HI5013 Managing Across Borders: Zara's Asian Market Entry Analysis

This report provides a comprehensive analysis of Zara's internationalization strategy in Asian markets. It begins by outlining the background of the company and defining internationalization, followed by a discussion of the reasons for Zara's expansion into Asia. The report delves into the specific strategies employed by Zara, such as its focus on quick response and minimal advertising, and examines the factors affecting management, including cultural considerations and negotiation styles. It also highlights the benefits and challenges encountered during the internationalization process, offering strategic recommendations for future growth. The report concludes by summarizing the key findings and emphasizing the importance of adapting to local market conditions for successful international expansion. Desklib offers similar solved assignments and resources for students.

Running Head: MANAGING ACROSS BORDERS
MANAGING ACROSS BORDERS
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHOR’S NOTE

1MANAGING ACROSS BORDERS
EXECUTIVE SUMMARY
The purpose of this report is to analyze the prospects and importance of the globalization process
and the essence of internationalizing a company so that the company can maximize its revenues
in the long run. The Zara Company has some excellent strategies and policies, which have been
put into effective usage through the proper implementation strategies. The Zara Company
analyzes the prospects of doing business by innovating its products and services. There is a lot of
research done to put forward the new design of the apparels and clothing. The Zara Company
emphasizes on expediting its product availability by reducing the supply time of the products and
then making the products available in the market in a matter of weeks since the date the design
has been launched. The Zara Company also practices the policy of Zero investment in
advertising its products and uses the surplus capital in their other aspects of setting up new stores
and operations.

2MANAGING ACROSS BORDERS
Table of Contents
INTRODUCTION...........................................................................................................................3
DISCUSSION..................................................................................................................................4
BACKGROUND OF THE COMPANY......................................................................................4
INTERNATIONALIZATION.....................................................................................................5
REASONS FOR INTERNATIONALISM..................................................................................6
FACTORS AFFECTING THE MANAGEMENT......................................................................8
STRATEGIES, WHICH THEY FOLLOW.................................................................................8
BENEFITS, CHALLENGES AND STRATEGIES....................................................................9
RECOMMENDATIONS...............................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

3MANAGING ACROSS BORDERS
INTRODUCTION
The industry of clothing and apparel is a very prestigious and innovative industry with
the emphasis constantly on innovation of the products. The companies involved in the clothing
industry need to do thorough research about the choices and preferences of the customers and
how the changes are affecting their choices and preferences in the coming years. The company
Zara focuses on globalizing its services and products on a global platform. The company Zara
also indulges in the process of innovating its products and services in such a manner that the
customers are lured into opting for the Zara brand. The brand value attached to the Zara products
is immense and the customers prefer buying the Zara products to any other apparel brand. The
prime reason for the Zara brand being so productive and successful is that the company has done
extensive groundwork and research into the aspects of consumer satisfaction and consumer
behavior. The report analyses the essence of the innovation and the styles of management styles
of the leadership of Zara. The Zara Company engages the process of innovation and planning
into the new styles and designing of the products, which leads to the excellent production of the
garments and the apparels in the market. The research done by the company includes the market
survey and the launching of new products based on the recommendations and the feedback of the
customer. The report analyzes the prospects of globalizing the products and internationalizing
the brand so that the customer base is expanded and increased to an enormous level. The Zara
company has made a name for itself in the global platform on the basis of its ethics and
innovative marketing strategy applied in its products. The report also recommends the areas
where the company can venture in the future to increase its prospects and revenues.

