Analyzing Zara's International Strategy And Growth Potential In An Essay.

Zara's Advantage in Global Travel

1. How does Zara's advantage travel globally? Explain what features of Zara travel well and which ones do not. Analyze / discuss.

2. What do you think of Zara's past international strategy? Evaluate its past strategy for Product (market selection), its mode of entry (e.g. franchising, etc) and its standardization of marketing approach.

3. What is the best way to grow the Zara chain internationally? Where do you think (what region) would make most sense?

Zara is one of the biggest retail chain in the world’s fashion industry. Indixt group from North West Spain owns the business. Some of the world’s famous brands are owned by the company. These include Pull & Bear, Massimo Dutti, Oysho, Stradivarius, Uterque, and Bershka. Zara was first opened in 1975. They had been one of the most successful brands in the world having innovation at its core. The production line of Zara is not outsourced to low-cost countries to ensure authenticity in designs and productions. Many other companies in this segment do outsource there production to low cost countries. Zara is not very fond of advertising there brand. Instead they open new stores in different locations. Zara has always been known for the efficient customer support and effective supply chain they have in place. Their main focus lies upon the loyal customer.

1. How does Zara's advantage travel globally? Explain what features of Zara travel well and which ones do not. Analyze / discuss.

Zara’s promotion strategy both for domestic and the foreign market is same where at the start of the sales or when new store is made, then advertisement campaigns are held. Zara uses its store and its customers as its main promotional tools. Prices are set centrally with Spain as the core center and other international market as destination. Spain has least prices and prices of the international store varies as per the distribution cost associated with the overall value chain. Store location has always been a critical factor both for domestic as well as international market. Zara (Vertica, 2011) uses prime locations as their priorities for establishing a store. Opening up of stores at prime location are decided as per the overall analysis of the local environment where opportunity persist for the company so as to achieve maximum profitability at the end.  Professional store decorators are used to prototype the interior design and shop window display centrally and then replicated internationally. Zara standardizes important strategic component such as window display, location, store layout, interior design, store display rotation, information systems, customer service and logistics. To suit the local preferences rest of the items are synchronized accordingly.

Zara's Past International Strategy

2. What do you think of Zara's past international strategy? Evaluate its past strategy for Product (market selection), its mode of entry (e.g. franchising, etc.) and its standardization of marketing approach.

Zara follows three theories when one is talking about internationalization (Carmen, 2009). Uppsala internationalization model, Transaction cost analysis model, and the network model. First one which is Uppsala internationalization model (Hongjoo, 2014) says that a firm using the experience gained over time intensifies the commitment towards the international market (Andrea, 2013). With time and experience in a particular area, one tends to spread the business in that area locally first and then globally as per the capacity of the business expands. Foreign market have similar features in this case to the local territory. Similar feature can be said to be language, political system and culture. Firstly sporadic exports are been followed with no exports in the initial period. Secondly independent representatives do the export. Then foreign sales subsidiary are established. This model requires a four step model stated above.

Zara started its business in 1975 when it opened its first store in Spain. Zara started off with opening stores in highly populated regions. They always tried to cover the territories they were working in and in 1988 went search for other international opportunities. They used their experience to learn and grow and to expand in the country and then to the foreign market. Their initial destination was Portugal because of its cultural and geographical similarity with Spain with some changes in the existing business model. Countries with less geographic distance were identified and new stores were opened there spreading all over the country. Then a new store was opened in Northern Europe particularly in Paris which is also called capital of fashion. Then they went to Mexico then to South American market. By overcoming the psychic and geographical distances, Zara expended in eight countries of Europe with the help of European Union. Then they changed the theme country of theirs to coincide with the Australian and Middle East Culture.

Zara readily followed the oil stain strategy by dominating over one place and spreading across similar to an oil stain on water. Zara opened its first social flagship store to get information about the industry and equipping the required expertise for which it opened the store in a strategic area. This expertise and experience helped the company to expand in the country. In European countries where the cultural and geographical distance is very low, Zara did direct investment using hierarchical model and used intermediate to enter the countries using joint ventures and franchises. In countries like India Zara used local agent like Tata to enter the market of the country. This overall strategy seems similar to the Uppsala internationalization model where Zara established there grounds in different countries going through the four stages. They outsourced some of the products instead of going to foreign manufacturing plant to be cost effective.

3. What is the best way to grow the Zara chain internationally? Where do you think (what region) would make most sense?

Zara uses multi brand store strategy which has both advantages and disadvantages for the company. Zara (Viswanadham, 2012) has multiple brands under its roof like Zara Kids, Pull & Bear, Massimo Dutti, Oysho, Stradivarius, Uterque, and Bershka. Zara followed an ethnocentric orientation during the early stages of internationalization where subsidiary companies of Zara had to be a replication of the existing Spanish stores. This approach however landed Zara into many difficulties due to the vast difference in the culture which is why Zara decided to now think on geographic front as well thereby allowing the company to use local solutions for the expansion of company rather than mere replicating the existing business model. One can see a homogeneous mix of products for the global market by Zara. It makes adjustments in the existing marketing mix hen it is expanding to different culture location. For example some of the garments weren’t allowed to be sold in Arab nations, vast different in customer sizes in Asian countries, different season as compared to other in the southern hemisphere.

Zara is one of the biggest retail chain in the world’s fashion industry. It has transformed itself from a local Spanish brand to a globally recognized fashion brand within just 30 years (Rupal, 2013).

References

Andrea Runfola, Simone Guercini, (2013) "Fast fashion companies coping with internationalization: driving the change or changing the model?", Journal of Fashion Marketing and Management: An International Journal, Vol. 17 Iss: 2, pp.190 - 205

Carmen Lopez, Ying Fan, Brunel Business School , 2009, "INTERNATIONALISATION OF THE SPANISH FASHION BRAND ZARA ", Journal of Fashion Marketing and Management (2009), 13:2, 279-296

Hongjoo Woo , Byoungho Jin, 2014, "Asian apparel brands’ Internationalization: the application of theories to the cases of Giordano and Uniqlo", Youngone

N. Viswanadham, 2012, ZARA-Fast Fashion, Ecosystem Aware Global Supply Chain Management, https://14.139.160.15/courses/110108056/module1/Lecture03.pdf

Rupal Parekh, 2013, "How Zara Ballooned Into a Multi-Billion Dollar Brand Without Advertising", Advertizing Age, https://adage.com/article/cmo-strategy/zara-grew-a-multi-billion-dollar-brand-sans-ads/243730/

Vertica Bhardwaj, Megan Eickman & Rodney C. Runyan, 2011, "A case study on the internationalization process of a ‘born-global’ fashion retailer", The International Review of Retail, Distribution and Consumer Research, Volume 21, Issue 3, 2011.