Why do businesses internationalize: A case study of Zara's entry into the Indian market

This article discusses the reasons why businesses internationalize, with a focus on Zara's entry into the Indian market. It explores how Zara utilized their labour in India, sustainability and supply chain, and how they sourced workers. The article also examines Zara's factory supply in India.

Why do business
internationalize

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
Background of company.........................................................................................................3
How Zara has utilized their labour in India............................................................................5
Sustainability and Supply chain.............................................................................................5
How Zara have used their knowledge, power and capabilities with India to source workers7
How factory supply in India...................................................................................................8
How Zara is employing local labour......................................................................................9
Why Zara has gone to India?................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Internationalisation is a process of producing, sourcing, selling and delivering the goods
and services from more than one country. There are various benefits which can be gained by
organisation while establishing business at international level such as it helps in availing access
of better talent, brings innovation, improve the performance and growth, increase profitability
and also enhance customer base. Company generally internationalise their business to boost its
sale and profitability. They globalise their expansion in order to grow and expand business
operations (Saraswat, 2018). By entering into new market, company can generate more revenue,
avail investment opportunities, compete for new sales, reduce cost and recruit new talent.
Through internationalisation, organisation can attract new customers in new market and increase
their market influence. This project is based on why company internationalise their business in
new market. The chosen organisation for this project is Zara, it is a retail brand that deals in
varieties of products such as clothing, shoes, accessories, perfumes, swimwear and beauty
products. Zara has internationalised their business in Indian Market in order to attract Indian
people and improve its performance and growth in new market.
Background of company
Zara is a Spanish clothing brand which was founded by Amancio Ortega in 1975. In the
first store of Zara, the products are featured at low price and also it is highly popular due to high
ended clothing fashion. Later, the founder has changed the manufacturing, design and
distribution process of brand in order to adapt new trend and remain trendy in market. Zara also
have its online presence in market which makes easier for customers to buy the product without
going to outlet (Dadwal, 2017). The brand is also engaging in global expansion due to which
they have created a strong presence on different cities and countries such as South Korea, Russia,
Mexico, Belgium, Greece, Indonesia, South Africa, Peru and many others. The target market of
Zara is customers of 18-35 aged. When the products are designed, it takes approx 10-15 days to
reach to stores. The brand has also faced various controversies such as exploitation and child
labour, allegations of anti-semitism, labour practices, copyright infringement and political
controversies in China. Zara has also expanded their business sin Indian Market in order to create
strong customer base and increase its growth.
Internationalization effects on local labour in India

According to (Belousova, 2019), Though internationalization is rising in the economy and labour
market which has helped workers in adjusting to the changing trends and world instead of
erecting protectionist measures. Internalization is effectively contributing in increasing
integration among labour markets and helps in bridging the gap between workers in developing
and advanced economies, especially with the spread of new technology. Internalization also
plays a very important role in increasing the domestic income inequality. Labour markets has
increased the around the world in the last two decades which helps in achieving more growth and
productivity in the Indian market. The advancement of technological processes, especially in the
communication and information sector has had a great impact on the share of the labour in the
unskilled sector. With the effect of internalization in India has created a great opportunities for
Zara to access high technology, capital flows, cheaper imports, human capital and large export
markets. Internalization helps the company in increasing their employee turnover rate which
helps in integrating more employment opportunities for gaining competitive advantage over
other rival companies. Internalization helps the company in designing products in an innovative
and creative way that it may be readily available for consuming across different countries. This
process is used by the company for expanding their global footprint in international market by
understanding the tastes and preferences of the customers. When the company internationalize
their products and services in the international market helps in increasing the knowledge and
skills of labours for achieving growth in the market. This also helps in producing their products
and services on the cross boarder for easy migration of goods and services in the market (Jacobs,
2020). Zara produces good quality products to their customers which helps in gaining their trust
and loyalty which makes them stick to the particular brand. For increasing the profitability and
productivity of the company, they sale products in the Indian market which results in better
employee satisfaction. Zara has used their labour in an efficient and effective manner as they
provide growth opportunities to the working staff to show their knowledge and skills towards
achieving success in the Indian market. The company provides effective training and
development programs in order to improve their skills and working efficiency for learning some
new concepts in order to develop employees knowledge. Zara provides extra wages and money
to the local labour so that they can fulfil their basic needs and demands as India is quite cheap as
compared to other countries.

