I.

ELEMENTS OF CLASSICAL MANAGEMENT IN ZARA INTERNATIONAL

There are several indications on the presence of classical management elements in Zara International’s
operations. First of all, the capabilities of the Parent company (Inditex Group) to minimize the supply chain
time by applying approaches such as shortening the time from order to arrival by complex system, along
with the application of just-in-time production and inventory reporting could be considered as the epitome
of Frederick W. Taylor’s motion study: which is focused on the science of reducing complex job and tasks
into basic physical motions (Price (1989) and Kulesza et al. (2011)).

As revealed in the case, one of the main competitive advantage of Zara is its very fast supply chain
distribution, which allows the company’s distribution centers to be stocked in a relatively short time. For
instance, stocking the merchandises in European stores would only require 24 hours, whereas shipping to
American and Asian stores can be accomplished within 48 hours. This is largely attributable to the
efficiencies of the employees assigned in the company’s distribution centers and across its supply chain.
The company employed well-trained set of employees who possess competence and skills in performing
their respective tasks throughout the supply chain. These outlooks might imply the implementation of the
2nd principles of scientific management: that companies should match their workers to their job in
accordance with the workers’ capabilities and supporting this with training to ensure maximum efficiencies
(Price, 1989).
At the same time, Zara’s managers contributes to the supply chain by ensuring that their stores maintain
the corporate strategy of single-stock inventory (no replenishing). The fact that Zara was able to maintain
this mode of operation as well as the usage of technology (smart devices) for sales tracking by the managers
are consistent with the implementation of the 4th principles of scientific management: that companies
should ensure that managers are able to focus their role in planning and training by implementing adequate
work allocation system (Locke, 1982).

It is also possible to categorize this rapid-response managerial system to be an evidence on the application
of Henri Fayol’s classical approach as described in Wren et al. (2002). The fact that store managers adhere
to a single plan to rapidly cover the market using united direction and superb initiatives provides an
impression that the company was able to implement four management functions. To illustrate: in ensuring
that their stores are stocked with the most highly –sought model, managers in Zara should exercise their
roles of ‘Foresight’ – especially for managers in foreign stores which might also facing challenges in regards
to differing customer tastes. At the same time, consistent efficiencies of the supply chain suggest that the
company had exercised, at very least, Fayol’s rules of organization, coordination and control.

II. ZARA INTERNATIONAL’S MODEL OF MANAGEMENT

I believe that Zara’s primary mode of management is contingency thinking. The principles of contingency
thinking suggests that there is no ‘best approach’ in managing a certain situation or businesses (Zeithaml
et al., 1988). This view also suggest that the most appropriate managerial techniques would be dependent
on the situation. The managerial techniques are also affected by the types of tasks that the organization
tried to accomplish.

The prevalence of contingency thinking can first be traced from the mode of operation and product sales
in Zara: Zara sells its brand-unique designs rather than selling conventional fashion products. Of course, it
is possible to argue that Zara’s design will ultimately follows the most recent market trend (thus suggesting
the system’s prevalence that designs are based on external conditions faced by the business in forms of
most recent fashion trends). However, it is imperative to note that Zara is a branded customer fashion
product: that its brand value also commands demands. Thus, the brand value (an internal factor) is also
prevalent for Zara’s case – basically negating the fundamental premise of system thinking which is entirely
based on external conditions.

It is also proper to assume that there are considerations on the interplays between the company’s brand
and management mode. For instance, it is possible to argue that the decision to ensure constant rapid-
response supply chain in Zara are being based on the considerations of Zara’s brand value (such as the
association of the brand as the most up to date fashion provider). The rapid speed supply chain provides
brand value to Zara and promoting valuable customer impressions that contributes to their success. This
interplay between brand and adopted supply chain could become a further indication that the company
applies mode of contingency thinking to ascertain its success.

Of course, this proposition could be challenged by the fact that all Zara stores operates based on a
centralized operational philosophy. Values such as no-replenishment inventory, constant inventory
replacement are similarly applied in American stores as in their European or Asian counterparts. At the first
sight, this contradicts the premise of contingency thinking philosophy. Considering that Zara is facing
different market challenges one another, it is reasonable to expect that as an adherer to the contingency
thinking philosophy, Zara should have adopted different mode of managerial techniques or inventory policy
for each of its stores. However, the author stressed out that the fundamentals of contingency thinking is
that the appropriate managerial techniques are dependent on the organizational environment and the
organizational objectives. In such regard, it is imperative to revisit Govindarajan (1982)’s suggestions that
instead of viewing the implementations per business units, the implementation of the contingency thinking
should be viewed from the standpoint of the entire organization.

