Zara Company Analysis Paper Example

1.1 Project Background Analysis

Zara is a successful company that deals with the sale and manufacture of fashion clothes. The company has managed to gain a global outlook and acceptance over the years. It has expanded its business activities to other regions and acquired other companies in the same industry in expanding its operations. In the production market, the company has had numerous achievements which include a vehement transition from retail stockiest to a global supplier of standard fashion designs. The business model that is currently being applied by the company is robust and outstanding and has been able to propel the business towards success. Zara has managed to come up with effective strategies that scale it ahead of the competitors in the market.

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Moreover, the company has done well in attracting consumers and retaining them. To remain successful and relevant Zara must ensure that it is ahead of the competitors regarding its strategies and operations by serving the most interests and preferences of the markets. Therefore, there is the need for the company to evaluate all areas of its business and make the necessary changes that will propel its success further.

Technology is a fast-growing field, and many organizations have been forced to ensure they make changes continually to keep up with the dynamic IT environment. Zara uses point of sale systems that are close to being outdated. The Point of Sale (POS) systems have been active since their implementation, and they have not shown any problems to date. However, the systems run on the disk operating system which is an OS that runs from a hard disk drive. The technology has become outdated, and Microsoft no longer supports it. Despite the lack of support by Microsoft, Zara has not experienced any problems, and therefore there is no need for upgrading the system. Nevertheless, with the continued growth of technology the company's hardware vendor for the POS terminals could improve their systems rendering the Disk Operating System (DOS) obsolete. The changes made by the vendor could create problems for the company and hurt its operations.

Additionally, the company has used relatively cheap and straightforward applications which are developed internally by the IT department. The systems have been useful but are only 95% accurate. The management supports that 95% is good enough as 100% is expensive. Additionally, stores and the headquarters are not connected using the systems and the employees in different stores have to call each other in situations such as finding out whether another store had a particular item in the store. Lack of a shared network affects the operations of the company and could lead to losses since the accuracy of inventory cannot be guaranteed in addition to the time wasted when communicating from one store to the other. The issue creates a need for an upgrade of Zara's IT infrastructure.

1.2. Business Justification for Undertaking the Project, Including Quantitative Analysis Using net present value (NPV)

The use of outdated IT infrastructure makes networking and communication difficult and poses the risk of disrupting workflow in case the current vendor of the POS upgrades their technology. Upgrading Zara's IT infrastructure will ensure the company remains current regarding the technology and they can, therefore, leverage the advantages of IT. The entity will have the ability to manage the inventory levels at each store effectively. The system will automatically update any changes in the in inventory without the need of the store managers manually counting and updating the stock. With the introduction of the new IT infrastructure, the company can efficiently track the inventory that is transported at a particular store and information on the changes in trends and preferences of the consumers on a regular basis. Additionally, the new system will have a network in place that will connect all the stores and the headquarters making management easier. The system will ensure the infrastructure remains current and can easily upgrade in the future based on technological changes.

Assuming the cost of the project will be PS100,000 based on the assumed cost of IT infrastructure upgrade the annual maintenance income will be PS120,000 and will be valid for the next five years with a scrap value of PS90,000. The cash flows of the project will be as follows:

• Initial cost PS100,000
• Annual maintenance cost PS120,000
• Scrap value PS90,000
• Equity contribution 100%
• Cost of equity 14%
• Cost of debt 8%
• Discount rate 14%
• Initial cost 100,000
• Maintenance cost 80,000
• Scrap value 90,000
• Total cash flows 100,000

The project has a positive net present value and would, therefore, be a viable investment by Zara. The company should undertake the project to improve the customer satisfaction and automate its process. The project will increase its productivity and thus its profitability. Undertaking the project will address the problem of the company having the outdated infrastructure and the lack of an effective network system.

1.3. Project Goals or Objectives

a. To improve efficiency: The project will be undertaken to improve the efficiency of the information systems used by Zara which is the main objective. Improving the efficiency of the IT infrastructure and systems used by the company will allow for more output to be acquired from all the inputs of the business.

b. To increase productivity: The project is undertaken to increase the productivity of the organization. Productivity will be achieved through an automated system that keeps track of the inventory levels in each store and the distribution centers. The entity can ensure shortages in inventory are managed better by increasing the customer satisfaction.

c. To improve communication: Undertaking the project will improve communication between the various departments, stores and the headquarters which will support decision making and automation.

d. To increase customer satisfaction: Undertaking the project will also lead to an increase in the customer satisfaction due to faster and more efficient services.

