ZARA CASE STUDY

2013 NOVEMBER – 2014

FEBRUARY MBA

INFORMATION TECHNOLOGY AND

MANAGEMENT INFORMATION SYSTEM

ITMIS

ASSIGNMENT

SERKANTABLE OF CONTENTS

Serkan SanC0213kgkg1113

I

III. CHAPTER 1

Introduction

Background of Zara

Aims & Objectives

V. CHAPTER 2

Decision-Making

Marketing Advertising

Information Technology

VII. CHAPTER 3

Problem Analysis

The Importance of Zara

Evaluation of IS Implementation

The Importance of Benefits

The Abstract impact of Costs

The Abstract impact of Benefits

XI. CHAPTER 4

Advises and Consequense

INFORMATION SYSTEM MANAGEMENT IN ZARA

XV. REFERENCES

XVI. BIBLIOGRAPHY


II

CHAPTER 1

INTRODUCTION

Inditex the largest international fashion brands has Zara

chains which was founded in La Coruna, Spain in 1975. The

basic idea which created Zara is that Amancio Ortega,

whose founded Zara, would like to make a link between

demand, manufacturing, and distribution and therefore

Zara could easily react to any changing occurs in the

Market. In 1985, Inditex was changed to a holding and

Zara is on the top of it and with the other retails.

Ortega made Jose Maria Castellano be an important part of

the company. It is believed that immediately being able

to response to demand of consumers, capebility of

computers, and decision-makings from every part of the

company were indispensable to boom the enterprise (McAfee

et al, 2007)

In 2003, 1,558 emporiums were operated in 45 countries by

Inditex and 550 out of them were piece of Zara chain

zara supported huge part of sales of Inditex 73.3%.

Zara has still a wide range of new style of its products

in collection of men, children and especially women with


III

a variety of prices. 60% of revenue of Zara sales came

from women section. The vital things making Zara on the

top of the its market are that instead of making

advertising the company has “ its commercials” who does

decision-making regarding what kind of products might be

in their stores and improving the garments by last styles

and trends.

Zara is the recognized company and niche player in the

markets such as Africa, Asia, Europe, America and Middle

East. The important of business model of Zara is

vertically merged. It is specialized in efficiency,

responsing to the demand of consumer as quick as it can,

and the last fahion trend (McAfee et al, 2007). All of

Zara’s product are advertised in its website

attractively.

It did not use to upgrade the old software system to the

new software system. Zara always improves its software

and applications internally by its Information

Technology. In this case of study, all emporiums of Zara

had the POS (Point of Sale) which had no full network

coverage throughout the stores. The POS had DOS system

which was not assisted by Microsoft. Although this

operating system had an age-old software, it could be

easily to support and maintain therefore Inditex used to

port1 its system extraordinarily; nevertheless, the head

1 “PORTING is the work of rewriting an existing piece of software so that it is compatible with another operating system” (Mcafee et al,


IV

of IT of Zara realized that If the company still had the

same software, it would be a disaster for further

developments will occur in next couple of years due to

the fact that all needs came from every level of company

indicated this therefore age-old OS would not have

capability for any improvements. This study explains the

infrastructure of IT of Zara, and its operations.

Zara is the recognized company and niche player in the

markets such as Africa, Asia, Europe, America and Middle

East. The important of business model of Zara is

vertically merged. It is specialized in efficiency,

responsing to the demand of consumer as quick as it can,

and the last fahion trend (McAfee et al, 2007). All of

Zara’s product are advertised in its website

attractively.

Objectives and Arrangement

Initially, the idea was to make a link between demand of

customer to manufacturing, and distribution to

manufacturing. Zara has remained to be a Market Leader

specifically being last fashion trend, design, and

cerativity with a fast impact to the market and thus the

company could easily have lead times in terms of

competiton, less inventory stock rather then a huge mess,

a gorgeous style of garments.

2007:p.2)


V

The procedure of Zara need to require the assortment of

era of incredible arrangement of pieces of clothing

throughout the entire year (Ferdows et al, 2003). 10,000

new goods was launched in comparison around 2500 of its

competitors by Zara and Zara dealed with the items as

starting point rather than dealing with them as end of

its style and supplier force (Mcafee, 2004). Zara’s

strategy is that not only did integrat its supply chain

and also dedicated to customer responsiveness. The thing

making Zara be difference from its competitors is that

focusing on fashion-consciousi young people. Notably in

the product development, infrasturucture of Information

Technology, marketing, the cost of production,

advertising, strategic partnership Zara’s capabilities

and commitments have supported extremely competitve

benefits.

