Everyone, no matter youngsters or middle-aged mothers, love to buy clothes and keep updated on latest fashion trend. In the past, people could only consume western styles clothing if they are rich enough to go shopping by travelling in European countries or able to afford expensive air mail to send the consumed western clothes back from overseas. However, it took a period of time and the fashionable clothing may become “old” at the time received.
As the information technology grows rapidly and, at the same time, trend of globalization makes the world become flat, people in every corner of the world receive updated news and knowledge quickly. They started to learn cultures from different part of the world. Cultural differences are no longer barriers on communication. People accepted cultures other than their own one. Therefore, more and more organizations started to set up subsidiaries in countries outside home town so as to gain some advantages on resources and labor; but the most important is to enlarge the customer bases and thus earn more profits. Spanish retailer, Zara, noticed the trend and set up subsidiary in Hong Kong few years ago. Nowadays, Zara becomes the most popular fashion brand in Hong Kong. You will see there are always crowd of consumers inside its stores both after working hours and on weekends. Other fast fashion retailers, like H&M, UNIQLO, also catch the brightly trend to set up subsidiaries in Hong Kong. Clearly, these popular retailers are riding two of the winning retail trends – being in fashion and low prices – making a very effective combination out of it. Zara is, especially, an interesting case study for many other retailers and fashion brands around the world. The goal of this report is trying to discuss internationalization strategy of Zara through looking at its winning elements in business model, especially finding out the factors leading Zara succeed in Hong Kong.
Background of Zara
Zara is the flagship brand of the Spanish retail group, Inditex SA, one of the super-heated performers in a soft retail market in recent years. Inditex is very popular to investors because it seemed to have higher profit margins than comparable retailers and the trend seemed sustainable. Amanclo Ortega Gaona, the founder of Inditex, though that consumers would think that clothes as a perishable commodity, such as bread, to be consumed quickly, rather than stored in warehouse, and he has gone about building a retail business that provides “freshly baked clothes”.
Zara was established in 1975 with over 2000 stores in around 56 countries. It is very famous among the youngster all over the world. It has a team of designers with unique design of clothing. It tried to sell high fashion with low prices. It was the beginner of fast fashion. In 2005, Zara was ranked in 77 in the 100 most valuable brands of the world. Harvard Business School recognized Zara as the worthiest European brand on research study. Wharton School considered Zara as the model to study future manufacturing industry.
Zara has a good financial background with rapid growth. Its growth rate on earnings per share is 10.9%, compared with that of five largest luxury brands, like Burberry, only has 7.7%.
What is “Fast Fashion”?
Fast fashion is used to describe clothing collections which are based on the latest fashion trend presented at Fashion Week in both the spring and the autumn of every year (Muran, 2007). These trends are designed and manufactured quickly and cheaply to allow the mainstream consumer to take advantage of current clothing styles at a lower price. This philosophy of quick manufacturing at an affordable price is used in large retailers such as H&M, Forever 21, Zara, and Primark.
However, these retailers have been in pending lawsuits over violations of Intellectual Property rights (Casabona, 2007). The alleged violations are brought on as pieces of merchandise at the...