Impact of Market Entry Strategy on ZARA's Expansion into Ivory Coast

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Impact of market entry strategy on ZARA
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Table of Contents
Chapter 1: Introduction..................................................................................................................................3
Chapter 2: Literature review..........................................................................................................................7
Chapter 3: Research Methodology...............................................................................................................10
Reference list...............................................................................................................................................14
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Chapter 1: Introduction
Introduction
The study aims to discuss on the market entry strategy that will be helpful for entering a new market. In
the modern times, most of the companies are trying to expand business in global market for generating
high profitability. The problems regarding globalisation will be discussed in this section. However, the
research project will be performed on ZARA.
Background of study
Globalisation helps to develop economic condition of a country. Global brands have started to promote
themselves aggressively for attracting more customers. Global market is being targeted as it is providing
with several opportunities. ZARA is trying to enter markets of Ivory Coast. The company has selected
joint venture market entry strategies, which will help them to lower risks. ZARA may face challenge
while entering the new markets due to competition. Joint venture strategy will be beneficial for entering
targeted market, as two companies may share risks and ownership in this strategy (Yan and Luo, 2016).
Company background
ZARA is a fast fashion Spanish clothing brand, which was established in 1975. The fashion group own
several popular companies such as Massimo Dutti, Pull&Bear, Oysho and others. The company has main
branch in Arteixo. In 1988, the company started to expand business in international markets. Currently
ZARA has more than 10000 stores in multiple countries. This has been stated that the revenues of this
brand have been increased by 3% in 2019 (zara.com. 2019).
Research aim
The research aims to understand the impact of Joint Venture Strategy on Zara while entering market of
Ivory Coast. Moreover, the project intends to analyse the current issues of globalisation.
Rationale
The issues of increased competition may bother the market entry of ZARA. In recent times, companies
are also developing new strategies for promoting their brands and create brand awareness. Social media
marketing is being used for performing such promotional activities. Social media usage has been
increased by 9% as of 2018 (statista.com. 2019). It has been observed that 70% of professional marketers
are relying on social media for promoting their brands (statista.com. 2019). According to a report,
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investment in social media marketing will be increased over next few months. In this way, those
companies have been able to attract customers. ZARA may have to invest more on advertising rather than
focussing on product development. This problem has become a significant issue as this may influence the
partnering companies negatively. Both the companies in joint venture may develop strategies and
misunderstanding may be created, which will damage brand image. This problem has become a issue now
as the internet users and social marketing has been increased. It has been stated that there are 4.39 billion
people who uses social media, which was 669 million previously (statista.com. 2019).
It can be stated that social media marketing is actually being fruitful. Social media marketing and other
marketing may increase investments of a company. A company may face challenges while entering a
market alone and investing more money on social media marketing. There are many large fashion brands
in the markets of Ivory Coast such as Oncheck and others. These brands have already achieved
recognition in the local markets. ZARA may face challenges while penetrating this market, as the brand
already has created brand awareness. Abidjan, the capital of Ivory coast is famous for its vibrant fashion
market so that it can be stated the people of this country are highly fashionable ( bbc.com. 2019).
There are also some risks of running in loss if ZARA cannot be able to sale its products in the market of
this country. Joint venture strategy is beneficial for reducing such risks. Two companies will have to
share the risks and losses as per agreement. Both the brands can work closely so that they can be able to
develop their products and improve services. In this way, competition can also be avoided.
Figure 1: Global social media marketing analytics
(Source: statista.com. 2019)
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Objectives and question
The objectives of the study are provided below:
 To identify the market entry strategy for ZARA while entering the markets of Ivory Coast
 To assess the problems regarding joint venture strategy
 To identify the concepts and theories that can be helpful for joint venture strategy
 To assess the factors that can mitigate identified risks
Question
1. What is the market entry strategy that can help ZARA to enter new market successfully?
2. What are the problems that can be posed by the current global market condition?
3. What are the theories that can be helpful for understanding joint venture strategy?
4. What are the factors for mitigating identified risks?
Structure of proposal
Figure 2: Structure of proposal
(Source: created by the learner)
Summary
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Competition in the global market is one of the biggest problems in recent times. The companies, which
are entering new markets, can face challenges while expanding business into a new country market. The
joint venture strategy is being used mostly for entering new markets, as it helps to reduce risks and create
brand awareness more easily. ZARA will be able to enter to the markets of Ivory Coast and operate
business successfully by following this strategy.
