What Is Zara's Fundamental Business Strategy? Is It Simple? What Are the Principles for Zara's Business Operation?
Essay by review • June 18, 2011 • Case Study • 1,575 Words (7 Pages) • 2,363 Views
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1) What is Zara's fundamental business strategy? Is it simple? What are the principles for Zara's business operation?
 Fundamental business philosophy of Zara
The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly.
Thus, the main business tactics of the company in context of this business philosophy is ;
[ Short lead time ] More fashionable clothes and embracing quick changing customer's tastes
[Decentralized Management] Taking advantage of the intelligence and trust the judgment of employees
[Lower quantities] Inventory will be formidable burden in perishable products
[More styles] Providing more choices for customers and more chances of hitting it right.
< Zara's Business Concept >
Fashion at Low Cost
Low Cost Fashion
 Reduce Creative Design ( Copy of leading styles )
 Define a fast response process
 Optimize the process ( lean organization)
 Advertising only for new arrivals
 No discounted sales
 Specialized network for production  Interdependent between design and product team
 Low product complexity : 3 types, size and colors
 More choices ( approximately 11,000 new items in a year)
 No classics ( Design for clothes to be worn 10 times )
 The principles for Zara's business operation
Based on the business strategy and tactics, Zara has been trying to optimize its business operation largely in three cyclical processes - ordering, fulfillment, and design and manufacturing. Much of the process are standardized and simplified under the excellent control and employee's intuitive decision making latitude. In short, the principle of Zara's business operation is optimization of all business process and get rids of all redundancies and unnecessary things. More extended or peripherals of the principles can be summarized as follow;
Keeping up with fashion ; short lead time and quick response to the market
Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales
Ownership and control of production ; vertically integrated manufacturing operation to enable its constant introducing of new items and also ensure short lead time
Highly people intensive process ; place great autonomy on employees
React rather than predict
2) What is the essence of Zara's IT strategy?
Zara runs an information-intensive business with remarkably little information technology. Since it has established such a standardized operational process, one might be assume that the company adopted significant and substantial IT packages. Zara, however, relies on people to make many crucial activities, without much help of computers. IT seems like an investment without returns which was described in the article of Mr. Nicholas G. Carr, "IT Doesn't Matter" In IT system, Zara positioned itself more likely as a laggard, but sophisticated and clever buyer of the commodity product, IT.
Many others who do spend on IT may leave the business process definition to IT vendor, and buying to an IT developing manager who has very little understanding of the business as it is and also do not know exactly where it could go. Zara has a perfect IT team with low turn over ratio last ten years and develops most of the system or writes the applications they need by themselves, sometimes with a little help of their vendor. It means that they perfectly understand what IT system is needed in when and where.
The reason we described IT technology as a commodity product in the first paragraph is partially because Zara sees it this way and they value their process and see this as their proprietary asset. Thus, the essence of Zara's IT strategy can be described as follow;
IT is an ancillary tool for helping people's activities, not a substitute for it.
Zara is a highly people oriented organization and also an information oriented organization. Many crucial activities and decisions made by employee without much help from IT technology itself. Therefore, product mangers travel tremendously around the world to collect first hand experience and information on the market.
Maintain the system knowledge within the company
Around 50 some of its IT people monitor and write the application and they know exactly which area they have to adopt a new application. So they can invest the right software and hardware. If there is any problem occur then people within the company can solve it, sometimes with help of the vendor.
Process oriented IT system
They see it is not a matter of IT technology but a matter of process. Thus, the IT technology must support its process, not the other way around.
Several years of consistent and constant investment on IT system
Zara has not built its IT system in a year or two. They regularly attend
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