...Zara Case Study Pre-course Assignment | International Business INTRODUCTION TO THE CASE Zara is a retail chain company which operates in the fashion industry. It's owned by Indixt group in North West Spain. It holds the ownership of some world famous brands such as Massimo Dutti, Pull & Bear, Oysho, Uterqüe, Stradivarius and Bershka. The very first Zara shop was open in 1975 and their specialty is frequent innovation of new product lines. Also they decided not to outsource their production to low-cost countries which is a trend in the same industry. At the same time they followed up a special policy of investing on opening a new store instead of investing on advertising which ultimately causes them to spread their branch network and make their products available everywhere. Zara controls most of the steps on their supply chain. Also they get the customer feedbacks and respond to them in an impressive manner. Through this, they are maintaining a loyal and frequently aware customer base. INTERNATIONAL BUSINESS 1 Pre-course Assignment | International Business CASE QUESTIONS Which theory is the best representative of Zara's internationalization? When considering about the internationalization theories, there are three main theories to be taken in to consideration. 1. The Uppsala internationalization model 2. The transaction cost analysis model 3. The network model The Uppsala Internationalization model In this model, a firm is willing to intensify their commitments...
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...CASE STUDY ZARA 1. Which theory is internationalization? the best representative of Zara’s (Inditex’s) In the case of Zara, the Uppsala model can be considered as the best representative theory concerning their internationalization strategy. The Uppsala model is an organic growth model, which aims to minimize psychic distance through small incremental steps in the internationalization process. Zara opened its first store in La Coruna in 1975 and focused on the domestic market in the early stages. Gaining experience from the home country before entering a foreign market is characteristic for the Uppsala model. The expansion of Zara was first limited to Spanish cities with more than 100,000 inhabitants. Due to the maturity of the Spanish market, Zara was aiming to expand to the international market. Because of the geographic and cultural proximity to Spain they started their foreign operations by opening a store in Portugal. This enabled a gradual learning-by-doing process, concentrating first on countries close to Spain. Subsequently they preceded the internationalization process by entering different European markets. The intention was to keep a low level of psychic and cultural distance in order to internationalize step-by-step. After obtaining more knowledge and experience in foreign markets, Zara started expanding to other regions more rapidly and out of consideration for geographical or cultural proximity. In general, the internationalization strategy of Zara can be best...
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...MARKETING CASE STUDY ZARA: THE SPANISH RETAILER GOES TO THE TOP OF WORLD FASHION Professor: Jennifer Stack Student: Martina Sekuloska San Sebastian October,2014 International marketing [ZARA:THE SPANISH RETAILER GOES TO THE TOP OF THE WORLD FASHION] INTRODUCTION Inditex is a fashion retailer which dates back to 1963 when it started life in a small workshop making woman’s clothing. Today it has more than 6.460 stores all over the world (Inditex, 2014). Officially it all started with the launch of the first Zara store in La coruña, north-west of Spain in 1975. At that time the textile maker Amancio Ortega decided to open his own store after years of work in the textile industry. This was followed by the brand’s internationalization at the end of the 1980s and the successive launch of several another retail concepts: Pull&Bear, Massimo Duti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe. Today, Inditex is considered to be the greatest fashion retail group, and its founder Amancio Ortega, the richest person in Spain. Zara is the flagship chain of the Inditex Group which generates nearly 65% of the net sales of the group (Inditex annual report 2013). It encompasses many different styles, from daily clothes, to more formal elegant clothes for women, men and children. This case study tackles the challenges of being the world’s fashion retailer, the sustainability of the competitive strategy, and the group’s internationalization process. CASE QUESTIONS...
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...Pre-course Assignment | International Business INTRODUCTION TO THE CASE Zara is a retail chain company which operates in the fashion industry. It's owned by Indixt group in North West Spain. It holds the ownership of some world famous brands such as Massimo Dutti, Pull & Bear, Oysho, Uterqüe, Stradivarius and Bershka. The very first Zara shop was open in 1975 and their specialty is frequent innovation of new product lines. Also they decided not to outsource their production to low-cost countries which is a trend in the same industry. At the same time they followed up a special policy of investing on opening a new store instead of investing on advertising which ultimately causes them to spread their branch network and make their products available everywhere. Zara controls most of the steps on their supply chain. Also they get the customer feedbacks and respond to them in an impressive manner. Through this, they are maintaining a loyal and frequently aware customer base. INTERNATIONAL BUSINESS 1 Pre-course Assignment | International Business CASE QUESTIONS Which theory is the best representative of Zara's internationalization? When considering about the internationalization theories, there are three main theories to be taken in to consideration. 1. The Uppsala internationalization model 2. The transaction cost analysis model 3. The network model The Uppsala Internationalization model In this model, a firm is willing to intensify their commitments towards...
