Zara Going Global Group14 (1)

8/2/2019 Zara Going Global Group14 (1)

http://slidepdf.com/reader/full/zara-going-global-group14-1 1/7

Going Global:

By Group 14

Saurabh Jyot Singh (69)

Seher Contractor (70)

Shakti Chittara (71)

Shila Schoots (72)

Shruti Agrawal (73)



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



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



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



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).



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



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

Zara Going Global Group14 (1)

Documents

Transcript of Zara Going Global Group14 (1)