Continuous Internal Assessment - 1

Under the Guidance of

Prof. Saba Fatma

Course Name: Principles of Management

A Report on Zara International

By

Arathy Sujaya Venu

MBAI

Register Number- 2227610

August 2022

CHRIST UNIVERSITY, BANGALORE

Zara International

Introduction

One of the most prosperous clothing retailers in the world is called Zara. Zara is the flagship

of Inditex, a holding company located in Galicia (Northwest Spain). Amancia Ortega owns

Inditex Group. ZARA has more than 1,700 stores in 78 countries, offering distinctive fashion

to customers worldwide, starting with the first store in Spain and most recently expanding

into Australia.

Organization Characteristics of Zara International

There are eight various retail selling forms that make up the Inditex Group, one of which is

Zara. Zara employs a lean organizational structure that prioritizes excellence in performance.

The lean organizational structure also helps to decentralize decision-making and cut down on

the number of administrative hierarchy levels. The business's focus on pointless

administrative processes is constrained by this paradigm. The Company just needs five weeks

to create a garment and two weeks to supply an existing model. By reducing the product life

cycle, this approach can better satisfy customer needs.

Departments And Their Functions

1)Designing

Zara employs a large number of designers who collaborate in teams to complete tasks given to

them by computer programs that predict prospective changes in consumer demand. Computers

provide initial guidance on what to design and how. In order to improve current production line

items and incorporate client comments into forthcoming collections, designers also received
daily sales data. Teams compete against one another, and design managers choose the winners.

Every few months, Zara shuffles teams to ensure that most of the designers are different after

two years. Employees with lower ratings are let go after multiple team rotations, while those

with good scores are elevated to supervisory positions.

2)Manufacturing

Zara implements a just-in-time production strategy that emphasizes internal production,

allowing the Company to respond more quickly to changes in demand. Zara frequently

modifies its in-season assortment because the Company makes 50–60% of its clothing at the

beginning of the season. The retailer normally operates 4.5 days per week at capacity and

reserves some capacity for additional shifts in situations of abrupt fluctuations in demand.

3) Distribution

Employees at the Zara warehouse looked over each store's shipment orders from 2005 to

identify which shipments were required. As operations grew, the business began to create new

decision-making processes based on a sizable operations research model that chose the timing

of each shipment to stores depending on inventory levels and demand. Zara tested the new

model in a trial project before implementing it fully. The experiment's findings demonstrated

that the Operations Research model decreased transshipments between outlets and enhanced

in-season sales by at least 3-4%. Zara was able to maximize the number of the warehouse

inventory allocation team to 60 personnel worldwide because the forecasting process was

automated.

All goods pass through Spain, resulting in a highly centralized distribution system. Twice

weekly shipping to retail locations is an absurd frequency for a fashion shop.

4) Retailing

Over 2000 Zara locations may be found worldwide. Zara's management does not prioritize

customer service because they understand that customers will still visit because they cannot

find the same trend, price, and selection of products elsewhere. Zara relies solely on word-of-

mouth advertising as a form of promotion. The best store placement near luxury goods is the

only marketing strategy it employs. Every store has a point-of-sale system that tracks what sells

and what doesn't. In order to refill the supply, the store generates reports on sales every hour.

Leading fast-fashion retailer Zara has developed a vertically integrated supply chain to suit its

business strategy, focusing on quick and flexible designing and manufacturing, frequent

distribution, and extensive selling. With a large client base covered, this operational model

permits frequent collection changes and rapid demand fluctuations. The operating and business

models are very similar.

Skills needed By Managers of Zara

• The managers need to be adept at boosting sales and solving issues. He should be able to lead

from the front by having a positive outlook and a can-do attitude.

• They should be able to multitask in a hectic environment.

• They ought to be interested in current trends in clothing and the market.

• They ought to be proficient in both customer service and communication.

• Must have an organized and detail-oriented personality.

• Possess the ability to prioritize work to increase team productivity.

Management Theories followed by Zara.

1)Classical Management Theory

Because it used the traditional management techniques, Zara International has been successful.

They have employees who are qualified for the roles, including designers and managers. The

company meticulously arranges the job and paves the road for employees to carry out

managerial decisions. The Company also has a distinct authority system. From the company's

control over the supply chain, people can discern the hierarchy of the organization.