CHAPTER 2

Decision-making


VI

It is believed that Zara had to give a respond as soon as

possible in terms of changing trends of fashion which is

still not to easy to forecast and to be influenced by

Ortega and Castellano and to achieve this Zara had to

follow the tendencies of young dwellers which were

influenced by the film or pop stars, etc. Zara would like

to dispatch the styles while they were still in fashion,

rather than trying to attract the consumers demands what

Zara had had. Zara’s difference in the market is shown by

this process. The second benefits which illustrated how

Zara’s remain different from its competitors is that

there was no integrated decision-making used to come from

a small group affected the all garments in Zara. This

decision-making were given to all employees to make Zara

influence from every part of the world and thus the

company leaded to response to the market at once. For

instance, unlikely the design teams of Zara’s

competitors could decide initially the design of clothes

then launch them through the market nevertheless in

Zara’s case the store managers chose what kind of

garments would be on sale furthemore, not only could

commercials who were a small of group decide which is the

perfect design and style for every product but also colud

browse the market and decide the designs. The high level

managers did not use to challenge this decisions because

of the structure of Zara.

Marketing and Advertising


VII

The extraordinary way of Zara’s approach in advertising

and marketing caused to be a Market Leader instead of

becoming follower was that the company spent 0.3% of its

revenue for the cost of its marketing and advertising

campaign, unlikely 3-4% were used to do expenditure by

its competitors. Miguel Diaz who was the marketing

executive officer stated that Zara’s customers could

easily advertise effectively muh more than normal

advertising campaign (Ferdows et al, 2003). The company

used to spend money on the cost of its stores rather than

its oponents and therefore Zara was able to concentrate

on its stores rather than its competitors. Furthermore,

Zara colud mainly invest money in prime store locations,

and store layouts which were changed constantly as

compared to its competitors.

Classics were not manufactured by Zara however slightly

stocked clothes in short life spans in terms of

durability and last trend and therefore customers already

knew that the merchandise of stores changed constantly

regarding 75% of the goods were used to change in four

weeks time so that the customers of Zara had purchase

garments at once before too late (Mcafee et al, 2007).

This kind of thought of trade was unique to Zara and

featured small shipments and frequent renew its stocks in

every stores (Thomas, 2006). To help in this philosophy

was the shipment Zara able to afford air travel Shipping

(Capell, 2008), although Zara had the Internet, rather


VIII

than selling goods online and are not set distribution

centers until sales and small and the rate of return as

high as 50-60% . Diaz summarize that customers need to

try clothes, which was not possible through the Internet

(Ferdows et al, 2003). Overall, the expense benefits, the

capability to support trademark conscious dependence of

customers where were initial requirements on Zara’s

abilities and increased the worth on market were held by

Zara rather than its competitors.

Information Technology

“Zara’s use of information technology was consistent with

speed and decentralized decision-making. Zara made

minimal investment in IT and so that did not have any

specific IT budget, cost and benefit analysis. Zara made

standardized and targeted use of IT” (Mcafee, 2004). Zara

prefered to chooce mankind brain instead of the decisions

were made by computers. As Zara operated in various

continents, the company chose to port its own softwares

rather than buying the commercial suitable ones which

required its own IT team. Zara had around 50 people who

operated of section IT and split off three parties:

Administrative Systems, Logistic Assistance and Store

Solutions and furthermore the IT department of Zara had

less turnover rate. The headquarters of Zara which was

located in La Coruna centralized all operations made from

IT departments and thus, the company had the mixed


IX

utilize of information and process so its fluent and fast

market return.

CHAPTER 3

Problem Analysis

Firstly, to analysis the issues of Zara, we have to focus

on reviewing the first and second acitivities so the

enterprise utilizing Micheal Porter’s worth linkage

theory as under (Porter, 1985).

The Importance of Zara

Michael Porter own establish of connected each other

recognized common behaviours solve the companies’ benefit

competitive. It useful was as a linked of worth make

events to model the firm. The important chain handy was

supporting lands of frail so then empowered these parts

for enterprisey’s competitiveness and profitability. The

model handy was in decideing the paths in where an

sation implement can IT or join worth to services the

goods. The aim movement of these to was make worth so

that goes beyond supplying goods or facilities the cost

of, thas produce a gain rate. The general included


X

linkage of five movement major plus four activities

countenance. The movement major enterprises were tasks

that bound up with indirectly towards the organization’s

products the production of so on facilities and

providing connect events capacity that overhaul and

support movement (Kroenke, 2012). The lifebility

enterprise’s bounding up with display successful

movements these.

