Zara Casestudy

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BIT HuangFei (Tracy)

Zara: a Spanish retailer goes to the top of world fashion

Answer1:
The international expansion of Zara started with the opening of a store in Portugal in 1988. Through establishment in Portugal Zara acquired international market experience and knowledge and realized that it would have to adjust its business model to suit the new international markets. International sales accounted for 69 percent of its total turnover in 2005, with Europe being its largest market by far. The limited market growth opportunity at home was the main influence on Zara’s decision to expand internationally. In addition to the maturity of market, there was a change in Spanish consumer behavior over this period, with increased spending in their spare time on travelling and education, and less on clothes. The key pull factors that explain the internationalization of Zara include Spain’s entry into the European Union in 1986, the globalization of the economy and thus potential economies of scale, the homogenization of consumption patterns across countries. Answer 2:

While Zara controls its entire production chain, Gap Inc and H&M outsource all their production. Zara’s vertical integration enables the firm to have a faster turnaround than its competitors. Product and geographic diversification has been used by the three clothing brands as their main directions for growth. Gap Inc and H&M have also developed new channels of sale. The development of electronic commerce sets Gap Inc and H&M apart from Zara which does not offer its products online. Gap Inc has focused mainly on the home market, international sales accounting for merely 15 percent of its turnover in 2005. H&M’s expansion strategy is characterized by developing and reinforcing its business system in each country entered. Zara has a wider international presence in comparison to both Gap and H&M, having become a global company in a shorter period of time. The international expansion...
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