International Growth of Zara Assignment Help
1. Choose a global fashion, automobile or grocery/supermarket company that has expanded across borders into Asia. Discuss and critique its approach to 'Internationalisation' including a clear analysis of the strategies and process it has used to expand across borders. Also provide a detailed analysis of the challenges and problems the business has faced as it has expanded into the Asian market.
2. Research, discuss and identify how 'globalization' impacts business today, and what international managers must know to stay ahead of the game. Identify and discuss how outsourcing and offshoring contribute to globalization using a company case study to identify the challenges, opportunities and problems that globalization presents.
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Big fashion brands like Zara mainly depend on a globally uniform kind of brand identity. They impactfully export different Scandinavian or similar kind of fashion and lifestyle all across the world. This function rightly as long as consumers in the developed nations are mainly focused towards Western level of role models, specifically when it comes to fashion. Similarly, customers in the new kind of marketing are constantly profiting from self-confidence as well as ask for local brands along with local products (Bambery et al, 2018). In the same manner, international players will therefore be required to be highly prepared for highly agile domestic competition.
However, the important question is that whether an international brand actually live up to the requirements of many diverse kind of culture which come from US to Europe all the way to continents like Asia without actually putting the whole identity as part of lineage. In fact, within the boundaries of one nation, there are usual big kind of changes or differences in purchasing power along with many consumer preferences. This is the factor that big brands like Zara for instance determine to align the products in countries like China to many urban cities and classes (Bartrett,2011). Despite of the fact that one-size-fits-all formula and principles like mortar expansion, Zara takes an approach called tiered approach in order to get product assortment. In many secondary towns with less amount of affluent consumer, comparatively less expensive goods along with accessories that are able to dominate the market, at the same time in Beijing and Shanghai the focus is on many exclusive kinds of apparel. Brands like ZARA also pursues a same kind of strategy as a part of mass market.
The aim to gain from the overall exposure of many exclusive kind of brands to international markets was one of the main goals for internationalization. The concept of internationalization-based strategies changes across many retailers and also their outcomes. Evident from failure, research in global retailing is not that very common, some outcomes in a constant shutdown of functions in that specific market.
At the time of initiating of a globalization strategy, fashion focused retailers must show upon the congruent of the product that can range as well as varied brand images as a part of context of many popular cultures as well as trading situations of international markets. The European fashion-based retail chain like Zara is one of the highly popular global Spain brans and one of highly successful among clothes retailers, therefore is main representation of international expansion (Deresky,2010).
Global growth of Zara
Right after opening the first kind of store in La Coruna in 1975, the company also expanded within the local market at the time of 1980. Global expansion initiated with launching the store in Portugal in the year 1988. Presently, the company is already functioning more than five continents with more than seventeen hundred stores. Global sales further accounted near to seventy percent of its complete turnover, with Asia and Europe being its biggest market.
The company ZARA has been recognized as trans-national level of retailer. On the base, this can look as a specific kind of classification ever since they seem committed to high level standardized operational formula that provides some options for market answer or responsiveness. Analysing the internationalization of strategy of ZARA can show otherwise. At the same time, the brand image is immensely standardised, the product growth and merchandising kind of strategy are highly flexible and permits for integration of pan-national fashion focused trends and it emerges (Esmail et al,2019). This is clear by its principle to trading in UK market. ZARA identifies all kid of appeal that the Spain based provided for the brand and clearly gain understood the distinct positioning that they had as a part of UK as fashion retailer. The organization thus focused on the highly fashionable lines within the UK stores. Price based policies within the UK has been highly upscale than their market to highly exploit their gain within UK market.
The strategy of oil stain as mentioned by the management is based on a pattern of the company global expansion. It initiates with the opening of many flagship store in big city. Right after growing and gaining some level of experience to function domestically in the nation, they then proceeded to have some chains in many adjoining phases. An instance is the flagship store in Beijing anchoring a pattern of domestic and then national level of expansion in order to go further sixty-seven store in France by year 2002
One can see that in global expansion strategy by ZARA, as its further divides into three phases as discussed below: -
Reluctance: in year 1975 till 1988, one may focus on expansion in its regional market. The overall maturity of the current market in Europe to see for options via international market for corporate development.
Cautious: in year 1988 till 1997 they had a highly cautious principle, enter about one nation every year. In this early time new to the global environment, the company enter in geographic territory and culture close to market that may seem the Spanish kind of market. For example, in the year 1990, the company-initiated operation in Asia, a geographically nation and a fashion focused capital (Gomes, 2017).