Evaluation of IS Implementation

Zara less is in this case, believed plus and at least

built utilize and venture in IT. The upper hand owns

vying Zara more racers not so due the utilize of IT and

because but of its fast answer to the outlet modifiying.

Zara owned does not a parameter task supervisor or to

period any ordinary in order to an IT founding capital.

Estimated Castellano capital of Inditex IT to 2002 was

0.5 % of revenue contrast as to 2% of revenue another

merchants of north American (McAfee et al., 2007).

Whereas there grouping no was of IT ordinary attempt, was

there not any the upper hand and payments dissect and

however enterprise make support capacity of competitive

the was most significant agent when think carefully any

judgement performing the approximate developing of IS.

Zara dissected had and contrast the concrete

(quantitative) besides the abstract (qualitative) and the

upper hand expenditure regime of the age-old and brand-

new regime.


XI

Analysis of the Cost

Existing method Zara at least expenditure was contain its

minimum cost had involved its due bounded with erectly

treatments. Zara’s Point of Sales utilize links referring

onto the framework DOS which at least require renovation

thus and holding the down expenditures additionally

owned Zara its possess section IT, advences which the

suitable regime DOS rather than purchasing the software

commercial suitable as had Zara operations, worldwide

maintaning accounting using suitable software the

commercial difficult was. For reasons these, maintained

Zara an IT section laborers 50 of, which calculates at

least than 0.5% of manpower Zara’s (McAfee, 2004). This

verified had to operative upper expenditure be. Firstly

utilized Zara fax for purchase ordering due but to time

verylong besides huge expenditure, variation Zara to

Personal Digital Assistant the challenge clear up answer

whereas the were outlets not linked, the labourers store

did asks phone to discover so a list of goods therefore

this rose the expenditure of phone in addition to this

disbursing period time moreover this losed dropped time

even performance due to the fact that contacting fraud,

labourers more fundamental to were achieved a list of

goods, which rose expenses however and no definite

parameter countable suitable was made to the evaluation

made whole.


XII

The Importance of Benefits

Existing method move the company’s of its IT existing

region grant allowance owned Zara drop expenditure drop

functional, and efficiency rise. Grew Zara the internally

software instead of the commercial buying software

suitable thus and, provide job Zara workers 50 simply and

its cost IT at least then was a quarter goods last trendy

quantity. Those had programme perform Zara able to do 95%

of its everyday work and a low continue to have software

expenses upgrade. These internally software grown easier

make Zara keep 15,000 hours development, vendor outer

section expenses so on a 22.9% obtain ROE above term

2002-1996.

Whenever financial examine distinctives Inditex

parameter and racers lock so we that the expense

trademark discover of Inditex sold of € 1,955 very was

at least contrasted such as Bershka, and Oysho and thus

the firm was free to with operate high ratios return.

Inditex even operating at least owned such as expenses

runners to its contrasted and so was free to own

operating returns and a bigger net distinctive of 11.02

%. on inter contrast the years 2000 so 1996, the revunue

company’s own threefold 31% rise in revenue a tendency

indicates of fast and gainful grown i n addition to Zara

hard money faster gathered then it out purchase for

example Zara with operated a unfavourable fund operating

(Ferdows et al., 2003) moreover Inditex the enterprise


XIII

family owns an oultlet capitalized-value bigger

equation worth onto outlet of €13,981 within 2002 so on

the outlet indicated worth similar somehow indicate fixed

term above 2002-1996 and thus the IT tactic owned Zara

permitted owned supreme minor net ratio of 11.02% within

2002 the four runners top within the manufacturing so on

net ratio supreme 10.49% within 2001 moreover the

company be free its drop expenses management byside

sustain obtain linkage productive.

The enterprise operates owned processing 45 nationswithin

1558 outlets within 2003so on owns a outlet range come up

to moreover enterprise 11,000 brand-new goods attached

utilize outlet contrast to its runners about 4000-2000 in

addition Return on Assets Inditex’s even rose was

contrast to background its years and such as the Return

on Assets within 2002 was 14.54% contrast to 13.07% in

2001. Forty-six percent of selling the party’s in were

Spain which even was the top level of enterrprise’s.

Fiscal For the year 2002 told Inditex a net of yield

$502 million dollars U.S. so on the executives Inditex

that esteem Zara the had latent to grant develop valid

terms outlet not only for instant Italy had branches

limited but also Italian Zara’s outletse were likedr and

thus, thought Castellano growth probability with the

Zara’s actual manifacture substructure so on dispatching

systems and back up could further enlargement. The vital

things making Zara on the top of the its market are that


XIV

instead of making advertising the company has “ its

commercials” who does decision-making regarding what kind

of products might be in their stores and improving the

garments by last styles and trends.

