Description
use of Information Technology(IT) by Zara Fashion company. It talks about their business model, TWOS analysis, points of difference etc.
CASE ANALYSIS
ZARA: IT FOR FAST FASHION
Outline
• • • • • • • Introduction to Zara Business Model Points of Difference Financial Comparative Study TOWS Analysis Focus Ahead Options & Suggestions
Introduction to Zara
• Zara- a multinational fashion clothing retailer and manufacturer • Founded by Amancio Ortega in 1975 • Headquartered in La Coruna, Spain • Holding company – Inditex • Zara chain had 550 stores in 45 countries in 2003 • Zara accounted for 73.3% of Inditex group’s sales
Business Model of ZARA
• Customers –
– Young, fashion conscious city dwellers
• Needs –
– Fashion Taste changes
• What Zara Does –
– Market Information – Design to Shelf – Value Drivers
Points of Difference
• Virtually no spending on advertising & marketing (0.3% of revenue as compared to 3-4%) • Sells trendy clothes and not “classic” ones with longer life span (shoppers didn’t expect durability from Zara; ‘clothes to be worn 10 times’) • Introduces new designs throughout the year (competitors introduce the new collection at the start of the fall/winter and spring/summer ) • Least time to introduce merchandise (almost 3 weeks – shortest in industry)
• Efficient Distribution System
Comparative Study
As of year 2002 Inditex Net Margin Market Capitalization (in € mn) Asset Turnover Ratio ROA Inventory Turnover Ratio 11.02% 13981 1.32 14.54% 10.39 Gap 3.30% 12320 1.46 4.82% H&M 12.49% 16496 1.56 19.50% Benetton -0.005% 1144 0.75 -0.38%
Data Unav. Data Unav. Data Unav.
*Using Exhibit 4 and 5
TOWS Strategic Alternatives Matrix
External Opportunities (O) 1) Geographical Expansion 2) Online Sales External Threats (T) 1) Local and Global Competitors 2) Threat from POS hardware vendor 3) Competitors using the new OS capabilities to reduce their costs & get real time information. ST Responsive supply chain result in lowering threat of competitors.
Internal Strengths (S) 1) Clear product communication 2) Lowest time to market product 3) Efficient Distribution System 4) Stores located on the best known street in prime retail districts 5) Vertical Integration Internal Weaknesses (W) 1)No support of DOS based OS from Microsoft 2)Point-of Sales designs over 10 years old 3)Inability of real-time communication within and other stores 4) Manual Inventory Management –eg: counting
SO Utilize the strengths to expand the number of stores in other places like Italy (one of the most fashion conscious people)
WO Improve the current supply chain to handle small orders. OR Routing the orders via stores (chance of additional sales)
WT By going for new OS and POS
Focus Ahead
• Invest in IT. • Introduction of new functionalities. • In-house software development.
Options in front of Zara
Continue with the current New POS + New OS + DOS based System and Software with porting other processes Advantages Established process with almost no complaints or disturbances; employees familiar with system; company growing at decent pace. Help in future scaling; availability of new features; non-reliance on single vendor; better inv. management and pricing; able to match competitors in IT space New POS + New OS + Software with porting + Other Functionalities Advantages of Option2 + Interconnectivity between stores; real time information availability
Disadvantages
No assistance for long Employees reaction is Employees reaction is term scalability; no uncertain; will require uncertain; will support available from new investment; may require new software vendor; no way disrupt few age old investment; may to leverage real processes; No inter- disrupt few age old information flow among connectivity between processes; and between stores; cant shops continue with age old Porting: Recoding software to make it compatible with new OS system for long
Options …
Continue with the current DOS based System and other processes Financial Position Inditex has high industry relative net margins (11.02%), ROA is good and increasing New POS + New OS + New POS + New OS + Software with Software with porting porting + Other Functionalities Total costs = €8.46 million (total costs reflect internet, hardware, software, licensing and AMC)
Option 2 No. of Stores Cost of 5 POS terminal Cost of wireless router Cost of 5 ethernet cards Hi Speed Internet Connection Training & Instalation cost for four day Porting Cost Unix Lisence Annual Maintenance (10 yrs) Other Software Costs Total Cost for System Upgradation 550 5000 180 250 240 8000 843750 88000 13750 0 8,464,000 8,745,250
Total costs = €8.75 million (includes internet, hardware, labour, programming, licensing and AMC)
Option 3 550 5000 180 250 240 8000 843750 88000 13750 281,250
In-house software development?
• Current Software customized to the operational needs of Zara -different from industry
• With new OS, new and complex needs might arise in future • Considering future needs, it can outsource the development as software becomes complex serving new needs • Outsourcing can free up resources and also help in getting cost effective software customization
Recommendations
• New IT Investment Required • Option 2 + Lookups of Same Store Inventory • Outsourcing of Software development
THANK YOU
doc_593733253.pptx
use of Information Technology(IT) by Zara Fashion company. It talks about their business model, TWOS analysis, points of difference etc.