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Chapter 2: Literature review
Concept
Globalisation refers to the incorporation of local markets into the global economy. Globalisation is
responsible for increasing interconnectedness of national economies. Investment form global brands can
be beneficial for the growth of developing countries. In modern times, most of the businesses are
expanding business in global markets for generating higher revenues. According to Obstfeld (2015),
globalisation has provided the businesses several opportunities including the tech developments, better
funding, lower manufacturing and others. On the other hand, Tissot (2016) has stated that there are
several risks that have also been posed by globalisation. This has increased competition and affected the
business operation of small companies. Small companies may not be able to compete with the big
companies due to the lack of resources. Lack of resources resists such businesses to compete in global
scales. Big companies may also face challenges while entering new markets. Companies need to develop
effective market entry strategies for penetrating such markets successfully. Joint venture is one of the
most important market entry strategies that have been used by several companies.
Factor
Several factors of globalisation can affect the joint venture process such as technological changes,
economical change and others. According to the Chanu and Dhir (2016), while using joint venturing
strategy both the company will need to ensure customers trust. In this way, the company can be able to
increase sales and achieve business objectives. Technological changes in new market may affect the
business operation of these companies. New entrants in markets may not be able to collect all the
information about the local market. Existing companies in market will be able to develop more unique
products and address the needs of customers by using latest technology. It is stated that the demands of
customers changes with respect to the latest technological and changes. These companies may face
challenges while positioning products for the customers. In the words of Bustinza et al. (2019),
companies need to create highly unique products as per the demands of customers in order to survive in
the competitive market. New companies may find it difficult to position products as per the requirements
of consumers so that this factor influences joint venture.
According to reports, failure rate of joint venture rate is 40% to 50% ( Prange and Mayrhofer, 2015).
Companies may not be able to compete with the existing big brands in the targeted market. Economical
changes in a country may affect the revenue generation of brands. Buying power of customers may be
influenced by economic changes. For example, if the economic recession increases the new entrant
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companies may not be able to generate revenues as expected. Sometimes, the companies may face
challenges while generating the investments that they have made.
Impact
Globalisation helps to develop economies of a country. Companies may also be able to grow by
expanding branches in different countries. The positive impacts of globalisation include development of
education, trade, trade flow and others. However, globalisation may leave a negative impact on the
cultures of a country. In the words of Gunn (2017), globalisation is responsible for affecting every aspects
of individual’s lifestyle. Globalisation has increased competition in markets. Increase of competition may
be beneficial for the existing companies as such companies start to modify products and develop service
quality. Emergence of global brands has been increased due to the increased competition in global
markets. Usage of social media for marketing has also been increased accordingly.
Barriers
Cultural barrier is one of the biggest barriers in recent times that can affect the brands to penetrate global
markets successfully. Brands will face challenges while hiring local people or understanding market
condition. Cultural norms of a country might restrain people from purchasing some specific goods. The
legal obstacles may also influence the companies to fulfil their aims successfully. The cultural difference
between the joint venturing companies may also be another barrier. This may cause misunderstanding
among the companies and restrain them to accomplish business objectives. These barriers can be
overcome by developing strategies.
Theories
Theory of liberalism, political realism, post modernism and others helps to understand globalisation
properly. According to the theory of liberalism, economic welfare and wellbeing of people should be
targeted while starting globalisation as extension of market led modernisation (Finnis, 2017). Theory of
post modernisation states that perspectives of globalisation emphasises on the significance of structural
power. The identities, knowledge and norms are groups under the label of modernism. Theory of trans-
formationalism refers to the increased interconnectedness in political, economical and cultural factors of
globalisation (Wood, 2016). These theories are helpful for understanding the concept of globalisation.