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...accepted paradigm regarding internationalization process of the firms. This model is based on the behavioural theory of the firm (Cyert and March, 1963); inspired by Cyert and March (1963) and Penrose (1959), the model describes the internationalisation process as slow, sequential and gradual, since it represents the firm’s gradual establishment in, integration of, and knowledge about foreign market. Zara and the Inditex group have made use of certain steps to make sure that their firm maintained a competitive advantage in the business environment. When a firm starts entering into foreign market, the first step or the stage chosen by the firm is to start export with the that country, as the firm has no knowedge, information of the resources in that country. In this stage the firm will gain no market experience. Initially, Zara followed the Uppsala Internationalization Model by first entering geographically close markets before advancing to more distant markets. For instance, Zara established a flagship store in a strategic location to build recognition and with the objective of obtaining market information and accumulating experience. The knowledge obtained would then guide Zara to open more stores in that nation (Lopez and Ying 2009). After obtain the experience that useful for operating locally, Zara added the number of its own stores in adjoining areas. This pattern of market expansion is called as “oil stain” by Inditex. The main reason that Zara are favorite in expending internationally...
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...Zara: the Spanish retailer goes to the top of world fashion’ Case Study 7/31/2015 0 Comments Introduction Zara (Inditex) is one of the successful fast fashion retailers under Inditex Group founded in 1975 owned by Ortega a Spanish businessman who owns 1830 stores in 82 countries and it is a vertically integrated retailer, controlling most of the steps on the supply chain (designs, produces and distributes itself). Pull & Bear, Massimo Dutti, Berksha, Oysho, Zara Home, Stradivarius, Uterque are the other multi-brands which come under Inditex itself. Low inventory cost, short lead time, quick response to the market, store is the main promotional tool, quick delivery and sales has made Zara’s business model distinguish among other competitors in the fashion industry -Inditex’s multi-brand success in 2011 -Sales growth of three giants in the fashion industry (including H&M and Gap Zara’s main competitors) Key success factors of Zara - Short lead time - More styles - Pricing strategy - Sell stocks in short term - Broad target market through multi brand portfolio - Quick respond to the market 1) Which theory is the best representative of Zara’s (inditex’s) internationalization? The internationalization practice of Zara started with the opening of a store in Oporto (Portugal) in the year 1988, through this establishment...
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...companies coping with internationalization: driving the change or changing the model? The purpose of the research is to investigate the business relationship between fast fashion and the process of firm internationalization. Does the international process drive the change or does the internationalization process change the model? Internationalization is when two or more countries are involved. Fast fashion has been considered original and new within the fashion sector. Firms have tried to follow business strategies aimed at reducing lead times and thereby responding rapidly to market trends in order to gain a competitive advantage. Lead time is time between the initiation and completion of production process. Fast fashion has been a means to access international markets with a focus on competitive advantage, traditional manufacturing, supply and retailing practices in fashion. Two leading fast fashion companies are Zara and H&M. Zara has 70% of total sales in Europe and H&M’s main markets are in Germany, France, UK Sweden, The Netherlands, Switzerland, Spain and Norway. At the minor level, national fast fashion companies are also faced with the challenge of expanding internationally. Tessilform is a small Italian fast fashion firm which this study analyzes ten years of data focusing on the company as they cope with the internationalization process. The main findings of the case suggest that although the strategy is to support the internationalization process, at the same...
