Zara Case Study

Running head: Zara Case Paper Analysis

Zara: IT for Fast Fashion Case Analysis

Sonal Bhagwat University of Houston-Victoria MGMT 6352-2011FA-25125 November 2011

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Zara Case Paper Analysis

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Table of Contents: •

Abstract

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Case Description

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Goals and Strategy

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Speed and Decision-making

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Marketing, Merchandising, and Advertising

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Information Technology

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Problem Analysis

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Firm-based-value chain model

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Model Application Implementation Opportunity Analysis

Evaluation of IS Implementation

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7 7 7 9 12

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Tangible Costs Analysis

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Tangible Benefits

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Intangible Costs Analysis

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Intangible Benefits

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Conclusion for Evaluation of IT Implementation

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Conclusion and Recommendations

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References

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3 Abstract

This case paper presents the business analysis of Zara, the leading and the profitable brand of Inditex. The case paper’s objective is to discuss whether to update the current DOS/IT infrastructure and evaluate the effects of the upgrade. By using the Michael Porter’s value chain analysis, we can understand Zara’s core business model of vertical integration and assess the areas where IS will add value to the system. The case paper also presents the IS implementation opportunities and evaluating the effectiveness of the implementation. The case paper concludes by providing recommendations for updating the current OS along with its advantages.


4 Case Description

Zara is one of the largest international fashion brands of Inditex. 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. The customer is at the heart of the business model. In 1985, Inditex became the holding company atop Zara and other retail chains, and Jose Maria Castellano Rios joined the company. Castellano and Ortega shared the same beliefs that quick response to customers, use of computers, and disintegrated decisionmaking were important to build the business (McAfee, Dessain, & Sjoman, 2007). Inditex operates 1,558 stores in 45 countries out of which 550 stores are a part of Zara chain. Zara generates a major portion of Inditex’s sales accounting for 73.3%. Zara offers a great choice of new style clothes for Men, Women, and Children along with moderate prices every time. The women clothing account for 60% of Zara’s revenue. Zara has developed the business model to sell the garments by following trends and styles, with virtually no advertising and trust the decision of a group of employees called as “commercials” on what clothes should be in stores. Zara has pioneered the niche market and has presence in all continents: Europe, America, Asia, Middle East, and Africa. Zara’s core business model is vertically integrated, it specializes in speed and efficiency and the fast fashion trend. Zara’s approach to information technology is consistent with its core business model (McAfee et al., 2007). The website www.zara.com serves only as display window and Zara does not use the Internet to make sales. Zara prefers developing applications internally for its use, instead of b uying the commercial available software. At the time of the case, the company relies on an out-of-date operating system, the P-O-S (Point of Sale), for its store terminals and h as no full-time network in place across the stores. The P-O-S system runs on DOS, which is not supported by Microsoft. As much this system is outdated, it is still easy to maintain and operable and with this Inditex has built an extraordinary well-performing value chain. However, in 2003, Zara’s CEO must decide whether to upgrade the retailer’s present system and risk the reliability with the current system, or continue with the old system that will not be compatible for future changes or improvements. The case describes this value, concentrating on its operations and IT infrastructure.


5 Goals and Strategy

Zara was developed with the initial goal to link customer demand to manufacturing, and link manufacturing to distribution. Zara has been successful to r emain focused on its core fashion philosophy that creativity and quality design together with a rapid response to market demands will yield profitable results. The goals such as short lead times, d ecreased inventory risk, and great choice of style and clothes have helped formulate a unique value proposition and shape Zara’s current business model. Zara’s strategy requires the generation of a great deal of product variety throughout the year (Ferdows, Lewis, & Machuca, 2003). Zara introduces 11,000 new items in comparison to 2000-4000 of its competitors. Zara treats the items as starting point instead of treating them as end of its design and procurement efforts (McAfee, 2004). Zara competes in the market with a strategy where a vertically integrated supply chain is dedicated to customer responsiveness. Zara has differentiated itself from its competitors by focused differentiation strategy, where it focuses on young, fashion-conscious city dwellers. Their commitment to this goal and their capabilities that they have developed to achieve it, have provided significant competitive advantage to Zara especially in the areas of product development, strategic partnerships and cost of production, advertising and marketing, and information technology infrastructure. Speed and Decision-making

