Issue of Upgrading Zara's

1. How would you advise Salgado to proceed on the issue of upgrading Zara's POS systems?

I feel that Salgado's dilemma embodies the concept of the duality of information systems. Zara's IT systems are both a constraint and an enabler to their organization. Their IT infrastructure is incredibly stable and easy to operate, which allows them to successfully achieve their business strategy of quickly delivering the latest fashions to their stores. However, due to the obsolete platform that their entire IT infrastructure is built upon, it is fast becoming a potential constraint to the further expansion of their business. Since the operating system their software uses is no longer manufactured or even supported by the manufacturer, there will come a time when growth will be limited by lack of available POS terminals that would work with their existing software and hardware. Because of the disastrous constraint potential that Zara faces by continuing to use an obsolete operating system, I would advise Salgado to upgrade Zara's POS systems in the very near future.

In order to methodically plan and implement this upgrade, I would advise Salgado to follow the innovation process when strategizing implementation of the new IT infrastructure. Since Inditex already has a technology steering committee, I would suggest that he use this as a platform for the generation of ideas for the first phase of this process. For the proof of concept and pilot stages, I would suggest Salgado carefully choose a few stores to test the ideas for the new infrastructure and implementation. This will allow the team to experience and troubleshoot as many issues as possible before large-scale implementation of the updates. Finally, during the transition stage, the new infrastructure can be officially rolled out to all Zara stores. I would further suggest that the transition stage be rolled out incrementally, perhaps by region, so that each store can have on-site IT support to assist with the transition and quickly respond to any initial problems with the new systems.

1a. Should the company upgrade the POS terminals to a modern operating system?

Yes, Zara should absolutely upgrade their POS terminals to a modern operating system. Not only does continuing to run DOS limit their ability to expand hardware and software capability, but it also means that their operating system is no longer manufactured or supported by Microsoft and will eventually become irreplaceable.

1b. Should the company build in-store networks?

Yes, they should build in-store networks. Doing so will increase efficiency of many daily tasks through automation. Rather than employees having to physically download the data from each POS every night, the network could easily include the capability to track sales and inventory. Having this information readily available will also allow management to quickly and accurately track sales performance from each specific section of the store.

1c. Should the company give employees the ability to look up inventory balances for items in their own stores?

Yes, I feel that employees should have the ability to look up inventory balances for items in their own store. The ability to check theoretical inventory in real time would be helpful in several circumstances, including during order placement for replenishment items, as well as in instances where customers or other stores call to check inventory of a particular item. Having this information readily available would save time for employees, who currently have to physically check the store to be able to determine whether or not a particular item is in stock. More importantly, it would save a lot of time and guesswork by the store manager when determining which items need to be replenished during the biweekly ordering process. Lastly, having inventory balances available would also allow the store and the headquarters to track thefts and damages, and thus determine if there is a need to implement loss control measures in certain stores or even company-wide.

1d. Should the company give employees the ability to look up inventory balances for items in other stores?

I feel very strongly that employees should have the ability to look up inventory balances for items in other stores. The ability to quickly and easily check the inventory of other stores would primarily serve customers and could potentially increase overall sales, because a customer would be able to easily find out if another nearby store has the item they want in their size and thus have the option to purchase it from that store. This convenience is almost expected from retail chains in today's world. This functionality would also be beneficial for facilitating store-to-store transfers in instances where one store is experiencing a surge in demand for a certain style that a nearby store has excess inventory of.

2. What is the Zara "business model?" How is it different from the business model of other large clothing retailers? What weaknesses, if any, do you see within this business model? Is it scalable?

The Zara business model focuses on linking manufacturing to customer demand, and manufacturing to distribution, which positions Zara to quickly respond to the inherently rapidly changing preferences of their target customers. This effectively allows Zara to largely bypass the primary pitfall in the retail industry: forecasting consumer demand. Zara is able to achieve and maintain a competitive advantage through a combination of cost focus and differentiation focus. The trendy and unique nature of their products allow Zara to manufacture them with the intent that they will only be worn a few times, and so they are able to save money by using less expensive materials.

Zara's unique business model is, in many ways, in direct contrast to the strategy of most large retail chains. While most retailers and designers spend lavishly on marketing campaigns and advertising to appeal to consumers, Zara focuses their resources on being able to manufacture and deliver clothes while they are still on trend and thus appealing in their own right. In keeping with this strategy, Zara keeps little to no inventory of clothes to minimize the risk of producing trendy clothing, and thus most of their clothes are sold out in stores within 3 to 4 weeks of arrival. The clothes are also designed to be on trend, rather than classic pieces, and are constructed to be worn only ten times. Zara also differs from their competitors in the amount of new styles they produce annually. While similar brands produce 2,000-4,000 items each year, Zara produces about 11,000. The reason for the substantial