Knowledge Management and Information Strategy: Zara Corporation - Case Study Example

?Introduction and Overview of the Organization Nature of the business Zara is one of the largest companies engaging in both the business of manufacturing and retailing of apparels in the world. Established in 1975 by Amancio Ortega (National Institute of Economic and Industry Research, Australia 2002, p.30) and it is part of the large conglomerate of its parent company Inditex, which currently is the world’s largest fashion company in the world. As the flagship brand within the group, Zara has emerged as the leading apparels maker in profits, turnover, trends and growth rates (Hall 2010, p.72). This company has its headquarters in La Coruna, Spain their success especially in recent times has prompted lots of questions from a variety of different fields in both economics and business into the exact ways in which such philosophy has propelled them to such heights of success. According to Torun(2007, p.7) acknowledges that Zara direct rivals in Europe are H &M, although the latter does not manufacture their products but rather outsource such services to low cost nations in the Far East. Gap is also a big competitor in the apparels and fashion industry. In the year 2008, Inditex had edged past Gap in terms of sales to emerge as the world’s largest fashion retailer (Welters and Lillethun2007, p.541).  Zara’s organizational Structure and Culture The employees at Zara have come to recognize that they are operating in fast changing world of fashion where a product can move from being trendy to staple in just a week. The owner of the company, Amancio Ortega, he likened the fashion industry to that of food by describing the industry as one with perishable goods (Casillas, Acedo and Moreno 2007, p.129).  At the company, the employees work like bees in a hive- as a team to get the work done successfully and quickly. When they are trying out new products, the design is performed, clothes prototyped and criticized in a very short time, normally in a few hours (Dunne, 2013). Brand perception and global visibility While competitors fall, Zara is going through one of the quickestinternationalgrowth the fashion globe has ever seen, opening a store a day and entering new markets worldwide – 68 countries so far and the chain’s profitability is among the highest in the industry. In the year 2012, Zara was ranked at position 37 a forty two percent increase from position 64 they had attained in the year 2005, and according to the global ranking site, its star will continue to rise as they continue to enter newer markets (Interbrand, 2013). Zara as a fashion brand is easily distinguishable from other fashion brands due the speed at which ne collection are launched, the premium price of its commodities and the premium locations of its stores in major cities. Which means that the company is not only providing their customers with a basic need that is clothing, but also their customers demand for self-actualization- putting on what they feel portrays their image. Every human being feels self-actualized when associated with a high performing product that has a high brand value (Mathews, 2006). For example, the name Zara easily comes to mind when one mentions the prime locations in cities that the company is associated. Zara’s brand reception all over the globe has been phenomenal over the last couple of years to say the least, for instance in New Delhi, India, when they opened a shop in the high end district, they have been recording staggering sales over the year(Jacoband Mamgain, 2011)). Trading and Business Partnerships Zara is a vertically integrated firm, which means that it controls it most of its economic activities from manufacturing to retailing. It swathes all the facets of the fashion development: design, production, logistics and circulation on its own administered retail shops. According to the owner, the firm produces almost fifty percent of its product. When entering new foreign markets, Zara has been known to enter into a new foray either through subsidiary, joint venture or through franchising (Sorge & Warner, 2001). In Europe and the South American market, to which the company considered markets of strong growth potential and low risks, they adopted the first strategy andthe second strategy was adopted in Germany, Italy and Japan. The company procures for fabric and other factors and completedclothes from exteriorcontractors with the aid of their procurement offices in Barcelona and Hong Kong as well as from the headquarters in La Coruna (Abbas, 2010). Europe had hitherto dominated Zara’s sourcing patterns, whereas the recent setting up of the Hong Kong office was for purely purchasing products from the Far East, China in particular. Much of their products are channeled through Comditel, a wholly owned subsidiary of Inditex, which manages dyeing, patterning and finishing undyed fabrics and supplies to Zara and other companies. The company has in its recent operations modified its relationships to the two airline companies; Air France-KLM Cargo and Emirates so that they bring back semi-finished and raw materials while exporting finished products from far locations (Davila, Epstein & Shelton, 2007). Evaluation of the System Information system is a combination of both the hardware and software used by organisations to collect, analyse, process and spread out data to different departments within the company. A sound information system supports the running and management of a company and hence aids in decision making and policy implementation. Integration of information technology into an organizations operation has been proved to create a number of positive impacts which increases profitability and efficiency in an organisation (Dunne, 2013). Zara Fashion Company has over the years demonstrated their commitment to build an organisation that incorporates information technology into its operations. Zara has adopted the computer networking to enable them manage the different retail and manufacturing outlets in the United Kingdom (Jonker & Witte, 2006). Through the help of Inditex, Zara has started a chain of retail stores that are maintained by internally owned suppliers, whereby the company has previously used a point of sale terminal that is operated by DOS but the organisation made a bold step towards upgrading the software in order to improve the efficiency. Despite the stability and smooth operation that the company has enjoyed while using a DOS operated point of sale, Zara noticed that advancement in technology and software will make it impossible for the different retail units to be integrated. This is especially so as a result