Ortega and Castellano believed that Zara needed to respond quickly to the changing fashion trends, which were very hard to predict and hard to influence. It needs to target the young, fashion-conscious city dwellers. Zara wanted to deliver styles when they were in fashion, rather than persuading the customers through marketing. The hallmark of Zara is its pull process. Another added advantage Zara has is of disintegrated decision-making. Instead of relying on the decision of a small group, it has given the autonomy to all the employees to delegate on behalf of the company. For example, the store managers decide what clothes would be on sale, and another small group called as “commercials” decides the design and production of clothes. Unlike other stores where the design teams decide the clothes design first and then introduce it in the market, Zara’s commercials scan the market and then decide on the design. The senior managers hardly challenge the decision made by the commercials.


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Marketing, Merchandising, and Advertising

Zara’s unique approach to advertising and marketing is an additional factor to its success. Zara uses only 0.3% of revenue for its marketing expenditure, instead of 3%-4% used by its competitors. According to the marketing executive Miguel Diaz, stores and word-of-mouth are more influential than advertising (Ferdows et al., 2003). Henc e, Zara maintains a cost advantage over its competitors. This cost advantage helps Zara concentrate on its stores. Thus, it can invest heavily in prime store locations, and store layouts. They are also able to change the store layouts more frequently as compared to its competitors. Zara does not produce “classics”, but rather sells clothes with short life spans, both in terms of fashion and durability. Customers know that the store inventor y changes frequently, about 75% of the merchandise is changed three to four weeks, so they need to buy it on the spot (McAfee et al., 2007). Zara’s unique merchandising philosophy features small shipments and frequent remerchandising (Thomas, 2006). To aid this shipment philosophy Zara is able to afford the air shipment than the ocean shipment (Capell, 2008). Even though Zara makes use of the internet, it does not sell merchandise over the internet as the distribution centers (DC) are not configured for small sales and the rate of return is as high as 50% - 60%. Diaz stated that the customers needed to try the clothes, which is not possible over the internet (Ferdows et al., 2003). Zara has a cost advantage and ability to maintain brand recognition, and customer loyalty, which are essential elements of Zara’s capabilities that build value in the company. Information Technology

Zara’s use of information technology is consistent with speed and decentralized decisionmaking. Zara makes minimal investment in IT and so does not have any specific IT budget and cost/benefit analysis. Zara makes standardized and targeted use of IT (McAfee, 2004). Zara believes on human intelligence rather than the computers to make the decisions. As they operate in various continents, Zara prefers to develop its own accounting software rather than buying the commercial available ones. It has an internal IT department of approximately 50 people, which is divided into three groups: Store Solutions, Logistics Support, and Administrative Systems. In addition, Zara’s IT department has a very low turnover rate. All the Zara’s IT operations are centralized from the headquarters located in La Coruna. Therefore, Zara makes the hybrid use of process and information for its smooth and rapid market response.


7 Problem Analysis

To understand the problems faced by Zara, we need to review the primary and the secondary activities of the company using Michael Porter’s value chain model as below. Firm-based-value chain model

Michael Porter has identified a set of interrelated generic activities to analyze the firms’ competitive advantage. It is useful to model the firm as a chain of value-creating activities. The value chain is useful to assess the areas of weakness and then strengthen those areas for company’s profitability and competitiveness. The model is useful in determining the ways in which an organization can implement IT or add value to the products and services. The goal of these activities is to create value that exceeds the cost of providing product or service, thus generating a profit margin. The generic chain consists of five Primary activities and four Support activities. The primary activities are business functions that relate directly to the production of the organization’s products and services and the support activities include functions that assist and facilitate the primary activities (Kroenke, 2012). The company’s survivability depends on the effectiveness of performing these activities. Model Application