How Zara has utilized their labour in India
Zara has utilised their labour in India effectively as they provide an opportunity to
unemployed people to show their talent and work with brand. In order to improve the skills,
knowledge and capabilities of labour, company focuses on providing training and development
opportunity to employees so that they can learn something new and perform their job role
effectively. While working in Zara, labour avails various benefits such as insurance, health and
wellness benefits, financial and retirement benefits, family and parenting, perks and discounts
and also professional support (Khurana, 2018). The brand focuses on creating positive working
environment for their employees so that they can contribute their productive outcomes in
achieving the business goals and objective. But there are various controversies which are faced
by Zara elated to labour exploitation. The brand has also passed a statement related to zero
tolerance approach towards the forced labour. Thus there are various laws related to labour
which Zara has to follow while working in Indian Market in order to remain stay away from any
legal conflicts and issues.
Sustainability and Supply chain
Zara has set various goals related to sustainability as they focus on reaching to net zero
emission by 2040, become free from single use of plastic and also offer 100% more sustainable
procurement of cellulose fibres, linen, cotton and other materials. The company has started a
repair and reuse program which is known as Closing the Loop. It provides an opportunity to
customers to drop their used garments in store and order their clothes to gain second life. The
brand has also focused on reducing the greenhouse gas emission which are generated from its
operations and supply chain (Kautish and Sharma, 2018). Zara is also focusing on recycling its
packaging. Zara is transparent brand that provides detailed information about its suppliers,
audits, polices and remediation process. In the final stage of production, Zara provides detailed
information about its suppliers, information about forced labours, gender equality and freedom of
association. The garments of Zara are produced by using processes and raw materials which
helps in reducing the negative impact on company as they use organic cotton and recycled
polyesters (Mishra and Dham, 2019). The brand also has 100% eco-efficient stores which help in
reducing the environmental impact with systems that enables to adjust energy and water
consumption to real needs of the store. Organisation is also committed to global fashion agenda,
in which the design team of company goes through specific training programmes on processes

and raw materials that helps in promoting the textile recycling. They are also committed to
CanopyStyle in order to protect the rainforest. The company is focused to work with suppliers so
that they can use the fibres such as viscose and modal that poses no risk to endangered forests.
Zara has also announced to close their few stores across the globe in order to reduce the energy
consumption. The bags, hangers, boxes and alarms of Zara are recycled and reused until their
useful life (Deshmukh and Mohan, 2016). The bags which are given to customers are 100%
made up recycled paper and also they are focusing on eliminating the single use of plastic by
2030. Zara offers high quality of products to its customers at affordable price which attracts
customers towards the brand.
Zara have strong supply chain unit which helps in increasing the performance and
productivity of business. The brand changes their clothing designs every two weeks on average
whereas the competitors of Zara generally change their designs in two or three weeks. The
business success of Zara is due to its highly responsive supply chain. The supply chain of
company is huge and also they have highly automated distributed center which is known as The
Cube. Company generally buys large quantities of few types of fabrics and does the garment
design and dyeing in-house. They purchases raw fabrics from suppliers in Spain, Greece, Italy
and Portugal. The suppliers of fabrics deliver the materials within 5 days of order being placed.
The raw materials which are collected through suppliers are passed through cube on their way to
clothing factories of Zara and the finished goods which are produced are passed through on their
way out to stores. The factories of Zara generally increase and decrease the production rate due
to which there is less inventory in supply chain and also less requirement of finance for
managing the inventory (Jhamb and et. al., 2020). Supply chain unit of Zara is highly organized
as the manufacturing of the product is done in northwestern Spain, the distribution and logistics
hub of company is located in Zaragoza which is developed by Spanish Government and suppliers
of organisation sent raw materials to Zara’s manufacturing centre. The finished garments of Zara
leave the Cube and transported to the logistic hub in Zaragoza. Thus, the garments are delivered
from the logistic hub to stores around the globe through truck or plane. Therefore, the success of
brand is due to its cross functional operation strategy which is linked with its vertically
integrated supply chain. This strategy enable mass production under push control which leads to
lower markdowns, high profitability, well managed inventories and value creation for
shareholders in short and long term. Zara has strong relationship with many suppliers across