4MANAGING ACROSS BORDERS
DISCUSSION
BACKGROUND OF THE COMPANY
Zara is a Spanish fashion company, which specializes in manufacturing clothing and
accessories for the people. It is based in Arteixo Galicia in Spain. It was established in 1975 and
its founders were Amancio Ortega and Rosalia Mera. The Zara fashion brand is the premier
brand of the inditex group, which is the largest retailer of apparel in the world. The fashion group
also has the ownership rights of the brands such as Massimo Dutti, Bershka, Pull&Bear,
Stradivarius, Zara Home, Oysho and Uterque.The Zara brand as of 2017, had ownership rights of
up to 20 clothing collections in a year. The first Zara showroom was inaugurated in 1975 in the
town of Galicia in Spain. The founder of the company Ortega, named the company as Zorba and
the inspiration for the naming of the company was the Spanish film Zorba the Greek. When he
realized that there existed a bar having the same name, he decided to rearrange the letters of the
newly founded company and changed it to Zara (Hanslin and Rindell 2014). The initial products
included the low budget replica of famous and costly clothing wear. The owner opened
numerous branches of the company in different cities of Spain. The 1980s saw the change in plan
for Ortega with subtle changes made in the aspects of designing, manufacturing as well as
distribution of the products to decrease the manufacturing time and expedite the process of
sending the apparel instantly to the showroom from the manufacturing hubs (Gamboa and
Goncalves 2014). This process was known as instant fashion. The changes, which were made,
included the inclusion of designers and technology for the manufacturing of the clothing ware
instead of employing normal people to do the same. The company understood and recognized
that the dynamics of doing business was changing in the modern world and therefore, the
company internationalized its expansion policies in 1988 when it expanded its services to Porto

5MANAGING ACROSS BORDERS
in Portugal. By 1989, it had ventured into the United States (Swoboda and Pennemann 2015). It
expanded into France by 1990s. Within a decade, Zara had expanded its global business to the
countries such as Mexico, Greece, Belgium, Sweden, Japan, Singapore, Romania, Phillipines,
Costa Rica, Indonesia, South Korea, India, South Africa and Australia (Huertas-García, Lengler
and Consolación-Segura 2017).Zara was responsible for introducing the RFID technology in
their stores in 2014. The RFID or the Radio Frequency Identification incorporates the
electromagnetic technological fields to self-identify and keep track of all the tags attached to the
objects. The energies from the nearby RFID is collected by the passive tags and the reader are
interrogated into the waves. Zara specializes in providing the apparel ware for the men, women
and the children. The supply chains are highly responsive and new products are shipped twice a
week by the organization. The products take a total of two weeks to reach the stores after they
are designed and manufactured. The total annual production of Zara is over 450 million items a
year (Talay, Townsend and Yeniyurt 2015).
INTERNATIONALIZATION
Internationalization can be defined as the outsourcing of the business to foreign countries
in order to maximize the profits and revenues for the company. The company internationalizes
its ventures out of its country of origin in order to expand its customer base and increase its
services and businesses in the outside countries. The aspect of globalizing the business is to the
foreign countries involve the outsourcing of the products as well as the services to the foreign
countries mainly due to the purpose of expansion of business with the intent to maximize the
profits as well as the supplying the products on a worldwide scale. The expansion of the business
can also result in the making of the countries interdependent upon each other. This
interdependence can cater well for the global brands as they can trade freely amongst the friendly

6MANAGING ACROSS BORDERS
countries. The only barrier in front of them is the trade agreements and the trade blocks, which
differ from one country to another (Yang et al., 2017). Zara was able to maximize its venture in
the foreign countries from a very early period when many countries were not even able to
understand the concept of globalization in the true essence of the term. The founder of the
organization Amancio Ortega emphasized on the aspect of distributing the materials on a global
platform. In order to do this, the company decided to go for zero advertising. Zara developed a
new policy wherein they decided upon devoting just one week for the designing and
manufacturing of the product as compared to the six month taken by the other apparel
companies. The money, which is saved from the policy of zero advertising, is the n utilized in the
other aspects such as opening new showrooms. Zara established its own factory in La Coruna in
Spain in the 1980s. It devised and followed a policy of Just-in-time (JIT) system. This system
enabled the company to be self-sufficient in terms of the availability of materials in all the stages
of production, complete the products as well as distribute the products to the stores globally
within the span of a few days (Coelho, Rita and Santos 2018). The company manufactures
majority of its products within the close proximity of Spain and areas in and around Spain while
the clothes which require a lengthy amount of shelf life are outsourced to the countries where
manufacturing costs are cheap such as the countries in Asia.
REASONS FOR INTERNATIONALISM
There are many reasons for the internationalism process of not just Zara but many other
countries as well. Zara has established itself as a global brand and it engages in manufacturing
the apparel and clothing material and supplies them throughout the world on a large scale. This is
done mainly because the company focuses on maximizing its revenues and generates profits
through the efficient allocation of the resources and revising the costs and revenues in such, a

