Zara's Strategic Approach: Expanding into the Chinese Market

This report provides a comprehensive analysis of Zara's international marketing strategy, focusing on its potential expansion into the Chinese market. It begins with an executive summary and an introduction to international marketing, highlighting the benefits of global expansion and the specific context of Zara's business. The report then delves into a country profile of China, examining its market size, competition, and consumer behavior. An environmental analysis, encompassing political, economic, social, and environmental factors, is conducted to assess the challenges and opportunities. The core of the report outlines Zara's internationalization strategy, including market entry, market selection, and proactive approaches. A SWOT analysis is presented to determine Zara's strengths, weaknesses, opportunities, and threats. The report also covers market segmentation and the marketing mix, offering insights into how Zara can effectively position itself in the Chinese market. The conclusion summarizes key findings and recommendations for Zara's successful entry into China.

International Marketing

EXECUTIVE SUMMARY
The report is based on an international clothing brand Zara. The firm wants to expand its
business in China and this will require several strategies and plans including market
segmentation, marketing mix, positioning, internationalisation and marketing strategy. This will
help to determine market of China and also position of Zara in order to establish business in
Chines market.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Country profile............................................................................................................................1
Environmental analysis...............................................................................................................3
INTERNATIONALISATION/EXPANSION.................................................................................4
Market strategy............................................................................................................................4
Zara SWOT analysis...................................................................................................................5
Market segmentation........................................................................................................................6
MARKETING MIX.........................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
International marketing can be described as simple application of marketing principles
across the globe which helps in creating awareness about services of firm worldwide. Maketing
across foreign boundaries is also beneficial for expanding business and operational activities.
However, there is a crossover between what is commonly expressed as international marketing
and global marketing, which is a similar term. The report is based on international expansion of
Zara in China. Zara SA is a Spanish fast fashion retailer firm founded in 1975 by Amancio
Ortega and Rosalia Mera. The fashion retailer provides luxury clothing and other accessories for
men, women and kids.
Zara expanded its domestic market during the 1980s after opening the first store in La
Coruna. The international expansion started with opening of store in Oporto, Portugal in 1988.
At present, organisation is operating over five continents with over 1,700 stores. The brand
image is highly standardized and the firm is now more focused on fashion trends.
The report will cover environmental analysis of China along with country profile. In
addition to this, marketing strategy and swot analysis in order to determine own strength and
weaknesses to take advantage of future opportunities such as business expansion. Finally, the
report will demonstrate market segmentation and marketing mix in the context of Zara
effectively.
Country profile
China is one of the most populated country and has a large market including successful
efforts of retail industry. Zara as a huge global phenomenon of expanding its market and
ambitions in the major emerging market of China. There is a stiff competition in China from
other global brands including Uniqlo and H&M (Surugiu and Surugiu, 2015). In accordance
with sucss of global brands in China, it is expected that spending of consumers will increase on
clothing in the future.
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Chinese market is one of the greatest opportunity for Zara which will assist the firm in
enhancing their revenues and international brand presence effectively. The firm also operates in
Asian market. In this global world, organisations of all sizes wants to establish their operations in
foreign markets as it helps to provide various benefits including opportunities for market
diversification and growth. Here are some major benefits for Zara of expanding business in
China such as:
Improving business reputation and global presence: Business will be able to improve its
reputation by going global and providing market offerings to totally different people. Potential
business partners will also think high when they know about international presence of brand.
Zara can easily expand its market to China.
Diversifying company markets: Taking business to global platform will help in diversifying
markets which will helps the firm in managing innovation and increasing returns (Grönroos,
2016). In case, the firm experienced dramatic shift because of any natural disaster.
New revenue potential: Global expansion in China will help Zara to access much larger base for
customers. Successful expansion will deliver higher revenues for firm and also new customers.
Globalisation could be an effective strategy in order to take revenues to higher levels.
Foreign investment opportunities: As many companies knows that foreign investment is
extremely valuable for firm. Going globally will help in international investment opportunities
which are effective for the growth and development of firm.
However, there are some factors which could affect expansion of Zara in China that
strategies and plans are required to manage them effectively.
China is one of the most attractive locations in the world and also grown to become the
strongest power (Griffith and Zhao, 2015). The legal system is also improved and there are
three reasons of establishing business in China such as Size of the market, low cost of labour and
growth potential. Apart from this, there are some challenges which ca be faced by Zara in China
are:
 Accomplishing strategic objectives that is cost reduction.
