We will use the VRIO Framework to analyze the internal environment of the

We will use the vrio framework to analyze the

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business strategy is to achieve a sustainable competitive advantage, which is very difficult task. We will use the VRIO Framework to analyze the internal environment of the Inditex (Zara) which will help us to determine whether Zara has resources/capabilities to exploit it’s competitive potential. “VRIO” is structured in a series of four questions: 1) Question of Value 2) Question of Rarity 3) Question of Imitability 4) Question of Organization. 16
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Fashion industry is very competitive and subject to rapidly evolving fashion trends. Based on the VRIO Framework and analysis of competitive advantage, we found that Inditex (Zara) has competitive advantage. Inside a business model we can see a strong vertical integration and well organized supply chain, which combined with organizational structure gives to Zara flexibility to respond, adapt and deliver merchandise faster than its competitors. Unlike their competitors such as H&M, Mango, United Colors of Benetton in Europe, Zara has disintegrated decision-making model. And above all, the price of merchandise is affordable. Now we will analyze each question in detail regarding VRIO Framework. 1) Value – does a resource enable a firm to exploit an environmental opportunity and/ or neutralize an environmental treat? We see Inditex rather as a combination of resources, so the most valuable resource we would put is the vertical integration. Instead of relying on third parties, the company manages all design, warehousing, distribution and logistics function itself. Doing that they are more flexible and faster than competitors and we know what these two words mean in apparel industry. Along with the vertical integration which also reduces operating costs it has excellent conceived organizational structure and values that all employees must respect. The reward is great autonomy that store managers have. Some skeptic persons could ask whether this value could be used in future? Our answer is probably yes, as Zara carefully follows changes in consumer tastes and due to flexibility and speed it can adapt. Second justification could be that it follows world trends and it might outsource more from Asian markets to reduce its costs. 2) Rareness – how many competing firms already posses particular valuable resources and capabilities? If we analyze competitors we’ll see that most of them outsource most of the production, while focusing on distribution and retailing. The reason is that the industry is more labor-intensive. Inditex does just the opposite .It puts more emphasize on capital-intensive industry. 17 Difference could be easily seen in figures: “Zara is able to produce new items and deliver them to its stores in less than three weeks rather than the average six months needed for luxury brands and in terms of production in a typical season it produces about 11000 different items while competitors would produce typically between 2000 and 4000.” 18 So we see that the resource is rare. 17 Although Inditex combines it also with labor – intensive industry ( doing that they are more flexible and faster in producing garment ) 18 Zara: Managing Stores for Fast Fashion – Harvard Business School 17
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3) Imitability – do firms without a resource or capabilities face a costly disadvantage in obtaining it compared to firms that already posses it?
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  • Fall '10
  • Franklin
  • Marketing, ........., Transaction cost, Inditex

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