Zara is the largest clothing retailer in the world operating in 59 countries. It pioneered a business model focused on quick response to fashion trends through vertical integration and a unique supply chain allowing new designs from concept to stores in under two weeks. Zara began expanding internationally in 1988 and now has over 800 stores worldwide using different entry strategies like subsidiaries, joint ventures, and franchising depending on the market. Its competitive advantages of fast fashion, quality products at affordable prices, and minimal advertising have made it highly successful and the main competitor to H&M and Gap in global markets.

1. MODE OF ENTRY
Group 3 | Section C
Akshay | Amit K. | David | Nishant | Sankalp | Sourav | Subhankar
(Zara Mode Of Entry)

2. INTR DUCTION

3.  Most Successful fashion retailer operating in 59 countries
 Deregulation in the textile and clothing industry. Unrestricted access to allWTO members.
 Changing textile industry:
Fragmented production with highly concentrated distribution channels.
Increasing internationalization, emerging competitors, consolidation with mergers & acquisitions
Subcontracting or delocalization of production to lower labor & transportation cost country
Revaluation of the business models to adapt to customers changing taste
Democratization: Offering latest products at attractive prices

4. CASE OF ZARA:
Flagship of Inditex; 2nd largest clothing retailer;
Zara accounted for 66% of the groups turnover
Inditex owns seven other clothing chains: Brand diversity
ZARA CONCEPT:
Aims to democratize fashion
Competitive Advantage:Turnaround time & Store as a source of information
Vertical Integration of design, JIT, low inventory, quick response, advanced IT
Overall quick response to consumers demand
“Live Collections”-most receptive garments in industry, half of Zara’s production
Store-Source of information.
Customer feedbackManagersHeadquartersDesignersRework-Stores
Small lot for every store,“Climate of scarcity & opportunity”
0.3% spending on advertisement, Store is the most effective communication tool

5. Business Model (Customer orientation)
Key factors in Zara’s model
 Time Factor
 The store
Strategy (Impact on other retailers)
 Customer Service
 Market based pricing
 Brand Acquisition & Brand Development
 Multi-Brand (Risk of cannibalization)
Product Line
(inditex brand Portfolio)

6. MOTIVES
FOR ZARA’S INTERNATIONALIZATION
Zara Stores
Oporto, Portugal: First international store,
1988
By the end of January 2006
 59 countries, 852 stores worldwide
 Europe: 664 (259 in Spain)
 America: 112
 Middle-East & Africa: 45
 Asia: 31
 America

7. MOTIVES
FOR ZARA’S INTERNATIONALIZATION
 Push: People spending less on clothes and more in their leisure time on travelling and education
 Pull: Spain's entry into European Union in 1986
 Globalization and homogenization of consumption pattern across countries
 Economies of scale
 Enablers: NewYork (1989), Paris (1990) and Milan (2001) – Image and Status reasons
 Learning by succeeding in competitive markets

8. MARKET SELECTION
FOR ZARA’S INTERNATIONALIZATION
Reluctance and
Trial
(1975-88)
Expansion in domestic
market
Geographical and cultural
proximity to Spain
First international store in
Oporto, Portugal (‘88)
Cautious
Expansion
(1989-1996)
-> Geographical or
Cultural proximity
-> 1 or 2 countries/year
France (‘90), Belgium and
Sweden (‘94),
Mexico (‘92)
Exception: NewYork (‘89)
Brand awareness and
Prestige
Aggressive
Expansion
(1997-2005)
Grow beyond geographical
and cultural barriers
Israel (‘97)
8 countries in Middle East –
Kuwait, UAE, etc. – (‘98)
Costa Rica, Monaco,
Philippines and Indonesia
(2005)
Stage 1 Stage II Stage III

9. MARKET ENTRY STRATEGIES
• Own Subsidiaries :
Involved direct investment
Most Expensive mode of entry
During exit of firm : High level of control and risk
Suitable for high growth potential and low business risk countries.
e.g. Spain, U.S., Europe, Brazil etc
• Joint ventures :
Co-operate strategies with local companies
Combination of manufacturing facilities & know how of local company
and expertise of foreign firm in market
Usually implemented in areas having large competitive markets

10. • Joint Ventures :
1999 – Benefit of ZARA in distribution sector from joint venture with
German firm Otto Versand and knowledge of European markets
1998 – Entered Japan by signing an agreement with Biti, a leading cloth co.
ZARA increased ownership to (78% : Germany, 80% : Italy, 100% : Japan)
– gained management control
• Franchising :
 Suitable for High Risk countries having small markets with low sales
forecast or are culturally distant (Saudi Arabia, Kuwait)
 Similar business model to subsidiaries regarding the product, store location,
interior design & human resources
 Gave franchisees chance to return merchandize and exclusivity in their area
but kept right to open it’s own stores at the same location

11. International Marketing Strategy
1. Zara was ranked 73th in the list of worlds top 100 brands.
2. Standardized Key strategic elements across all stores: Location, window
display, interior design, Store layout, Store display rotation, Customer service,
and Logistics
3. Shift from ethnocentric Orientation to Geocentric orientation in 2004
4. Dualistic brand name strategy: Company uses the name of the firm and a
unique brand name for the same product group. Like‐ ‘Zara Basic’, ‘Zara
Trafaluc’

12. Promotion and Pricing
• Zara’s promotional strategy is same for domestic and international
market
• Relies mostly on stores for its promotional campaigns. Advertisement
campaign is carried out only during new store openings.
• International prices are higher due to longer distribution channels.
Based on the prices Zara has positioned itself in different
international market.

13. ZARA’S main Competitors
‘ Fashion and quality at the best price’
 Key factors behind H&M’s Success:
Location of stores
Flexibility of production
Low prices
E‐commerce for Nordic countries
‘A combination of market and entrepreneurial ambition’
 Internationalization:
First phase of expansion in neighboring countries
Second phase expansion in ‘Anglo‐German’ countries

14. ‘ When we expand, it is important to listen carefully to the local market.
We need to adapt but not at the expense of loosing what makes us who
we are.’
Expansion:
 Franchise agreement helps to keep the management control across countries
Opening stores in best market locations
Customized interior designing of stores according to the culture of the
country
Strategy : Zara’s concept with local adaptation

15. Key factors behind GAP’s growth :
 International expansion
 Diversification into accessories and personal
care products
 Creation of new brands
 Development of electronic commerce channel
 Huge number of suppliers
Internationalization :
 First phase of expansion in countries with same
cultural diversity
 Second phase expansion into German markets
 Expanding in the Middle east, Singapore and Malaysia
in future
 Franchising as a strategy to expand