of software incompatibility for the POS that are not DOS operated (Boyes, 2012). Since the introduction of new information system tools into the operation of the company, Zara has had a number of benefits that are directly attributed to information technology. This section analyses the benefits and advantages that Zara has enjoyed since they introduced new information systems. The fashion market is one of the most competitive sectors and the position that the company has so far maintained can be attributed to their sound strategic decisions. Chief among them is the introduction of information system into its operational units. Information technology has enabled Zara fashion house to improve its competitive advantage and enabled it attract a number of customers due to integration of information technology (Hill & Jones, 2001). The products that the fashion house has so far developed have been majorly due to their efficient information technology based production and marketing systems. Information technology has improved the nature of goods and fashions products that the house produces. This makes it possible for the house to maintain and attract new customers who remain faithful clients for an extended period of time. Fashion industry requires sound marketing and promotional strategy to enable an organisation attract and retain more customers. Zara fashion house has improved its competitive advantage by using new technological tools to reach its clients. Chief amongst these tools is the web 2.0 interactive internet and social media (Ghemawat, 2006). Zara information system has also been described by scholars as inclusive and involving. This is so due to the fact that the fashion house integrates the skills of its people with their information technology tools. Market research and response trends are conducted by qualified personnel assisted by PDA devices. This has resulted into a hybrid model of information from the different stores around the continent to the headquarters (Welters & Lillethun, 2007). Zara also uses handheld devices to send standardized information on their customer’s information and response on their products to their in house designers. This has enabled the organisation to respond promptly to customers’ needs and changing needs in the market, and this is attributed to the great competitive advantage that the organisation enjoys this far (Boyes, 2012). Zara’s customer relationship management system Customer relationship management is a company’s ability to interact with its customers whether in the sales or services platform. Clear customer relationship management enables a business understand the needs of its customers and work on better retention strategy for their customers. CRM also helps in the attraction of new customers and as a client and contract winning strategy. Zara fashion house has incorporated a number of customer relationship management practises into its system that has enabled it to remain as a major market force in the industry. Proper implementation of customer relationship management requires the use of sound information technology tools (Interbrand, 2013). Zara fashion house manages its CRM electronically through the use of the web and Smartphone gadgets. This has made it quite easy for the fashion house to interact one on one with the clients and factor in their desires into the products of the company. In CRM, collection, linking and proper management of customer information is necessary and critical. This has however been made easier with advances in information technology, a fact that Zara house appreciates and utilises (Hill & Jones, 2001). Zara house has advanced its CRM practise through integrating their management practises with software like the help desk software, email organisers and enterprise applications. Handling CRM information can only be possible if an organisation have the right people to manage it. Zara has succeeded in this by training enough personnel to handle its multiple access points of their different retail stores located in different parts of the country. The organisation has clearly defined the roles of different individuals that handle the systems, giving different privileges to different personnel at different stores (Jim, Peter, and Prat, 2007). To make CRM successful and meaningful to the organisation, Zara fashion house has an advanced technological system of capturing and storing client’s information. This data is highly secured by the system to eliminate the possibilities of data theft which may be used by other competitors in the market (Davila, Epstein & Shelton, 2007). Zara is lauded for its great strategy of customer driven performance networked operation that links customers directly to the company and with the major suppliers. The company initially adopted the PDA devices to enable it communicate with its customers hence gaining real experience of the market (King, 2009). Zara’s stores also provide digital inputs to the customers, and this has personalised the CRM system of the company and made it possible for the customers input to at any stage of production. When the designers make sketches for their next products, reliable customers are provided with an opportunity to review the designs before they are released to the market. The customer relationship management system as implemented by Zara fashion house results into complete capturing of every detail that is generated from the interactions between the fashion house and the customers (Barreiro, 2008). This has made Zara to become a customer centric business, aspects that place it at a better competitive advantage as compared to other market players. The point of sale points in Zara are also integrated into the customer relationship management software. This enables the headquartered in Spain to gain knowledge on the goods that are sold and those that the customers asked for. This has enabled the organisation to send such new requests by customers to designers who can then work and avail them in the market real time. This also enables the management of the fashion house to know what actually they need to keep and what they must get rid of based on the response of the clients. The automation of the system makes it faster and easier to create new designs and products (Boyes, 2012); sound customer relationship management systems have enabled Zara to spread its influence in the fashion industry beyond Spain. This has been successful due to the fact that the company has integrated information technology into its systems which has made it easier to interact and react to the customer’s needs. The fashion industry requires promptness, response to the customers need and surveillance