Managing Technical Business Growth: Organization Design and Structure of Zara

This report focuses on the organization design and structure of Zara, a multinational clothing brand. It discusses the advantages and disadvantages of functional structure, strategy analysis, and proposes a new divisional organizational structure for future growth.

Running Head: ORGANIZATION DESIGN 0
Managing Technical Business Growth
Organization design and structure
(Student details :)
3/5/2019

Organization Design 1
Contents
Managing Technical Business Growth Introduction.................................................................2
Structure.....................................................................................................................................3
Selecting.....................................................................................................................................3
Advantages and Disadvantages..................................................................................................4
Advantages of functional structure........................................................................................4
Disadvantages, operational issues and challenges of functional structure.............................4
Strategy Analysis.......................................................................................................................5
Critique of current functional organizational structure..........................................................5
Connections amid the existing organizational structure and new proposed structure of Zara
................................................................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................7

Organization Design 2
Managing Technical Business Growth
Introduction
This report is focused on organization design and structure of a multinational clothing
brand: ZARA. Besides, the readers of this journal will be able to assess introduction about
brand, their scope as well as recent marketing problems which they are facing in the
international clothing market. Zara was founded in Spain as a fashion & accessories retailer
having over 2,000 retail sites all around the world. Zara is owned by Inditex and hence
became a highly successful fashion brand, majorly due to their fascinating supply as well as
distribution strategies (Zara, 2019).
In this way, paper will offer insights over the organizational design of Zara along with
drawing conclusions on Zara’s status in the international business strategy space, as well as
on the organizational design of structures for straddling geography. In the context of scope of
the clothing company, Zara has been hugely successful with their adopted approach. Its scope
is no more restricted as its parent company, Spanish firm Inditex is now become the world’s
greatest clothing retailer (Zara, 2019). On the other hand, few U.S.-based apparel firms are
now happily following suit which is clearly depicting that nobody can stop Inditex to become
world’s top first clothing manufacturer (Zara, 2019).

Organization Design 3
Source: (Zott & Amit, 2010)
Structure
The successful clothing firm Zara is working under the management of Inditex parent
company. Hence, Zara offers a dynamic and global work environment to their employees.
Organization culture at Zara greatly values quality training, job stability, as well as internal
promotion to motivate their employees at work ( Kozenkow, 2018).
As per the above figure of organizational structure and design of Zara, functional
departmentalization works at the firm. Zara is further divided in Women, Men and Kids with
various designers as well as products. However, at Zara distribution, logistics and other
departments are common. Besides, the major qualities of the organization structures of
Inditex and Zara include horizontal differentiation while communication takes place easily. In
addition, a global organization emphasizes on regional trends and demands which helps form
to get easily adapted to every market within they operates.
Organization structure of Zara with lesser layers of supervisory levels suggests that
Zara’s staff easily communicate with each other and hence the retail stores become the heart
of marketing process. When customers have some complaints about the products they
purchased, then their staff will collect the items and rapidly pass to their commercial as well
as design teams. In this way, work culture and structure of functioning makes this process
quick, and clothing company receives satisfaction from their customers in order to be
successful (Tiwana & Konsynski, 2010).
There are three important types including functional, matrix and multi-divisional
corporate structures which are adoptable for the Zara Company to get successful in
international fashion industry. The above mentioned organizational structures describe the
values, customs as well as traditions of the corporate. The selection of the proper
organizational structure is critically important because when an organization does not
incorporate a well-structured design to be followed by their people, then the reputation of the
firm is ruined (Bolman & Deal, 2017).
Selecting
Organization structure of Zara being a hierarchical flow of sub ordination of
functional departments is a well- systematized structure. The first strategy of chosen structure
is that by looking at its functional organizational structure, employees of the company can
easily find who to report to, and how to communicate with the colleagues. Therefore, this
organization structure would enhance the efficiency of overall working by making work
easier and enhance productivity of the employees (Cooren, Kuhn, Cornelissen, & Clark,
2011). Zara’s organization structure is mixed because few functions are shared with many
brands, not only for Zara. Under functioning with the exclusive management of parent
company Inditex, Zara has an international staff of 70,000 professionals. Out of these
international professionals 82.8% are young women of an average age of 26 years. Moreover,
Inditex’s organization culture is majorly based on teamwork, high level of demand as well as
an open communication. At Zara, people want buying clothes from its retailing shop again
and again. The reason behind above is that Zara’s management focus on fulfilling high
demand with effective teamwork and open communication which offers a dynamic as well as
international setting to work in (GalbRaith, 2014). Moreover, second strategy which its
functional structure utilise is low inventory strategy. The idea behind this strategy is that low-

