Q1. Analyze the strengths and weaknesses of Zara (Spanish Clothier Company) by using value configurations model (value chains, shops or networks) and VRIO framework (Value – Rareness – Imitation – Organized) and prepare an activity map showing the alignment of Zara’s strengths and weaknesses with its competitive strategy.A1. ZARA Value Chain Analysis:Primary Activities:Inbound Logistics; Zara supplies %40 of its fabric from another Inditex-owned subsidiary through vertical integration. Almost half of the fabrics are purchased undyed to allow fast to mid-season color changes. Zara also work with Fibracolor, a dyestuff producer owned by Inditex. The rest of the fabrics come from among 260 other suppliers. None account for more than %4 of Zara’s total production in order to minimize dependency on single suppliers.Operations; Zara produces %50 of its products in its own network of 22 Spanish factories and 18 of them are located in around La Coruna the headquarter of Zara. The other half is produced from 400 outside suppliers, %70 of which are in Europe and most of the rest is in Asia. Fashion sensitive products are produced in Europe and basic products which have cost or quality advantage are produced in Asia.Outbound Logistics; Zara’s distribution center is in La Coruna and satellite centers in Brazil and Mexico which serve as hub of logical operations. Trucks has mobile tracking system to ensure that inventory moves with minimum delay. Delivery is done twice a week is possible to every Zara store. Fast handling of garments is also possible. The outbound logistics is based on just-in-time.Marketing and Sales; Company uses little advertising or promotion. Marketing is done via word-of-mouth layout of shops. Zara also tries to locate in the most-up market. Typical Zara store is left empty in order create pleasant, spacious and uncluttered shopping environment.Services; Zara aims to provide good quality clothing and accessories at affordable prices. Shops are located in premium places in major cities. Stores are visually appealing, clean and spacious. Employee wear Zara clothes as well.Support Activities: Procurement; Zara usually sources fabrics and finished products from low-cost foreign markets. Specific designs are selected for production, the material is cut from the stock, produced and delivered to company stores throughout the world.Technologic Development; Zara uses technology to make the flow of information faster. They make the technology investment in this way. This system also helps keep track of new market trendsHuman Recourses Management; 60,000 people work in Zara, half of them in Spain and rest is various countries. The average age of the workers is 26, women hold more than half of the executive, technical and managerial positions.Firm infrastructure; In order for customers to visit stores more often, the turnover of products is done rapidly. Positive word-of-mouth, attractive in store ambience are some the ideas of Zara.VRIO Analysis of Zara:Value; Zara is in the group of Inditex. For this reason, Inditex is a combination of sources. Zara makes vertical integration by managing all design, production, warehousing, distribution and logistics processes instead of relying on third parties. By doing so, Zara can act more flexibly and quickly in every process from all its competitors. Besides vertical integration which reduces operating costs, they have an organization and values which all employees respect. Zara can adapt the changes in consumer enjoyment most flexibly and rapidly.Rarity; By analyzing the other competitors, we will see most of them focus on distribution and retailing while outsourcing production. The reason of outsourcing is labor-intensive production. So, companies produce their goods in lower labor countries. Inditex manages the whole process in its own way and does exactly the opposite. Instead of an average of six months for luxury brands, Zara typically produces new goods and takes them to stores in less than three weeks, typically on a regular basis.Imitability; Almost everything could be imitated. If the competitors copy the Zara business model, but we assume that they can only do so in the long run. It will take a few years to build a vertical integration model with such a supply chain and to create the organizational structure Zara has. We also need to consider the massive costs that these companies will face for copying the Zara model that companies are exposed to. Even if they can apply this model, Zara is likely to develop this model and go further.Organized; All manager in Zara have autonomy. This brings an organization that takes advantage of its resources and capabilities to the limits. If we look at the annual reports, we can see that sales and earnings are steadily increasing. VRIO Framework of Zara:Valuable? Rare? Inimitable? Organized? Competitive Implications Economic PerformanceNo Competitive Disadvantage Below normalYes No Competitive Parity NormalYes Yes No Temporary competitive advantage Above NormalYes Yes Yes YesSustainable Competitive advantage Above NormalQ2. Analyze your firm’s strengths and weaknesses by using value configurations model (value chains, shops or networks) and VRIO framework (Value – Rareness – Imitation – Organized) and prepare an activity map showing the alignment of your firm’s strengths and weaknesses with its competitive strategy.A2.Delphi Value Chain Analysis:Primary Activities:Inbound Logistics; Delphi produces common rail which is a component of diesel engine. %80 of raw material is provided locally. That makes demand changes flexibly and rapidly with the suppliers. Sensor and valve assembly is also done in the plant also. These items are provided from abroad. Though they are mounted on more than 30 references they are all same model in terms of fitting to all references. These also makes flexibility and fast response for customer demands.Operations; %85 of the products are delivered to Europe. Production is done in Turkey due to lower labor cost. There is also Chinese plant for the Chinese market. Plants are located closer to the targeted markets with lower labor cost countries. Sensor and valve assembly is also done in these plants to reduce cost. So, nothing is outsourced. Also, all production lines and machines have flexibility to produce