 Local differentiation.
 The strength of core competencies in certain activities and areas.
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Environmental analysis
Analysing political, economic, social cultural, demographic environment of China is
crucial for Zara. This will help the firm in understanding market situation and preferences
towards specific products and services of fashion retailer.
Political factors: Political factors includes both formal and informal rules. It is known as the
most unsettled force. Government of China is focused on improving e-commerce. However,
there are various barriers which can hinder expansion plan of Zara that is intellectual property
rights, tax policies and protection are some regulations supports customer rights, privacy, etc.
Economic factors: China economy experiences effective GDP growth rate. Economic
development has a major impact on small businesses. The GDP rate shows that each citizen
adds more values to society (Sousa and Tan, 2015). In this case, purchasing power of
customers is increasing which can be good for Zara. However, inflation rates and high property
prices could affect some decisions of business.
Social factors: It can be said that demographics are changing and social and cultural aspects of
China plays a crucial role as the country is known for its population. Age distribution fluctuate
and population growth alter cultural values and social trends. Other factors such as education,
lifestyle, religion and emigration can affect the decision making of Zara. There are almost 420
million internet users in China that most of the people shop online.
Environmental factors: There are a lot of factors affecting China that rapid economic
development has an impact on natural environment. Air pollution, water, industrial waste,
climate change, deforestation and biodiversity losses are some environmental challenges for
China. However, government of China is taking initial steps to minimize environmental
concerns. Encouraging participation of local people in environmental protection is one of the
example of initiatives.
Thus, it can be said that there are several issues might affect expansion plan of Zara to
Chines market but on the other hand it will help the retailer in establishing successful
international brand image (Eisend, Evanschitzky and Calantone, 2016). The management of
successful business functions will aid the company in enhancing revenues, profitability with
strong customer base.
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INTERNATIONALISATION/EXPANSION
Market strategy
An international expansion strategy involves market entry strategy including important
choices in order to focus on primary markets, identification of channel strategy and target
customer, value offerings for product and service, allocation of resources, creating operating
model and brand positioning effectively. Zara wants to expand its operational activities in China
in order to increase production and profitability. Moreover, this will also help to enhance brand
image. Zara must extend its reach to all major continents across globe.
Proactive not reactive: It can be said that international expansion is an important and major
token for business. It is a long term plan to establish a new venture at different country and place.
A proactive approach is required to enter in a new market (Beck, Chapman and Palmatier,
2015).
Increasing sales in existing markets: It is the safest and easiest way from the firm is able to
expand. This requires pricing strategies, location, marketing techniques and customer group.
Existing increasing sales will help to reach more customers and profitability.
Market selection: Right country for the internationalisation is selected that right factors are
required to determine such as business practices, language, legal and political system, economic
environment, infrastructure, culture and education which has an impact on business.
Market entry: Market entry requires various strategies and plans in order to make strategic
choices. Resource commitment, investment risks and share of profits has major impact on firm.
Evaluation of various market environmental factors will help Zara to manage strategies
accordingly. Maximum control over operational activities is required to manage business.
Market approach: It is a method of determining appraisal value of an asset based on selling
prices. The approach is evaluation method that helps to measure and calculate value of property
as part of the valuation procedure effectively (Alshaketheep and Syed, 2018). Market
approach can be used by Zara is order evaluate actual market condition of Chines market.
Motivation: Motivation or motivational strategies helps to increase effective management
practices. It helps to enhance high level of worker motivation. Management of Zara must treat
people as empower employees, individuals, rewards and incentive system, flexible workplace
and redesign jobs. This will help to enhance chances of getting motivated employees for
expansion purpose.
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Hennes & Mauritz is a Swedish multinational clothing retail firm competing Zara at
different levels including clothing and other accessories. H&M, Zara and Uniqlo are the three
clothing retailers operating business at international level. The competition is rising day by day
and expansion requires an effective strategies and plans.
Zara SWOT analysis
SWOT analysis of Zara will help to determine its strength, weaknesses, opportunities and
threats. This will help to determine factors which are needed for the international expansion
strategy effectively.
Strengths: One of the foremost advantage Zara lies in its design abilities. The firm has unique
design for people who understand Zara and visit stores very well. Clothes are elegant, fantastic
finishing and superior quality. The brand value is 10.07 billion and ranked at number 53 by
Forbes. It also stayed away from controversies and believe in health culture at workplace. Supply
chain is also strong and an average 450 million items are designed by Zara (Parry, Greenhough
and Dyck, 2016). An effective physical evidence in stores express completely trendy image of
firm along with all new and fresh materials.
