Report: Globalization Factors, Challenges, and Zara Company Analysis

This report examines the driving forces behind globalization, including cost, market, environment, and competition, using Zara as a prominent case study. It delves into the strategic complexities of operating in a global environment, such as international company structures, foreign regulations, cost calculations, and global pricing strategies. The report further explores currency rate fluctuations and strategic challenges in supply chain management, focusing on globalization, customer preferences, market growth, quality, and compliance, all illustrated through the example of Zara. The analysis highlights how Zara navigates these challenges, emphasizing the importance of adapting to evolving market dynamics and maintaining a competitive edge in the global fashion industry. The report also provides a comprehensive overview of the factors influencing globalization and their impact on businesses, with Zara as a key example.

TITLE- GLOBAL BUSINESS ENVIRONMENT
INTRODUCTION
 Globalization is basically a process in which any business or an organization starts
operating on global scale. In this document we will explain all the four major factors
which drive globalization i.e. cost, market, environment and competition with an
example of Zara Company in the first part of this document.
 Report will also explain strategic complexities associated with operating in a global
environment like international company structure, foreign laws and regulations, cost
calculation and global pricing strategy.
 Currency ratesand strategic challenges in context of supply chain management which
are globalization, customer preference, market growth, quality and compliance with
Zara Company as an example.
Factors which drive Globalization:
Globalization is driven by four major factors. All the factors will be explained with an
example of Zara Company:
Cost:
1. The main motivation for any global company is to maximise their investment. One
nation market may be insufficient to provide country subsidiaries of a company all
economies of scope and scale, especially with the change in marketplace.
2. Whereas promoting and advertising a product can bleed across borders so companies
should make their product available each and everywhere where it
3. can be heard-of. In reality global opportunities and cost will lead to take tough decisions
for market segment, customer segment and build appropriate strategies.
4. One of the strategy is to pursue price leadership that means offering a product in global
market at lower price than competitors that means controlling cost of logistics, research
and development etc.
5. can be heard-of. In reality global opportunities and cost will lead to take tough decisions
for market segment, customer segment and build appropriate strategies.
6. One of the strategy is to pursue price leadership that means offering a product in global
market at lower price than competitors that means controlling cost of logistics, research
and development etc.
Cost leadership and product differentiation are not mutually exclusive,
however many global marketers combine both of them so that they can
contribute to their global scale of product and marketing as done by Zara,
they have improved their design of all their products as well as are offering
their products at a bit lower price as compared to their competitors. However,
marketers who opt for high differentiation should not forget to monitor cost
of their product because customer sees the price paid for the quality obtained.
Environment:
 There are few factors that are accelerating demands for global services and
products are across border information transfer, increasing mobility and
wealth of customers, publicity of globalization benefits and technology
revolution.
 Newly emerging business or organization or market are benefiting from
advance communication by leaping all the stages of economic development
that others went through in years. Because of increasing trending region,
newer technology new groups of global players are taking advantage of all
these factors.
 In earlier years it was a procedure to build a plant in every country they
serve but not its not the case, these mini nations serve handful manufacturing
bases to the world market.
 These also allow companies to develop new products or move quickly to
conquer new market or change directions when thesituation calls. Like Zara
products are manufactured in Spain but shipped to whole Russia.
Market:
 Nowadays consumers are becoming more similar in terms of education, lifestyle, income, aspiration and also in use of their leisure time.
 Some product marketers find ready buyers with high purchasing power with well-developed infrastructure in certain countries.
 While few other product are fare best at less sophisticated market. It doesn't mean that if a company is having global strategies they will serve entire globe. They need to take same critical
choices which includes a decision that where resources should be spend and where they should not or hang back.
 Most basic approach is to start picking up regions and then all the countries which need to serve within them.
 Then we should start grouping regions that might follow similar organizational structure of existing export office or multinational managements.
 For example we can split Europe in northern region, central region and southern region that have similar behavioural traits and demographic traits and because of this market data might be
more easily available where theorganization is grouping market according to existing structure andframework.
 Example: Zara is easily available in united stated, Russia but is not easily available in Europe as compared to other countries.
Competition:
 To remain in the competition all the global rivals need to intensify their marketing in
each and every region where they need to survive to sustain advantages, and if
weekend it can affect their market share worldwide.
 Nowadays all the competitive companies introduce new products, upgrade new
products and deliver them faster than ever before. I company doesn't act faster or
remain ahead in the competition can risked getting their ideas seen and picked off by
other global players. Clothing sector is a section which is growing and expanding
really fast in global market,
 So companies like Zara need to think of new strategies to grow more and more in the
global market. They also need to upgrade and modify their products according to the
emerging market and trend according to the region to sustainin the market and
compete with all the global leaders in their industry.
Strategic challenges in context of supply chain management:
 Current supply chain is developing complexity due to many factors and customers
nowadays are demanding new products at correct time and at nominal price.
 Because of this supply chain is facing some difficulties as developingreasonable and
cost effective supply chain is really challenging. Few of the main supply chain
challenges are:
Globalisation:
 Biggest challenge faced by companies nowadays is to reduce cost of their supply chain. To satisfy customer's price expectation organizations have chosen low cost countries for manufacture so
that there is tax reduction and reduction of direct and indirect cost.
 But having global suppliers increases complexity which comes from extended delivery time. Customers are nowadays very much demanding they not only want cheaper products but want
their product on time.
Customer preferences:
 As already stated above global supply chain are very complex. Not to forget constantly changing product features is increasing the challenge even more.
 When a product is released, customer pressures the company to think of new product or upgrade the current product. To modify and enhance a product companies need to constantly redesign
their supply network to fulfil market demand in such a way that its completely transparent for the present customers.
Market Growth:
 Activities and need of new customers is another challenge for the companies. Cost of product development to its introduction need to be considered. So, therefore companies are trying to
expand in terms of distribution for revenue growth and increased market share.

