Task 2

The Market Entry Mode model provides the motives behind entering into foreign market. This can be
analyzed as follows:

Market Growth and Sales

Zara’s parent company Inditex has a significant market growth of 16% in the first quarter of 2023 (Pons
and Reid, 2023). If they could enter new markets like Asian and South American countries with growing
demand (16.7%) for the fashion industry (www.fibre2fashion.com, n.d.). Although Zara serves a small
portion of South American and Asian countries, but there are opportunities to serve a large customer
group, and from that, they would have revenue streams. Thus, Zara can have sustainable sales growth by
expanding into new markets.

Differentiation
Zara is expanding globally, including establishing 100 stores in China and India, to have a more
competitive advantage by differentiating its fast fashion business model (Toppan Digital Language, 2016).
The initiative taken by Zara attracted consumers who are more into fashion, creating a competitive edge
in the fashion industry. Zara differentiates their product with available styles and responds to the market
trend by producing small quantities of products aligning with the culture (prezi.com, n.d.).

Economies of Scale
When Zara focused on efficiency through its vertical integration or emphasizing its supply chain, it
started to become cost-efficient. If they expand it on a larger scale, then they will have a larger supplier
network. As a result, this will reduce the production cost, and Zara can offer better pricing for better
profit. Moreover, more global presence will allow them to reduce transportation costs, inventory cost
reduction, and optimize the distribution network. In fact, Zara’s economies of scale will be a barrier for
new entrants. This is one of the motives for the company’s strategy to ensure profitability with cost
optimization. Also brands like H&M, Mango, Forever 21 etc., adopted economies of scale (www.ipl.org,
n.d.).

Risk Diversification
Establishing business in different regions helps to diversify the risk accordingly. As a result, the
dependency on a single market is reduced. Moreover, if any economic downturn or disaster occurs, Zara
will have other country operations to run the business. The popular fashion brand Forever 21 faced a
financial crisis due to the economic downturn in 2008, which severely attacked the company
(j469.ascjclass.org, n.d). Thus it is necessary to diversify the risk if possible that what helped Zara.

These motives of Zara help to build strategy by having a market growth where Zara focuses on increasing
sales and expecting to have a large customer base. Zara looked for new market opportunities and
customized their product according to the region’s customer preference. Furthermore, the motive of
competitive advantage compels Zara to make continuous innovations and trends or market
responsiveness. The company invested in supply chain, design, and customer data analytics just to
ensure its market leader position.
Three Global Entry Strategies for Zara
Here are some recommendations for three global entry strategies that Zara can follow based on the
research.
Franchising
Franchising for global presence will allow Zara to leverage local small retail shop that knows and
understand the target market and how to make the product according to customer preference. By
partnering with franchisees, Zara can have a great network in different locations at a lower cost because
franchising allows Zara to share costs. This will help Zara to have more cost advantage. Zara can also
diversify its risk by franchising. Besides, the local shops will access Zara to their local supplier, which will
let Zara know how to navigate the local regulatory environment. With taking franchising strategy famous
apparel brand GAP turned around its business which led to success (www.cascade.app, n.d.).

Strategic Alliances
Strategic alliances with well-established retailers or any fashion brand can leverage the partner’s brand
reputation, access to customer base and distribution networks. Strategic alliance helps brand to share
and transfer knowledge and this came to work when Uniqlo and JW Anderson created aesthetic and
attractive products (Nast, 2017). This will allow Zara to enter into a market and gain market access with
low investment and risk. Besides, knowledge sharing, technology sharing and joint market efforts can
give Zara a stronger base as a brand in the market.

Online Marketplace and Digital Partnership

To reach to new customers partnering with an online marketplace can be an option for Zara. Tommy
Hilfiger partnered with Gigi Hadid to use social media influence to create brand awareness (WW,
FashionNetwork.com 2015). Similarly, online marketplaces like eBay, Amazon or selecting any social
media influencers to have a larger marketplace to serve. Customers who buy products from here have
high level of trust. If Zara can provide goods in good condition, they can gain trust.

Acquisition
Zara can acquire local fashion stores to have a strong market presence. Zara already has an established
supply chain and distribution network. Acquiring locals will be a win-win situation for both because Zara
can benefit from their brand recognition and customer loyalty. Eventually, it will help Zara to gain larger
market shares.

Justification of Global Entry Strategies

 The environmental analysis suggests that Zara is in a highly competitive market. By forming a
strategic alliance or partnership, Zara can get to know the market knowledge, distribution
channels and local designers or fashion influencers. This will help Zara to operate the regulatory
complexities, cultural differences and customer target reach.
 Also, environmental analysis indicated Zara's investment in technology and digitalization.
Expanding Zara’s e-commerce and online presence aligns with market trends and consumer
behavior. Investing in online platforms can open the door for Zara to serve more. Eventually, this
 will pave the way of offering more product line. Digital marketing and social media strategies
enable Zara to create brand awareness.
 Opening flagship stores or company-owned stores in specific locations will leverage competitive
advantages like brand reputation, efficient supply chain, response to fashion trends.
 Practicing sustainable corporate social activities will help create a strong brand image in the
market. Along with it, Zara’s investment in R&D will enhance a greater customer experience and
will keep them ahead in fashion trends.

Pons, C. and Reid, H. (2023). Zara-owner Inditex enjoys strong start to summer. Reuters. [online] 7 Jun.
Available at: https://www.reuters.com/business/retail-consumer/zara-owner-inditexs-quarterly-profit-
rises-54-sale-boom-continues-2023-06-07/ [Accessed 8 Jun. 2023].

www.fibre2fashion.com (n.d.). Garment Importing Countries | Latin America New Market for Garment
Exporters. [online] www.fibre2fashion.com. Available at: https://www.fibre2fashion.com/industry-
article/6951/latin-america-is-new-focus-area-for-garment-exports [Accessed 8 Jun. 2023].

Toppan Digital Language. (2016). How Zara is Tackling India and China. [online] Available at:
https://toppandigital.com/us/blog-usa/zara-tackling-india-china/.

prezi.com. (n.d.). Business Strategy of ZARA. [online] Available at:

https://prezi.com/ebb4xswf8dhh/business-strategy-of-zara/#:~:text=The%20differentiation%20of
%20the%20products [Accessed 8 Jun. 2023].

www.ipl.org. (n.d.). Low Economies Of Scale In The Fashion Industry | ipl.org. [online] Available at:
https://www.ipl.org/essay/The-Importance-Of-Sustainability-In-The-Fashion-FKNKMGHEAJP6 [Accessed
8 Jun. 2023].

j469.ascjclass.org. (n.d.). Forever 21 and the retail apocalypse’s effects on the economy. [online]
Available at: http://j469.ascjclass.org/2019/11/09/forever-21-and-the-retail-apocalypses-effects-on-the-
economy/ [Accessed 8 Jun. 2023].

www.cascade.app. (n.d.). Strategy Study: How Gap’s Growth Story Became One Of A Kind. [online]
Available at: https://www.cascade.app/studies/gap-strategy-study.

Nast, C. (2017). We Foresee a Lot of Tartan in Our Future Thanks to J.W. Anderson x Uniqlo. [online]
Glamour. Available at: https://www.glamour.com/story/uniqlo-jw-anderson-collaboration-pictures.

WW, FashionNetwork.com. “Gigi Hadid to Partner with Tommy Hilfiger as Brand Ambassador.”
FashionNetwork.Com, 17 Dec. 2015, ww.fashionnetwork.com/news/gigi-hadid-to-partner-with-tommy-
hilfiger-as-brand-ambassador,608579.html.