Literature gap
This literature does not include strategies that will be beneficial for avoiding such risks and barriers.
However, any other market entry strategy has not been discussed apart from the joint venture. There is a
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future scope of analysing other market entry strategy, which will be helpful for understanding the concept
more deeply.
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Chapter 3: Research Methodology
Research onion
Figure 3: Research Onion
(Source: Saunders et al., 2012)
Research philosophy
There are four types of research philosophies such as pragmatism, positivism, interpretivism and realism.
In this project, positivism will be used, as data collection and interpretation will be included. Positivism
helps to gain knowledge through the process of observation. The findings of the project will be
quantifiable as per this research philosophy.
Research approach
Research approach mainly includes three types of elements, which includes deductive, inductive,
abductive approaches. Deductive approach will be used in this project. Deductive approach refers to the
development of hypothesis based on those theories that are already exists. In this project, hypothesis and
research question have been developed so that the deductive approach will be suitable.
Research design
Research design can be categorised in two different types including conclusive and exploratory research
approach. Exploratory research design will be used here. Problems regarding globalisation have been
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discussed in this project. This approach is suitable for analysing problems so that this design has been
chosen.
Data collection
There are several methods of data collection, which includes primary and secondary data collection.
Primary data collection will be used here for collecting data. This data collection method can be divided
into two parts such as qualitative and quantitative data collection. In this project, surveys, questionnaire
based data collection, interviews and other processes will be used.
Data analysis
In this project, the qualitative and quantitative data analysis method will be used. Interviews and focus
groups will be included in the research so that the qualitative data analysis process will be used. On the
other hand critical analysis interpretation will also be provided so that the quantitative method is also
selected.
Sampling size and technique
The sampling size will be 58 employees and 2 managers for performing the research. The probability
sampling g technique will be followed, as the respondents will be selected randomly. In non-probability
technique, the respondents are selected non-randomly so that the probability technique will be suitable.
Ethical consideration
Thus, it can be stated that research participants will not be harmed for performing this research. The
dignity of each participant will be respected and prioritised. The survey will be conducted after obtaining
full consent form participants. Privacy of respondents will be prioritised. Data protection act 1998 will be
adhered.
WBS and Gantt chart
Task Name of Activity
Start
Date
Duratio
n
End
Date
1.1 Selection of topic 4/3/2019 1 4/4/2019
1.2 Preparing questionnaire 4/4/2019 3 4/7/2019
1.3 Finalizing the methods of data collection 4/7/2019 3
4/10/201
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1.4 Assessment of questionnaire patterns
4/10/201
9 3
4/13/201
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2.1 Conducting primary data collection 4/13/201 10 4/23/201
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9 9
2.2 Validation of collected responses
4/23/201
9 2
4/25/201
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2.3 Quantitative analysis
4/25/201
9 10 5/5/2019
2.4 Qualitative analysis 5/5/2019 8
5/13/201
9
2.5 Assessment of data
5/13/201
9 3
5/16/201
9
2.6 Analysis of findings
5/16/201
9 7
5/23/201
9
3.1 Final assessment
5/23/201
9 5
5/28/201
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3.2 Presentation of projects
5/28/201
9 1
5/29/201
9
3.3 Documentation
5/29/201
9 4 6/2/2019
3.4 Final presentation 6/2/2019 1 6/3/2019
Table 1: Work Break-down structure
(Source: created by the learner)
Selection of topic
Preparing questionnaire
Finalising the methods of data collection
Assessment of questionnaire patterns
Conducting primary data collection
Validation of collected responses
Quantitative analysis
Qualitative analysis
Assessment of data
Analysis of findings
Final assessment
Presentation of projects
Documentation
Final presentation
4/3 4/13 4/23 5/3 5/13 5/23 6/2 6/12
Figure 4: Gantt chart
(Source: created by the learner)
Limitation
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