zara going global group14 (1)
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8/2/2019 Zara Going Global Group14 (1)
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Going Global:
By Group 14
Saurabh Jyot Singh (69)
Seher Contractor (70)
Shakti Chittara (71)
Shila Schoots (72)
Shruti Agrawal (73)
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Zara Retailers
Spanish clothing & accessories based in Arteixo, Galicia ownedby Inditex group
Known for introducing new designs in record 2 weeks compared
to 6 month average
Unusual strategy ± Not outsourcing manufacturing to low-cost countries
± Zero advertising, instead invest in opening new stores
No. of Stores (2001)Europe
North America
South America
Middle East
Japan
80% of new stores projected to beopened in 2002 were expected to
be outside Spain
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Growth options
Limited growth in Spain,80% of new stores to be
opened outside Spain
Rest of Europe offeringsignificant and sustained
growth over mediumterm
Italy being the lucrative
option, Zara attemptedto enter through JVs with
Benetton and Percassi
North America, though alarger region, presented
its own problems of higher operating costs
and weak demand
Asia even morecompetitive and difficultto penetrate than North
America
South America wasmuch smaller andsubject to profitability
pressures
Middle East was moreprofitable on average,
but even smaller
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Market Selection
Zaras international expansion began in 1988with the opening of a store in Oporto innorthern Portugal. In 1989, it opened its first store in New York and in 1990, its first storein Paris. Between 1992 and 1997, it entered about one country per year
Rapid expansion gave Zara a much broader footprint than larger apparel chains: by way of Comparison of its competitors like GAP .
Zara would first open a flagship store in a major city and, after developing someexperience operating locally, add stores in adjoining areas.
Zara had historically looked for new country markets that resembled the Spanish market,had a minimum level of economic development, and would be relatively easy to enter.Macro Analysis ( Tariffs, legal structure, cost) and micro analysis( info about local stores,
competitors
Zaraunlike its competitorsfocused more on market prices than on its own costs inforecasting its prices in a particular market. These forecasts were then overlaid on costestimates, which incorporated considerations of distance, tariffs, taxes, and so forth, tosee whether a potential market could reach profitability quickly enough
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Market Entry Modes
Company owned stores
231 stores in 18 countries
Key, high-profilecountries (e.g. PortugalFrance, Belgium)-> High growthprospects-> Low risk
Acquiring prime retail
space, or long termlease (10-20 yrs)
Drawback: greatestcommitment of resources
Franchises
31 stores in 12countries
Small, risky countries(e.g. Poland, Iceland,Middle East)-> Significant culturaldifferences-> Administrativebarriers
Contracts for 5 yrs withwell-established playersin complementarybusinesses
Joint Ventures
20 stores in Germanyand Japan
Large, importantmarkets with entrybarriers-> Difficult to obtainprime retail space
50-50 split, but mgmtcontrol by Zara
Drawback: complexitiesregarding put and calloptions, possibly forcingZara to buy out partner
International expansion started in 198
9 and resulted in 28
2 stores outside Spain in 200
1,now 1605 stores in 84 countries, including 336 in Spain.
Sometimes there would be switches in mode of market participation (e.g. Turkey wasentered through franchising in 1998 , but became company owned in 1999).
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Marketing
Zara entered a new country by opening a flagship store in amajor city and used the insights to adjust the marketing mix for
that market
Pricing for each market was based on the fact as to how much
extra cost it took to supply the garments from Spain
The price tags were changed to show prices of only the placeswhere a particular garment was to be sold
Zara garments were positioned differently in different markets.
E.g. Zara targeted Upper and middle class segment in Mexico
Only pricing and positioning differed in different regions whereaspromotion and product offerings more or less remained the same
85-90 % of the basic designs available across different locations
were the same with only 10-15 % designs varying based on
regional preferences
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Management
International activities under Zara Holding, B. V. of Netherlands
Primary currency: Euros, $ Sales in U.S. offset $ Purchases
from Far East
CountryGeneralManager
RealEstate
Manager
HumanResourceManager
Commercial
Manager
Administrative
Manager
FinancialManager
Country Management Team
Bridge between top mgmt. at HQ & store mgr. at local level by
propogating best practices
Standarized reporting system, extensive analysis & problem
solving rather than market exit
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