The primary activities will differ as the model of service chan ges, but the support activities will not differ. An application of the Porter’s value chain mod el is as follows: T R O P P U S

S E I T I V I T C A

Y S I R E A T I M I I V R T P C A

ADMINISTRATION & SYSTEMS PROCUREMENT BUSINESS SUPPORT UNITS

G N I R E D R O

T N E M L L I F L U F

N G I S E D

G N I R U T C A F U N A M

FIGURE: MICHAEL PORTER’S VALUE CHAIN MODEL FOR ZARA

FIRM’S N O I T U B I R T S I D

VALUE S R E T N E C

S E R O T S

CHAIN


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The above figure suggests that Zara performs a number of operations. The primary activities at Zara are comprised of ordering, fulfillment, design and m anufacturing, and among these activities, ordering was the most regular, precisely defined, and standardized around the world. Zara has differentiated itself from its competitors by adding value in the every step right from manufacturing to distribution to sales. Zara has a flat and decentralized decision-making. The store managers at Zara had the autonomy to select the inventories at each store rather than depending on the headquarters to make the decision. The store managers decided items on sale, and deal with the customers, property owners, and contractors. The store managers communicated with the commercials and worked in close proximity. The commercials decide on the clothes production and design and higher-level managers typically did not review their decisions. Zara’s distribution centers manage the inbound logistics of receiving, warehousing and inventory control of input materials. Zara’s distribution centers (DC) receive bulk quan tities of each garment and then recombining each garments for shipment to each store. The use of information systems helps keep track of the SKU’s (Stock- keeping units). Zara does not stock inventory and so reduces the inventory risk. There is little inventory anywhere in the Zara’s supply chain. The clothes reach from the factories to the DC’s to the stores for sale. Zara h as pioneered its operations, which enables the constant introduction of new items in short lead times. Zara owns factories around the world and so can consistently move a design from conception to production and from production to DC to retail stores. Zara’s SKUs and the DC manage the outbound logistics where they match the supply and demand. The production of the items was determined according to the demand of the item to reduce the overall cost and inventory risk. Zara believes that its customers and stores are the form of marketing rather than advertising. Zara spends only 0.3% of its revenue on advertising as compared to 3%-4% of those of its competitors (McAfee et al., 2007). Zara is supported by various activities such as procurement, technology development, human-resource management, and firm’s infrastructure. Most of the activities are common to other industries. On the support activities for Zara, it has an internal IT department for the development of various applications. The CEO managed the IT department instead of CTO or CIO. This IT department is divided into three groups: Store Solutions, Logistics Support, and


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Administrative Systems. This use of information technology has reduced the overhead costs and has developed a cost advantage. Implementation Opportunity Analysis

Zara has used information technology and systems in terms of functional area processes and decision levels. Zara’s business model uses P-O-S terminals, which run on DOS operating system not supported by Microsoft. Zara also uses the PDA’s for ordering and for tasks such as handling garment returns to DCs and transmitting information from headquarters to all stores (McAfee et al., 2007). Looking at the table it is clear that Zara can enhance its primary activities by implementing IT in its system. Currently, Zara uses the outdated OS (operating system), and so the operations such as ordering, fulfillment, design and manu facturing, and the in store operations are not that efficient. The PDAs cause redundancy. The POS terminals make it difficult to check in-store inventories, check inventories in other stores, and share information. The store managers would have to call to check for available SKUs, which is a time-consuming process. Zara makes no use of the internet to make sales. The website is only there to maintain presence. Zara makes minimal investment and use of IT. It believes in the word-of-mouth marketing and investment in stores rather than relying on advertising. Zara has decentralized decision-making, the store managers are responsible to decide what items are on sale, and the commercials decide where to allocate the SKU’s. The above shows the areas where Zara can make the use of proper IT/IS infrastructure. The present system followed by Zara has been v ery effective, and so the company has continued using it without any changes so far. Although there is no immediate urgent need to change the P-O-S, the question still remains is whether to invest in an obsolete technology. Hence, the change is unavoidable. The proper implementation of IT and IS can provide great opportunity for Zara to improve its value chain operations. The table below shows in detail the functional areas with the problems and opportunities and the associated decision levels.

