Zara Case Study: Supply Chain, Tax, and Global Strategy Analysis

This case study examines the business strategies of Zara, a prominent Spanish clothing and accessories retailer, focusing on its global expansion and operational challenges. Part A delves into Zara's adopted concepts and theories, including global trade and comparative advantage, while also identifying three key threats and opportunities for growth. The analysis extends to how rapid market expansion affects Zara's supply chain strategy, exploring concepts of convergence, divergence, and cross-convergence in relation to global knowledge and local needs. It further explores tax and exchange rate issues and evaluates the benefits and challenges of Zara's expansion into China. Part B presents a mind mapping model outlining Zara's strategic advantages and external environmental factors. Part C concludes the study, reinforcing Zara's global brand presence and the importance of strategic adaptation. The case study highlights Zara's need to address fierce competition, align with international designers, and adapt to technological changes and customer preferences to maintain its market position. References to academic literature are provided to support the analysis.

Study Case - Zara

Table of Contents
INTRODUCTION...........................................................................................................................1
PART A...........................................................................................................................................1
1. Concepts and theories adopted by Zara. ................................................................................1
2. Identify and discuss three main threats and three main opportunities that should be
considered by Zara in expanding its global reach. .....................................................................1
3. How rapid expansion of markets affect Zara to change their supply chain strategy. ............3
4. Concept of convergence, divergence and cross convergence, how Zara combining the
global knowledge and local needs. .............................................................................................3
5. Explore four key tax and exchange rate issues which Zara could face...................................4
6. What are the benefits and challenges for Zara as it expands in china of being a global
company that doesn't act locally. ...............................................................................................4
PART B............................................................................................................................................5
PART C............................................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Present report is based on Zara case study in which it will discuss about different
concepts theories of Zara. Furthermore, it will discuss about Zara threats and opportunities
through which they get better opportunities and growth for the future purposes. Zara is the well-
known brand which is Spain based clothing and accessories’ retailer company. This case study
based on the three parts which will discuss below.
PART A
1. Concepts and theories adopted by Zara.
Zara is the most superior brand in clothing and accessories sector founded by husband
wife Duo Amancio Ortega and Rosalia Mera under the umbrella of Indtex. It is the multinational
conglomerate. The main concept of the company is to understand the global trade environment
produce services accordingly (Ettenson and Klein, (2005)). Global economy is the economy
which works on planetary scale. Furthermore, it is the economy which originated goods, money,
services and information. Moreover, global economy has increase in rapid form where
companies adopt new services and idea in order to make new market. Zara adopts this concept to
expand new services and business growth. For example, WTO world trade organisation its main
aim to foster greater worldwide openness dealing. Another theory of Zara which they apply is
comparative advantage. To maintain the Comparative market theory flexible company apply five
porter forces concept in order to minimize the external factors and maintain its company
functions. Comparative theory has two versions: relative comparative advantage and absolute
comparative advantage. Zara is the leading and most wanted brand in the world; company needs
to measure the comparative advantage in order to enhance the brand image and brand expansion.
Relative comparative advantage is based on the assumptions like whichever company is famous
for their core product, they will get the comparative advantage from them. This theory helps
company to gain from global trade by specialisation ( French, (1979) ).
2. Identify and discuss three main threats and three main opportunities that should be considered
by Zara in expanding its global reach.
Some threats and opportunities which are faced by Zara Company are given below:
Opportunities
 Scope for global Expansion: Zara is the global market trend. It has a big opportunity to
enter in the global market and get higher level of profit margin. Zara has spread their
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presence in four continents. Still, they require tom cover or more countries, more
expansion and more growth will give more opportunities to the country. For that,
company needs to understand the market conditions of the cities and then enter into the
market such as China, Singapore, UAE, Japan and Saudi Arabia ( Kapferer, (1997)).
 Opportunity to expand in e-commerce: Another opportunity for the company is to take
its business at online level. From they get more profit revenue and brand popularity. Zara
already has numerous online stores, however, they need to adopt their functions and
provide services in those countries where online shopping is not available. This helps
company to take more exposure and growth to get customer satisfaction and brand
loyalty.
 More attention to distribution network: Zara has an opportunity through which they
distribute their services across the world. In US, Zara has 52 stores as compared to 453 in
Spain etc. they also need to satisfy the customers of US by growing more outlets and
stores (Kilbourne and Pickett, (2008).
Threats
 Fierce Competition: Zara has been facing furious competition at local and global level.
At local level, they face competition with Sweden's H&M and Massimo Dutti,
Stradivarius. Big organisation has affect directly on the Zara by adopting big strategies
and higher level of competition in the market. Moreover, they facing the issues.
 No Collaboration with international designers: Zara has no collaboration with the
company unlike H&M. They need to collaborate itself with international designers to aim
more profit margin and growth such as Lagerfeld, Lanvin, Alexander Wang. With the
help of this collaboration customer to get more customers to buy from the company who
