Zara Case Study : The Resource Based View

“Competitive Advantage introduces the concept of the value chain, a general Framework for thinking strategically about the activities involved in any business and assessing their relative cost and role in differentiation”. Michael Porter, (1985).

Every human across the world has the fundamental right to work in a safe and healthy environment. In the current global economy, developing countries have evolved as the major manufacturers and exporters for large apparel companies because of their low wages and unregulated labor. Due to global capitalism and economic competition, multinational companies seek lowest production costs to build their competitive advantage in the industry.

Traditional supply chains take a supplier centric/push view with a focus on what a business is trying to sell rather than a focus on customer’s demands (Kotler et al, 2009). Zara’s supply chain adopts a vertical structure which is mainly demand driven with cycle times being kept to a minimum which allows information to be acted upon quickly (Grant, 2011).

The Spanish retail chain Zara has unique supply chain management practices that enable it to gain a competitive advantage over other fashion retailers in the industry. Zara’s rapid response time enables the firm to quickly respond to changing fashions while deliberately under producing products. This strategy, which is supported by competencies in logistic management, design and information systems, allows the company to maintain less inventory and higher profit margins and is a key factor to Zara’s success. The firm should continue to add value by seeking new opportunities to expand in the retail market and maintain their sustainable growth.

In differentiation strategies, the emphasis is on creating value through sustainable uniqueness. This can be achieved through product innovations, superior quality, or superior service, which is then sustained and leveraged through creative advertising; brand-building and strong supply chain relationships. Another requirement for a successful differentiation strategy is that customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create it. A differentiation strategy will lead to higher firm performance only if buyers value the attributes that make a product or service unique enough to pay a higher price for it or if they choose to buy from that firm preferentially. If

The value chain helps an organization in understanding where value is created at each of its activities and in linking those value-adding activities with the business strategy and customer needs. This set of activities which represents a unique and integrated value-creating sequence is hard for competitors to emulate and thereby sets up and maintains a long lasting competitive advantage for the organization. For example, The Warehouse Group Limited, the largest store retailer in New Zealand, has

Zappos, as the first and the world’s largest online shoes retailer, has developed a high quality experience and delivered “wow” to customers. It has established a strong relationship with customer and stick to bring the store to the customer’s home. It has used less twenty yeas to become a profitable company holding an outstanding reputation for customer service and its employee are passionately engage in their works. In this paper, I aimed to analyze the relationship between strategic capabilities and performance in Zappos’s success. The business environment is not constant rather than changeable, so how Zappos goes ahead of revival and forms its unique competency advantages. I will utilize VRIO test to detect the company’s level of competitive advantage. In addition, I will continually combine Barney’ theory of resource based view(RBV) with Zappos to identified which resources it processes and how Zappos used those to form its core competency.

In order to have higher profit margin, one of the most effective ways is to cut down production costs. In view of the low labor cost in developing countries, global sourcing seems to be a good choice to reduce costs. With the development of global production networks and the increasing competition, fast all fashion clothing firms have shifted their manufacturing operations to low lost locations over the past decades.

A value chain adds value to raw materials as they pass through the production process and then, inevitably, through the marketing and sales process. In a broad sense, it is about identifying value via identifying areas of comparative advantage and how the organization can bolster its market standing and its overall value and impact. It may also be noted that the value chain is, for all intents and purposes, all internal activities and processes within the organization that yield outputs in one form or another. It entails (or should entail) everything from channel objectives to distribution strategy to marketing program supports to supplier configuration and collaboration to communication plans (Burrows et al, 2012).

The pressure to produce goods inexpensively has driven companies to seek low-cost areas for producing those goods. In the quest to compete with low-cost discounters such as Wal-Mart, companies have been increasingly driven to overseas markets to produce their goods. Within the textile arena, especially, this phenomenon is occurring with regularity. One look at the label of the clothing in one's closet reveals clothing that was produced in Bangalore, Honduras, China, Bombay, and other far-flung regions throughout the world. As the world becomes smaller and the global marketplace increases, companies have been establishing plants in nations in which the labor costs are cheap. While many deride

Esprit has positioned in a different market segment from rivals like Zara, H&M and Mango. The "Esprit woman" describes tis typical customer, should be in their 30s and care more about the quality and value of a product than its price. Most other "fast fashion" retailers are more price-driven and target mainly youngsters aged from 15 to 20 years old.

Inditex founder, Amancio Ortega Gaona, started his fashion business in 1949 at the age of 13, as a delivery boy for a local shirt maker in La Coruña, Spain and in a little over a decade was working as shop manager. With the knowledge and experience gained along the way, he began developing his own designs, after which he left his job to start his own business in the early 1960s. With only $25 in startup capital and working out of his sister’s home, Ortega’s vision was to replicate popular fashions using affordable materials, creating high demand clothing that could be sold at lower prices. He sold his gowns, housecoats, and lingerie to his former employer and other local shops. By 1963 he had opened his

The business world today is a competitive one. All the companies are trying their best to get ahead in the game. Because that is how they will improve and be the best at what they do. To achieve this the companies have to constantly strive hard and try to be ahead of their competitors or at least in step with them. This is where value chain comes in. Value chain deals with adding value to your product so that the company might gain a competitive edge over their rivals.

This article is a discussion about the competitive advantages Zappos has, using resource based view and dynamic capabilities analysis. Although there are SWOT framework and Porter’s five forces model etc. to understand the firm’s competitive advantage, those are environmental analysis, which is “only the half story” as Barney,(1995) suggested. So, an analysis of a firm’s internal strengths and weaknesses is required. Barney (2001) states "resource-based logic can help managers more completely understand the kind of resources that help generate sustained strategic advantages, help them use this understanding to evaluate the full range of resources their firm may possess, and then exploit those resources that

The unit of analysis is the Zara Group, which belongs to the Spanish company Inditex. It is a very global company which has been selected due to it does an intensive application of ICTs in its processes, mainly manufacturing and distribution ones, as well as its logistical processes. Because of this, it can stand