Inditex International Expansion

Topics: Inditex, Economics, Market Pages: 8 (2394 words) Published: April 27, 2008
How Inditex became global: from local to global

Established in 1975 in A Coruña (North – Eastern Spain) by Amancio Ortega, Inditex has grown rapidly to become one of the largest fashion retailers in the whole world competing with the American Gap and the Swedish Hennes & Maurizt (H&M). “In addition to Zara, the largest of its retail chains, Inditex has another seven commercial formats: Bershka, Stradivarius, Massimo Dutti, Oysho, Pull and Bear, Skhuaban and Zara Home (all of the targeting different age and disposable income segments). The group also includes more than a hundred companies associated with different textile, manufacturer, infrastructure and distribution businesses” (Inditex 2006 p.2). Inditex is listed since 23 May 2001 in the Spanish Stock Exchange with a market value around the 25,000 million Euros (Inditex 2006).

Until 1990 Inditex´s operations were confined in its domestic market Spain, there it established a competitive advantage: just in time fashion taken directly from the street, nightclubs or fashion weeks which 15 days after is ready to satisfy costumer’s desires (Blanco and Salgado 2004). In addition, “Zara has flourished on the principle of being responsible for its products all the way from initial conception to the customer” (Emerald Group Publishing Limited 2005). By 1990, however, Zara realised that the Spanish market was far too saturated; they had to change their growth strategy. For that reason, they started its global expansion by entering Spanish natural export exit: Portugal. Shortly after, Inditex started its outer expansion in France, the US and the rest of the world. But let’s focus on which entry strategies Inditex had to pursue to become global.

Inditex choose a localization strategy which meant: 1) increasing profitability by customizing their outlets providing a good match to tastes and preferences in different national markets (Hill 2007) and by 2) choosing the perfect location for their stores which will only be located in the fashion districts of cities over 100.000 inhabitants plus the store minimum area must be 1500 square metres (Blanco and Salgado 2004).

Entry Strategies:”Think global, act local”. Advantages and disadvantages

Inditex has followed very different entry strategies according to: 1) Trade characteristics of each country. China and Japan are the best cases to illustrate this issue. Both pursue severe protectionist policies which forced Inditex to make an agreement with local firms, after a long “Guanxi”, to entry the market. The rational was to have the help of a local partner and win the governments favour. 2) On the other hand, the introduction of textiles and clothing into the GATTs (Dicken 2004) undoubtedly benefited Inditex´s expansion in the non European market, and lastly 3) their own objectives in which, Inditex´s prevailing strategy is the wholly owned subsidiary formula. Establishing a wholly owned subsidiary can be done in two ways. The firm can acquire an established firm or as Inditex did, set up a new operation in that country: Greenfield Venture (Hill 2007). One of the barriers Inditex had to face pursuing this strategy was to bear with the full capital costs. Besides, doing business with a new culture could also be a major problem. One of the examples of this strategy was the entry in Argentina. The reason being was Argentineans’ European taste for clothing would guarantee the success (Blanco and Salgado 2004). The Greenfield Venture was a success which permitted the entrance to the Latin American market.

“In a complex, uncertain world filled with dangerous opponents, it is best not to go it alone” (Ohmae, K 1990 p.141). Following Ohmae´s principles Inditex pursues Joint Venture strategies as another way to enter difficult markets such as the Italian, widely known for their exquisite fashion taste and part of the European expansion strategy. The first attempt was a joint venture with Benetton Group; it was the first time...
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