Managing Across Borders Report 2022

MANAGING ACROSS
BORDERS

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Executive Summary
Zara is expanding at much faster rate in different parts of the world and this expansion over
the borders is impacted by several environmental factors that are having impact on the
operations of the company. This report is going to address the internal and external
environment of Zara. It was found that the political and legal environment might create
challenges for the policies that are made by the firm. Social and technological factors will be
going to boost the operations of Zara if they are able to make sure that they incorporate
innovation in their business process. Economic and environmental factors might create
challenges for the sustainability of the firm. The industry specific factors suggest that
bargaining power of people is on the higher side while that of suppliers is on the lower side.
Competition has become cut-throat and the threat of substitution is on the higher side. It was
also found that this company has huge strength in term of brand name, variety, and supply
chain etc. while weaknesses include Net Contribution percentage and profitability ratio are
below the industry average and higher attrition rate. This report also provides details about
the ways in which joint-ventures along with merger and acquisitions have been used by the
firm to boost their internationalisation process. This company’s major focus is on the
reducing the cost of operations at the same time enhancing the focus on differentiation
strategy. Increasing competition, rising labour cost, new foreign investments, trade war,
piracy, fluctuation in currency prices and technology enhancement are some of the challenges
faced by Zara. Globalisation has facilitated this company and at the same time strategies
related to offshoring and outsourcing will have impact on the support activities of the firm.

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Contents
Introduction............................................................................................................... 1
Background............................................................................................................... 1
External environment analysis........................................................................................ 1
PESTLE analysis..................................................................................................... 2
Porter’s five force analysis......................................................................................... 3
Internal analysis.......................................................................................................... 4
SWOT analysis....................................................................................................... 4
Strategy to internationalisation........................................................................................ 5
Entry mode strategies................................................................................................ 5
Generic strategies..................................................................................................... 6
Any challenges and problems...................................................................................... 6
Globalisation............................................................................................................. 7
Outsourcing and offshoring............................................................................................ 8
Pros...................................................................................................................... 8
Cons..................................................................................................................... 8
Conclusion................................................................................................................ 9
References.............................................................................................................. 10

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Introduction
Multi-national firms are looking for new markets not only for selling their products but also
for doing production in these countries. These new countries provide them with new
resources and help them in lowering down their cost of operations. Every company has their
own set of strategies for making expansion into the new markets (Crofton and Dopico, 2012).
The approach to internationalisation is chosen according to the requirements of the company
and the dynamics of the industry. With the increment in the cross border relationships
between different industries, it has become easier for the management to expand over cross-
borders. There are several challenges faced by the companies in these approaches to
internationalisation. The smoothness in the internationalisation approach will ensure the way
in which company will make its strategies. Zara is a Spanish apparel retailer and specialises
in fast fashion. Their product range includes clothing, accessories, swimwear, perfumes,
beauty, and shoes. It is the biggest firm in the group Inditex. Zara being an international firm
need to choose the best approach to internationalisation especially while expanding their
business into other countries. This report is going to critique about strategies and policies
used in the process of internationalisation approach of Zara. It also addresses the challenges
and problem the company might face while expanding into the Asian market.
Background
Zara entered into China in the year 2006. This fast fashion brand started selling its product
through its own site Zara.cn in the year 2012. They are also selling their products with the
help of Tmall. With its major focus on the bigger markets such as China, they have made
strategies in such a manner so that they are able to grow in the Chinese market with a rate of
60% every year between 2007 and 2012. In China it has more than 500 stores (Hansen,
2012). However in the past two or three years they have faced a stiff competition from the
brands such as H&M and Uniqlo. In the first three quarters of 2016, this firm has reported a
rise in sales by 16% with a profit up with 20% to reach to €2.02bn.
External environment analysis
For the success, it is critical for the firms to understand the external environment they are in
and according to it they need to design their strategies.