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Zara Case Study

2584 words - 11 pages

Pre-course Assignment | International Business

Zara is a retail chain company which operates in the fashion industry. It's owned by Indixt group in North West Spain. It holds the ownership of some world famous brands such as Massimo Dutti, Pull & Bear, Oysho, Uterqüe, Stradivarius and Bershka. The very first Zara shop was open in 1975 and their specialty is frequent innovation of new product lines. Also they decided not to outsource their production to low-cost countries which is a trend in the same industry. At the same time they followed up a special policy of investing on opening a new store instead of investing on advertising which ultimately causes them to ...view middle of the document...

These steps shows how a company moves to an international market.

Stage 1: no regular export activities (sporadic export). Stage 2: export via independent representatives (export modes). Stage 3: establishment of a foreign sales subsidiary. Stage 4: foreign production/manufacturing units.

Zara's Internationalization Theory After Zara opened its first store in 1975 in Spain, Zara started to open up new stores in every high populated city in Spain. When they covered their territory, they started to search for international opportunities in 1988. They grow up by their experience, expanded in their country and then reached the foreign markets. They selected Portugal as their new destination as the culture and geography is almost same as Spain. While experiencing their first international experience, they had to change their business model accordingly.



Pre-course Assignment | International Business

They identified the countries with less geographical and psychic distance, open up a new store in there and spreading all over in that country. They expanded to Northern Europe by opening a store in Paris, the capital of fashions. Mexico was geographically in distance by they found it closer in culture. Through that the doors for South American market were open for them.

With the help of European Union, Zara managed to expand their business in eight countries by overcoming the geographical and psychic distances. They changed their theme country to country alongside with the culture (Australia and Middle East) and they even changed their products as per the regional requirement (Asia) Zara follows expansion strategy known as ‘oil stain’ (dominate strongly in one place, then spread across the surface of the country, like an oil stain on water). When Zara opens its first store, the socalled flagship store, in a strategic area with the purpose of getting information about the market and acquiring expertise. The experience guides Zara in the later phases of expansion in that country.

They used direct investments (Hierarchical model) to European countries where they owns everything and the geographical and cultural distance is low and they used intermediate model to reach the countries using franchises and joint ventures. Countries like India would not be easy to reach by a foreign company but using their local agent (Tata) they could perform much easier.

By considering their movements, Zara was using the Uppsala Internationalization model so far and they have followed up the steps in that model to reach the international market. They didn't actually go to the foreign manufacturing plants but at least they've outsourced some products on cost effective propose.



Pre-course Assignment | International Business

Please evaluate the competitive strategy of the three world market leaders. Which of the three will be the future winner with regard to global retailing in the fashion...

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