Zara Case Paper Analysis Primary

Already Has

10 Problems/Needs

Activity

Ordering

Fulfillment

Decision making level

-Manual checking of inventories for ordering -Handheld computers (PDAs)

-Store Managers Problems: -The screen of the PDAs is small. -Lack of in-store computers to check inventories and sales. Also cannot match the exact inventory. -Cannot look at inventories in other stores. Needs: -In-store computers to check inventories

-Commercials cannot Problems: match the exact supply and -The commercials ship items not ordered by demand the store. Lack of in-store computers makes it difficult to check which store needs the items. Needs: -To make use of IT Design -Commercials decided on Problems: the design -Commercials within the design teams make a guess of the design and communicate it with factories. -Commercials surveyed the market by talking to people. Needs: -Use of IT will help track sales data, and ease the communication with the store managers. Manufacturing -Zara has vertically Problems: integrated manufacturing -Simple applications used do not have operations, which enables sophisticated mathematics to generate constant introduction of optimal plans and schedules. new items with short lead -Plans and schedules are almost times. communicated manually instead of using IT. -Zara has large computer- -Internally developed software applications controlled equipment to cut are not compatible with the outside cloth into patterns. applications. -Has internally developed Needs: simple applications to plan -Use of IT for easy communication of plans production. and schedules. -Use of universal compatible software. Distribution -DC relies heavily on Problems: Centers automation and -The Internally developed software may not computerization. be compatible with the vendors. -IS tracks each SKUs. Needs: -DC’s use internally developed applications to control the DC’s automation often in collaboration with the vendors of conveyor equipment.

-Commercials

-Commercials within design teams.

-Factory Managers. -Commercials

-DC Managers

Zara Case Paper Analysis Primary

Already Has

11 Problems/Needs

Activity

Decision making level

Stores

-Uses PDAs and POS systems. -Used the DOS operating system. No IT support is required to open new stores. -Use floppy discs to transfer information. -The store managers manually check the inventories.

Support

Already Has

-Store Managers Problems: -Stores did not have computers beyond the PDA and POS terminals. -PDAs and POS could not share information within a store and other stores to check for available SKUs. The store personnel needed to call to check for SKUs -.POS terminals used the outdated DOS operating system. -No in-store networking available. Needs: -In-store networking should be available. Problems/Needs Decision making

Activity

level

Administration Administration: Problems: and Systems -Uses standard commercial -Internally developed applications by the IT applications for office department may not be suitable for use. productivity (word-Lack of IT use. processing, e-mails) Needs: -Vendor compatible software. IT: -IS department responsible -IT use can enhance efficiency. for the internal development of applications. -The IS department have three groups: Store Solutions, Logistics Support, and Administrative Systems. Human Resources: -Training and development Procurement -Supply Chain Problems: -Lack of computers in stores, makes it Management There are fewer inventories difficult to match the exact inventory. in the entire supply chain. Needs: -In-store computers Business -Has support areas for Problems: Support Areas Expansion, -Communication is difficult Real Estate, -Time consuming International, -Offices need to be near the location for Logistics, communication Raw material, Needs: Manufacturing Plants. -Use of IT for easy communication -Enhanced efficiency -Use of IT can make centralized operations possible.

