Discussion: The framework outlines
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More interestingly, what sounds like an exciting way to show off the power of technology can also be interpreted as a way to increase the cost of doing business. Although some investments, such as using ATMs to replace tellers, lowered costs, other investments raised costs (such as needing to offer phone, Web, and mobile banking options to customers).
FIGURE 2.7 Application of value chain model to Zara.
Activity Zara’s Value Chain
Primary Activities
Inbound Logistics IT‐enabled just‐in‐time (JIT) strategy results in inventory being received when needed. Most dyes are purchased from its own subsidiaries to better support JIT strategy and reduce costs. Many suppliers are located near its production facilities.
Operations Information systems support decisions about the fabric, cut, and price points. Cloth is ironed and products are packed on hangers so they don’t need ironing when they arrive at stores. Price tags are already on the products. Zara produces 60% of its merchandise in house. Fabric is cut and dyed by robots in 23 highly automated Spanish factories.
Outbound Logistics Clothes move on miles of automated conveyor belts at distribution centers and reach stores within 48 hours of the order.
Marketing and Sales Limited inventory allows low percentage of unsold inventory (10%); POS at stores linked to headquarters track how items are selling; customers ask for what they want, and this information is transmitted daily from stores to designers over handheld computers.
Service No focus on service on products.
Support Activities
Organization IT supports tightly knit collaboration among designers, store managers, market specialists, production managers, and production planners.
Human Resources Managers are trained to understand what’s selling and report data to designers every day. The manager is key to making customers feel listened to and to communicating with head- quarters to keep each store and the entire Zara clothing line at the cutting edge of fashion.
Technology Technology is integrated to support all primary activities. Zara’s IT staff works with vendors to develop automated conveyors to support distribution activities.
Purchasing Vertical integration reduces amount of purchasing needed.
7 Don Goeltz, “Hypercompetition,” vol. 1 of The Encyclopedia of Management Theory, ed. Eric Kessler (Los Angeles: Sage, 2013), 359–60.
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44 Strategic Use of Information Resources
Rather than arguing that sustaining a competitive advantage is a deadly distraction, Piccoli and Ives8 provide a framework that outlines the ways in which a firm can provide barriers to competitors, which would build sus- tainability. The framework outlines four types of barriers: IT project barrier, IT resources and capabilities barrier, complementary resources barrier, and preemption barrier. See Figure 2.8 for a brief definition and a few examples of each.
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