Zara: IT for Fast Fashion Case Study

Issue Identification “Why fix something that isn’t broken?” Amancio Ortega founded Zara in La Coruna, Spain in 1975. During 1985, Inditex came to life as a holding company atop Zara and other retail stores later on like Pull & Bear, Bershka, Massimo Dutti, Stradivarius and Oysho. Zara is however the first one to have opened and to this day Inditex’s largest and most successful with 550 stores worldwide. Ortega and Castellano, Inditex’s CEO, believe that computers are critically important in running the kind of business they want to build. Moreover, they came up with strategies and goals for the company in order to succeed and so far these have worked excellently with very few issues. The only “issue” for Zara in 2003 was a decision making regarding the upgrade of their POS system. This system ran on DOS, which had not been supported by Windows for many years now and had been unchanged within the store for over a decade.

Environmental and Root Case Analysis
The immediate issue was the question of upgrading the POS system to a newer one that would be up to date with Windows and simply with the newest technology during 2003. Zara was the only customer left of the hardware vendor for POS terminals that still used the ancient operating system and Salgado, the head of IT, thought it was too risky to let them fall so far behind current technology. Consequently, he worried that the hardware vendor for their POS terminals would upgrade their machines so that they wouldn’t be DOS-compatible anymore. Upgrading the system could add functionality, network capability accommodating more sophisticated capabilities. In contrast, Sanchez, the technical lead for the POS system, had a solution to all these “issues” and did not agree with the idea of upgrading the system right away. He argued that everything about their software worked just fine now and that they had never had problems with it. Furthermore, he pointed out that if the vendor decided to upgrade their system they could buy a bunch of the current terminals so if that happened they’d have lots of time while they ported the POS application to a new OS. He continued saying that sales got recorded in stores around the world and transmitted to them there everyday without a problem.
Simultaneously, Zara was very focused on their main goals being speed and good decision-making. They were very unique and different from their main competitors, which were other multinational clothing retailers such as H&M, Gap and Benetton. They needed to respond quickly to the demands of their young and fashion-conscious customers since their tastes in clothing changed rapidly. In addition, Zara’s store managers had more authority than other stores since they could decide what garments would be on sale, placed orders for the items they thought should get produced and would get sold and initiate store-to-store transfers when they saw that garments selling slowly in one area were popular in another one.
In contrast to their competitors, Zara did virtually no advertising which saved them a lot of money that in reality they did not need to spend. Their marketing expenditures only averaged 0.3% of revenue, instead of the usual 3%-4% of their competitors. Moreover, Zara tried not to produce any “classic” clothes; instead they aimed for them to have short life spans, which would push customers to buy a garment on their first visit since it could be gone on their next one. Zara garments were described as “clothes to be worn 10 times.” This multinational store also had as strategy to not sell clothes over the Internet because it would be too complicated for the store to deal with it. To reach its goal of quickly and accurately responding to shifting consumer demands, Zara established three cyclical processes, which were ordering, fulfillment and design and manufacturing. They used PDA’s, which communicate to La Coruna through dial-up modems for order management.