CAPSTONE PROJECT — ZARA

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    Management
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    Assignment
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    High School
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CAPSTONE PROJECT — ZARA 9

CAPSTONE PROJECT — ZARA

Capstone Project — Zara

Executive Summary

Zara focuses on manufacturing and selling products like the women and men accessories, shoes, clothes as well as cosmetic. The company’s is located in Arteixo, Spain and has over 9000 stores in 91 countries. The mission of the company is to sustainably contribute to the society and environment development where it operates. Zara’s vision is to dedicatedly satisfy the customer needs through continuous innovation. Zara has numerous goals and objectives such as to operate eco-friendly stores and to save energy by cutting energy consumption by 20 per cent. The success of Zara is attributed to two core competencies; innovation and efficiency. The report has determined that organic structure was the most appropriate organisational structure at Zara because it offers the needed flexible changes and can limit the hierarchy levels to improve the research outcome, as well as establish democratic work environment.

The report has reviewed the financial performance of Zara, and has established some mixed results recorded between 2011 and 2015; for instance, the company’s sales/revenue in 2011 was 78.19 Million but reduced to 71.22 million in 2015. The company recorded the highest sales in 2013 (83.26M) then dropped drastically in 2015. Still, Inditex sales and the net income (in million Euros) have been increasing progressively and are projected to continue increasing.

Basically, organisational culture develops through three levels; artefacts having noticeable attributes, employees’ values, and concealed assumed values. This report examines Zara’s management competencies, leadership style, and people management. The external environment of Zara is analysed using porter’s five force and PESTLE analysis. It has been recommended that the company should learn to listen to its customers in order to make sure their needs are met and to be able to retain a substantial market share in the competitive industry.

Furthermore, Zara should adopt a marketing culture so as to further promote its consumer-centric strategy. The clothing industry is very competitive and highly volatile; therefore, Zara should develop a competitive edge in order to grow and survive. Consumer centrism is an important feature that could benefit companies operating in the fashion industry since consumers as the most important stakeholders can enable the business to grow and become profitable. Therefore, it is imperative to understand the value of the customer so as to be able to priorities their needs and bring about customer satisfaction.

1.0 Introduction

Zara is a Spanish clothing retailer, established in1975 by Amancio Ortega, and focuses on manufacturing and selling products like the women and men accessories, shoes, clothes as well as cosmetic. The company is a flagship retail store in Inditex group, and seeks to promote fashion by offering more recent fashion economically. Zara’s vertical integration of design, just-in-time (JIT) production strategy, flexible organisational structure and innovation ability enables the company to focus on the demands of the customers (Lopez & Fan, 2009). The company’s is located in Arteixo, Spain and has over 9000 stores in 91 countries. The mission of the company is to sustainably contribute to the society and environment development where it operates. Zara’s vision is to dedicatedly satisfy the customer needs through continuous innovation. Zara has numerous goals and objectives such as to operate eco-friendly stores and to save energy by cutting energy consumption by 20 per cent.

The company normally design and sell its products swiftly in all its stores. Furthermore, innovation differentiates the company from the competitors and the differentiation strategy has been adopted all through Zara’s supply chain. Although the company is very successful in the market, there is a need for it to improve its management competencies in order to retain the organisation’s innovation and efficiency. This can be achieved through understanding multigenerational workforces, proficient communication skills and offering influencing feedbacks. Zara’s managers should clearly drive the communication expectations by interacting with employees openly and frequently. This can enable the managers to pursue efficiency and create a relaxed environment for innovation.

2.0 Zara’s Organizational Culture

In view to Schein’s typology, organizational culture develops over time rather than in a single day as employees solve problems, experience changes, and interact with the external environment. According to Levin (2000 p.91), organisational culture develops through three levels; artifacts which are the observable characteristics, values of employees, and assumed values which remain hidden. Basically, organisational culture develops through three levels; artefacts having noticeable attributes, employees’ values, and concealed assumed values.

At Zara, the organisational culture has developed progressively since the company started its operations in Spain. The company stocks clothes designed in line with the most recent fashion trends while the employees repeatedly express passion, teamwork, and flexibility when engaging with the customers. Importantly, creativity is the main driving force at Zara and the working environment promotes culture development where communication is an important element. Communication promotes decision making processes and enables the organisation to gather information from the customers with regard to the changing customers’ expectations and the latest fashion trends.

2.1 Customer-centric Culture

Given that the customers are the most important asset of the company, Zara’s organisational culture is customer centric. The fashion trends are normally set by the customers; therefore, items available at different Zara stores are determined by these trends. Furthermore, Zara has entrepreneurial culture since it employs young talented staff who can be promoted easily in the flat organisational structure; therefore, promotes a competitive culture amongst the worker forces (Schrodt, 2009 p.200). Additionally, Zara’s culture place emphasis on risk-taking as well as swift espousal of fashion ideas in order to remain up-to-date with the current trends and also to create new trends. As a result, the company has managed to be conversant with the changing street fashion; thus resulting in consistent success and growth in the global marketplace.

2.2 Decentralized and Flexible Culture

As pointed out in the report, companies in the clothing industry are expected to have a high level of flexibility in order to quickly adapt to the changing trends in the industry. For this reason, Zara’s culture is considered to be relevant because it allows the workers to easily identify new fashion trends and avail them in its retail stores. Operating a business in the fashion world as mentioned by Zammuto, Gifford and Goodman
(2000 p.277) needs a high level of flexibility to enable quick adoption of changing fashion trends.