Weaknesses: Zara has everything for everyone that it does not have any specialise in anything.
Customers starts shifting, when competitor is focused on one thing. Cost id one of the core
strength for Zara but it may lead to lack of advertising. The brand can double its profitability by
advertising its products. There is also a low safety stock for Zara that it is a strategy managed by
them in order to keep consumers walking into the store.
Opportunities: The firm is famous for its design and fashion products. It may be more popular in
the future resulting in growing market potential effectively. It is a such status symbol in the retail
and clothing market. Capitalisation is required on the growing market potential of the existing
market. In addition to this, market expansion to China is also an opportunity for business in order
to increase its global presence and ensures providing stylish clothing effectively.
Threats: Zara done a mistake of not advertising its operations from the start. They have a unique
selling proposition and also ways from which it keeps rotating design. Customers are usually
unable to know about the latest design of Zara in the lack of advertising. They might get hear it
from anyone other using Zara products. Competition is also rising that H&M, Vero Moda and
Mango are also loved for their designs (Keillor, 2015). Zara delivers similar quality and unique
propositions with low prices.
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Competition: Burberry, Chanel, Prada, Versace, Louis Vuitton, Ralph Lauren and Valentino are
some key competitors for Zara in the market as well as in international expansion.
Thus, it can be said that Zara is able to increase its reach to China by operating
exclusively through its stores. China is a popular and big country that people will love products
and services offered by Zara effectively. It just requires a move to look into Chines market.
Market segmentation
Market segmentation is a process in which the market of potential customers is divided
into groups, characteristics or different segments effectively. In simple words, it is a process of
dividing large units into small units which have more related or similar characteristics. The
concept will help to divide the complete market set up into smaller subset comprising demand,
taste and preference of customers effectively. It can be said that one market segment is totally
different from the other segment.
Basis of market segmentation
Gender: Marketer divide market into smaller segments based on gender. Men and women both
have different choices and preferences. Marketing strategies is required for men's which would
not work in case of females (Akgün, Keskin and Ayar, 2014). Women would not purchase
products meant for men. Industries like Zara, footwear, cosmetic requires segmentation
according to the gender in order to assess their demands in the market especially in new market.
Age group: One of the ways of market segmentation is divination of target audience into age
group. Marketing strategies and products will be different for adults and kids. Age group will be
divided in terms of 5 to 15 kids, 15 to 25 adults and 25 above men.
Income: Management of Zara must divide customers according to their income in China. There
are three categories of this section such as high, mid and low income group. Stores are divided
according to different range of products as per the income of people into higher and lower level
income group. For an example, Carrefour, Pantaloon are high income group as compared to
Reliance retail, Vishal retail and Big Bazaar. Income decides the purchasing power of customers
that products according to their affordability helps to manage ratio between producing and
purchasing.
Occupation: Occupation also relates to the market segmentation that needs of office goers are
different from college and school students. It can be understand with a simple example that a
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beach house shirt or a funky T-shirt has no takers in a Zodiac store. Thus, occupation derives
thinking of people in terms of what they want to wear, what they need to wear etc.
Targeting: After creating market segments within market, Zara management is able to devise its
marketing strategies and promotional schemes to a particular segment or individual taste. When
market segments are completed, business starts to target them accordingly. It is the second stage,
where firm analyse which segment needs to target (Di Maria and Ganau, 2014). Various
factors must be analysed such as effectiveness and profitability of every segment in order to
determine potential growth and size of the segment.
Positioning: Positioning is a stage where Zara requires strategy to determine how they will place
their services or products to the targeted customers in the market. This process helps to select
best and appropriate marketing mix. It is important for Zara to determine why consumers would
avail offerings rather than competitors. Unique selling proposition will help to determine certain
factors and a positioning plan for understanding various segments. This will help to identify best
marketing model for position offerings.
MARKETING MIX
Zara is a very popular Spanish clothing retailer which implements the use of effective
marketing strategy in order to accomplish business goals and objectives. Consistently, Zara has
become the best known fashion brand for Spain. The firm has currently 2000 stores in 77
nations. The numbers are likely to be double in the future. Zara started its operations in 2010 in
India. The 7ps of marketing mix element are described below:
Product: Zara is known as Coca Cola of fashion industry. The craze of this brand is increasing
day by day and people liking clothing and other materials offered by brand. One of the major
strength of the firm is responds to changes according to the needs of customers very quickly and
effectively. The firm also not outsource manufacturing process by making it fully control of
products it produces. The method of unique selling preposition is also used to create the latest
trends effectively (Czinkota and Ursic, 2015). New styles are available within stores in two or
four-week maximum. The product which is not at all preferred by buyers is directly pulled out.
