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Zara Technoligy can Change Everything - Term Paper Example

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Zara was founded by Amancio Ortega, who in 2003 was still its largest shareholder and the richest man in Spain. Ortega had started in 1963 with clothing factories. …
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Download file to see previous pages So he integrated forward, opening the first Zara store in La Coruna in 1975(Mcafee et al., 2007, p.3). The growth of Zara was phenomenal since its establishment in 1975. The success of first Zara store encouraged Ortega to open more clothing stores across Spain. It is often said that the innovation and ability to produce new products and services are decisive factors in boosting the growth of an organization. Zara did succeed in introducing new clothing products and trends in the market quite rapidly. Moreover, Ortega gave more emphasize to the production of new designs based on the rapidly changing industry trends, which helped him to compete effectively in the market. 1985 was a year which has huge importance in the history of Zara. Two major events occurred in this year that changed the entire face of the company. “First, Inditex (Industria de Diseno Textil) was formed as a holding company atop Zara, other retail chains and a network of internally owned suppliers. Second, Jose Maria Castellano Rios joined the company” (Mcafee et al., 2007, p.3). Being an expert in IT, Castellano did everything possible to incorporate computer related technologies at every corners of the company. He had realized that without computers and internet, no industry can look forward and he changed the face of the company from a low end clothing company to a high end technology based clothing company. It should be noted that the net margin of Inditex increased from 7.21% to 11.2% during the period of 1996 to 2002 (Mcafee et al., 2007, p.16). The above statistics clearly suggest that the company is growing in the right direction since the introduction as a result of the innovative business strategies and the judicious use of technology in all the functional departments. “At the beginning of 2003, Inditex operated 1,558 stores in 45 countries, of which nearly 550 were part of the Zara chain. For its fiscal-year 2002, Inditex had posted a net income of A438 million” (Mcafee et al., 2007, p.5). The growth of Zara can be better understood with the help of Michael Porter’s five forces model. Zara and Porter’s five forces model Michael Porter’s famous five forces model is used extensively at present in business sectors to analyze the competitive power of an organization in the market. It helps business people to realize their strengths and weaknesses. Since market is changing rapidly because of the rapid technological growth, no organization can secure their top spot in the market, if they are reluctant in making periodical changes in their business strategies. For example, the rivalry between Apple and Microsoft is famous. Even though Microsoft concentrated only in the operating system market, Apple diversified its portfolios to many other fields and they became the most valuable technology company in the world at present, pushing Microsoft far behind. In other words, organizations should make changes in their business strategies based on the changes in the market in order to keep their competitive power intact all the time. Porter’s five force model helps organizations to measure their competitive power at a given time period. Porter model can be used to foresee the future threats and opportunities and the organizations can plan well accordingly. According to Michael Porter, five competitive forces that may affect an organization are; Threat of substitute products, Threat of new entrants, Intense rivalry among existing players, Bargaining power of suppliers and Bargaining power of Buyers (Porter’s Five Forces Model, 2009). The following illustration makes these points clearer. (Porter’ ...Download file to see next pagesRead More
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