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...1. Inditex/Zara history (Explain) Amancio Ortega Gaono began Inditex as a way to bring high fashion apparel to the market at an affordable price. After years working in the apparel retail industry in la Coruña, Spain, Ortega left his job in the early 1960’s to being manufacturing trendy designers pieces in cheaper materials and selling these items to local shops. In 1975, Ortega opened his first retail store, Zara, drawn by its inexpensive, fashionable merchandise, and Ortega expanded the Zara chain quickly. 1980’s Ortega joined with computer expert Jose Maria Castellano to design a highly responsive supply chin that could quickly produce the latest fashions. A team of designers would replicate popular items, nearby factories would produce them, and they would be shipped from a central warehouse to stores. In 1985’s, Ortega restructure the company and named it Industria de Diseño Textil S.A., o Inditex. In 1990’s, Inditex expanded internationally and diversified its brand portfolio. Zara had added childrenswear, and four new brands had been added to the portfolio; Pull & Bear, Massimo Dutti, Bershka and Stradivarius. 2. How important is Zara for Inditex group internationalization process? Explain and make comments Mainly, Zara is the first brand that Inditex had, it have been successfully accepted into the market in different countries and provide a huge opportunities to Inditex to grow up continuously. The limited market growth opportunities at home was the...
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...Introduction to Zara (Inditex) Case Study In 1975, Amancio Ortega started a fashion retail shop that makes the fashionable clothes faster and beauty than other competitors. The first Zara store opened in 1975 in Spain. The very best quality of Zara was, it only takes two weeks to develop a new cloth/product and release it to the market while other competitors take two months. Zara didn’t get third party help to distribute, design or even produce because Zara did them alone. Zara was fashion focused producers that makes new clothes, apparels according to the trending fashion. Zara uses its own strategic method which is done by sending some employees to higher level venues, occasions, functions, clubs etc.Then the collected new designs and patterns will be forwarded to the headquarters. Although Store managers are used to report feedback, new demands that is given by the customers. These methods will help Zara to be the top among their industrial competitors. Although this method will helps Zara to manufacture more products than others, like 30,000 products annually while others are doing 10,000. Another unique quality of Zara is they don’t keep products that doesn’t sell for around 4 weeks and this trick make customers to come and see regularly on Zara stores that “What’s new?” With the development process of Zara become more and more popular and powerful on its industrial market. Hence Zara decided to enter the market with various brands. They were categorized into...
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...business strategies. In less than 30 years, Zara went from a local brand to a global brand and ranked as the 73rd in the list of the world’s 100 top brand by Interbrand. As mentioned previously, key success factors for Zara are: short turnaround time for concepts to reach the market, smaller quantities per style and many more styles during the year. Further, the elements supporting the successful factors are: extensive research providing constant inputs into the product development process, locating business functions close to headquarters for tight control and finally Zara’s advanced communication and technology. This model was carried out to 59 countries with 852 stores, where the international sales accounted for 69% of total turnover. In the initial stages, Zara followed the ethnocentric strategy where Zara measured other cultures against their own and sought what was most ideal. By encountering difficulties in some countries due to cultural differences, Zara quickly adapted and changed its strategy to geocentric strategy. Further, similar to the domestic market, all Zara’s shops were set up in prime locations, and standardized key strategic elements such as window display, interior design, layout, customer service and logistics. The internalization process of Zara focuses on the three factors: motives, market selection and entry options. The pull factors Spain’s entry into the European Union in 1986 gave the opportunity for Zara to expand internationally via potential economies...
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...the same time. They also use simple packaging strategy (black plastic hangers) to imply that the items are the newest of the new. •There is unity of direction in the supply chain (from design to retail sales) and turnaround time is clearly set for each point. •Inditex Group controls design, production, and distribution and retail sales of Zara Intl. 1.In what ways are the elements of the classical management and behavioural management approaches evident at Zara International. •Zara’s main objective was to bring the new trends in fashion to the customers as soon as possible. •They have utilized the global advantage of having Inditex on the production and distribution of their product. •Zara introduced a fast-paced delivery of latest designer trends on a lower price to their stores that are also located in fashion capitals and other continents. o2 weeks update of garments o2x a week garment replenishment oLogistical centers for timely distribution (24 hrs for Eu, 48 hrs for US and Asia) •Zara enticed their customers not by advertisements but by effective visual merchandising of their items and stores. •As for contingency, Zara uses data from...
