Zara Fashion: Expansion Strategies, Asian Market Entry & Challenges

This case study examines Zara Fashion Retailers Company, a multinational fashion brand, and its global expansion strategies, particularly in the Asian market. It highlights Zara's competitive advantages, such as in-house production, efficient supply chain management using RFID technology, and a zero-advertising policy that allows for reinvestment in new stores. The study delves into Zara's successful entry into China and India, outlining strategies like partnering with local manufacturers and adapting to local consumer preferences. It also addresses challenges faced in these markets, including competition from local brands, betrayal by local partners, and infrastructural limitations. The case study concludes by acknowledging Zara's achievements and ongoing efforts to maintain its competitive edge in the dynamic fashion industry, emphasizing the need to adapt to evolving market conditions and address challenges effectively. Desklib offers a wealth of resources, including similar case studies and solved assignments, to aid students in their academic pursuits.

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ZARA FASHION RETAILERS COMPANY
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Zara Fashion Retailer Company
Executive summary
ZARA fashion Retailers Company is a multinational company that trades in fashioned high-end
clothing for men, women and even children. The company designs, develops, and distribute new
fashions worldwide through its stores that are located in various countries such as Spain, USA,
Morocco, South Korea, and even Mexico. The company’s main objective is to distribute fashions
clothing globally at as low prices as possible. The company produces products that fit a range of
wide market that include both the young and the elderly, average and the rich and customers
from various religious backgrounds. Zara Company boasts of very high competitive advantage
over its perceived competitors as it produces its own products in the company-owned factories. It
has embraced technology through the use of Radio-frequency identification (RDIF) chip that
helps in monitoring the stock flow. The company has experienced a substantial growth from its
establishment to date due to its efficient response to the market dynamics and some of its policies
like the zero advertisement policy that enables reinvestment of profits in establishing new stores.
From the already done strategies, the company has expanded in many countries but there are
places where its presence has never been felt such as some parts of Africa. A continued effort
plus handling the current challenges well present a bright future for the company’s growth.

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Introduction
Zara Fashion Retailers Company is one the largest fashion international companies that trade in
clothing and accessories. It is a Spanish company formed more than forty years ago by the
cofounders Amancio Ortega and Rosalia Mera in Arteixo, Galicia, Spain. The store started as a
small store that featured low-priced products but of popular high-end fashions. Zara has then
grown into a large company with several stores in various parts of the world; entire Europe,
USA, Mexico, Middle and even Far East. Currently, Zara is the main brand of the Inditex group
and boasts of more than 2200 stores globally, trades online and with an annual revenue collection
of approximately $9 billion. Such a growth from just a single store into being a multibillion
dollar company has been characterized by tremendous changes, improvements and even errors in
the process in a bid to satisfy the demands of the ever dynamic market.
Zara Company Expansion Strategies
The company has undergone various adjustments in their attempt to maintain and expand their
market share in the fashion industry. Some of the main decisive factors in the industry has been
the ability to adjust to the dynamics of the market in terms of the emerging trends and changes in
the taste of the consumers. Zara Fashions Company, just like other companies in the industry has
tried to do their business differently in order to lure customers into their stores and to maintain
the existing ones (Gamboa & Gonçalves 2014). For instance, the time taken to develop and
deliver a new fashion into the market is of great importance as the company that develops and
delivers a new trendy model in the market has upper hand in acquiring and maintaining new
customers. To achieve this milestone, Ortega in 1980s decided to alter the processes of design,
manufacturing, and distributions to help reduce time and logistics involved in coming up with a

