Technology in Zara - Term Paper Example

Background Information Amancio Ortega, one of the richest personalities in Spain saw the development and founding of Zara. The idea had been based on the foundation of clothing factory in 1963 to meet the needs of the dwellers. Subsequently, he developed the idea that manufacturers needed to have a direct relation with their customers. Zara was developed to open its first basis store in 1975 La Coruna (Lopez & Fan, 2009). 1985 saw vital improvements to the company with the formation of Inditex with Castellano José Maria its CEO. Castellano and Ortega shared a belief that application of computers could attribute the business development prospect that was the basis of Zara development. The strategy that Zara applied was to boost its sales when they had still been popular and the choice of the majority of its users. The fashion market had attracted the youth who had a passion for the latest trend of commodity preferring a point of Sale that could be accessed easily. The fashion produced by Zara had to rely on the current trading patterns as preferred to applying persuasiveness. Zara store managers were accorded particular responsibility when they had been trusted to make a judgment on the variety of stock that the store required to progress. The managers aided in boosting returns when they carried out surveys to articulate the merchandize that would generate profit. Zara failed to offer any advertising promotions and only announced its annual sales or inform of new stores opening, and this enabled the company to save costs incurred in advertising as compared to their competitors. The major investment that the company incurred was in the development of the outlook of their stores with its location on town centers. There was a recorded 1558 stores belonging to Inditex in 2003, of which 550 belonged to Zara (Mcafee, Dessain, & sJoman, 2007). Spain composed over half of customers with France becoming the leading international market. On a gender basis, women realized the leading merchandize sale with 60% sale recorded followed by men and women. The most profits had been recorded between 1996, and 2000, and Inditex recorded a net return of $4,554. Zara’s Porters Four Models General strategies Zara’s strategy is to focus on the popularity that has been achieved on its consumers rather that popularizing the less recognized stock. The managers are accorded outstanding obligation to determine the products that would have a positive implication on the revenue that would be generated by the company. The desire to trust these employees with the principal decision has led to the generation of the realized profit because the company does not dictate the available merchandize, but have an indirect link to consumers through the manager. An added strategy to regulate the revenue spent is realized in the reduction of advertising fees as the company fails to engage in the process. This strategy is applied in creating a modernized store to attract the customers because of the position in the urban centers that require better display. Zara applied a consistent procedure to ensure its goals are attained, and a wider market niche satisfied. These were categorized into simpler units. Orders were placed to La Coruna on a two times weekly basis. This ensured that the required items that were on demand delivered to customers and the managers applied a system that checked on the deliveries through a dial-up modem system. Fulfillment was achieved through checking for orders that the customers had been engaged in consuming updating the manuals to satisfy the ordered merchandize. Value Chain Designing and manufacturing ensured that the latest fashion had been implemented, and a wider collection maintained in stock. The design established the trend within the market to alter the merchandize that would sell more to the clients predicting the future pattern of the goods. This made sure that Zara had stayed with the competitors to capture the consumer market that appreciated the latest trend of items. The distribution center was run by a computerized system that ensured that the bulk of the products had been properly packaged for distribution. The conveyor belts delivered the finished merchandize to their destination to ensure that a system that accounted for the products had been established. Zara’s IT sector conveyed the applications that regulated the automation process within the DC while engaging the conveyor equipment. Rivalry The company witnessed rivalry from other fashion distributors in H & M, Gap and Benetton who invested in advertising of their merchandize to inform their clients of the stock that they had generated in their stores. Unlike these stores, Zara had focused on the customer satisfaction building stronger relations with its customers by ensuring that the display unit had been at par with the latest technology and design. It had included the strategy to induce a short life span in its designs prompting the customers to purchase the item before being outfaced in their stores. Threat of New entrants There is a developing consumer market whose pattern of purchasing the fashion products remains unrecognized. This system has prompted Zara to maintain the demand for its products within the market to keep their clients. They regulate the period that an item can be found in the stores through constant shuffling of their stock. Bargaining Power of Buyers The buyers in the market are fashion oriented and would prefer to acquire high quality fashion items at affordable prizes. Zara stores fail to provide a system that offers the buyers control over the prizes of their products. This is a poor marketing strategy because a limited number of consumers require better prizes for the goods before purchase. They can easily turn to alternative fashion houses in terms of financial crises (Rave, 2010). Supply Power The goods are ordered twice weekly and fulfillment of the delivery services achieved through assessing the required products while updating the stock. The latest trend of fashion is assessed and personalized into Zara products through, for example, changing the color of a collar in a shirt. The DC uses modern technology to promote effectiveness within the supply chain of products to reach their consumers in due time before they are surfaced. Substitute Products The system applied by Zara ensures that there is a regulation of available products within its stores and reduce the time that a product is placed within the market. The only weakness that their system contains is the fixed pricing strategy and failure to participate in advertising that may not reach a potential large clientele. They then opt for substitutes that they have knowledge of the cost that they present. Substitute products may offer a better value in financial regulation, in economic crisis situations. Information Matrix Salgado and his colleagues have installed the latest computerized technology to handle the IT implications needed to generate profits to Zara. The software was designed to accommodate the provisions that Zara presented due to the dynamic operations of the company. Internal application was utilized to design a personalized accounting software. All applications were in house designed with a similar implication justified on the manufacturing, ordering and fulfillment of customer satisfaction. Technology This is necessary to create efficiency and