The Abstract impact of Costs

Existing method avail Zara ’ s above runners its not was

due to the utilize avail IT but due to an linkage

productive reinforcement reaction and fast variable

outlet however durability of its superiority runners be

on hazardous because the in less the IT venture moreover

that Zara’s of an purposed senescent substructure IT is

avoid the of the enterprise sprawling consediring

restricting its productivity by knowledge missed because

shortage of IT real arrangement. The software DOS

utilized did the with POS link was likely constantly

operabler, but infact that encourage did Microsoft not

the software DOS age-old so that a future making begin on

movement hazardous. Zara owned section of IT included

laborer 50 who had responsibility of all sections in the

enterprise. Althoug Zara utilized not did the system of

suitable trademark, laborer framework improved. These

labourer were operated forcedly by Zara. The software

current unable was the guess sales, for decision or

losses guess as the was method inefficient to the stock

equal.


XV

Calculating management stock was troublesome that because

of structure of Zara branches not linked. Asking the

other outlets’ stocking to them always caused a fortune

in terms of money, time, efficiency. Moreover the

Personal Digital Assistance were used to make a list of

lack of goods in the outlets that often caused many

problems due to PDA’s havin mini display and discordant.

Upgrading age-ols framework with the brand-new technology

would lead to existing many problems such as incompatible

with the system of its suppliers, etc. On the other hand,

this improvement would lead to rise productivity,

efficiency in all part of the company as opposed to

hamper activities of the enterprise in terms of

networking.

The Abstract impact of Benefits

Existing method in those days Zara the used terminal POS,

which on organized the software DOS. Zara used had been

this for more method than in ten years, as the working

was method. The method current POS did not any need help

IT as ready to use software, and reinstallation situation

in bad of event simple wast herefore, no experience extra

of was workers important the existing framework Zara was

able to choice fast the top level person in outlet every

Zara able to were sustain their work enterprise every day

thus Zara owned a benefit competitive over competitors

its. The system current did not Zara to need its increase

section hIT and rent and finally the section IT improved


XVI

internally applications POS where successful, were

working perfect, , and easy sustain and lunch the system

by time

CHAPTER 4

Advises and Consequense

In conclusion, intangible and tangible advantages

outweighed the costs and thus the existing framework

should be upgraded to new framework by Zara. The cost of

upgrading system would be affect the budget of the

company nevertheless, this expense will be depreciate in

terms of time in the long run.

As Zara utilization POS terminals that work on the old

fashioned DOS framework and in addition it needs to

redesign the POS terminals with a more current and good

working framework and thus Current POS terminals that are

accessible work on advanced OS, for example, Windows,

LINUX and can utilize a mixture of physical layer

conventions, however Ethernet is at present the favored

framework and and for instance IBM-intuit retail results


XVII

work on Windows OS not only The POS might as well have

the client based functionalities that will record deals,

returns, trades, layaways, and so on. Likewise, "Behind

doors " workstations of the POS framework may as well

handle capacities, for example, stock control, acquiring,

and accepting and exchanging of items to and from

different areas and herefore Zara might as well likewise

utilize CRM programming and for example Sap that not just

help to address the fleeting objectives to diminish

cost and expansion the choice making, yet can likewise

help accomplish separated abilities to contend viably

over the long haul and nevertheless Zara might as well

run the old and the new frameworks side by side, until

the new framework is working easily and honestly when the

new framework is working easily, Zara might as well keep

the old framework for while and in the meantime what's

more Zara might as well utilize the web to make online

bargains and exploit the accessible free social

networking to push itself but also therefore Zara has

dependably utilized IT as an extra rather a substitute

(Mcafee, 2004) not only expansion of such capacities

will improve Zara's operations and finally these will

include more entrance boundaries for the new contenders

and the existing contenders will upgrade their operations

keeping in mind the end goal to stay in rivalry with

Zara.


XVIII

In terms of Management Information System this study

showed us that Zara was very good at porting its

framework especially where the porting is necessary. In

the meantime, it can be mentioned that the old-fashioned

Information System which Zara had must be upgraded

gradually to the new technology with the current system.

Therefore Zara would be powerful and erect in the market

with its competitors.

Overall, Zara responsed to the demand of customers in

terms of changing market trends and fashion rapidly. The

current infrastructure of IT was still to be able

consistent with enterprise of Zara and nevetheless any

effect may be occurred by in terms of last OS from its

suppliers or/and purchasing new machines probably would

not be compatible with the existing OS anymore due to the

fact that the Microsoft had not supported DOS yet.