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new design and making it available to consumers. This development involved the use of
technologies to identify any room for fashion design development and the use of group designers
instead of individuals.
Through this adjustment, the company has been able to develop new product and deliver it to the
stores in one week against the six-month industry average. The company has therefore been able
to launch an average of 1200 new designs annually, producing more than 450 million products
per annum. With this kind of fast process of developing, designing, producing, and delivering
new products in to the market, the firm has been able to earn competitive share of the market as
it has made most of the customers in the fashion industry believe that it’s only Zara the king in
new fashions. It is believed that Zara is so efficient that if a new fashion does not perform well
and maybe stays for a whole week without selling, it can be withdrawn from the shelves and new
orders cancelled as explained by Caro, Gallien, Díaz, García, Corredoira, Montes, Ramos and
Correa (2010). This fast adjustment allows them to be able to redesign the product and bring it
back to the stores within a week.
Rinallo and Basuroy (2009) found out that the company adopted a policy of zero advertising and
instead reinvest a fraction of the revenue in establishing new stores. This policy has favored Zara
Company in various ways such as nondisclosure of the company future plans and intentions.
Through advertisement, other competitors do have rough idea of the company’s yet-to-come
products, and may tend to produce a similar product to counteract the advertised one leading to
lower sales hence lower revenue collection. Zara as a company tries to get competitors off-guard
in new fashion development. Establishment of new stores help in spreading the image of the
brand and expanding the company while advertisement would have just spread the brand but not
expanding the company.

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Zara reduces production costs by producing most of its products within a given proximity. For
example, most Zara products are manufactured in Spain, Portugal, Turkey, and Morocco. The
company does not outsource most of its fashionable products like its competitors who outsource
them from Asia but instead produce them at company-owned factories. The company established
one of its factories in La Coruna a city well known for the rich textile industry. This concept
helps Zara access raw materials easily hence lowering production cost which in the end has a
reducing tendency on the price of the final product, (Rinallo, & Basuroy 2009). The low-priced
high quality fashions help the company attain greater heights in market share in the industry as
compared to its competitors. The strategic locations of the factories help in making the
distribution process simpler and this makes response to customer demands faster.
There has been a lot of pressure from online shopping service providers who present a platform
that enables customers to orders products and get them delivered at their door steps (Caro et al.
2010). Zara has reacted to this competition by focusing on sales and marketing as well. Through
this platform, the existing and new Zara customers are able to order fashion products online.
Davila and Ditillo (2017) elaborate that in order to monitor and control the flow of stock in the
company’s stores worldwide, Zara introduced the use of Radio-frequency identification (RDIF)
chip. The chips are embedded on the security tags of the products but are removed ones the
product is purchased. This process triggers a system that enables the company to detect a radio
signal from the tags, the stockiest take inventory and replaced the sold item. The system also
enables location of items that are not on the selves through the use of RFID tags. This technology
has made it easy to know the stores that require restocking worldwide as the system is centrally
managed (Caro & Gallien 2010). It also helps in identifying non-moving stock that needs
recalling for redesigning.

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Zara Company has always tried to better its trading process all the way from production,
distribution to actual selling. In 2011, the company entered a dialogue with environmental
campaigners such as Greenpeace and committed to eradicate the processes that lead to release of
toxic and harmful byproducts within its trading structure by 2020, (Brunner & DeLuca 2016).
The company went ahead to become the biggest retailer globally to participate in raising
awareness for Detox Campaign and later switched to production free from toxic release.
Zara in Asia
Zara has been considered one of the best innovative company when it comes to expanding into a
new market. The company uses a well calculated approach to handle every market it expands to.
The Asian market has been challenging to many foreign companies but Zara formulated its way
in, a strategy that lead o very rapid growth (Davila & Ditillo 2017). The company’s success in
Asia has been attributed to the company’s mastery of its chain of supply. The fact that it
manufactures its own products which makes the chain shorter as compared to other competitors
who outsource the products.
Zara in China
Zara opened its first flagship store in Shanghai in 2006 and the brand grew fast, the company had
more than 120 stores in the country by 2011. The company has made use of local manufactures
to partner in production of its products, a move that made the Chinese population accept the
company as part of them. They viewed Zara as their own as compared to other foreign
companies that tried to venture into the market with totally foreign products. The concentrated
on differentiation in the Chinese market to make its products more distinctive. This move made
consumers clearly identify the products and the stores in the cities. Zara’s ever dynamic fashions