Ambition- experiential level of learning motivated the retailer in order to become highly ambitious in their global level of aspirations. Since Zara gaining more global experience, that overcome the psychological hindrances, the company took very aggressive and quick international expansion from the year 1998. This happened regardless of highly culture or in some cases geographic level proximity. For instance, shops were initiated in more than sixteen nationals from the year 1998 till 1999. Such nations consist Canada, UK, Japan and many more, that differ immensely in operations as well as culture.
Right kind of management along with marketing strategies are needed along with different details focused knowledge of the current economy and the overall earning along with spending of different localities or the GDP of nations which can also calculate the nation's economy as well as the capacity to spend as well as develop must be called before taking a high level of leap as well as spread the horizon all across the world (Hurley, 2017). The report further discusses about which process of entry focused strategy the company adapted to enter into Chinese as well as Indian market along with whether such strategy proved to be advantageous for the company and the gain and drawbacks sit is going to deal and lately it also tests which nation will be ideal and why.
The company ZARA further is able to adopt a supply chain model depending on Fast Fashion. The upcoming fashions further supplies from different design to offer in fixed period of time, as compared to six-month sector on an average. They function a vertical kind of supply chain, so they themselves can undertake all the things from production, design, source as well as distribution. This permits them execute complete control on the business and further reduces their vulnerability to different accusations of many unethical levels of practice like sweatshop focused labour.
Entry strategy of ZARA in Asian countries
Th fact is the majority of stores by Zara are established in Spain, the global expansion has helped in adopting three diverse kind of entry methods like franchising, subsidiaries and Joint ventures.
As per the regulations by many Asian countries like India on FDI, the company had to partner with Tata group to enter the country in order to form a joint venture in 2009. There Inditex owns approx. 51% of the partnership and the subsidiary company like Tata Trent Ltd. holds approx. 49%. Because of many issues that the company is currently facing, the expansion of store was slow with just one added store operational as the second Spanish retailer to enter the country like India beside Mango. At the same time, Mango further expanded in this country by adopting franchise route.
As per the management of the company, the entry in many Asian countries including Indian and Chinese market has a major strategic significance for the company and specifically Indian is considered as one of the main priorities in Asian region when the offering of the retail is concerned (KUMAR et al, 2018). The joint ventures in India is crucial since this is considered to be a co-operative strategy where production facilities and known-how of the domestic organizations are mixed with the overall expertise of the global company in the market, mainly in big, competitive market where it becomes challenging to get property to establish retail stores or where there can be other forms of hindrances that need co-operation with many local firms that Zara consider its stores as one of the crucial element as a part of business model. The store is considered as the main interface between the consumer and varied engine of the whole business, production, fashion design, retail and logistics. In order to get into the market in India, the company behind Zara also called as Inditex utilised the strategy of persisting a joint venture with current Trent Ltd, a Tata Group organization, a highly identified clothing line-based distributor. The company also controls approx. fifty one percent of joint venture, at the same owns forty nine percent. The main issue that the company had faced while entering the market of India were associated to Demography as well as cultural focused concerns. The demography associated to India comes with a population of approx. 1.2 billion population and the target group would be wide than what one may anticipate. As the income is increasing in India, the demand will be higher along with better quality and fashion focused clothing (Liaqat, 2017).
Cultural issues: it is an important issue that has been of high significance while entering any international market. It is important to accept the angles or approaches along with belief system of the role focused culture in impact as well as in India social system is given high importance.
To effectively accomplish the objectives, the company pursued a strong strategy focused on selling a lot of local or domestic clothing lines and global lines however also maintain that Zara as the main brand. The company also target the bigger places consisting either the first as well as the second place in the market of clothing. Any such place would be enough for the company to develop an outstanding kind which is similar to production, distribution and marketing. Such place can establish a stage where the company can sell the clothing lines as well as many other special kinds of fashion products as well (Mohr & Batsakis, 2017).