The swift adoption of new fashion trends at Zara is made possible by the employment of young employees given that the younger people can easily identify the new fashion trends as compared to the older people. Such a quality has made Zara’s culture very relevant given that it
allows the employees to identify new fashion trends and avail them in their retail stores.

The process of identifying as well as adopting new fashion trends should take short period so that the brand can retain its relevance. In addition, the fast changing trends in the clothing industry needs all members of the organization to act in urgency. Presently, Zara operates in a highly competitive and volatile industry that needs firms to develop a competitive advantage for the sake of growth and survival (Chan, Shaffer & Snape, 2007 p.21). In addition, Zara is operating across cultures and countries that need different fashion trends to be assimilated across the board. In order to be successful, Zara operates a flexible as well as decentralized culture that caters for phenomenon with the purpose of
promoting success in different locations.

Still, the company faces some challenges in terms of managing the changing cultural dynamics; for instance, the company is accused of favoring light-skinned employees of color over other races. Besides that, there are a number of employees complaining about favoritism in promotions, working hours’ distribution and treatment. This is an outcome of managing human resources from different cultures.

2.3 Promoting a Culture of Diversity

In order to eliminate biasness, Zara should promote a culture of diversity
employing people from different educational backgrounds, age groups, as well as culture. Given that the company operates in different culture, it should ensure that the element of racism is eliminated and should change its recruitment policy so as to include people from the minority groups as well as older generation (O’reilly, Chatman & Caldwell, 2003 p.511). Still, Zara’s organizational culture is effective culture and worth emulating. Customer satisfaction can be achieved by prioritizing their needs and increasing the level of interaction.

3.0 Conclusion

In conclusion, Zara seeks to meet the customers by offering good quality products. In terms of business and competitor strategy, the company has never advertised its products through the mainstream media like H&M or Gap (its main competitors). More importantly, the company depends on Just-in-time (JIT) production as its operation strategy. The organisation structure at Zara is hierarchical subordination flow of the functional department and as evidenced by the organisational chart, the structure is well- organised and allows employees to communicate and offer feedback effectively. For this reason, the structure has improved efficiency at Zara since it makes work easier and improves employees’ productivity.

In terms of leadership style at Zara, Amancio Ortega is evidently an active and open person while communicating with his followers. Ortega normally engages with his employees often; for instance, he takes lunch together with his workers in the company’s cafeteria, but often displays little interest in fashion since he hardly dresses clothes from Zara. Therefore, Ortega’s style of leadership is a country club management typified by his low concerns for commercial results and high concerns for people. The country club leadership is beneficial because it creates a relaxed working environment; thus, making employees comfortable. However, it normally results in reduced productivity because of the lack of direction and control. Therefore, this type of leadership is inappropriate to Zara since it negatively affects the organisational efficiency. Zara can increase its retention by strengthening its core competences. Furthermore, Zara should shift to Team Management leadership style in order to improve the leadership effectiveness.

With view to external environment analysis, it is evident that the political environment has been favourable to Zara since the company operates more than 7,000 stores, has over 70,000 international staffs, and operates in almost 91 countries. In terms of economic force, the company is very sensitive to various economic factors; for instance, sales are more likely to decline during the economic crisis. In terms of social force, Zara is not only attractive to tourists but also offers a huge impact on online customers owing to its cheaper prices and variety of products. Technology does not have an enormous impact in the clothing industry, but Zara relies on technology to facilitate fast delivery and improve the organisational performance

Zara’s organisational culture is customer centric since the fashion trends are normally set by the customers; therefore, items available at different Zara stores are normally determined by these trends. The company has created a positive corporate image because it employs young employees who present the organisation as trendy. However, Zara should learn to listen to its customers in order to make sure their needs are met and to be able to retain a substantial market share in the competitive industry. Furthermore, Zara should adopt a marketing culture so as to further promote its consumer-centric strategy. The clothing industry is very competitive and highly volatile; therefore, Zara should develop a competitive edge in order to grow and survive. The report has established that Consumer centrism is an important feature that could benefit firm operating in the fashion industry since consumers as the most important stakeholders can enable the business to grow and become profitable. Therefore, it is imperative to understand the value of the customer so as to be able to priorities their needs and bring about customer satisfaction.

4.0 References

Chan L L M, Shaffer M A, Snape E D 2007, ‘In search of sustained competitive advantage: The impact of organizational culture, competitive strategy and human resource management practices on firm performance’, The International Journal of Human Resource Management, Vol.15, No. 1, Pp.17-35.

Levin I M 2000, ‘Five windows into organization culture: An assessment framework and approach’, Organization Development Journal, Vol 18, No.1, Pp. 83-94.

Lopez, C., & Fan, Y. (2009). INTERNATIONALISATION OF SPANISH FASHION BRAND ZARA. Case Study, Brunel University, Uxbridge, London.

O’reilly C A, Chatman J, Caldwell D F 2003, ‘People and organizational culture: A profile comparison approach to assessing person-organization fit’, Academy of Management Journal, Vol. 34, No.3, Pp.487-516.

Zammuto R F, Gifford B, Goodman E A 2000, The handbook of organizational culture and climate, Thousand Oaks: Sage Publications.

Schrodt P 2009, ‘The relationship between organizational identification and organizational culture: Employee perceptions of culture and identification in a retail sales organization’, Communication Studies Journal, Pp.189-202.