contain the high production rate that is witnessed by the company. Zara is based on a large-scale distribution of products and inclusion of technology in the compiling of data would generate efficiency. With the increased inventory from 157 in 1998 to a figure of 382 in 2002, the company has witnessed a total asset of 3013, in millions of Euros with a personalized accounting and operations software. Technology boosts efficiency and creates satisfaction to the increasing market demand with over 550 stores across an international consumer. Dell handhelds These give a catalogue of the merchandize within the stock and the values that the company offers for each item. They allow managers to keep track on items ordered and update on the existing stock from the leading supplier Inditex. These gadgets are handy in analyzing the content of the data and may be installed to trace the list of the stock and their value. Customers are provided with the opportunity to assess the price of the commodities. Order Form This is a digital system applied to update on the available stock. This is downloaded to all the handhelds consisting of the available items with their description and visual images. The software predicted the trend of goods sold with each store possessing a separate order form to offer a detailed description of the merchandize. The system boosted ordering with the system capability to be updated using the infrared technology to articulate on the products that would sell more, as the users visited the stores to give the ratings. Point of Sale Terminal The system worked on the DOS system that provided little room for development to create flexibility. However, the system has enabled the company to record the developments in the sales and realized improved profits over the years. This has been the principal argument in overhauling the old system that applied DOS as compared to the new OS that is easier and faster. Sanchez has argued that the old system has not proved faulty and would still serve its purpose of giving accurate results. However, the argument remains that there is the need to update the software to accommodate the changes that may be realized with the current technological development that are developed to create efficiency in the business and entertainment industry. Case Issues The main argument is to upgrade the software used in the store’s POS to rid it of the DOS system (Mcafee, Dessain, & sJoman, 2007). However, there is the realization that the current system has not affected the sales negatively or proved inefficient. The other problem that would be generated by overhauling the system would mean an extra cost incurred in refreshing the system to accommodate the new system. It would imply the temporary closure of the stores as the renovations are made effective. The company had been developing at an increased rate, and the worry was centered on the DOS software that could prove vulnerable to changes subjected by the company, that supplied it with the services. The confirmation to this problem had been in the confirmation placed on the company when the vendor confirmed that Zara had been the only serious client that had been using the old system. In the case, it is highlighted that there are little funds invested in the advertising of the products offered by the store, and this is likely to decrease the profit margin with an increased market that remain uninformed. The managers had complained of the PDAs because they had consumed more time with the small screens that it offered, when they had been used in attributing the results in the stock. Moreover, there may be a problem witnessed in loss of prospective clients as the company lacks a provision to deliver services to its clients that are incapable of accessing their stores. It only specializes on bulk deliveries with little room for customer satisfaction services. The prices are set and defined in the stocks available within their stores as the managers dictate the stocks to be supplied within their branches. Recommendations The recommendation placed is seen in the argument that Salgado had presented in applying the use of the updated operating system that would accommodate the newly invented gadgets. The POS application had to accommodate either Windows or Linux OS that could provide a more flexible approach in updating the services offered by the store. The updated POS software would accommodate the application of the system on large screens to solve the problem experienced by the managers, on the small PDF screens that impaired their resolve in updating the stock. The installation of the modernized POS would improve the network system within the company and boost the cheap wireless system that is more flexible. Within the wireless system, there exists a capability to access the system easily in generating accounts and monitoring the sales of the merchandize. This provision would further improve communication by limiting the application of mobile phone devices or unnecessary movement as these items could be ordered and checked online. The recommendations were centered on improving the technological developments that Zara had utilized in generating efficiency within its operation. The greatest hustle witnessed would be in overhauling the system and this could prove to be expensive and time consuming, which the company wanted to avoid generating profit. However, an effective system is one that is capable of handling a high amount data and be flexible when the modernized systems are applied to complete in the market (Chakravorti, 2003). Ordering and updating the stock with a simpler accounting measures are accommodated in the new system. How to make Zara better Firstly, the company should implement the latest software trend in the POS to facilitate better service delivery and prevent future irregularities that would be witnessed on using the old OS. The manager’s ability to dictate the stock within their stores is a positive development; however, there should be a careful analysis of the customer satisfaction through sampling a wider selection of stock. The chain’s focus on a wider market is limiting to clients who may be interested in purchasing singular items. The application of the internet technology is vital to conduct market research and offer online requests for service delivery (Norton & Kaplan, 2000). Moreover, Zara’s ability to incorporate the latest fashion trends in their designs should be relayed to customers. There should be no assumption of the scope of marketing and each customer to be taken seriously when advertising is considered (Bjork, 2010). References Bjork, C. (2010). Zara Tries a Fast One on the Net. The Source. Retrieved on 28 February 2012, from: Chakravorti, B. (2003). Slow Pace of Fast Change: Bringing Innovations to Market in a Connected World (Hardcover). Boston: Harvard Business Press Books. Print. Lopez, C., and Fan, Y. (2009). International of the Spanish fashion brand Zara. Journal of Fashion Marketing and Management. Vol. 13(2): pp. 279-296. Mcafee, A., Dessain, V. and sJoman, A. (2007). Zara: IT for Fast Fashion. Havard Business School. Retrieved 27 February 2012, from: Norton, D. and Kaplan, R. (2000). Creating the Strategy-Focused Organization. Boston: Harvard Business Press Books. Print. Rave, P. (2010). How to Approach the "Base of the Pyramid": A Business-strategy and Country Analysis for an EBook Reader. München: GRIN Verlag. Print. Read More