7MANAGING ACROSS BORDERS
way that the organization is able to relocate the revenues so that the organization manages the
money, which is saved in some other ventures (Vriens and Martins Alves 2017). Globalizing the
organization’s products also means that the organization is able to cater to a wide array of
customers in a global scale. The customers who are located in different parts of the world are
able to buy the Zara apparel and the clothing products based on the globalization process (Park
2015). The Zara organization also indulges in the allocation of the manufacturing of some of its
costlier products to the countries of Asia where the cost of production is lower in comparison to
the cost of production in the western countries. The manufacturing of the products in Asia also
leads to the saving of the company’s capital resources because of the availability of cheap labor
in Asian countries. Zara has invested heavily in the Asian countries such as China, India and the
Vietnam (Ci, Park and Kim 2017). These countries have cheap labor as well as a vast and diverse
population. Therefore, the prospects of doing business in these countries are immense from the
perspective of a global retailer giant. The fact that Zara does not invest in advertising makes the
company use its resources in the aspects of opening new stores and investing in the
manufacturing sectors. Zara has also implemented a relatively innovative way of doing business
by shortening the shelf life of its products and the shortening of the shelf life of its products
implies that the company has a greater chance of registering huge profits as the time required for
the products to be sold off to the customers decreases (Graffigna and Gambetti 2015). Zara
follows a strategy of modifying the items according to the tastes and preferences of the customer.
This is done by consciously monitoring the customer’s fashion changes. Zara maintains the range
of basic designs, which are carried over through all the years. The other companies have the
opposite policies of removing the clothes and apparels, which stays in the shelves for more than
four weeks (Cho and Fiore 2015).

8MANAGING ACROSS BORDERS
FACTORS AFFECTING THE MANAGEMENT
The globalizing of a product entails the leadership with the responsibility to gather
information about the culture of the country where they are intending to establish their
manufacturing plants as well as sell their products. The organizational leadership must be fully
acquainted with the cultural norms of the people who will be their customer base. In order to
understand the culture of the new country, the organization must be fully well versed in the
dominant culture of the country and must respect the different cultures and tradition of the
country (Michel and Donthu 2014). The negotiation skills of the leaders of the organization are
fully assessed and analyzed when the organization ventures out into the new country as the basic
criteria of negotiation is to assist in the building of the relationship with the citizens of the
country. The organization also needs to make some important changes in the style of decision-
making as the decision-taking pattern of one country might be very different from the
requirement of another country (Delgado-Ballester and Fernandez Sabiote 2015). The
management styles can vastly increase the profitability of the company. The management
leadership can make subtle changes about the new changes, which they are going to implement
in the country they are venturing into. These changes can increase their revenues in the country
where they have decided to venture into.
STRATEGIES, WHICH THEY FOLLOW
The reason behind the appalling success of Zara is the fact that the company has made
some very innovative changes in its policy of doing business. These tweaks in its style of doing
business have facilitated the company to maximize its profitability within a short span of time.
Innovative strategies followed by Zara include the introduction of Fast Fashion. The Fast
Fashion is the modern usage of the fashion retailers to introduce the designs, which are