In order to promote the company along with its clothing lines, the company used advertisements through visual mode, print ads as well as the concept of e-marketing that meet the changing needs of customers from Asia, specifically those market or consumers who reside in Urban India. For such promotional level of campaign, the ideal data that the company uses is been able to establish the reputation as one of primary and main clothing line organizations for many years. it is also able to rise way above the issues in many of its market for number of years currently. The company is able to rise up the issues in most of the market in direct manner. This further made it possible via the effective promotional as well as positional level of strategies setting to maintain not just big profitability, however also setting up the foundation of the clothes and fashion trends introduced by the company. The promotion focused strategies of the company in India are comfortably executed by the domestic workforce themselves which make sure that the company to improve majorly without the actual burden of executing expensive technologies (Mohr & Batsakis, 2017). Such angles or initiatives can further lead in improved level of finance-based profit for the company and will make sure that the foundation of such distribution network for the clothing lines like Zara.
The company also managed to maintain a goodwill of iconic brand among teenagers and youth mainly. This is one consumer industry that other clothing organizations have ignored lately in place of many adult customers. The company also follows a distinct strategy of showing the generation as a part of their campaign. Such campaigns in India will communicate that Zara is not a just clothing line for the coming generation, its consumers are also ahead by a generation of the competitors. The company is also able to set up an overall image for itself in India since the clothing line for the current time. It is further discovered that purchasing power of the youth as well as the marketing power of number of celebrities were same. They further have garnered major profitability gains out of such strategies and there is no factor why such things wont also function in Asian countries (Shin, 2019).
But the company has faced many issues like present regulations related to FDI in India and other near by countries can stipulate that international single-brand focused retailers should pass a forty nine percent stake to many domestic partners. This consist of the retailer sharing organization details as well as data that one will not normally like to be part with. In addition, franchised stores mean that the retailers have the capacity to lose some level of control on how such things work, that many organization fears can harm the brand. At the same time, single brand retailers are usually change with entering the market of India. For any clothing retailer similar to Zara, added issues consist of the relative level of lack of seasoned level of changes or variations as well as the unique, consolidated kind of style of dress as a part of women attire that changes greatly to the company's present ranges (Sung & Goebel, 2018).
The company has also opened their flagship stores in China as well. Global strategy by the company can be defined by the mix many generic levels of strategy based on cost leadership as well as differentiation focused strategy. There are mix of considerations, but, like when choosing the market of China, labour expenses as well as productivity, cost of distribution along with shipment expenses of raw materials are focused on many considerations are part of characters or considerations including 4Ps similar to China focused customers as well as business culture. Considerations focused on market entry consist of economics macro elements that consist of tax, political situations and export focused tariff along micro eco reasons consisting domestic competitors, location, demand and stores (Tan, 2019). Regulations from domestic manufacturer and government challenges are focused on considerations.
Company also provides a simple kind of explanations for the high success: it offers new kind of stock to its shops two time of a week, and newer stocks constantly consist new kind of designs. The company manufacture higher than nineteen thousand diverse designs once a year. To do this, the company parent firm Inditex should break the conventional business methods, that goes from one design to source to shops to consumers (Wood et al, 2016). The model of Zara despite initiate with consumers and then went to stores, source and design.
In the current world of constant trends, one can find it to be significant to understand from consumers and rapidly answer to the needs. The company work with approx. nine hundred diverse factories as well as supplier, consisting twelve directly owning factories working in Spain. Such twelve core factories manufacture the most significant as well as clothes that are trendy, which will be shown on stores' display places (Teo et al, 2019). There are more than half of products by Zara are made in its manufacturing based in Spain, Monaca as well as Portugal, thirty percent can be sourced from Asia as well as twenty percent can be sourced from USA and Europe. China manufacture approx. thirteen percent of products.
Success elements consist the cost-based leadership strategy, differentiation of many strategies, effective distribution. Technology and data, fast kind of delivery of new commodities, trends and designs. But ones of failure elements are Zara's core distribution structure that cannot be wrong in entering a particular market of different nature like that of China.
The company Zara has an antique business structure that gives the organization its competitive gains. one of such gains is the economic of scale that company can use and the organization has been highly successful in scaling up the current distribution structure. But, with the constant development of the company, mainly because of the expansion in the global markets, there are issues in focus to ZARA's core logistic model. There are some arguments that a core logistics model can suffer from further diseconomies of scale. The structure can work ideally with the present number of shops since major of which are centralised in UK and Europe. But Zara will not be gaining from short amount of lead time and low level of operational expense with a single kind core distribution centre model since branch off into other nations (Zhu& Dowling, 2000). The competitive gain accomplished by Zara's vertical level of integration seems eroding. Since the company is opening stores in Asian market, the ability of Zara to be able retain the flexibility in well adjusting manufacturing to be able to accommodate many changes or differences in domestic trends still stays a question.
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