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...outsourcing is denied by Zara. This is a good approach towards owned working force and not to get involved in activities that may lead to unethical concerns. Organization has developed a smooth image for quality management process implications in industry and now it is time to unleash new domains for organization. It is not recommended that company should start activities in outsourcing that may led to questions and confusions in current quality management and employee relationship management, but a healthy process that leads to internationalization should be considered. Another option that has been followed by management in last years is to become eco friendly and development of such sales points. The Inditex group has achieved eco-efficient and friendly certificates; a major one is LEED (Leadership in Energy and Environmental design). LEED is a famous and one of the acknowledged certificate and Inditex had got it for Zara Barcelona. Inditex management has mentioned this in its mission statement and following this objective will create a competitive advantage. Competitors are in process of getting this milestone and the group has to make new plans and create more benchmarks in this eco friendship race. Zara has spread a common concept of fast fashion. New style ranges are frequently introduced in market and thus Zara is moving parallel to market trends. Sales persons at stores with PDAs communicate and inform “The Cube” so fast that enables Zara to respond market...
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...though their earnings were very stable - approximately 80% of Zara stores were slated to be opened outside of spain 2. Compare Zara and H&M, What do you see? - Zara owned much of its production and most of its stores, H&M’s vertical scope was narrower - H&M had longer lead times than Zara (still considered average by industry standard) - H&M had been quicker to internationalize - H&M had been more focused in internationalization (one country at a time and a distribution center at each one) - H&M had lower prices than Zara, employed fewer designers (60% less than Zara though Zara was 40% smaller), engaged in extensive advertising and refurbished its stores less frequently - H&M operated a single format, although it marketed its clothes under numerous labels or concepts to different customer segments 3. How consistent is Zara’s business model in terms of its value proposition, value chain, and competitive advantage? Inditex - Location: HQ and most upstream in Galicia corner of Europe from perspective of transport costs, which important given their business model - Spain: quickly opening up to the rest of the world: low prices and less fashion sensitive than Italy - retailing generated 82% of Inditex’s net income, roughly in line with its share of the group’s total capital investment and employment - increasing (though still limited) coordination and resource sharing amongst chains Zara Value Chain: - owning production and own stores - early...
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...European Research Studies, Volume XIV, Issue (2), 2011 “Carolina Herrera” Internationalization Strategy: Democratic Luxury or Maximum Exclusiveness? Cristina Calvo Porral1, Domingo Calvo Dopico2 Abstract: The Company Carolina Herrera has identified a market niche that demands garments, apparel and accessories and to which it can offer a somewhat differentiated product with excellent quality. This market niche is the target of several companies such as Loewe and Vuitton, which may be clearly identified as the leading companies and worldwide references. In this scenario, the question of which internationalization strategy must be pursued to access the luxury fashion product market should be raised. A Benchmarking analysis was carried out for the purpose of identifying best commercial performances of leading worldwide Brand names to determine the marketing planning strategy. Results show the companies’ recognition of a globalised luxury and the discovery of a global market niche with huge growth potential, such as luxury handbags, make us state that there are still growth opportunities that have not been exploited. Key Words: Internationalization, Benchmarking, Branding, Fashion Markets JEL Classification L21, M30, M31 1 2 University of A Coruna, Faculty of Economics, Spain, email: ccalvo@udc.es University of A Coruna, Faculty of Economics, Spain, email: domingo@udc.es 4 European Research Studies, Volume XIV, Issue (2), 2011 1. Introduction ...
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...across the country (smith 2014). This can be a risky strategy as the shift towards a more globalised market means companies who have been successful in their home market (such as Primark) will find themselves competing with foreign businesses which are much bigger and more successful. However, International expansion offers businesses the opportunity to become recognised on a global scale, for example, companies such as Coco Cola, McDonalds and Microsoft could not have achieved global leadership within their industry without expanding abroad, therefore International expansion offers international reputation which is necessary when wanting to become a leader. Internationalization Theory The Uppsala model (a.k.a the Stage Model) is an important theory that explains how firms expand abroad, under this model, internationalization is seen as an incremental process whereby firms increase their international involvement in a stepwise manner (Bhardwaj et al 2011). The Uppsala model is based on two assumptions: (i) the resource-based theory and (ii) the incremental process (Forsgren 2002). Under the resource-based theory, Anderson and Kheam (1996) explain that for some firms, their lack of knowledge of foreign markets constitutes a major hurdle to their expansion plans and adds to their “market uncertainty”. To reduce this...
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