Administration: -Senior Level Managers IT: -Senior Level Managers -Middle Level Managers Human Resource: -Senior Level Managers

-All Levels of Management -DC Managers

-Development Officers -Middle Level Managers -Senior Level Managers


12 Evaluation of IS Implementation

In this case, Zara believes less is more and makes minimal use and investment in IT. The competitive advantage Zara has over its competitors is not so much due the use of IT, but because of its quick response to the changing market. Zara does not have a chief information officer or any formal process for setting an IT budget. Castellano estimated Inditex’s IT budget for 2002 was 0.5 % of the revenue, as compared to the 2% of the revenue of other North American retailers (McAfee et al., 2007). As there is no formal justification of IT efforts, there is also not any cost/benefit analysis. However, to maintain business competitiveness is the most important factor to consider when making any decision regarding the upgrade of IS. Zara needs to analyze and compare the Tangible (quantitative) costs and benefits as well as the Intangible (qualitative) costs and benefits of the old system and the new system. Tangible Costs Analysis

Current system: Zara has minimal cost involved due to its vertically integrated operations. Zara’s use of POS terminals based on the DOS system, which requires minimal maintenance, and thus, keeping the costs down. In addition, Zara has its own IT department, which develops the DOS compatible software instead of purchasing the commercial available software. As Zara has operations, worldwide managing accounting using the commercial available software is difficult. For these reasons, Zara maintains an IT dep artment of 50 employees, which accounts for less than 0.5% of the company’s workforce (McAfee, 2004). This has proved to be very cost effective. Earlier Zara used fax for ordering, but due to the long time as well as large cost, Zara switched to PDAs to resolve the issue. As the stores are not connected, the store employees make telephone calls to check for inventories, this increases the phone cost as well as this process is time consuming. This lost time also decreases productivity. Due to improper communication, more employees are required to manage the inventory, which increases the cost. However, no specific numerical data is available to make the complete evaluation. Future system: As Zara uses the P-O-S terminals that operate on th e outdated DOS software, installation of new OS such as Linux, Windows, or UNIX will enable Zara to develop its capabilities. According to McAfee et al., the following costs can be identified in upgrading the current OS. By comparing the cost of OS for POS terminals, we find that Linux does not have any One-time license cost, whereas, Windows has a One-time license cost of €140 and


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UNIX has a One-time license cost of €160. Thus, Linux offers cheapest implementation costs for Zara. However, Linux has higher ongoing costs, such as service contract cost, ranging from €10 €150 as the Linux service contract depends highly on IT staff’s knowledge in Linux programming and maintenance. As Zara will install the new OS on a large number of computers, it needs to consider the costs of each OS. To upgrade the system Zara will also have to install new hardware and replace the old POS terminals. The cost of POS terminals is €5000, which will also require installation of new cables, routers etc. The Wireless routers and Ethernet cost, staff training cost, software installation and maintenance cost, and the per store connectivity cost of €240 etc. will also add to the upgrade costs. Apparently, this seems to be an immediate expense, but the cost will depreciate over the years. Tangible Benefits

Current system: Zara’s choice of its current IT system has allowed Zara to reduce expenditures, reduce operational cost, and increase efficiency. Zara develops the software internally instead of purchasing the commercial available software. Thus, Zara employs just 50 employees and its IT expenditure is less than one-fourth the fashion industry average. These software have enabled Zara perform 95% of its daily activities and maintain a low software upgrade cost. These internally developed software help save Zara 15,000 development hours, outside vendor costs, and provide a 22.9% ROE over the period of 1996-2002. When comparing the financial data of Inditex and key competitors, we find that the cost of goods sold of Inditex (€1,955) is very less as compared Gap, and H&M. Thus, the firm was able to operate with high profit margins. Inditex also has less operating expenses as compared to its competitors, and so is able to have operating profits and a higher net margin of 11.02%. In comparison between the years 1996 and 2000, the company’s earnings have tripled (31% increase in profits) indicating a trend of rapid and profitable growth. In addition, Zara collects cash faster than it pays out i.e. Zara operates with a “negative working capital” (Ferdows et al., 2003). Inditex, the parent company, has a higher market capitalization (equity to market value) of €13,981 (in thousands) for 2002, and the market value has remained somewhat stable over the period of 1996-2002. Thus, the IT strategy has enabled Zara to have the second highest net margin of 11.02% in 2002 of the four highest competitors in the industry and the highest net margin of 10.49% in 2001.The firm is able to reduce its operating costs by maintaining an efficient supply chain.


