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I believe Zaras attitude towards their market strategy was on point in terms of
successfully succeeding internationalization. Between Zara strategically opening stores
and how they used micro and macro analysis from the headquarters, showed their
knowledge and understanding in market selection. Through years 1992-1997 Zara had
opened 1 store internationally per year, 1998-1999 there were 16 stores opened, and
2000-2001 a record 8 stores, while in comparison their biggest competitors such as H&M
has only opened 8 stores between mid-1980s and 2001, and GAP with only opening 5.
How was Zara able to open so many stores during that time period and still be successful
today? Simple. They used a method called the oil stain method when opening stores in
foreign markets. This method entails opening up a flagship store in a major city or area in
a country, then after learning their customs, culture, and other experiences within that
specific market, they then started to branch outwards from their flagship store, adding
stores within the area. I believe this concept is brilliant. Unlike what we saw in the
Starbucks case study, where they just opened up 10 stores in a global market without
learning anything in particular, Zara used a much more strategic and alternate approach
that seemed to work when they entered a new market. In addition to Zaras market
strategy, they also implemented a micro and macro analysis conducted from their
headquarters to study a specific entry opportunity when entering new unfamiliar markets
globally. By Zara conducting these local micro and macro analysis, they were able to
learn about local macroeconomic variables such as taxes, legal costs, salaries, rents, etc.
and also local microeconomic variables, which focused on local demand, channels,
competitors, etc. I believe by having Zara knowing about the micro and macro economic
variables helped them have the upper hand when it came to their market strategic
globally, compared to some of their other competitors who didnt pay as close to detail in
this strategy which ultimately left them failing in their marketing strategy.
2. Again, regarding Zaras internationalization towards their mode of entry, I believe they
executed it in a successful and well thought out way. Zaras mode of entry corresponded
with the countries market that Zara wanted to expand in. When expanding globally, Zara
used only 3 specific modes of entry: company-owned stores, joint ventures, and
franchises, and depending on what type of market they were considering expanding into,
they would use that specific entry mode that best benefited them for that market. For
example, if Zara was planning on opening a store in a prominent, high-potential market
with expected high growth potential and low business risk, you could bet they would use
the company-owned modes of entry. While on the other hand, if entering a market that
seemed to be too risky, small market size, or had major differences when it came to
culture and diversity, then the best mode of entry for Zara would be franchising. Why?
Because franchising contracts usually only lasted 5 years, they were certainly well
recognized, and financially important key components in any businesses. Also, Zara
made sure that franchising their stores globally had its perks by only charging them a 5-
10% of their sales for franchising, full Zara corporate services (human resources,
training, etc.) at no additional cost to the franchiser, and also they could sell back up to
10% of their purchased merchandise from Zara. These franchising benefits were
completely unheard of in comparison to any of their competitors. This concept and idea
certainly made franchising a Zara store internationally very appealing to a lot of people
who were interested. Lastly, Zaras last mode of entry being joint ventures, where
typically only used when company-owned entry simply wasnt an option for them. What
does that mean? Why wouldnt Zara be able to open up a company-owned store
internationally? Unfortunately, sometimes when there are important markets there are
barriers to entry. This mode makes the most sense for Zara to pursue in if they wanted a
prime store location in city where there is a lot of growth potential and they cant have a
company-owned store due to entry barriers. With only 20 Zara stores worldwide having
joint ventures, this makes it the least popular mode of entry. By Zara closing executing
their best options of which modes of entry best suites them and the market they are about
to do business in, I think they did an outstanding job providing the benefits above.
3. I believe Zaras past internationalization strategies were very successful and I had
absolutely no complaints until I read their strategy on standardizing their marketing
approach. I strongly believe that they should make a few changes concerning their
approach to marketing, in regards to pricing and commonality between stores across
various countries globally. As far as pricing is concerned, I believe prices should be
decided upon the market in which you are entering. It doesnt make sense to me for them
to charge $100 for shirt in a store located in Mexico and the same price for the same shirt
located in Spain. The average yearly income in Mexico is only $3,000, where in Spain
its around $14,000. As a result of this decision, Zara has left them a smaller consumer
base then in other locations because they standardized their marketing approach. I
strongly suggest Zara makes prices more affordable to the markets in which they open
their stores in to attract more business and make it more appealing to the average
consumer. Another problem and/or concern I have with the standardization in Zaras
marketing approach is the commonality among designs in stores globally. It doesnt
matter if a shop in a Zara on Broadway in New York City, USA, shop in Zara on
Champs-Elysees in Paris, France, or shop in a Zara on Oxford Street in Sydney, Australia,
85% to 90% of all the designs and apparel items that Zara has to offer are the same. How
boring is that? Consumers like stores that appeal to them, and wear something that
appeals to their culture and traditions, etc. Instead of Zaras standardizing all of their
stores with the same designs, they should consider meeting some countries requirements
maybe a few stores at a time to see if this would boost sales, and if it does, maybe
consider doing it for all of the store locations globally.
In conclusion, I believe Zaras internationalization strategy is very strong in comparison
with some of their other competitive retailers such as H&M, Gap, Forever 21, etc. I think
they have a very successful management team in place, and as a result they have
succeeded in internationalization and have become a successful global apparel company
who originally started from Spain.