Zara is trying to sort out some issues in India like the firm is coping up with cultural and local
people needs which is a huge challenge for firm. Adaption of product refers to differentiation,
customisation or localisation. It is a strategy of catering various needs of customers in different
countries. Continual changes will help Zara to foster it's experimentally and flexibility.
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In addition to this, Zara management is also able to involve global products in the belief
of same products to be sold across market without any modification. The concept is now become
meaningful because of the trend by multinational businesses to increase economies of scale.
Product standardisation includes customer preferences, government and trade restrictions. Thus,
Zara is able towards product adaption and standardisation in China.
Pricing: The major concept of the firm is to provide products and services at a reasonable price
to customers in the market. Zara believes that customers find its prices quite affordable and
effective as per the quality of material and products. Some Zara stores might be very premium
but others are also much affordable for customers. Zara follows premium pricing strategy in
order to make price affordable for consumers by optimising training and development cost
effectively. The firm is providing the latest fashion at lower prices in all the international stores.
The overall structure of the firm is very low as compared to its other key competitors (Shu, Jin
and Zhou, 2017). The prices are also country specific that these are managed according to the
tax and other rates applied on material. Market based pricing strategy sets target prices for
consumers which are they willing to pay. The budget is also fixed according to the target price
for production.
People are likely to purchase products and services from Zara and also able to afford
international brand. For an example, people could afford 5 dollars for international product Tie
of Zara that means it could be five minimum price for the particular product effectively. Zara
must come with higher prices as it can be changed after entering into the market. Changes in
price of products are possible after taking reaction from audience that it will help better to make
certain changes efficiently.
Promotion: Zara has a different marketing policy of Zero investment in marketing. Instead, the
firm use money to advertise in opening new stores. The striking thing about Zara is that it has
found differences between other products of rivalry firms that matters to customers effectively.
In addition to this, key marketing strategy is based on differentiation, experience, exclusivity and
affordability. The firm relies heavily on word of mouth in order to promote advertising. The
target population for the products is age group between 18-40 living in the cities. This is because
that the group is more fashion conscious more than any other brand. The market segment also
comprises women (65%), Children (15%) and Men (25%). The attention of firm shows the
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commitment they have towards each of their showrooms. Every store manager is also free to talk
to their counterparts at Spain regarding marketing and improvement plans.
Zara mostly hire people belonging from fashion business or have knowledge regarding
fashion industry. Local people from China can be also used for promotional activities as it is
easy to find labour with low prices (Siamagka and Balabanis, 2015). Zara also has a
shopping application in China which has a major benefit in online shopping that people living in
China mostly uses internet facilities. This will help to enhance revenues and market share.
Place: The firm has vertically integrated retail which are unique from others. This means that
Zara designs, manufactures and distributes products and services itself effectively. The approach
is working because it has managed itself by establishing one of the leading brand for fashion in
Spain. The expansion is ongoing along with operations in 30 different nations. 90% of the stores
are owned by Zara itself and rest 10% are in joint venture with franchises.
CONCLUSION
It can be concluded from the above report that Zara SA is a Spanish fast fashion retailer
firm wants an international expansion. Moreover, Chinese market is identified as one of the
greatest opportunity for Zara which will assist the firm in enhancing their revenues and
international brand presence effectively. The main aim of Zara to expand its operational
activities in China is to increase production and profitability. Zara is able to increase its reach to
China by operating exclusively through its stores. In addition to this, the management of
successful business functions will also aid the company in enhancing revenues, profitability with
the help of strong customer base. Apart from this, analysation of political, economic, social
cultural, demographic environment of China is important for Zara. This will help the firm in
understanding market situation and customer preferences towards specific products and services
of fashion retailer effectively.
Zara is a well known fashion brand but, it must advertise its operations and products in
order to be more popular. Advertising is a way to reach potential customers easily and
effectively. This will definitely help Zara to be known in Chines market in order to create
awareness. This will help to reach potential customers and will increase production. One of the
most crucial thing is that the firm is managing its operational activities and strategies in different
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