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The company has operations in 45 countries with 1,558 stores in 2003 and has a wide market reach. The company introduces 11,000 new items as compared to its competitors averaged 2000-4000. Inditex’s ROA is also increasing as compared to its previous years, such as the ROA in 2002 is 14.54% as compared to 13.07% of 2001. Forty-six percent of the group’s sales are in Spain, which is also the company’s headquarters. For the fiscal year 2002, Inditex reported a net income of $502 million U.S. dollars. The Inditex executives believe that Zara has the potential to grow given the current market conditions. For example, Italy has very few stores, but Zara’s Italian stores are popular and thus, Castellano expects growth prospects. With the current Zara’s infrastructure of production and distribution networks, it can support future growth. Future system: The installation of the new system will enab le Zara improve the efficiency, which will directly influence Zara’s revenue. With the smooth communication among the stores as well as the headquarters, Zara can better predict the future needs of material, and save cost by hedging them at a low cost. The system will also enable Zara to make clothes prototypes at a quicker rate and get a faster response from the customers. Therefore, there will be more sales, less cost, more revenue, and more profit. For example, the system upgrade will provide better efficiency and networking between the stores and thus, reduce the operational costs and the number of per store employees. However, no specific numerical data is available to make the complete evaluation. Intangible Costs Analysis

Current system: Zara’s advantage over its competitors is not because of the use of IT advantage, but because of an efficient supply chain and fast response to the changing market. The sustainability of its competitive edge might be at risk due to the lack in the IT investment. Zara’s use of an aging IT infrastructure is hampering the growth of the company by limiting its efficiency by lost information due to the lack of proper IT structure. The DOS system used by the POS terminals maybe operable currently, but in reality Microsoft does not support the outdated DOS system. Therefore, building a future on shaky foundation is risky. Zara has an IT department with just 50 employees who share the work of the whole organization. The employees develop software, as the company does not use the commercial available software. With just 50 employees, these employees are overworked. The current system is unable to predict the sales, plan for or estimate losses as the system is inefficient to match the inventory.


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The Zara stores are not connected and so the inventory management is difficult. The store managers make calls to check for the inventories, which is time consuming and less productive. The store managers use the PDAs for ordering whose screens are small and incompatible, which can cause errors in the ordering system. In the era of rapid IT development such as wireless, mobile commerce, etc. the company’s decision to use the old system could hamper company’s efficiency and deplete its corporate image. Another area of concern is the unreliability from of the change in the IT system from the supplier side. Future system: Zara has been using the POS terminals for over a decade, without any essential change. Changing this system to a new system would require training of the employees. Acceptance of the new system by the employees might be difficult due to the inertia to change. Currently, store employees can easily operate the POS system without worrying about the procedures. The probable problems that would arise in adopting the new system will be difficulty in training the staff, more IT staff experts etc. Zara has alwa ys treated IT as a cost center rather than enabler. This explains the lack of CIO and CTO. This mentality can crush ambitious projects in the company that lacks the management expertise and experience of a senior IT official. The new OS will nurture future inventions. The adaption period required for the new system would lead to less productivity. The employees could face problems such as faulty hardware, incompatible software, and possibly updating of the other equipment. Zara has a decentralized and an informal current culture. However, if the new system requires too many tasks then this could dissolve creativity and autonomy of the personnel over time. Intangible Benefits

Current system: Zara currently uses the POS terminals, which operates on the DOS system. Zara has been using this system for more than a decade, as the system was operable. The current POS system did not require any IT assistance as software installation, and reinstallation in case of serious event was straightforward. Therefore, no additional training of employees is necessary. With the current system, Zara was able to make quick decisions and the managers at each Zara store were able to manage their daily business operations. Thus, Zara had a competitive advantage over its competitors. The current system did not require Zara to expand its IT department and hire any CIO or CTO. The IT department internally developed POS applications, which were stable, effective, and easy to roll out and maintain over time

