Zara: Challenges in International Growth and Market Expansion

This report analyzes the challenges faced by Zara in its international growth strategy. It begins by assessing the external factors influencing Zara using PEST analysis, including political instability in regions like Catalonia, the impact of the Eurozone crisis, and the influence of technology on retail. The report then examines Zara's market entry strategy, highlighting the inefficiencies of its existing model in new markets and the impact of its cost leadership business model on supply chain costs. Furthermore, it addresses the intense competition in the fashion sector, particularly from rivals like H&M and The Gap, and the challenges posed by legal and business limitations in emerging markets like China and South Korea. The report references various sources to support its analysis, providing a comprehensive overview of the obstacles Zara must overcome to sustain its global expansion.

3. Challenges faced by Zara for continued international growth
The difficulties to proceed with continued international growth that will be confronted by Zara
can be assessed utilizing PEST examination apparatus. This instrument is useful in
understanding the outside market variables influencing Zara.
Political: As an organization headquartered in Spain, Zara is influenced by the Catalan freedom
development (Catalan News Agency, 2011). On the off chance that the Catalan locale picks up
freedom from Spain this will imply that a few operations of Zara would be in te recently shaped
nation. So this would affect Zara.
Social: There has been huge increment in online retail deals in the UK (Moth, 2015. In any case,
the online operations of Zara are less developed when contrasted with that of their principle
rivals in UK, for example, ASOS, Marks and Spencer, H&M and so on.
Economical: Eurozone obligation emergency has not yet settled. As an organization that has
significant operations in Spain and Portugal Zara is impacted by this emergency (Fashion Vore,
2013).
Technical: Zara uses technology in a few regions of their store network. So the new
improvement in computerization innovation impacts Zara (Fashion Vore, 2013).
From the Pest examination it can be derived that political and financial strength in Spain and
Europe is a principle test to universal development of Zara.
Market entry method adopted by Zara is similar to the stage model of internationalization. Under
this strategy, Zara enters new markets that are geographically closer to Spain through a single
store and uses this store to test the new market. Based on the viability of the market further
expansion is carried out. However, as Zara is entering new markets that are away from Spain,
this strategy has lost its efficiency. Moreover, the business model of Zara is driven cost

leadership. The operations in distant markets increase cost as supply chain lengthens (Lopez and
Fan, 2009). This is another challenge to the international growth of Zara.
The biggest challenge that Zara has is the strong and increased level of competition in the
fashion sector as it is surrounded by large number of apparel retailers. The biggest competitor of
Zara in UK includes H&M, The Gap etc. Moreover, the competitive pricing strategies from these
rival challenges the operational tactics of Zara. The competition set up biggest challenge for Zara
when it tries to enlarge its business into new regions. There exists a growing market for Zara in
emerging countries like China, South-Korea etc, but the legal regulations and business limits in
these places make it complex to enter (Kennedy, 2014).

References
Catalan News Agency, 2011. The retail group Inditex that owns Zara will invest €190
millions in Catalonia. Catalan News Agency, [online]17 February. Available at:
http://www.catalannewsagency.com/business/item/the-retail-group-inditex-that-owns-
zara-will-invest-190-millions-in-catalonia.
Fashion Vore, 2013. Zara. Fashion Vore, [online]. Available at:
https://fashionvore.files.wordpress.com/2013/10/zara-report.pdf
Kennedy, B., 2014. Retail marketing theory in fashion retailing context. Germany: GRIN
Verlag GmbH.