Organization Design 4
inventories generate a sense of insistence among their customers. This works as people think
they should better buy the dress as there are only few left. Third strategy level contains easier
monitoring and supervision takes place at Zara due to its functional structure. The fourth
strategy of Zara’s functional organizational structure is adopting efficient communication
channels and ways to communicate customer demands with the company’s manufacturing
and designing departments ( Kozenkow, 2018).
Advantages and Disadvantages
On the basis of the organizational structure which Zara have chosen, here the
advantages and disadvantages of the structure are discussed based on Zara’s growth
opportunity.
Advantages of functional structure
Increasing efficiency of the operations of the Zara’s business is one of the major
advantages of functional structure. In addition, when employees can focus on sole specific
functional area, then they can attain significant efficacies from the perspective of process
flow as well as managerial methods. In the context of Zara, it is advantageous to have a
department which contains experts in their relevant fields like accounting or product (Lumen
Learning, 2018).
Moreover, the chain of command in Zara’s organizational structure is very clear,
hence everyone is aware of which decisions they are permitted to make as well as whom to
report along with the number of employees who are reporting to them. At Zara Company,
with the help of functional structure, setting career paths as well as programmes for their
employees and monitoring employees’ progress near the goals is much easier (Cooren, Kuhn,
Cornelissen, & Clark, 2011).
By utilising functional structure, training at Zara is made easier as it is easier to
outline the training requirements of employees, along with monitor and update the training
programmes of Zara workers (Tiwana & Konsynski, 2010). Additionally, below list is
containing major advantages of functional organisational structure:
 It maintains prestige and power of major organizational functions of Zara
 It follows important principles of professional specialisation at Zara
 It helps in logical reflection of organizational functions of Zara
 It simplifies job training at Zara
 It furnishes ways of tight control at the top management of Zara Company (Lumen
Learning, 2018).
Disadvantages, operational issues and challenges of functional structure
Apart from the above mentioned advantages of the functional structure, so many
disadvantages and challenges are involved with this (Bolman & Deal, 2017). Firstly, the
whole system is disadvantaged with bureaucratic bottlenecks on account for hierarchical
nature of decision-making. As we know that usually, prior decisions are made, desired files
must pass from assured officers in the hierarchical chain, even though no value would be
added. Hence, these time-taking processes inadvertently delay jobs (Ashkenas, Ulrich, Jick,
& Kerr, 2015).
While using this organizational structure and design, it is difficult to amateur
responsibility for an act on a single employee prior a final decision is made ( THOMPSON,

Organization Design 5
2018). Another challenge while using this organization structure is that there is a tendency of
poor communication across the functional silos in Zara organisation, which possibly
declining flexibility as well as innovation. In addition, sometimes functional areas may face
difficulties while working with rest functional areas (Alexis , 2018). Moreover, other
challenge of the functional structure is that there is a tendency for Zara’s employees of taking
a specialist perspective within organisational matters. Furthermore, within a functional
structure there is none unequivocal method to determine the effectiveness of distinct
functional managers as each function subsidises jointly to the Zara‘s ultimate output. Thus,
no way of evaluating the fraction of profit which was contributed by each exists. Moreover,
the major disadvantages of the functional organisation structure are as follows:
 This structure de-emphasises Zara’s inclusive objectives
 The structure overspecialises as well as narrows views of major personnel at Zara
 Structure reduces co-ordination amid functions of Zara Company
 The responsibility for gained profits by the Zara firm is at the top level only
 It slows adaptation to modifications in the working environment (Zott & Amit, 2010).
 It limits growth and development of general managers of Zara
Strategy Analysis
Critique of current functional organizational structure
The critique of the effectiveness of the Zara’s current structure will provide an
improved organizational structure design suggestions in order to make the firm top first
clothing supplier world-wide (GalbRaith, 2014). In this context, VRIO framework can be
utilised to analyse the current strategies of the Zara Company in following way:
Source: (GalbRaith, 2014)
 Zara’s products and services are undoubtedly valuable.
 Zara’s services and delivery as well as organization’s working environment is rare
among entire clothing industry world-wide.
 Zara’s products are costly to imitable.
 Zara’s organization is well-managed from the customers, employees, other staff point
of view (Cooren, Kuhn, Cornelissen, & Clark, 2011).

Organization Design 6
Strengths
Product Process: Vertical Systemization
Capability of recreating fashion
High turnovers of Zara’s products
An active utilisation of retail stores
Weaknesses
Repeated sales of Out-of-stock clothes
Mid-priced goods
Sometimes low quality due to fashion race
Limitations on services
Opportunities
International growth of fashion market
International Fashion products
Diversified cultural areas
Threats
Limitation of designer copies because of low
inventory stock
Emerging newcomers in clothing market
Connections amid the existing organizational structure and new proposed
structure of Zara
Although the organizational structure adopted by Zara Company is well-structured,
designed as well as organized yet there are some suggestions in order to further improve the
productivity and revenues of the company within the international market. The suggested
new organizational structure is divisional one ( Kozenkow, 2018). Furthermore, the writer of
this paper suggesting that following are the brighter sides of adopting a divisional
organizational structure:
 By adopting divisional structure Zara can implement more strategic targeting of
female buyers as different divisions will be responsible for the distinct area
customers.
 Knowledge and Info regarding customers’ increasing and changed demands can be
passed easily to the manufacturing unit without a need to be passed through channels.
 Divisional structure will further provide an Asian Market Invasion
 If Zara Clothing Company uses divisional structure then continuous improvement of
QR system will take place as in functional structure innovative ideas take longer time
to be implemented.
 By adopting divisional organization structure Zara will have Industrial diversification
at a large extent (Deloitte Insights, 2016).
Conclusion
In conclusion, the report has successfully identified different important organizational
designs and structures for the betterment of the chosen clothing company; Zara. We have
identified three organizational structures as functional, matrix and multi-divisional to identify
a better organization design for the future growth of Zara Company. Furthermore,
advantages, challenges as well as disadvantages of functional structure have been discussed
in detail so that readers can easily get the reasons why Zara has chosen the organizational
structure and what are the major keys to success in an international market. Strategy analysis
of Zara has been done with the help of VRIO framework while utilising SWOT analysis of
Zara’s current strategies. Finally, this paper has successfully identified the present
organizational structure, design and culture of Zara Clothing Company while suggested a
new organizational culture for the future growth and opportunities.
References

Organization Design 7
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