globe due to which they doesn’t face any issue related to orders and products. The suppliers
helps in fulfilling the need and demand of customers in effective and efficient manner due to
which the profitability and sale of business increases. Zara focuses on purchasing organic fibre
clothing materials from its suppliers in order to produce sustainable clothes and products for its
customers.
How Zara have used their knowledge, power and capabilities with India to source workers
Zara have used their knowledge, power and capabilities to source workers in India as
they have inspected the Indian market while entering and also understand the labour policies and
laws for attracting the government and Labour. For tapping into Indian market, Zara has taken a
smart move as the brand has teamed up with Tata Group to form joint enterprise. Tata Group is
one of the recognized brands in India so they don’t have to face much issues related to labour
and expanding business in Indian market. Tata Group has played an important role in sourcing
the workers of Zara. In order to attract the labor of Indian market, company started a recruitment
drive by announcing the vacancies in Zara (Mayrhofer and Roederer, 2016). The recruitment
drive helps in filling the job position in company. Zara starts hiring the employees on the basis of
required qualification and experiences. They have also promoted their brand in many areas of
India in order to attract the customers and employees towards the company. The promotional
strategy which is used by Zara in order to reach to labour and customers are print media, video
advertisement and idea of e-marketing. Zara generally targets the urban areas of India for hiring
and improving their sales. They also provide various benefits to its labors so that they can
perform better in organisation and achieve their goals and objective respectively. They are also
focused on creating strong team within Indian market so that they can work for increasing the
profitability and growth of business. For creating strong team, the brand increases
communication and also address and work with cultural differences. While hiring the employees
within company, they also provide training and development opportunity to their staff so that
they can improve their skills, knowledge, abilities and capabilities. The training and development
program helps in increasing the motivation and morale level of employees due to which they
contribute their productive output. It also encourages people to learn something new and perform
well in organisation.

How factory supply in India
Zara is highly renowned brand which is known for its fast fashion and latest design. The
brand is popular in old and young generation due to its affordable fashion. Zara generally adopts
Fast fashion supply model in order to attract customers towards the brand. Through this model,
company supplies its latest fashion from design to delivery within 2 weeks. Zara operates
vertical supply chain due to which they undertake design, sourcing, manufacture and
distribution. This strategy helps them to take total control over the business and makes them less
vulnerable to accusations of unethical practices like sweatshop labour. Zara have its strong
presence in various countries across globe (Schaich Graniel and et. al., 2021). The entry mode of
Zara in Indian market is joint venture. Zara has teamed up with Tata Group in 2009 in order to
enter into India. The company has shares of fifty one percent of this collaboration whereas the
subsidiary of Tata, Trent holds forty nine percent in this deal. Zara thinks that the entry in Indian
market is important for the growth of organisation as it comes in top priority in Asia region. In
order to enter in India market, Inditex which is the company behind Zara used joint venture
strategy with Trent Limited. It is a subsidiary of Tata Group which is highly recognized for its
clothing line distributor. The brand has chosen the joint venture mode as it is a co-operative
strategy in which manufacturing facilities and local organisation are combined with the expertise
of foreign company in market as in competitive market it becomes challenging to acquire
property for setting up retail outlets. Zara also have concerned related to demographic and
cultural. India has wide range of population which is beneficial for Zara as they can reach to
large number of target market within Indian market. Culture also plays an important role for
company while entering into new market. As Tata Group is aware about the culture of Indian
market, it becomes easy for Zara to attract the people of different culture. There are various
factories of Zara across the globe. In India, the brand has warehouse in Haryana region which is
near to Delhi. The products of Zara are manufactured in Spain, Bangladesh, Morocco, Turkey,
Portugal and Armenia. These products are manufactured and later it is distributed in Cube of
Zara. From the cube it is delivered through truck and plane across the globe. The suppliers of
company are strong as they are focused to distribute the fibres in effective and efficient manner.
Due to which company doesn’t face any shortage related to fibre of clothes. In order to achieve
the goals, Zara has pursued the strategy of selling its variety of local clothing lines and
international clothing lines by focusing on maintaining Zara as primary brand in India. They

have targeted the larger positions in Indian market and become the first and second position of
clothing lines. For promoting the company and its clothing line, Zara uses video advertisements,
idea of e-marketing and prints ads for reaching to large number of customers (Viardot and
Nylund, 2017). The main motive of brand is to fulfil the need and requirement of customers in
order to create strong customer base. Zara generally offers high quality of products to its
consumers with trendy fashion which helps in satisfying the need and expectation of customers.
Zara has come up with various allegations related to child labour in few countries, But in India,
child labour is prohibited due to which the brand don’t hire children’s to do work in organisation.
Thus, Zara avoids hiring children to perform job duties and also they pay their workers enough
salary that fulfils their needs and requirements, The company also provide various other benefits
to employees such as health insurance, perks, incentive and others. Zara also focuses on
engaging their staff and makes them feel motivated while working in an organisation so that they
can give their best efforts in accomplishing the task. They organize appraisals and appreciation
program for their workers in order to make them feel valued and important in the company. Zara
also gives their employees rewards on the basis of their performance on order to boost their
engagement level. The staff of Zara can also purchase the clothes of brand at discounted rates.
How Zara is employing local labour
The brand attracts local labour by organizing recruitment and hiring programs, they invite
the labour in an organisation and conducts interview in order to identify the right participants for
the job position in Indian market. They hire the labour on the basis of their performance and
experience. Zara focuses on hiring talented staff who have potential to give their best output in
accomplishing the target (Mayrhofer and Roederer, 2016). While entering into Indian market, the
company provide opportunities to unemployed people of India so that they can grab this
opportunities and perform their work effectively. They generally attract local labour by offering
extra wages and other benefits which helps in fulfilling their needs and requirements. It is being
analyzed that the labour of India is cheap as compare to other countries. Zara only focuses on
hiring the local labour of India as they are true citizen of country and also they can easily
understand the need and expectation of local customers. The local labour can help in increasing
the profitability and growth of business by creating strong connections with local people and
giving them better user experience. It becomes difficult for foreign workers to come in India and
work effectively as they don’t understand the culture, language and tradition of India. Thus, it

