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Zara: Global Expansion Essay

1385 words - 6 pages

Zara is one of the world’s largest fashion retailers; it’s a Spanish clothing and accessories retailer. It is the flagship company of Inditex, a holding company which includes seven other brands, and was founded in Artexio, Spain in 1975 by Amanico Ortega and Rosalia Mera. Just this year Forbes named Ortega the 3rd richest man in the world. “Zara contributes about 80% of Inditex's revenues, which have grown by 27% per year on average since 1998,” (Zara’s). As of 2012, the retailer boosts a whopping 1,925 stores and just 120 were opened in 2012. These stores are also in 86 markets, and entered 5 new markets in 2012. They employ 120,314 people. Annual revenues equal €10,541,000 as of 2012. Zara has been around since 1975 but has shown no signs of slowing down. They are globally expanding into new markets yearly and have found success in adapting their business to these new markets. Zara does extensive research before entering a new market and decides on a method best suited to each region.
Zara’s motive when globally expanding was they wanted to reach more fashion conscious consumers and become known for its fast fashion. When Zara first entered markets they entered markets that were culturally or geographically close. They also looked at the behavior of consumers; the French are more fashionable and quality oriented while Germans are price sensitive, Americans are less trendy, Japanese consumers are trendier, and the British shop at stores based on social affinity. The fact that like Germany some countries are price sensitive is the reason they have different prices for different regions. Zara keeps about 80% of its inventory the same for all regions with 20% of it changed for each market. They adapt their strategies to different cultural, administrative, geographical, and economic factors.
Zara uses two different strategies adaptation by variation and adaptation by externalization. In adaptation by variation they change the clothing and accessories they offer depending on taste, cultural or religious differences of the customers. Zara listens to store managers on feedback straight from the customers so they know what is selling and what isn’t. By listening to feedback they are better able to pinpoint trends and efficiently alter or discontinue clothes that don’t sell. In adaptation by externalization helps Zara deal with international issues and reduce the burden of adaptation. Zara stores are usually company-owned but some governments prohibit foreign-owned businesses causing Zara to franchise or form joint ventures to enter that market.
The International expansion of Zara started in Oporto, Portugal in 1988. This was a good place to start expansion for Zara because the market was close geographically as well as culturally. This allowed Zara to save time and money because the markets were not that different from Spain’s so they didn’t have to make many adjustments to their marketing mix. Soon after Zara opened its first store in the United...

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