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Fashion industry is closely related to the retail business that has specific rules that should be followed to ensure stable operation of the entire network. In this respect, ZARA is a chain of retail stores that sell clothes all over the world. The importance of information is very high for such chain of retail stores because they are supposed to operate on a similar basis. In addition, the POS terminals are of paramount importance for such stores as they contain the information about the goods and enable the stores to operate effectively.
Scope of the research
Business models. The definition of business model can be related to the process of maintenance of the company or to the receiving of revenue. However, all the business models reflect the general idea of how the company should operate and what should be the main strategies to reach the goals set by the board.
In this respect, it is possible to review the e-commerce business models aimed at providing the companies with the opportunities for effective online trade techniques. The application of a business model should be evaluated to the type of business the company is involved in in order to ensure that it selects the most appropriate business model and would benefit greatly from it.
The companies operate to get revenue and each of them has specific methods of doing this. The study by Casadesus-Masanell and Ricart (2007) contains elements that are claimed to be components of a business model; as such, choices (policies, assets, and governance) and consequences (flexible and rigid) are integral parts of every business model (p. 3). At the same time, Zott and Amit (2009) insists that the key to understanding the business mode of the company is the analysis of its activity system (p. 2).
As suggested by Magretta (2010), “every viable organization is built on a sound business model, but a business model is not a strategy, even though many people use the terms interchangeably” (p. 2). The importance of realizing how the company should operate and the major issues related to its strategies and policies makes the business model an issue of patent processes as many companies such as Amazon patent their inventions such as ‘one-click purchasing’ an integral part of their business model.
Information needed for operation. The importance of information for operation of a company is high due to the number of companies that may potentially operate in the same market and the competition that increase due to the changes in the market that are related to the suppliers, consumers, brand awareness, new entries into the market, and other aspects that should be taken into account.
So, if the company wants to stay in the market and operate effectively, it should be aware of the main tendencies in information technologies and other areas that may help it to be in advance of all other competitors.
Evaluation of global operation
Upgrading of ZARA’s POS systems. The process of upgrading the POS systems of ZARA can be time and cost consuming if it is planned to be performed once a century. The changes should be appropriate in terms of time. If the managers feel that the system should be upgraded, they should upgrade it because the changes made in a timely manner can increase the revenue of the company and bring it forward with regard to the level of competition in the sector of business.
The application of PDAs was initially considered to be inappropriate and cost consuming whereas the operation of the stores is facilitated with the help of these devices because the ZARA does not have centralised units that would make decisions, collect information on the needs of every store, and other actions.
In this respect, the implementation of PDAs can be considered one of the most effective innovations integrated into the ZARA system operation. Salgado should proceed on the issue of upgrading ZARA’s POS systems through making agreements with manufacturers and distributors of more advanced software necessary for normal operation of POS.
The company should upgrade the POS terminals to a modern operating system because it would enable it to operate in accordance with the modern requirements and avoid the necessity of changing the entire network in several years when the company would implement other processes into operation. The changes should be made in the moment when the company is ready for them because the next period can appear to be less effective for the company and it would not be able to sustain its competitive advantage.
The in-store networks should be built in to ensure that all members of the teams in every store are capable of making decisions to facilitate the process of decision-making and make decisions when they are required and not when they come to the very top. The employees should get the ability to look up inventory balances for items in their own stores though it is not necessary for employees to be able to look up inventory balances for items in other stores because this may lead to unfair competition between the stores.
ZARA’s business model. ZARA’s business model includes operation of retail stores via online connections that enable the employees to make orders and have appropriate selection of items of clothes, leadership skills are necessary for employees of the stores to make decisions at once. As suggested by Watson (2005), the business model should include not only strategies of the company but also all the components that “result in costs for itself and value for the customer” (p. 2).
Pahl and Mohring (2009) analysed ZARA’s business model and define it as the following: “ZARA organised its supply chain to transfer both hard data and personal perceptions of costumer behaviour quickly and easily from the shops to designers and the production department, thus clothing the information loop between consumers and its own upstream operations” (p. 11). In other words, the connection between the customers and designers is direct to ensure adequate responses.
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Limitations and recommendations
The recommendations concerning ZARA’s business model and its relation to the IT innovations are pertaining to the importance of updating of POS when it is required. However, it does not seem necessary to change something which operates effectively and does not need costs for additional maintenance or repairing.
ZARA is one of the retail chains that effectively operate all over the world due to the leadership skills and adequate responses of the designers to the customers’ expectations expressed through the network. As such, every customer is sure to receive what he/she wants due to the system of information.
Casadesus-Masanell, R., & Ricart, J. E., 2007. Competing through business models. Working Paper 713.
Magretta, Joan, 2010. Why business models matter. In: Harvard Business School Press, ed. 2010. Harvard business review on business model innovation. Boston, MA: Harvard Business Press, pp. 1-19.
Pahl, N., & Mohring, W., 2009. Successful business models in the fashion retail industry: strategic audit of H&M compared to ZARA. München: GRIN Verlag.
Watson, David., 2005. Business models. Hampshire: Harriman House Limited.
Zott, C., & Amit, R., 2009. Business model design: an activity system perspective. Long Range Planning doi:10.1016/j.lrp.2009.07.004.