Key Factors Giving Zara a Competitive Advantage in the Market

Topics: Asset, Balance sheet, Vertical integration Pages: 3 (967 words) Published: October 17, 2007
Zara owns and manages numerous resources that can be categorized as tangible, intangible or organizational capabilities. The interactions between tangible and intangible resources help create organizational capabilities that provide value to the end consumer.

Zara has a large variety of tangible resources due to its international expansion and vertical integration. Zara has 507 stores around the world with a total selling area of 488,400 m² and €1,050 million of Inditex's capital invested into them. It also owns a 130,000 m² warehouse in close vicinity to its headquarters in Arteixo, Spain. In order to accommodate the company's initiatives for backward vertical integration, Zara purchased 20 factories that were highly automated with machines that were specialized for specific garments. 18 of these factories were located near headquarters, which minimized transportation costs. Zara provided financial support, technology, logistics and most, if not all business to the 450 workshops it sent cut garments to for sewing purposes. Legally, these businesses were not Zara's subsidiaries, but considering how much it invested into them, it practically did own them. The company owned a 400,000 m² distribution centre in Arteixo, smaller centres in South America and eventually had to purchase a new facility of 120,000 m² to provide for its expansion. The new centre was near the airport, and had a railway and road network nearby, reducing delivery expenses. Stores were located in fashion districts and upscale shopping centres and inventory consisted of garments, accessories, toiletries and cosmetics. Most stores were leased, but owned property was purchased for a total of €400 million with a current market value of four to five times that amount. Zara spent more time and money relocating, updating and expanding its stores than its competitors.

The company has many intangible assets that work together with their tangible assets to provide value....
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