Drawing on the Resource Based View literature, evaluate whether and how Zara generates sustainable competitive advantage.
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Q. Drawing on the Resource Based View literature, evaluate whether and how Zara
generates sustainable competitive advantage.
The Resource Based View (RBV) provides an explanation of competitive heterogeneity based
on the premise that close competitors differ in their resources and capabilities in important
and durable ways, thus providing them with a Competitive Advantage (CA) (Helfat & Peteraf
(2003)). Zara has evidently become the largest subsidiary of the Inditex group; a company
that encourages each subsidiary to develop their own strategy. Therefore applying the RBV
and focusing in on the key aspects of each competency: design, manufacturing and
distribution, and retailing, this paper will aim to derive whether Zara has managed to create
a strategy that holds a Sustainable Competitive Advantage (SCA).
Barney (1991) suggests that “a firm is said to have a CA when it is implementing a value
creating strategy not simultaneously being implemented by any current or potential
competitor.” Operating with very flat-structured design departments and with a heavy focus
on cat-walk trends, Zara have been able to create and constantly-develop products which
reflected the ‘current’ season (Z10); by not relying on “maestros” to determine what future
trends are going to be and instead having a collaborative team working together – imitating
current trends – this allowed them to cut design times down to 4-6 days as opposed to 4-
6weeks (Z22). Moreover, it was also suggested that failure rates on new products were at 1%
as opposed to 10%, the industry average; saving significantly on costs (Z10). As a result this
would suggest that it does provide Zara with a CA; adding value through cost-savings and
enhancing product security, however, for it to be sustainable Barney (1991) and Wernerfelt
(1984) state that a competency must pass four tests – Valuable, Rare, non-Imitable, Non-
substitutable (V.R.I.N). Coff (1997) argues that “human resources” are the hardest asset to
retain when trying to maintain a SCA as fixed assets cannot quit and move; reject authority;
and/or demand higher wages unlike employees. However, the design team have greater
opportunities, when in contrast with competitors, to create/develop new products as several
samples are produced daily, in addition they’re flown to various shows across the world to
enhance their understanding of fashion (Z10); thus implying that they are less likely to leave
(Campbell et al (2012)). Although Zara have provided their designers with an opportunistic
environment, and can consider this routine/cultural value a way of retaining them, employee
mobility can never be fully-controlled (Kryscynski, et al (2012)). The flat-structured, imitation
focus could also be imitable by their competitors and as a result cannot be seen as a SCA, with
reference to V.R.I.N (Barney (1991), Wernerfelt (1984)).
Nevertheless, this imitation approach that Zara has created is only feasible due to the
implementation of a vertical integration system (VIS) they have established – with regards to
their manufacturing and distribution channels – which allows them to produce their products
quickly (Z9). Operating with a “backwards” approach Zara have reduced their lead times (Z5)
by exploiting efficiencies between: receiving information on fashion trends, designing new
products, getting them manufactured, and distributed – then later retailing (Z12). It also
allowed them to be more flexible and therefore could adjust its product line a lot later (Z9).
Moreover, addressing Teece et al (1997) dynamic capabilities theory where a “firm’s ability to
integrate, build, and reconfigure internal and external competences to address rapidly
changing environments", suggesting they have provided themselves with a SCA.
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