9MANAGING ACROSS BORDERS
showcased in the fashion walk concerts and introduce the fashion statements straight into the
stores to capture the attention of the customers. Zara has been able to incorporate the rapidly
changing fashion trends in the fashion industry and has filled the gaps which existed between the
common people and the fashion industry. The company introduces new designs in the fashion
industry and quickly puts them up for sales to capture the attention of the people. This results in
the profit maximization of the company. The common notation used for Zara is that they supply
the freshly baked clothes to the common people. Zara also focuses on manufacturing fewer
quantities of products and focuses more on the qualitative aspects of the products. This enables
the company to attach a touch of elegance and brand element in their products (Dawson and
Mukoyama 2014). The status attached to the Zara product is immense in the society.
BENEFITS, CHALLENGES AND STRATEGIES
The benefits from expanding its services and production on a global platform enables the
company Zara to interact with the global audience and gather information regarding the latest
trends in the fashion industry. The Zara Company incorporates the latest demands and
requirements of the customers and incorporates those demands in the new products, which are
going to be launched by the company. The company also invests heavily in the designing and the
manufacturing of the products and the research done to implement a new design is immense
among the employees working with Zara. The process of supplying new designs is done on a
very short time so that after the launching of a new design, the products are immediately sent to
the people for the sale of the products. This is done in the gap of a few weeks. The procees of
expediting this entire process comes at a cost. The cost is that the Zara Company follows a policy
of zero advertising. Where the other retailers are investing heavily on advertising and hiring new
celebrities to promote the products, the Zara Company does the entire opposite (Azevedo and

10MANAGING ACROSS BORDERS
Sanchez 2015). They focus more on the designing and the manufacturing of the products. In the
current age, the Zara Company is facing a huge amount of challenge from the online shopping
industry. The e-commerce industry has grown in leaps and bounds and there is an ever-growing
threat to the Zara Company to tackle the threat of e-commerce. The company has to put forward
an innovative plan in order to overcome the challenge of e-commerce industry (Islam and
Rahman 2016). The Zara Company is known for innovating ideas so it would not be a challenge
for the company to overcome the challenge. The company has investments in many countries so
it would not be a problem to try out different ideas and strategies in different countries. The
benefit of doing business in different countries is that one idea, which has emerged from a
particular country, can be incorporated into another country or more than one country
(Mayrhofer and Roederer 2016). The viability of the exchange of ideas increases with the
number of countries where Zara is operating. Zara being a global brand, therefore, it enjoys the
privilege of having the trust and goodwill of the people who hold the company very highly. It is
for this reason that the company is taking a great risk by not investing in the aspect of advertising
its products.
RECOMMENDATIONS
It would be better for the leadership of Zara to try out new innovative ideas in the long
run such as expanding their availability in the online sector. The Zara Company also has the
added advantage of being a global brand, so the decision to venture into the online marketing
arena will not be a difficult choice for the company as the company has the trust and support of
the people worldwide. The company also has a global presence, which entails the company with
the facility of procuring the materials from its manufacturing plants, which are located in
different parts of the world. The zara company can also venture out in the area of providing

11MANAGING ACROSS BORDERS
sportswear to the athletes and the sports team. Limiting itself to the fashion apparels limits the
scale and magnitude of its operations. Therefore, it is important for the Zara Company to venture
out into the other unexplored territories and try out new innovating ideas. The Zara Company can
also increase its revenues by selectively merging with the local companies, which are offering
excellent online retailing services. The mergers would allow the local companies to get the
financial assistance from the global brand Zara and the Zara company can learn about the
nuances of doing online trade. These recommendations can be fruitful only if the company
engages in the policy of innovating its style of doing business. The Zara Company can also
include the common and decorative styles and attires of ethnic communities such as the ethic
wear of the Chinese, the Japanese, the Indians, and the Vietnamese. These incorporations will
allow the company to be versatile in its approach and cater to a wide array of audience and
customer base. The increase in the customer base would result in the profit maximization of the
Zara Company and result in the collection of huge revenues.