Zara is the run by Inditex, which is the largest Spanish corporation and the world’s largest fashion group. Zara was first opened by Amancio Ortego Gaona in 1975 on an upmarket shopping street in La Coruna, and has continued to expand at a very positive growth rate. By the 1970’s, there were half a dozen Zara stores in Galician cities, and by the year of 1990, Zara had opened in various countries internationally such as USA, Paris, and Portugal.
Zara is able to successfully sell their brand by promoting fast fashion rather than high fashion; which allows them to quickly adapt to changing fashion styles and market their products more efficiently to their customers. They are able to accomplish this through vertical integrated operations that allow them to make quicker decisions when it comes time to making decisions. They are able to market their products efficiently by tantalizing exclusivity, since they only display posters at stores on their window display it gives way for customers to think that if there’s a limitation to the product, they should buy it rather quickly. Vertical integration plays a successful role in this because Zara is able to meet customer demands more quickly by shortening the time it takes to make decisions.
Zara’s success could be given to their information technology tools employed at their production level; from a designer checking for sketches with colleagues to market specialists, all the way to cross-functional teams examining clothing prototypes in the hallways of Inditex building. However, a major problem that Zara faces is they can continue using their existing POS system which runs on DOS, but there exists a higher probability that Microsoft’s DOS supplier will cease to produce and use the software. Although changing the POS system is very urgent, it’s a must that Zara must invest in IT infrastructure because DOS is an obsolete technology, and it’s unclear whether the POS terminal vendor will continue to provide the same terminal without somehow changing its hardware. Another issue that Zara faces is their inventory management. The decisions are made much quicker, so it’s likely that managers and employees are the ones who are making most of the decisions. This being said, without sharing any inventory information electronically, it makes it difficult to manage inventory. Both of these problems that Zara faces can be solved through the investment of upgrading their POS and getting rid of the existing DOS.
To effectively use SWOT analysis as evidence of critical thinking, I will first use Porter’s five forces, and how each of his forces play an attribute to the strengths, weaknesses, opportunities, and threats to Zara.
Threat of New Entrants: In Zara, the threat for new entrants is fairly low as of right now. This is due to the low overall production costs from Zara because their production, marketing, and distribution costs are spread globally in large production units. This makes small time entrants...