Zara's International Expansion Strategies

This article discusses the international expansion strategies used by Zara, a multinational apparel retailer. It explores the use of subsidiaries, joint ventures, and franchising for expanding into different countries. The main joint ventures with Otto Versand and Tata Group are also discussed.

Human Resource Planning
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Company Brief
Zara is a Spanish organization operating in the fashion industry in different countries. This
organization is a multinational organization and it is currently operating in around 50
countries. Zara is considered as largest apparel retailer of the world. First store for this
organization was started by Amancio Ortega in the year 1975. Over a period of time it has
expanded their business operations internationally through expansion strategies such as joint
venture, franchising, and formation of subsidiaries. Quality and variety of product provided
by Zara have contributed significantly towards the popularity of Zara's product in the market.
What has Zara done to expand internationally?
There is a different type of strategies that are used by Zara for international expansion.
Following are three international expansion strategies that were used by Zara-
Subsidiaries
This method of entry in an international market is considered as the most expensive and
risky. 100% owned subsidiary is established in different countries for international expansion
through subsidiaries. This method was used by Zara where there was the scope of high
growth and low risk. This is strategy help to Zara to expand its market in Europe, Brazil, the
US, and Spain (Mo, 2015).
Joint ventures
According to this strategy business organization tend to join hands with a business
organization that is operating successfully in a particular country. This type of strategy is
used when there is a lot of competition in the market and there are some restrictions on entry
in the market (Mo, 2015). This strategy has been extensively used by Zara for international
expansion. Zara established different joint ventures with business organizations like Biti and
TATA group.
Franchising
This is strategy was used by ZARA for markets with no expectations and higher risk.
Licenses were provided to local apparel organizations to sell product and services of ZARA
and these local organization are entitled to retain commission on the total sales (Lopez and
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Fan, 2009). It can be said that the primary strategy that was used by Zara expansion through a
joint venture.
Discuss the different joint ventures for Zara?
Main joint ventures that are used by Zara for rapid expansion in the international market are
as follows-
Otto Versand- Zara entered in the European market with the help of Otto Versand. Synergy
benefits were created with this joint venture with the help of knowledge acquired by Zara
through this joint venture in the European market. It's a very profitable venture for the
organization as it has been a profitable venture for a long period of time. Knowledge and
experience of this organization are very high as it has been operating in the European market
since 1949 (Lopez and Fan, 2009).
Tata Group- India is considered as one of the most potential countries to expand any kind of
business in the world due to high population and economic stability. The company has
entered into a joint venture with Tata Group which has been operating in different business
industries of India. This joint venture is also very profitable for the organization. According
to the latest financial statements published by ZARA India, total profit earned by the
organization in the financial year 2019 has increased by 72% and it is expected continue this
growth rate in coming financial years (Mazumdar, 2018).
The main problem that is faced by ZARA in expansion through a joint venture is the selection
of a particular organization for entering a specific country. It is important that the
organization selected for the joint venture should have sufficient resources that can create
synergy benefits.
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References
Lopez, C. and Fan, Y., 2009. Internationalisation of the Spanish fashion brand Zara. Journal
of Fashion Marketing and Management: An International Journal, 13(2), pp.279-296.
Mazumdar, J. 2018. Zara India reports 72% rise in FY18 profit. Financial express.
Retrievable at: https://www.financialexpress.com/industry/zara-india-reports-72-rise-in-fy18-
profit/1234579/
Mo, Z., 2015. Internationalization process of fast fashion retailers: evidence of H&M and
Zara. International Journal of Business and Management, 10(3), p.217.
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