all references.Outbound Logistics; Goods are generally delivered by trucks as long as there is no delay in production. Due to truck delivery from Turkey to Europe, there is no flexibility for the goods. For this reason, it is necessary to keep inventory in order to provide flexibility in customer demands. Airfreight is an option for flexibility as well but increases logistics cost.Marketing and Sales; Delphi doesn’t produce end-user products so they don’t make any marketing activities. Support activitiesSupporting Activities;Services; In Delphi there is product and service solution department. It deals with all kinds of after sales problems. There is customer support engineer in terms of solving customer complaints.Support Activities;Procurement; Delphi sources high-alloyed forge as raw material. Also, sensor and valve is purchased. Raw material is purchased locally since there is no sensor and valve supplier in Turkey, they are purchased from abroad.Technology Development; Due to emission restrictions product needs to be improved continuously. R department works on to make better products in terms of emission. For challenging with the customers, operation costs need to be reduced as well. These improvements are done by following up technology and implementing to the process.Human Recourses Management; 1,200 people work in Delphi, almost 1,000 of them are blue collar which means production is labor-intensive. All blue collars are member of the same union so their rights defending by this union. For the white collars, there is matrix organization. For the production people, everyone connected to a unit manager and connected a functional manager with dash line.Firm Infrastructure; Firm infrastructure based on customer oriented for solutions and following up new technologies in order to improve process and customer.VRIO Analysis of Delphi:Value: Delphi creates its value by manufacturing quality high-end products with reasonable prices. Both machining, coating and assembly is done in same plant. Since all processes that affect each other are managed from the same place, the solution is reached more quickly when any process is affected. Rarity; Other companies which make the same job generally outsource their almost all processes. Delphi manages its production processes, which are as much as delivery, reducing its costs a little.Imitability; The products or services are difficult to imitate due to high technology needed to imitate. Besides high technology, there is great know how needed as well. There is nothing special about the organization. Only thing could not be imitated is managing whole processes in same place. It is needed investment such as assembling and coating.Organized; There are APUs (Autonomous Production Unit) in the organization. Each unit contains functions within itself such as production, quality, process and maintenance. That provides quick responses for any problem which requires intervention. Each function person is connected to functional manager as well for any kind of support.Valuable? Rare? Inimitable? Organized? Competitive Implications Economic PerformanceNo Competitive Disadvantage Below normalYes No Competitive Parity NormalYes Yes No Temporary competitive advantage Above NormalYes Yes Yes Yes Sustainable Competitive advantage Above NormalQ3. Critically compare Porter’s ideas on competition (i.e., five forces model and generic strategies) with Kim and Mauborgne’s (2004) Blue Ocean strategy. Is Porter’s five forces model still relevant in today’s business environment?A3.Porter’s Five Forces is a competitive marketing strategy. It covers the newcomers’ main concerns in long-term. In this context, even if companies develop innovative strategies that will provide better performance, these innovations will be temporarily because successful strategies will be imitated by other companies in long term. Then it creates another competition. Due to electronic business is unlimited size, changes in market opportunities are constantly evolving unless a firm has new unique resources and new sustainable competitive advantages. the faster this imitation process, the faster and more intensely the companies find themselves in a situation where their profits are lowered because their market share falls. Indeed, the main concern of strategic management is survival and competition between companies is fast enough. innovation can offer a temporary solution, but imitating in the long run, it forces firms to compete with competitors. In the long run there is an inverse relationship between the number of firms in the sector and profitability. Basically, this is a fundamental influence of the Porter’s Five Forces.Blue Ocean is a new market innovation strategy where competition is not available. It is a great way to thinking on value creation. The Blue Ocean Strategy defines the markets for products and results in less or zero competition. Therefore, the company profitability is not inverse relationship between the number of the firms in sector, because these firms can multiply their profits through new markets without competition. Unlike the five forces, the strategic concern of companies is not managing competition, but managing innovation.In general, Porter focuses on the strategy of competing against the red ocean. It is also concerned with the micro-environmental factors affecting businesses within the same industry. The blue ocean is a strategy that has created a new market that is not yet rivaled.The ’70s and’ 80s global economy were based on growth and competition. For this reason, competition and profitability were the preliminary objectives of the companies. Compared to today’s dynamics, the development in the industry could be determined and predicted.Therefore, the porter five force model assumes static market conditions. This is not possible today’s dynamic market conditions.The five-forces model can be used for later analysis of the new situation, but it does not really work for preventive actions.In general, Porter’s Five Forces model has limitations in today’s market. New business models and market dynamics are not considered. The value of the Porters model is the ability of executives to think about the current state of the industry as an initial point for more detailed analysis and to think easily.