1.4. Assumptions & Constraints

Changes that may be affected by the assumptions will influence the schedule of the project, its scope, and the quality of the project (Robinson, Ryan and Abbasi 2018 p.34). The assumptions made are:

The project is a priority project in the company: The upgrade of the entity's IT infrastructure is the priority project after the financial year readiness. It is crucial for the project to be considered a priority by the organization to allow for the objectives to be achieved and the upgrade dates to be maintained. Therefore, throughout the time when the project will be undertaken the company cannot introduce any other projects that will require the same resources without negatively impacting the schedule. Therefore, Zara will not open any new stores or have any new operations that may have an adverse consequence on the undertaking of the task for it to be completed based on the schedule that will be created.

The upgrades will be carried out based on the importance and impact to the business: All the existing modifications will be analyzed by the project team to ensure that the functionality delivered is sufficient and will not affect the business negatively. Therefore, all the systems and equipment approved for use in the project must be free of bugs to ensure the smooth transition. All the new customizations have to be acknowledged, justified and presented to the entire project group for commodities to be approved (Robinson, Ryan and Abbasi 2018 p.34). The executive advisory group will assist in making decisions concerning customizations that have two or more solutions.

Reassignments will not take place: The team members for the project will remain allocated at the planned level. Any changes in resources will affect the completion of the project. Therefore, it is assumed that all the persons who are part of the team will remain in their planned level and will not be reassigned to other tasks throughout the project cycle.

The constraints

Lack of resources: The upgrade of the It infrastructure requires a lot of investment from Zara. The company will have to invest a lot of resources regarding finances and the time for the successful completion of the project. The large investment is because the project involves extensive customization of the IT system for the organization and thus requires changes in the software and hardware used by the company in various departments (Kerzner and Kerzner 2017 p. 56). Provision of the resources may be challenging for the company and therefore negatively affect the fruitful accomplishment of the task. The constraint can be addressed by ensuring the necessary finances for the end of the project are made available beforehand.

b. System failures and bugs during the implementation process: System failures are a common occurrence in IT projects. Some of the bugs may be difficult to identify until the systems are already in operation (Kendrick 2015 p. 23). The crashes and bugs may considerably distress the success of the operation by negatively impacting the schedule and the cost of the project.

Work Breakdown Structure

For the successful completion of the project a work breakdown structure will be used and will include the project's tasks which provide a framework for organizing and managing the work of the project.

2.1. Personnel Information

• Xan Salgado Management Executive manager
• James William Management Executive manager
• Bruno Sanchez Information Systems Project manager
• Alpha James Information Systems Advisory team
• Juliet Jane Information Systems Advisory team
• Sarah Evans Information Systems Advisory team
• Christine Chris Stores Manager Committee member
• Mark Antony Store manager Committee member
• Serah Davis Quality control Committee member
• Mary IS Upgrade team
• John Ted IS Upgrade team
• Robert Henstridge IS Upgrade team
• Christopher Willy Accounting Upgrade team
• Mary Cate Procurement Upgrade team
• Luke Cage Sales Upgrade team

The personnel table shows the staffing plan for the project. The project is objectively complex and includes coordination of employees from different units within the organization. The schedule will also involve members from different stores to ensure the smooth transition from the existing systems to the new ones. The responsibilities and duties of the team are:

• The executive management refers to the top management for the company originating from the headquarters. The administration will be responsible for reviewing the status of the project at each point, the budget, resources and the risks associated. Evaluation will be conducted regularly, and they will ensure the project is on track based on the plan and make various approvals and disapprovals by giving feedback to the team. The membership in this position is two managers.
• The committee will work in conjunction with the executive management to conduct a review of the project. The management will also work with the upgrade team and the advisory group and advice on the impact of the project on the success of the company. The team will arrange regular meetings with the different groups on a regular basis to communicate the information.
• The advisory group is responsible for giving insight on the steps that should be undertaken at each point of the project (Marchewka 2014 p. 45). The members undertake an appraisal of the development plan and address any issues presented by the upgrade group promptly (Marchewka 2014 p. 45). Any changes t...