Globalisation:
 Biggest challenge faced by companies nowadays is to reduce cost of their supply chain. To satisfy customer's price expectation organizations have chosen low cost countries for
manufacture so that there is tax reduction and reduction of direct and indirect cost.
 But having global suppliers increases complexity which comes from extended delivery time. Customers are nowadays very much demanding they not only want cheaper products
but want their product on time.
Customer preferences:
 As already stated above global supply chain are very complex. Not to forget constantly changing product features is increasing the challenge even more.
 When a product is released, customer pressures the company to think of new product or upgrade the current product. To modify and enhance a product companies need to
constantly redesign their supply network to fulfil market demand in such a way that its completely transparent for the present customers.
Market Growth:
 Activities and need of new customers is another challenge for the companies. Cost of product development to its introduction need to be considered. So, therefore companies are
trying to expand in terms of distribution for revenue growth and increased market share.
 All the global companies are expected to grow in their home country as well as in foreign country. Companies normally face difficulty in emerging in a new market due to
government policies, fees and trading policies. Like Zara is facing problems in Europe for their market growth.
Quality and compliance:
 Nowadays product reviews, feedback, comments have a huge effect on customer's shopping aside from quality and price. Product reviews have not only influence their shopping behavior but also increased
the chances of product return.
 So companies are under high pressure of creating increased quality products and create them constantly. They can do it by checking quality of product at every level of supply chain such as raw material,
manufacturing, quality etc.
 Product quality is always hand in hand with compliance. Organization need to qualify all the international standards, need to check quality of product, permits, license and certification which can be
beneficiary for them and their supply chain management.
Strategic complexities associated with operating in a global environment are:
International company structure:
 If a company aim is to be globally known then they should have a team for this challenge. If they do not have a proper structure of a company and proper location of their teams they will face challenges
internationally.
 For example Zara, Zara has a central president who oversees all the branches and manages smaller presidents (country based or region based) despite of its global presence it is managedcentrally and
consistently around the world.
Foreign laws and regulations:
 Gaining knowledge of local laws and regulation, tax implementation and trading laws is important for any business to run globally.
 Like Zara was sued for negligence of selling a dress on time worth thousands of dollar as a breech in law.
Cost calculation and global pricing strategy:
 While doing business oversees product price can be a problem and should be considered as a part of your strategy. Cost of the product should remain competitive still ensuring profit. Before setting price of
a product companies should research price of direct and local market which can give you a bench mark ensuring that it works in your favor.
 Cost of labor, manufacturing, shipping, marketing and distribution cost must be considered before finalizing the price of the product. This lays keen impact on the growth of Zara.
Currency rates:
 One of the major challenge is fluctuation in currency rate it has always been a
problem for global business, So monitoring exchange rates must be the central part
of the strategy.
 One way to protect yourself form from this fluctuating currency is to pay supplier
and production in the same currency as in the one you are selling. Like if currency
rate in Europe increases then price of the product will also increase and companies
like Zara will face loss in its profit similarly if the currency rate decreases then
selling of a product will also increase which will eventually increase sales of the
product and company will gain profit.
CONCLUSION
 From the above case study it has been summarized that cost, market, environment
and competition are the four main factors which drive globalization.
 All these factors are explained with Zara as a company.
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