2) The behavioral management strategy

The management staff of the Company also employs behavioral management strategies. These

methods make the supposition that individuals are sociable and self-actualizing. The apparel

sector is successful thanks to Zara International. If we consider behavioral management

strategies, a number of elements affect the Company's success ( Robbins and Coulter, 2010).

McGregor's Theories X and Y: People despise doing labor, lack ambition, act irresponsibly,

and prefer to be led, claims Theory X. People are self-directed, innovative, and eager to put in

the effort, according to Theory Y. According to McGregor, managers may have one of these

viewpoints or the other. He thinks, though, that Theory X's assumptions are flawed. By giving

workers more job engagement, independence, and responsibility, Theory Y empowers workers.

Based on how forward-thinking and contemporary the Company looks to be, Zara is more

likely to adopt the Theory Y approach. Additionally, it would give stylists the creative latitude

they need to develop looks for retail outlets.

The Argyris Theory of Adult Personality is in opposition to conventional, hierarchical

management techniques and the demands and skills of mature people. Certain behaviors that

are influenced by conventional management techniques are incompatible with the mature adult
personality. This is permitted by Zara for their stylists who go out and spot and develop trends,

but not so much for lower-level store staff.

3) Quantitative Approach:

Utilization vs. Wait Times: Arguably, Zara's greatest operational insight into success is the

inverse relationship between utilization (for example, warehouses, manufacturing, or factories)

and the wait times associated with those products. Although few businesses see this connection

when looking to improve operational efficiency through better utilization rates, the discipline

of operational research in queueing theory mathematically proves it.

In contrast to local operations, Zara is more concerned with system-level optimization. The

German federal administrators said, "We can envisage that a half-empty truck can be delivered

to Japan twice a week for air transport or operating industries for only one shift."

Similar to how most businesses would aim to maximize rather than minimize inventories in

their distribution center.

Zara collaborated with a professor from the MIT Department on an inventory allocation

system.

A few years ago, operations research was used to optimize the store's inventory allocation.

Network.

This involves the regression of each product's demand at each retailer, followed by the transfer

of

products to the shops.

Violations of Management theory:

The business disregarded Maslow's Hierarchy of Needs Hypothesis, a behavioral approach

theory. In August 2011, Brazilian federal government inspectors found 15 immigrants living

and working in appalling conditions in two tiny workshops in So Paolo. One of the Company's

suppliers had contracted out the work, so the employees were required to put in long days—up

to 16 hours per day—and had limited freedom of movement.

The inspectors later came to the conclusion that the two workshops' working conditions were

"analogous to slavery." The workers were producing clothing for Zara, a label controlled by

Inditex, a fast fashion industry giant with roots in Spain. The contract for the workshops where

the abuse took place belonged to Zara's supplier. According to the inspection report, Zara Brazil

had direct control over the supply chain, and as a result, it should be recognized as the real

employer and held accountable for the circumstances of the worker who was rescued.

The corporation had to enter a so-called "dirty" slave labor list—the public register of people

or companies employing workers in conditions that are comparable to slavery—and pay fines

for 48 separate offenses during workshop inspections. A number of sanctions were imposed on

the Company, and Zara Brazil disputed the legality of the dirty list as a tool by contesting these

sanctions in court.

One can infer from the aforementioned situation that the firm violated the rights to freedom

and the physiological needs of the employees and anyone connected to or working for the

Company.

Due to this scandal, $20 million in restitution had to be paid, along with R$ 3.5 million in

"social investments" in support of organizations working for immigrant and human rights.
The idea of compensation, which states that everyone should be paid fairly for their work and

treated as valuable employees rather than just as a cost, is another broken tenet. Zara made

experience difficulties when Inditex, her owner, caught fire in a sweatshop that Brazilian police

found.

Although Index denied having any knowledge, the corporation was nonetheless able to praise

and compensate the personnel.

Current Practice

As recommended by the Brazilian authorities, Zara currently works to ensure that all of its

employees have access to the physiological needs they require, adheres to Maslow's hierarchy

of needs, and keeps updated records of its suppliers and their subcontractors' information. Also

observed is fair payment.

Conclusion

We may infer from the research that Zara International makes use of a range of management
theories, including classical, quantitative, and behavioral. There were few management
practice violations that the organization naturally overcame.
References

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