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made the female customers a desire to visit its stores more than other stores in the country. The
company also ventured in homewares and partnered with the local manufactured who were good
at designing and manufacturing but poor in marketing and distribution. The company located the
homeware stores in the stylish departmental stores that attracted the above average and the rich
class of customers.
Challenges in Chinese Market
However, the company faced stiff competition from local competitors who it partnered with but
later brock out after understanding the game of industry. It is said that some multinational retail
giants have been fighting Zara to a point that some even corrupt the local administration to
frustrate Zara (Gamboa & Gonçalves 2014). Another major challenge in the Chinese market has
been betrayal by the local partners who tend to take some acts against their code of contract and
sometimes violet the Chinese labor laws. Such violations have always damaged the image of
Zara Company as mostly media talk about Zara not the local partners.
Zara n India
India has a policy that any foreign company has to partner with a major local brand to operate in
the country. Zara achieved this by partnering with Tata Group to approach the Indian market.
The company has been trying to lure the Indian elusive customers by regularly updating its stores
with new fashions (Davila & Ditillo 2017).
Challenges in Indian Market
Opening new stores was a challenge due to lack of spaces o open large store. The designing of
the buildings do not favor large store like the ones Zara operates.

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Majority of the population wear traditional clothing. This cultural practice has been a challenge
to Zara as there has been a shy off from new fashions in the country.
Indian clothes are colorful, and this has been a challenge to Zara designers who have been
restraining color palette.
Conclusion
Zara has achieved a lot from the time of its establishment to date. The company has conquered
many market challenges including the Asian market challenges. In India and china, Zara has
taken defensive position against most of its competitors, but on a serious note the company brand
has been performing well so far. More are planned, however, it’s very unlikely that Zara will
achieve the same growth in stores as it has achieved in China. At the same time, old rivals such
as Gap and H&M have now entered the market. This adds to competition for available retail
space, as well as a share of the customer attention and wallet. Zara’s clearly optimistic though.

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List of References
Brunner, E, & DeLuca, K 2016, 'The Argumentative Force Of Image Networks: Greenpeace's
Panmediated Global Detox Campaign', Argumentation & Advocacy, 52, 4, pp. 281-299.
Caro, F, Gallien, J, Díaz, M, García, J, Corredoira, J, Montes, M, Ramos, J, & Correa, J 2010,
'Zara Uses Operations Research to Reengineer Its Global Distribution Process', Interfaces, 40, 1,
pp. 71-84.
Caro, F, & Gallien, J 2010, 'Inventory Management of a Fast-Fashion Retail
Network', Operations Research, 58, 2, pp. 257-273.
Chatterjee, Sayan. "Simple Rules for Designing Business Models." California Management
Review 55, no. 2 (Winter2013 2013): 97-124.
Davila, A, & Ditillo, A 2017, 'Management Control Systems for Creative Teams: Managing
Stylistic Creativity in Fashion Companies', Journal Of Management Accounting Research, 29, 3,
pp. 27-47.
Fuchs, C, Prandelli, E, Schreier, M, & Dahl, D 2013, 'All That Is Users Might Not Be Gold:
How Labeling Products as User Designed Backfires in the Context of Luxury Fashion
Brands', Journal Of Marketing, 77, 5, pp. 75-91.
Gamboa, A, & Gonçalves, H 2014, 'Customer loyalty through social networks: Lessons from
Zara on Facebook', Business Horizons, 57, 6, pp. 709-717, Business Source Premier.
'Global Commodity Chains and Fast Fashion: How the Apparel Industry Continues to Re-Invent
Itself' 2014, Competition & Change, 18, 3, pp. 246-264.
Rinallo, D, & Basuroy, S 2009, 'Does Advertising Spending Influence Media Coverage of the
Advertiser?', Journal Of Marketing, 73, 6, pp. 33-46.

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Rinallo, D, & Basuroy, S 2009"From Armani to Zara: Impression formation based on fashion
store patronage." Journal Of Business Research 65, no. 10 (October 2012): 1487-1494.