becomes challenging for foreign workers to attract the people of Indian market and fulfil their
needs and expectation accordingly. It is important for company to employ local labour who can
understand the language, culture and tradition of country. They employ labour on the basis of
their performance and experience. The local hiring can be improved by paying attention to local
talent in region and also develop presence on social media. They also focuses on hiring the
employees, by treating candidates like customers and also they implement employee referral
program in order to attract staff. Zara has posted jobs on its company website in order to create
awareness among audience related to vacant job position and also they have tied up with
recruiters and staffing agencies in order to invite employees within workplace. The labour
market of India is wide due to which Zara can avail wide varieties of labours that can contribute
their best output in achieving the goals and objective of business. They have also created strong
presence on social media platforms in order to attract talented people within workplace. The
recruitment strategies which can be used by company for hiring great employees are by creating
compelling job description, checking resumes and implementing employee referral program.
Thus, by offering local jobs company can boost local employment rates and also improve the
productivity of business. The organisation has also implemented pay policies in order to attract
employees. They generally pay to their labour on the basis of their performance and productivity.
Why Zara has gone to India?
India is one of the attractive retail destinations in the world due to its steady economic
growth, infrastructure creation, supply of good real estate and favourable demographics. There
are various factors which help in driving growth in retail market such as healthy economic
growth, increasing disposal income, changing customers taste and preferences, changing
demographic profile. Zara generally goes in India due to large population, business friendly laws,
vast trade network, Indian work ethics and working class, low operational cost and Indian
financial system. Through these reason, Zara thinks to establish its business in Indian Market.
Operating business in India helps in availing access of new market, new customers and new
opportunities. Company can increase its profitability and growth by offering products and
services in Indian market. It is important for an organisation to focus on attracting customers by
offering them high quality of goods and services at affordable price (Mahardika and
Wayansantika, 2021). Going into Indian market helps in reaching to wide range of population
due to which the sale and profitability of business increases. For entering into India market, the

company has chosen joint venture mode. They have paired up with Trent limited which is a
subsidiary of Tata group in order to tap into Indian Market. Both the companies have agreed to
share forty nine and fifty one percentage of company. Forty nine percent is of Trent company
whereas fifty one percent is of Zara. The brand generally choose joint venture mode as it is co-
operative strategy in which both the parties have equal role for managing the business activities.
Through pairing up with Trent company, Zara can avail access of new market and distribution
networks. They can also increase their capacity and share a risk of cost with partner according to
certain percentage. The joint venture also helps in providing access to new knowledge and
expertise and also company can avail greater resources (Jin, Almousa and Kim, 2018). While
entering into Indian market, it is important for Zara to understand the expectation and need of
customers. They must also know the local languages and culture of Indian market in order to
attract customers. But through forming joint venture, company can also overcome the issues
related to language and cultural difference of Indian market and develop a strategy for attracting
customers.
CONCLUSION
It is being concluded from the above information that it is important for an organistaion
to understand the target market in order to establish the business in effective and efficient
manner. While tapping into new market, company should understand the mode through which
they can enter. Zara has chosen joint venture mode in order to enter into Indian market so that
they can easily avail the new talent, customers and resources. It is the responsibility of
organisation to focus on identifying the legal laws and legislation of the country in which they
are going to enter so that they can stay away from any legal issues and conflicts. In the
competitive environment, it becomes necessary to gain competitive edge in market and create
strong customer base, Organisation can gain competitive advantage in market by satisfying the
need and expectation of customers. It is one of the top priorities of company to understand the
need and requirement of people for creating strong customer base. In new market, it becomes
challenging for brand to attract customers. Thus, the brand can attract customers by offering high
quality of products at affordable price. They can also provide discount and sales benefits to their
consumers in order to boost the sale and productivity of business.

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