At this point, the author stressed out the arguments by Sitkin et al. (1994), that since contingency thinking
approach’s implementation is actually based on the organizational standpoint, it basically conforms to the
types of organization and the prevalent organizational setting. In other words: it is related to Aguilera et al.
(2008)’s dynamics where organizational settings (such as managerial approaches, systems and
organizational philosophy) are readily designed based on considerations on both external and internal
factors. Regardless, the assessment of external and internal factors would produce organizational design
that generally falls onto two distinct organizational types: mechanistic organization (where tasks are
routines and non-changing) as well as organic organization (where tasks are constantly changing), where
contingency planning is applicable to both types of organization (Gupta and Govindarajan, 1984). After all,
if we re-infer our argument with Zara’s supply chain example, it is clear that the supply chain design is used
to support the brand proposition of the entire company hence instead of being considered as a ‘system’ it
is more closely resembling ‘corporate operational mechanism’. In this regards, it can be concluded that the
success case of Zara represents a success story on how contingency thinking is applied within a mechanistic
organization. Furthermore, Zara’s usage of technologies to assist its managers to track sales data actually
serves as fact on the recognition of technologies as contingencies, particularly on Woodward (1970)’s
arguments that contingencies such as technologies will determine the job design and performance of the
employees.

III. ZARA PERFORMANCE ANALYSIS

The following Table presents the performance outlooks of Major Global Apparel Manufacturer and Retailer
in 2019:

Table 1: Major Global Apparel Manufacturer and Retailer (2019)1

Sales Change
Company Name Country of
End of Fiscal Year (Billions (%) in
(Flagship Brand) Origin
of dollar) local base
INDITEX (ZARA) Spain Jan. 2019 28.89 3.2
FAST RETAILING(UNIQLO) Japan Aug. 2019 21.51 7.5
Hennes & Mauritz Sweden Nov. 2018 21.5 5.2
Gap USA Feb. 2019 16.58 4.6
Limited Brands USA Feb. 2019 13.24 4.8

PVH (Calvin Klein,Tommy Hilfiger) USA Feb. 2019 9.66 8.3

Ralph Lauren USA Mar. 2019 6.31 2.1

NEXT UK Jan. 2019 5.08 1.9

1
Available at: https://www.fastretailing.com/eng/ir/direction/position.html
 AMERICAN EAGLE OUTFITTERS USA Feb. 2019 4.04 6.3
Abercrombie & Fitch USA Feb. 2019 3.59 2.8
Esprit Hong Kong Jun. 2019 1.65 -16

As seen from Fast Retailing (2019)’s reports above, at present, Zara could be considered as the largest
Global Apparel Manufacturer and Retailer based on sales volume. It is also supported from positive market
growth in the local base by 3.2%. This could be considered as a highly favourable outlook, considering that
there are growing demands for the entire product segment in the apparel industry for the upcoming future,
as seen by Euromonitor (2016)’s prediction as follows:

Figure 1: Growth Prediction of Apparel Industry (2016-2021)2

However, concerns should be highlighted on the global sales growth of Zara. Recent report released by Atlas
(2019) outlined a dire sales growth performances for Zara over the past 4 years:

Figure 2: Sales Growth of Global Apparel Brands (2015-2018)3

2
Source: Euromonitor (2016)
3
Source: The Atlas (2019): https://www.theatlas.com/charts/eqkEERwg5
The Atlas (2019) recent reports shows that although Zara still retains its post as the market leader in the
Global Apparel market, the company is not doing well in terms of sales growth, it also indicates that today,
Zara’s product had substantially declined in the market. This also magnify the outlook where although
Zara’s scored a positive growth of 3.2% recently, such growth are reportedly fell behind brands such as
UNIQLO (7.5%), GAP (4.6%). Limited Brands (4.8%), or H&M (5.2%). After all, it is imperative to note that
sales volume might not be an accurate representation of growth potentials, since smaller sales scale of
more expensive goods would nevertheless: produce high sales volume that masks growth problems such
as dwindling sales, as seen in the case of Zara.

Based on such outlook, I would conclude that Zara had not doing well to adapt and innovate. In fact, it’s
growth performance had clearly shown that it had fell behind competitors such as UNIQLO, GAP, H&M,
BooHoo and ASOS and that there are glaring issues of dwindling growth performance over the years, with
the most recent 3.2% growth being the lowest point over the past 4 years since 2015.
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