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should assign a budget for implementing the whole upgrade. Instead of investing at a time, Zara should make the investment in sequential stages. Zara will need to design a formal chain of decision-making. The PDAs used for ordering are inconvenient to use and so, Zara should replace them with convenient equipment such as the PCs. In addition, the PDAs and the POS are not connected. In order to improve the networking capabilities at each store level, Zara should switch from a modem-based network to a broadband-based network. This will allow Zara to stay connected with the other stores as well as with the headquarters. As Zara uses POS terminals that operate on the outdated DOS system, it needs to update the POS terminals with a more modern and compatible operating system. Modern POS terminals that are available operate on modern OS such as Windows, UNIX and can use a variety of physical layer protocols, though Ethernet is currently the preferred system. For example, HPintuit retail solutions operate on Windows OS. The POS should have the customer-based functionalities that will record sales, returns, exchanges, layaways, etc. In addition, “Backoffice” computers of the POS system should handle functions such as inventory control, purchasing, and receiving and transferring of products to and from other locations. Zara should also use CRM software such as Sap that not only help to address the short-term imperatives- to reduce cost and increase the decision-making, but can also help achieve differentiated capabilities in order to compete effectively over the long-term. Initially, Zara should run the old and the new systems side by side, until the new system is operating smoothly. Even when the new system is operating smoothly, Zara should keep the old system for while. At the same time, Zara should focus on the development of its IT department by hiring a CIO or CTO. Under the expertise of the CIO, Zara will be able to tackle the IT related problems and undertake ambitious developments. In addition, Zara should use the internet to make online sales, and take advantage of the available free social media to promote itself. Zara has always used IT as an adjunct rather a substitute (McAfee, 2004). Addition of such capabilities will enhance Zara’s operations. These will add more entry barriers for the new competitors and the existing competitors will have to enhance their operations in order to stay in competition with Zara. The Zara IT case has a significant impact on the MIS field. It shows how a company can enhance its operations by the necessary use of IT. The case suggests Zara to change the old technology and adopt the new technology to stay in pace with the competition. This also shows the importance of the IT and the emerging trend of MIS.


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In conclusion, Zara has maintained an upper hand over its competitors by the response to the changing market trends and fashion and by vertical integration. Zara, with its present IT infrastructure has been effective and able to be consistent with its core business. However, depending on an unreliable change from the supplier side, obsolete OS will not be compatible for future improvements or growth. Although, there no immediate need to change the current system, Zara should not invest more in the current obsolete IT infrastructure. It should adopt the change to the new OS eventually. Making a gradual change to the new system will increase Zara’s efficiency, without facing the sudden setback of implementing the change at once.


19 References

Capell, K., (2008, Oct.20). Zara thrives b y breaking all rules. BusinessWeek, (4104), 66, 1 Color Photograph Ferdows, K., Lewis, M., & Machuca, J. A.D., (2003). Zara. Supply Chain Forum: International Journal, 4(2), 62-66, 5, 3 Black and White Photographs, 1 Graph

Kroenke, D. M., (2012). Experiencing MIS (3rd ed.), In Organizational strategy, Information systems, and Competitive advantage (p. 51). Upper Saddle River, NJ: Pearson Education, Inc. McAfee, A., (Spring2004). Do you have too much IT? MIT Sloan Management Review, 45(3), 18-22, 4p McAfee, A., Dessain, V., & Sjoman, A., (Sep2007). Zara: IT for Fast Fashion. Harvard Business School, 1-23 Thomas, R.J., (Jan2006). Uncovering Zara. Apparel Magazine, 47 (5), 27, 3, 4, 1 Color Photograph

Zara Case Study

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