_L3/2012%20MANIS/MANIS%20Lec%204.pdf [Accessed 12 January 2016]