ZARA: FAST FAHION
1) What is Zara’s basis of competitive advantage? How does it travel globally? At the heart of Zara's success is a vertically integrated business model spanning design, just-in-time production, marketing and sales. The key to this model is the ability to adapt the offer to customers desires in the shortest time possible. For Zara , time is the main factor to be considered, above and beyond production cost. The group believed that vertical integration gave it more flexibility than its rivals to respond to fickle fashion trends. With the European markets becoming saturated, Zara had been looking at stretching its product line and furthering its global expansion.
To support its’ globalization, Zara established 3 souring companies in Hong Kong for purposes of purchasing as well as trend-spotting suggested that sourcing from Far East, particularly China, might expand substantially. In terms of distribution, Zara’s system includes larger facility in Arteixo and much smaller centers in Argentina, Brazil and Mexico that consolidated shipments from Arteixo. It consistently invest in prime locations of their flag store in each new entered country, minimizing advertisement expense while keep effective “word of mouth” among target customers. 80- 85% of the products that the company offers globally are relative standardized fashionable products while keep some difference in consideration of size and culture-diversity. Localized management team also guaranteed operation effectiveness because of their culture awareness. In terms of pricing in new entered market, Zara define the price different from that of local market under consideration of two-folds, target populations and local purchase capability.
2) What do you think of Zara’s past international strategy? Evaluate, in particular, its past strategy for market selection , its mode of entry , and is standardization of its marketing approach.
Its’ past international strategy is pretty moderate and driven by a data-based analysis. market selection
Zara expanded into markets geographically and/or psychologically proximate and with a minimum level of socio-economic development (Paris, Belgium and Sweden) by evaluating from data of micro and macro prospective. Gradually, Zara try to expand in market geographically distant but culturally close to Spain and became like that a reference of the South American market. In the Zara’s strategy, the opening of a store in 1989 in New-York permitted to have an international prestige and to get close to the fashion trends. Zara made a more rapid global expansion after 1997 and reinforce its’ market in Eroupean country rather than adding more countries. In the meanwhile , it start to considering whether enter USA or east Asia market is a smart choice as well. Mode of Entry
The entrance on international market has been undertaken through three entry modes: Own subsidiaries: This expensive strategy was adopted in Europe and in South America because there is a high growth potential and low business risk of these countries. Joint ventures: If Zara has not knowledge about the market it prefers to use Joint ventures approach in order to make synergy with the local companies. For example, in 1999 Zara entered into a joint venture with the German firm Otto Versand and benefited from the latter’s experience in the distribution sector and knowledge of one of the largest markets in Europe. Franchising: This strategy is chosen for high-risk countries which are culturally distant or have small markets with low sales forecast like Saudi Arabia, Kuwait, Andorra or Malaysia. Zara´s franchisees follow the same business model regarding the product, store location, interior design, logistic, human resources, etc.
standardization of marketing approach
After selecting a market entry strategy for a particular country, Zara follows a pattern of expansion known in the company as “oil stain”. In simple...