of the industry to gain information. The products mostly desired by the clients should be made available to them promptly. A communication channels that makes it possible for designers to know the emerging tastes of the clients increases their response time to the needs of the clients (Barreiro, 2008). Information technology has been dynamic and changing every single day. The ability of a company to remain afloat and manage the high competition in the fashion and design industry depends on the ability of an industry player to change with the changing times. A number of emerging trends in technology can be adopted by Zara to enable them improve their management and operational efficiency. The internet is one avenue of business that has been dynamic and has the potential to define the success index of an organisation. Marketing has changed from the traditional approaches of marketing to the use of the internet and the web to reach clients. The internet also presents an opportunity for organisations to interact with their clients directly and factor in their desires in their products (Interbrand, 2013). Zara fashion house should exploit the opportunities that the internet’s present to improve its business and management performance. The development of web 2.0, which is an interactive web interface, also makes it possible for companies to get feedback from their clients. This will enable it to counter the views, desires and trends of their clients promptly and factor them into their products and goods. The social media also presents a better opportunity for Zara fashion house to reach out to most of its clients. Social media has created a trend across the globe and almost every youth and middle aged adults as using it. The use of Twitter, Facebook and other social media sites can enable Zara improve its sales volume and increase the market population that it controls (Abbas, 2010). Recommendations Information technology is one of the most dynamic areas of science that have witnessed a number of changes over the years. This has led to the development of new tools that have been employed in different areas of business operations. Customer relationship management systems must be characterised with promptness and the speed as that enables the business to respond with similar speed. Emerging trends in information technology presents a number of opportunities to improve the nature of customer’s interactions and improve the general performance of zara fashion house (Jonker & Witte, 2006). The advancement and growth of smart mobile telephones has resulted into mobile devices that have advanced operating systems. Such phones have the capability of working with the current CRM software available in the market (Harmon, 2010). As a result, Zara can invest into this and improve the efficiency and speed of interacting with his customers. Phones are more faster than on point computers because they are carried around by the users. A client can post a comment on a given designed product while in one of the retail shops. The CRM team online will be able to respond to such a comment on the spot and increase the chance of making a sale and retaining the client (Vrijhoef, 2011). The introduction of web 2.0 has also revolutionised the internet and made it cheaper for businesses to conduct their activities online. Web 2.0 allows the creation of an interactive interface in which any user or visitor can be able to post a comment and get a response immediately. Web 2.0 also has services which are free and more efficient than some of the previously available tools. E-bay is one of the most widely used feature of the Web 2.0 today in customer expectations and needs management. It provides an opportunity for organisations like zara whose success depends mostly on the attitudes of their clients towards their products (Davila, Epstein & Shelton, 2007). The social media is today one of the mostly used application in the internet used as an interactive, for business pleasure and business site. Social media presents an opportunity for businesses to monitor the behaviours and desires of the customers, and this can help such businesses to factor in these desires into their products in line with the desires of the customers. Facebook, twitter and other social media sites also provides on the spot opportunity for businesses to monitor the behaviour and wants of clients. Creating a page or a following link enables customers to interact with the management at no operational costs at all (Jim, Peter, and Prat, 2007). Together with concrete benefits, the company’s present operations and implementation of Information Technology upgrades will offer many intangible advantages. King (2009, p.413) such should be used in planning processes to consistently monitor the relationship between IT infrastructure flexibility and alignment. These advantages comprise enhanced processes at their plants and points ofdispatchbecauseof more efficiency scheduling operations and planned processes and production. Data on orders and inventory will also be significantly enhanced and data information will be on time, more consistent, and more inclusive. Throughraising their operating system used in several retail points of sales, respective line manager will be able to make more up to date inventorydecisions, through the enhancedcontact to real-time sales and inventory data (Harmon, 2010). Zara fashion has remained a major force in the fashion industry and this has been attributed to the management approaches of the business. Fashion industry is dictated by the ability of a player to respond to the emerging needs of the customers and the critiques that are made on a daily basis. Zara fashion designers have developed a number of techniques to enable them manage the high competition in the market and to remain profitable despite the changing dynamics of business. Chief among these strategies include the use of update and IT assisted customer relationship management system. Zara has adopted a CRM system that enables it to address the emerging needs of the clients promptly. This has led to the development of new products within a short notice given by the clients. References Abbas, A., 2010, Zara: Case study, Roula, Jannoun. Barreiro, A. M. (2008). Towards a new system for the fashion industry - The Zara model. Revista internacional de sociologia. 66(51) 105 – 122. Boyes, W. J (2012). Fundamentals of economics. Boston, MA, Houghton Mifflin. Casillas, J. C., Acedo, F. J., & Moreno, A. M. (2007). International entrepreneurship in family Businesses. Cheltenham, UK, Edward Elgar. Davila, T., Epstein, M. J., & Shelton, R. D. 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