Zara’s business model contains two essential elements that differentiate it from its competitors. These include Zara’s approach toward its target audience and the company’s decision-making systems (McAfee et al., 2007). Regarding Zara’s strategy, the company prefers to adapt to the demands of its young fashion-conscious urban audience rather than trying to control and create trends through marketing instruments.
Regarding the company’s decision-making system, it is highly decentralized in comparison with the competitors. Zara needs constant updates regarding its target customers’ preferences and demands, as the relevance of the company’s goods is directly linked to such knowledge. Moreover, data collection and transmission speed are critical, as some of the trends the company chases may only last for several weeks.
Zara’s POS terminals used in every chain store are outdated in terms of software. They use unsupported DOS systems, and therefore the terminals are highly restricted in terms of their functions. These issues limit the capabilities and information access of the store managers. On the other hand, the system’s current state results in smooth and low-cost operations with low centralized IT involvement.
The recommendation to Zara company is to update its POS systems. The company should move towards supported and relevant software. Moreover, this software should support additional functions, such as looking up store inventory balances and sharing information online. The systems should be compatible with more convenient equipment from the hardware perspective.
Basis for Recommendation
1. The main reason for the recommendation is that the update of POS systems will increase the effectiveness of the store management. The introduction of the new software will allow for compatibility with better hardware, therefore increasing the effectiveness of some of the physical procedures. Furthermore, the updated software will increase store managers’ effectiveness and autonomy in terms of stock management. Managers will be able to reduce the number of necessary informational transactions and better coordinate with the other stores regarding the stock. This falls in line with the company’s business model of achieving effectiveness through decentralized decision-making.
2. The second important reason is that the company will be safer in terms of its operations. While the company is relatively protected in the short run from the hardware perspective, it cannot be sure about the supply of terminals. Moreover, there may still be issues regarding both software and hardware support and supply in the long run. Finally, the need for change may come unexpectedly, causing disruptions in operations, and overlap with other internal or external issues regarding the company, creating a crisis situation. Thus, it can be advised for Zara to use the quiet and prosperous times to transit smoothly while it can.
Next Steps: The whole procedure can be divided into four main steps. Firstly, the company should pick new software and hardware for their POS systems. Both should be supported in the long run, relatively easy to operate, and compatible with Zara’s own programs and IT solutions. Secondly, relevant programs and applications should be prepared for transfer to the new systems. Thirdly, the tests should be run throughout different stores to understand the system’s capabilities, opportunities, and challenges it creates. Finally, the fourth stage implies the implementation of new systems step by step to avoid critical disruptions of operations.
McAfee, A., Dessain, V. & Sjoman, A. (2007). Zara: IT for fast fashion. Harvard Business School.