Zara: Business, Finances and Human Resources Analysis

  CONTENTS PAGE

• INTRODUCTION (PAGE 3)
• Organisational Structure and Management (PAGE 3,4)
• Marketing (PAGE 5,6)
• Human Resource Management (PAGE 6)
• Operations (PAGE 6,7)
• Sustainability and Social Responsibility (PAGE 7,8)
• How the business functions of the selected retailer might be impacted by the current changes in the retail sector as indicated in the case and in other sources? (PAGE 8,9)
• CONCLUSION (PAGE 9)
• REFERENCES (PAGE 10)

Introduction

In the present work is going to show the strategic analysis of the Zara’s company, which is located in the textile sector and dedicated to the retail distribution of clothing focusing on young fashion which, currently is constantly changing due to new trends that young people demand to the textile and fashion sector.

The reason of this choice is the high admiration for this Spanish company which started in a small repair shop in poor conditions and nowadays is one of the biggest stores and also one of the main chains of retail textile clothing distribution worldwide.

This work teaches the development of the Zara´s company, as well as, its organization chart, the various marketing strategies, the management of human resources, its operations and sustainability and social responsibility.

The analysis goes back at his beginning, in a small place where Amancio Ortega, the Zara´s inventor, create housecoats in 1963. Then in 1975, he opened the first store in La Coruña, Spain that was the origin of the currently noun as ¨Group Inditex¨ which is compound by several brands like Pull & Bear, Massimo Dutti, Bershka, Stradivarius and Oysho… After forty years Zara is one of the biggest chain stores in the international level with more than seven thousand commercial establishment around the world. This company has been spreading for Europe, Africa, Asia, America and Oceania.

Lastly, to argue the next question: ‘How the business functions of your selected retailer might be impacted by the current changes in the retail sector as indicated in the case and in other sources?’

Finalizing the present work with a brief conclusion and personal opinion assessing the aspects and objectives proposed in this work of a company as big as Zara.

Organisational Structure and Management

The organizational structure of Inditex it is compound by several corporative departments of central services of the six brands ( Zara, Pull and Bear. Massimo Dutti, Bershka, Stradivarius and Oysho) and by a series of support areas or functions shared by all business units.

One of these departments is Zara, which his structure of the organization chart is vertical and by hierarchy levels. It shows in a particular way the position structure of the organisation areas and the authority that they have with the employees.

VANTAGES:

1. Every department is independent.
2. The internal problems do not concern other areas.
3. Every department has specific functions.
4. It indicates in objective form the hierarchies of the staff.
5. They provide clear lines of authority.

DISVANTAGES

1. The employees in the low part of a vertical structure one can feel less valued that those in the highest positions of the chain.
2. The weak leadership in the top part can harm the efficiency of the whole organization.
3. There is no communication between(among) the departments.
4. The reaction of the departments can be slow in conformity with the position of the area.
5. The information can be late in coming to the areas of minor hierarchic value.

The flow chart of the company Zara answers to Maslow’s needs, beginning for the physiological needs as dressing, need of safety as to have an employment and therefore resources, need of affiliation as friendship or affection, need of recognition as respect, success and the need of self-fulfilment as the leadership, resolution of problems and transcendency. Every area is independent, focused in the needs that the market needs, divided by kinds and ages for the satisfaction of the consumer.

MARKETING

Zara´s marketing is compound by different strategies for each sector:

PROMOTION AND DISTRIBUTION

This company does not invert in the publicity, but they invert all the money in stores, ubication, decoration and shop windows, that is, Zara wants to improve the imagine of the store.

They do not chase possible consumers with aggressive advertising. They just place where the aim public will be standing them out, in order to, they enter and buy.

For it, they use several and big shop windows, so that it does not go unnoticed, with wide and ample doors, promoting a more fluid entrance for the store and inviting us to enter.

Furthermore, the order, decoration and the cleaning are essential, in order to not get distracted with the clothes.

Also, the majority of the stores are in the best ubication, in good street of each city or near of other luxury shops which give prestige for Zara. However, these types of shops like Gucci, Prada, wants to keep away from Zara.

PRODUCT

Zara instead to hiring with good designers from around the world, just copies them.

When the great designers present the fashion of the new season this company imitates them with cheap materials, some modifications and bringing the clothes to light immediately. Because nowadays, people don’t want to wait for the clothes to arrive, just see them and buy them immediately. This concept is called ¨fast fashion¨ because the product leaves the factory to the store without going through distributors and wholesalers.

This company is based on innovation, maintaining products of continuity and reducing costs to lower the price.

PRICE

Zara gives us clothes at affordable prices for the majority of the public thanks to the sale she manages to make on a large scale, that is to say, cheaper. In addition, Zara does not spend the money on storage, because she manufactures at the same time as she sells clothes.

In each country, depending on the public and the currency, Zara puts a different price. In Spain, for example, it is cheaper than in the United States.

TECHNOLOGY

Zara changes with the new technologies when it has launched the payment by phone in all their stores in Spain.

In addition to radiofrequency chips, which allows better location of the of the clothes and the distribution of the same. Improving the anti-theft measures.

