Zara Fast Fashion

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 mІ and Ђ1,050 million of Inditex’s capital invested into them. It also owns a 130,000 mІ 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 mІ distribution centre in Arteixo, smaller centres in South America and eventually had to purchase a new facility of 120,000 mІ 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 Ђ400 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. Amancio Gaona, founder of Inditex has become aware of how costs pile up through the apparel chain because of his previous work experiences. Jose Castellano, CEO of Inditex is knowledgeable in business economics and has professional experience in information technology, sales and finance. Together, the two of them compliment each other’s skills to enhance the company’s organizational capacity. Also, Zara has highly committed store managers, as they have a low turnover rate. Its stores have 40 exclusive, highly demanded brands with distinct identities. Designers are inspired by trade fairs, fashion shows, and luxury brand collection catalogues as it positioned itself as a trend follower rather than a trend setter. Zara’s offerings consist of broad, rapidly changing, fashionable, designer style products at reasonable quality and lower than competitors’ prices. However, profit margins were not sacrificed due to significant efficiencies of vertical integration, laidback advertising policies and a minimal amount of markdowns. Despite the lack of advertising efforts, Zara is amongst the three most recognized brands in Spain, especially for women aged 18-34 with middle to middle-high income levels. Image, reputation, prices and store displays were altered to match the positioning strategy in each country. Although majority of the products offered in each country are standardized, Zara takes into consideration local trends and cultural differences to appeal to local consumers. The process of determining whether a market is worthwhile entering entails a microeconomic and macroeconomic analysis along with a profitability analysis and forecast. Depending on the characteristics of the economy and industry, Zara used different techniques when entering a new country’s market including company-owned stores, joint ventures and franchising.