Although the current OS worked without any problems for

now, the company might be upgrade the software to the new

OS. In addition, Zara should do modular implementation

for upgrading its current system instead of investing

money for the current system. This approach would be

prevent to face the company any inconvenient

circumstances throughout developing OS.


XIX

INFORMATION SYSTEM MANAGEMENT IN ZARA

DOMAIN INPUT PROCESS OUTPUT USERS INFORMATION

SYSTEM

Manifactu

ring,

Stores,

Distribut

ion

All

Relev

ant

Datas

In

Process

Purchasi

ngs and

Products

Relev

ant

Offic

ers

TPS


XX

OPERAT

IONA

L LEVE

LFinance

and

Accountin

g

Departmen

t

All

Relev

ant

Datas

In

Process

Incomes

and

Expensse

s

Finan

ce

Offic

ers

TPS

Human

Resource

Departmen

t

All

Relev

ant

Datas

In

Process

Employee

s

Records

HR

Offic

ers

TPS

Informati

on

Technolog

y

Departmen

t

All

Relev

ant

Datas

In

Process

All

Departme

nts

Records

IT

Offic

ers

TPS

TACT

ICAL DOMAIN INPUT PROCESS OUTPUT USERS INFORMATION

SYSTEM


XXI

LEVE

LManifactu

ring,

Stores,

Distribut

ion

TPS In

Process

Managin

g the

enterpr

ise

Releva

nt

Manage

rs

DSS

Marketing

Departmen

t

TPS In

Process

Managin

g

Marketi

ng and

Adverti

sing

Market

ing

Manage

rs

DSS

Human

Resource

Departmen

t

TPS In

Process

Managin

g HR

HR

Manage

rs

DSS

Finance

and

Accountin

g

Departmen

t

TPS In

Process

Managin

g

Finance

Financ

e

Manage

rs

DSS

STRAT DOMAIN INPUT PROCESS OUTPUT USERS INFORMATION

SYSTEM


XXII

EGIC

AL L

EVEL

Administra

iton

Department

All DSS

from IT,

HR,

Marketing

,

Finance,

Manifactu

ring

In

Process

Strate

gic

Decisi

ons

Executi

ves

Officer

s

ESS

[Total 3,622 words]

REFERENCES

Michael A. Lewis and Jose A. D. Machuca (2002), Zara’s Secret

Fast Fashion, The case study of Zara, Columbia Business

School, Kasra Ferdows, Georgetown University, USA

Mudrak Tomas, Van Wagenberg Andreas, Wubben Emiel (2005),

Innovation process and innovativeness of facility management organisations,

Facilities, Volume 23, Number 3/4, p.103–118.

Capell, K., (2008), Zara thrives by breaking all rules,

Business Week, (4104), p.66

Ferdows, K., Lewis, M. & Machuca, J. A. D. (2003), Zara

Supply Chain Forum: International Journal, 4(2), 62-66, 5, 3.


XXIII

Kroenke, D. M., (2012), Experiencing MIS, 3rd edition, In

Organizational Strategy, Information Systems, and Competitive Advantage,

p.51. Upper Saddle River, NJ: Pearson Education, Inc.

Mcafee, A., (2004), Do you have too much IT? MIT Sloan Management

Review, 45(3), 18-22

Mcafee, A., Dessain, V., & Sjoman, A., (2007), Zara: IT for

Fast Fashion, Harvard Business School, p.1-23.

BIBLIOGRAPHY

Hill, CWL (2006), Global Business Today, 4th edition, McGraw-

Hill/Irwin, New York


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Hill, CWL (2007), International Business Competing in the Global

Marketplace, 6th edition, McGraw-Hill/Irwin, New York

Saunders, M Lewis, P and Thornhill, A (2007) rson Research

Methods for Business Students, 6th edition, Pea Education

Limited, England

KEIFER, J.L. and KEIFER, M.C., (2009), A Method for

Embedding Business Etics Into Traditional Business

Analysis, Southern Journal of Business and Ethics, 1, pp. 141-150.

Friend, Graham Zehle, Stefan (2004), Guide to Business Planning,

London GBR. Available from:

http://site.ebrary.com/lib/westminsterintl/docDetail.acti

on?docID=10210696

[Accessed 10th February 2014].

Porter, M. E. (1985), Competitive advantage: Creating and sustaining

superior performance, New York: Free Press


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http://site.ebrary.com/lib/westminsterintl/docDetail.action?docID=10210696

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