(Sandra Sánchez Serrano, 2018)

HUMAN RESOURCE MANAGEMENT

-Ability to make decisions in a short time: In each store there is a person in charge who must report on sales and all interactions with customers.

– Team of young designers and open mind: The people who have to make the inputs that go to the stores are the designers. They have to adapt all the new clothes they receive. It consists of continuous innovation and team building.

– Transmit a young, modern and successful image of the company: Employees feel they are working in an innovative company. It gives rise to a particular profile that is very much identified with the store.

– Promote teamwork: In all stores a cooperative system is established in which all employees have responsibility.

– Continuous training: Employees are taught to convey a good image of the company. As Zara does not advertise, attention must be paid to the needs of customers.

– High self-demand: This is one of the main requirements. This company is looking for motivated and cooperative employees who can assume the established requirements.

– Distribution of employee shares: This is a way for employees to participate in the course of business.

(Incocif.es, 2015)

OPERATIONS

DESIGN PROCESS

The key piece is the store where the customer’s fashion wishes and the proposals of the chain design teams converge. They are also the main image support of the brand.

First, the garment is designed by computer on which a prototype is made in a handcrafted way and then subjected to examination by its own creative team that will decide whether to market the pattern or not, thus avoiding time and material costs.

MANUFACTURING PROCESS

Zara´s production is based in the term ¨Just in Time¨, is a concept from Japanese philosophy focusing on the elimination of waste in management or production system.

The company´s production gives an advantage in time and capacity, which seeks to increase your quality and productivity, committing the least possible defects and increasing production without increasing costs.

Zara is characterised by adapting the production process to the requests of the stores, avoiding mass production and manufacturing in small batches. The just in time system allows you to personalize your processes and take advantage of your innovations.

DISTRIBUTION PROCESS

The key to distribution is the rapid flow of information from the stores, thanks to the fact that the logistics centres act as a connection between the two. Thanks to just in time their stores have a minimum stock, thus reducing storage costs and avoiding stock breakage, as goods are sent every fortnight from the logistics centre.

In general, eight hundred people are in charge of preparing the orders, but in case of greater demand they incorporate 400 workers.

For its part, distribution to the rest of Europe is done through fleet of trucks, using aircraft for more distant areas.

SUSTAINBILITY AND SOCIAL RESPONSIBLE

In order to carry out this strategy, this company has a departmental organization which splits up in four rules:

1. Fulfilment of the Code of Conduct
2. Security and Health in the Work
3. Projects of social Investment
4. Projects of Integration in the company

The company uses, in this sense, a triple system to manage the sustainability and responsibility of its business model, following the traceability of its vertical and horizontal integration model form. This is the origin to the final presentation to clients, what is known as the 3 pillars of the responsible behaviour in the production chain:

     1.The DNA of its offices: tied to its employees (legality, respect and diversity)

     2.The DNA of its factories: tied to its suppliers and business partners (transparency,         legality and traceability)

     3.The DNA of its stories: tied to its clients (quality, security and health)

Zara has achieved three great milestones in search for a management model and the most sustainable business:

1. Design of the business: Creation of value for consumers, for society and especially for the community.
2. Operation: Control of supplier’s responsible policies
3. Logistics: Sustainable mobility plans following the principle of Kyoto
4. Sales: Teaching for a more responsible way of consumption

DISCUSS

Zara´s company did not have any problem with the technology’s innovation. It is the best way for carry out a company and for offering a good service.  In 2007, Inditex launched its first website, Zara home.com, then in 2010 Zara.com was created. The company has invested one billion of euros to increase its technology, such as the creation of the technologic centre which is operational the 24 hours a day a week. Its function is to promote the online sales of the 90 markets in which it is present.

Another innovation to improve the logistics of the company has been the internal development of radio frequency systems (RFID), which makes the location of the clothes is faster and more accurate.

How does Brexit affect fashion?

In 2015 Inditex’s sales in the United Kingdom rose to 700 million pounds, thanks to the six chains of the group ¨ Inditex ¨, but especially to Zara and Zara home due to the higher number of establishments.

Pablo Isla, the president of the group, declared in the last presentation of results that Brexit would have a minimally relevant impact on the company’s accounts.

This possible weakening of the economy and the increase in inflation due to the depreciation of the pound is what worries the managers of the company. On the other hand, Zara, despite the fall of the pound, has increased its market share from 0.6% in December 2015 to 0.7% in December 2016.

Where the company has noticed a greater impact is in the real estate investments. Brexit will cause a devaluation of the pound sterling, which would cause a loss of purchasing power of buyers and lead to declines in sales in the company’s stores. A devaluation of the pound would lower the price of the property, so Amancio Ortega would notice significant losses.

CONCLUSION

Zara was able to create a business model unique in the world characterised by speed, innovation and flexibility. What used to be a small repair shop is now the Inditex group, the number 1 textile retailer worldwide. This has revolutionized the world of fashion by guiding its value chain towards the customer. This business tries to get ahead to create the future, all this is the key to success for the company.

¨I´LL KEEP WORKING UNTIL THE END¨, Amancio Ortega

REFERENCES

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