Zara International Management

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Summary

I – PRESENTATION OF ZARA        3

Total revenue        3

History        3

An organization with strong and values        3

A global company with a structure made to ensure a very fast supply        4

An innovative way of managing fast fashion retail        4

Portfolio and Product’s Life Cycle        2

ZARA’s Portfolio        2

Product Life Cycle        2

COMPETITIVE POSITION AND ADVANTAGES ANALYSIS        3

Swot analysis        3

Zara’s Porters five forces analysis        5

II – ZARA’S IMPLEMENTATION IN INDIA        7

The Four Distances CAGE analysis        7

What are the country advantages of India?        8

Foreign direct investment in India        8

External analysis India: PESTLE        9

Zara’s International strategy – Focus on India        10

International Opportunities        10

International Strategies        10

Modes of entry        10

Risks in the International Environment        12

SOCIAL ENVIRONEMENT RISKS        12

Conclusions and outcomes        14

Bibliography        15

I – PRESENTATION OF ZARA

The organization Zara is a fast retail chain, and belongs to Inditex group, which include brands as Massimo Dutti, Pull & Bear, Oysho, Stradivarius, Uterfque, and more recently Zara Home. In 2015, the group employed almost 153 000 employees over the world.

Total revenue

This last year, the sales of the group represented 20 900 000 000euros. Their net income equaled 2 082 000 000 euros. Zara today is ranked 30Th of the “Best Global Brands”.

Zara, Inditex’s major brand, is a very successful organization worldwide, always respecting its mission. However, the revenues of Zara are not available. Zara represented 66% of Inditex’s total revenue in 2015.

History

The actual CEO, Amancio Ortega, has created Zara in Spain in 1965. Zara’s mission is to sell fashion clothes at low prices and respond the quicker possible to customer’s demand. We could add a recent move to this mission, which is the promise of managing an ethic supply chain. Being very successful, Zara takes 66% over the whole group. During the past decades, the major company has expanded fast and successfully abroad. Today, the famous fashion retail counts more than 2000 stores, present in 88 markets and 27 online markets. In 2015, their net sales equals 13 628 000 000 euros. Regarding Zara home, 666 000 000 euros.

An organization with strong and values

Beyond theses short-oriented moves associated to Zara’s expansion, the group aims to adopt durable business relations regarding to sustainable development. In 2015, “Inditex joined the effort to achieve the 17 Sustainable Development Goals set by the United Nations in 2015 to fight climate change, poverty and inequality with concrete goals for 2030.” In their annual report a more customer sided vision is promoted as well: “Each of the brands has a unique and separate personality, image and offering. But they do share a single business model, which always places the customer at the heart of all its decisions”. In addition to this customer-sided approach, culture of the company is based on self-discipline, entrepreneurial mentality, innovation and teamwork.

After having focused on the domestic market between 1975 and 1988, they have done their first expansion in a closed cultural distance country: Portugal, which is familiar to Spain. Then Zara kept expanding in closed to home markets: France in 1993, followed by Greece in 1994, Belgium and Sweden in 1995, Malta and Cyprus in 1996… Two exceptions of this internationalization wave are New York in 1989, and Mexico in 1992. By expanding to the States, the CEO wanted to build brand awareness and increase his international reputation. Plus it enabled Zara to get closer to fashion trends (knowledge-seeking). The competitiveness has been the main difficulty for Zara. Finally, Mexico although is a far country, is characterized by a similar culture than in Spain. Zara added in the past years 24 countries to its portfolio. In 1998, Zara made its first move to Asia by opening stores in Japan. 

Impacts of these values on Zara’s strategy

Limiting Zara’s internationalization to home-domestic market would decrease the dynamism of the organization, the market getting saturated and highly competitive. That’s why the chairman of the group aims to grow markets in South America, so that Zara can benefit of an emerging market. Plus, South America is relatively close country if we take into account the spoken language, as the culture. Nevertheless, he also keeps a focus on Asia, which remain a major strategic priority in the next years.

As it will be discussed later, what differentiates Zara from its other competitors is probably the flexibility of its business model. The company, by providing new clothes model every 5 weeks maximum, creates exclusivity and “emergency” purchase from the customers. It joins what have been mentioned below, the importance given to Zara’s customer.

A global company with a structure made to ensure a very fast supply

Zara’s headquarter is located in La Coruña (Spain), at the same place than Inditex.

The company works on a bi-directional flow of production, and information. Decision-making is completely centralized as decision come mostly from Spain and other few local head offices that belong to Zara. The stores and production center are very integrated and HO and subsidiaries are totally dependent. There are no distribution centers per country, which mean more control.