CASE ANALYSIS
ZARA: IT FOR FAST FASHION
Outline
• • • • • • • Introduction to Zara Business Model Points of Difference Financial Comparative Study TOWS Analysis Focus Ahead Options & Suggestions
Introduction to Zara
• Zara- a multinational fashion clothing retailer and manufacturer • Founded by Amancio Ortega in 1975 • Headquartered in La Coruna, Spain • Holding company – Inditex • Zara chain had 550 stores in 45 countries in 2003 • Zara accounted for 73.3% of Inditex group’s sales
Business Model of ZARA
• Customers –
– Young, fashion conscious city dwellers
• Needs –
– Fashion Taste changes
• What Zara Does –
– Market Information – Design to Shelf – Value Drivers
Points of Difference
• Virtually no spending on advertising & marketing (0.3% of revenue as compared to 3-4%) • Sells trendy clothes and not “classic” ones with longer life span (shoppers didn’t expect durability from Zara; ‘clothes to be worn 10 times’) • Introduces new designs throughout the year (competitors introduce the new collection at the start of the fall/winter and spring/summer ) • Least time to introduce merchandise (almost 3 weeks – shortest in industry)
• Efficient Distribution System
Comparative Study
As of year 2002 Inditex Net Margin Market Capitalization (in € mn) Asset Turnover Ratio ROA Inventory Turnover Ratio 11.02% 13981 1.32 14.54% 10.39 Gap 3.30% 12320 1.46 4.82% H&M 12.49% 16496 1.56 19.50% Benetton -0.005% 1144 0.75 -0.38%
Data Unav. Data Unav. Data Unav.
*Using Exhibit 4 and 5
TOWS Strategic Alternatives Matrix
External Opportunities (O) 1) Geographical Expansion 2) Online Sales External Threats (T) 1) Local and Global Competitors 2) Threat from POS hardware vendor 3) Competitors using the new OS capabilities to reduce their costs & get real time information. ST Responsive supply chain result in lowering threat of competitors.
Internal Strengths (S) 1) Clear product communication 2) Lowest time to market product 3) Efficient Distribution System 4) Stores located on the best known street in prime retail districts 5) Vertical Integration Internal Weaknesses (W) 1)No support of DOS based OS from Microsoft 2)Point-of Sales designs over 10 years old 3)Inability of real-time communication within and other stores 4) Manual Inventory Management –eg: counting
SO Utilize the strengths to expand the number of stores in other places like Italy (one of the most fashion conscious people)
WO Improve the current supply chain to handle small orders. OR Routing the orders via stores (chance of additional sales)
WT By going for new OS and POS
Focus Ahead
• Invest in IT. • Introduction of new functionalities. • In-house software development.
Options in front of Zara
Continue with the current New POS + New OS + DOS based System and Software with porting other processes Advantages Established process with almost no complaints or disturbances; employees familiar with system; company growing at decent pace. Help in future scaling; availability of new features; non-reliance on single vendor; better inv. management and pricing; able to match competitors in IT space New POS + New OS + Software with porting + Other Functionalities Advantages of Option2 + Interconnectivity between stores; real time information availability
Disadvantages
No assistance for long Employees reaction is Employees reaction is term scalability; no uncertain; will require uncertain; will support available from new investment; may require new software vendor; no way disrupt few age old investment; may to leverage real processes; No inter- disrupt few age old information flow among connectivity between processes; and between stores; cant shops continue with age old Porting: Recoding software to make it compatible with new OS system for long
Options …
Continue with the current DOS based System and other processes Financial Position Inditex has high industry relative net margins (11.02%), ROA is good and increasing New POS + New OS + New POS + New OS + Software with Software with porting porting + Other Functionalities Total costs = €8.46 million (total costs reflect internet, hardware, software, licensing and AMC)
Option 2 No. of Stores Cost of 5 POS terminal Cost of wireless router Cost of 5 ethernet cards Hi Speed Internet Connection Training & Instalation cost for four day Porting Cost Unix Lisence Annual Maintenance (10 yrs) Other Software Costs Total Cost for System Upgradation 550 5000 180 250 240 8000 843750 88000 13750 0 8,464,000 8,745,250
Total costs = €8.75 million (includes internet, hardware, labour, programming, licensing and AMC)
Option 3 550 5000 180 250 240 8000 843750 88000 13750 281,250
In-house software development?
• Current Software customized to the operational needs of Zara -different from industry
• With new OS, new and complex needs might arise in future • Considering future needs, it can outsource the development as software becomes complex serving new needs • Outsourcing can free up resources and also help in getting cost effective software customization
Recommendations
• New IT Investment Required • Option 2 + Lookups of Same Store Inventory • Outsourcing of Software development
THANK YOU
doc_593733253.pptx