UNIVERSITI TEKNOLOGI MARA

INDIVIDUAL ASSIGNMENT

COURSE

GLOBAL BUSINESS STRATEGY

COURSE CODE

IBM 641

EXAMINATION

JULY 2013

SUBMISSION DATE

06 MAY 2013

LECTURER

MR SHAMSUL BAHARIN SAIHANI

NAME

MURNIZAHAYATI BINTI ARIPIN (2010274214)

GROUP

EBMMB8C

TOPIC

ZARA VRIO FRAMEWORK

INDIVIDUAL ASSIGNMENT IBM 641

VRIO FRAMEWORK

INTRODUCTION
Zara is a one of the largest international fashion brands belonging to the Spanish fashion group
Inditex operates in addition to Massimo Dutti and Stradivarius, founded by Amancio Ortega
Gaona is the company's flagship brand and is represented in Europe, America, Africa and Asia in
1483 major cities worldwide, 500 of them in Spain.

In 2012, Zara shows its revamped image based on four guiding principles: beauty, clarity,
functionality and sustainability. Simplicity is the byword throughout the store as part of Zara's
mission to bring customers into direct contact with fashion. Inditex opens its first stores in
Armenia, Bosnia-Herzegovina, Ecuador, Georgia and the Former Yugoslav Republic of
Macedonia and reach 6,000 stores worldwide.

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INDIVIDUAL ASSIGNMENT IBM 641

VRIO FRAMEWORK

s VRIO Framework

VALUE
The Question of Value: Does a resource enable a firm to exploit an environmental opportunity,
and/or neutralize an environmental threat?

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. 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.

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INDIVIDUAL ASSIGNMENT IBM 641

VRIO FRAMEWORK

RARITY
The Question of Rarity: Is a resource currently controlled by only a small number of competing
firms? [Are the resources used to make the products/services or the products/services themselves
rare?

If we analyze competitors well 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. 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. So we can see that the resource is rare.

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INDIVIDUAL ASSIGNMENT IBM 641

VRIO FRAMEWORK

IMITABILITY
The Question of Imitability: Do firms without a resource face a cost disadvantage in obtaining
or developing it? [is what a firm is doing difficult to imitate?]

Nowadays almost everything is imitable. The question is how long it takes to imitate. In the case
of Inditex we freely assume that if competitors were to copy Zara business model, they could,
but only in a long run. It would take a few years to establish vertical integration model with that
kind of supply chain and even more to create organizational structure (culture) that Zara has. We
should also take into consideration enormous costs that those firms would incur in order to copy
the model, which are often impossible for firms to incur. Although if this is supposed to happen,
we think that in meanwhile Zara would probably progress more in other segments, because as we
saw they make small changes very often. To cite the Inditexs founder Amancio Ortega when he
talked to Pablo Isla who is CEO: Once a month, come here thinking that we are near
bankruptcy. You will find a lot of things to change.

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INDIVIDUAL ASSIGNMENT IBM 641

VRIO FRAMEWORK

ORGANIZATION
The Question of Organization: Are a firms other policies and procedures organized to
support the exploitation of its valuable, rare, and costly-to-imitate resources?

We can see that it is. If we look at the annual reports we can see that they are constantly
increasing sales and profits. Merit for this goes to top management, but also to every individual
engaged in every process of Inditex. We shouldnt forget that section managers have autonomy
and that they together with the DTs, HR managers and commercials contribute to success. Here
lies Zara strength. Possibility of coordinating all those people despite the fact, that they have
some kind of autonomy in decision-making process.

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