provides designer clothes (Alwitt and Pitts, (1996) ).
3. How rapid expansion of markets affect Zara to change their supply chain strategy.
The main factor which affects company’s Supply Chain Management (SCM) is industry
competitors. Due to modernisation, Zara has adopted new technologies and market growth in
order to manage their all 1_1519821428costs and services. Globalisation concept is the best to
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leverage company functions and growth which helps to rise new market share and incentives.
Furthermore, main stakeholders and policy issues which affects company' supply chain
management and give positive and negative impacts on the company operations. Customers
have different choices and preferences by which they put demand of particular products and
services. Furthermore, policies and government changes may affect the company’s supply chain
and give high cost on it. For instance, government may increase the tax rates on services. In that
situation, organisation increases their prices through which customer are less interested to
purchase those products. In this situation, company’s supply chain strategy gets affected and lead
to low profit margin. Zara is the global market leader which is facing heavy competition among
their competitors. Moreover, they need to apply effective supply chain strategy in order to meet
the needs of the customers (Amao, (2011) ). Supply chain strategy of the company should be
attractive and strong to handle the uncertain changes so that it does not face any issues and
challenges in the global market. Company needs to determine the comparative advantages to set
the target and their own opportunities in the competitive market. Moreover, the main objective of
the company is to get higher satisfaction level of the customers by providing them the best
quality of services and superior branded clothes. Company also need to adopt strategy to identify
the competitors’ plans and policies. Furthermore, another concept which affects supply chain
strategy is technological concepts which give higher changes and opportunities for the
companies. Technologies is the rapid changes factors which is compulsory for the company to
adopt and get attraction of customers. This is another concept which affects supply chain
strategy. This factor minimises the cost and provides flexibility in working. Zara needs to
exacting its online services for their potential customers to make effective the supply chain
strategy (Carroll, (1991) ).
4. Concept of convergence, divergence and cross convergence, how Zara combining the global
knowledge and local needs.
Concept of convergence is the term through which Zara has opportunity to adopt new
technologies and growth for new expansion. Zara has to adopt convergence policy to meet the
needs of global as well as local customers. Convergence concept helps company to combine the
prices to get more attraction of the customers. Along with that, it is necessary for the company to
take advantage of the concept to get more expansion. It is known as concept of convergence.
Like transfer pricing it is the concept when two companies transfer its prices under common
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ownership control. Moreover, this is the example of convergence. This process helps company to
maintain the uniformity format among the market (Clemens and Douglas, (2006)). Moreover,
concept of divergence means when companies has adopted their separate changes as per their
own policies. Like Exchange rate and fluctuations in which uniformity is not existed there are
changes in prices, services or in qualities. Moreover, Zara has applies divergence concept to
meet the global and local needs. They make their own prices and policies. The focus of the
company is on the quality which is most important element. This helps company to attract large
number of customers. For big organisation, it is very easy for them to enter into international
market but for the small scale businesses, it is very difficult for them to enter into the
multinational market. In accordance with that, Zara is the leading brand which focuses on the
customer needs and wants. They focus on the top level of customers which easily afford their
prices and services. To enhance the global knowledge and meet the needs of local areas, they
need to focus on the middle group of customers.
5. Explore four key tax and exchange rate issues which Zara could face.
Zara would affect different issues of exchange rates, inflation rates, current account
deficit. They also need to adopt terms of trade which helps them to understand the environment
of china. Along with that, they may facing the issues of population level, like May Zara product
and services are not much affordable by the country members. Due to changes in inflation rates
currency exchange rates would be affected. High inflation rates would rise the prices of products
through customer attraction may decrease. For making market and brand image stronger
company needs to adopt lower price services to get customer attraction (Crane and Matten,
(2016) ).
6. What are the benefits and challenges for Zara as it expands in china of being a global company
that doesn't act locally.
China is the most popular and customer focus country. It has huge opportunity and
growth in order to meet the needs of customers. For entering into international market, Zara
needs to adopt major policies and rules and regulations of China. It is a globally competitive
country which has strong technologies and growth opportunities ( Elkington, (1997) ). Moreover,
the big opportunities in China is there are huge population which is ready to pay amount for the
branded products. For Zara, it is the opportunity to attract large number of customers and profit
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margin. On the other side, Zara needs to set the prices on the basis of their customer preferences.
They need to determine the actual needs and wants of the customers accordingly they provide the
services. Along with that, they also need to analyse the government tax rates and policies for the
international businesses. Zara has opportunity to get potential for greater profitability and
involves greater risk to start their business at global level. In respect of consumers, they attract
customers to set the prices at lower price (Fiss and Zajac, (2006)). In addition, disadvantage is
erosion of own culture. Moreover, the main aim of the company is to build strong relation with
the customers. Zara also need to adopt ethical policies of China before entering into the market.
Furthermore, they need to face some troubles in the other country to manage the operation
functions.
PART B
Zara is the leading brand for which they need to expand their business at global level in
order to meet the needs of customers (Mintzberg, (1983) ). Along with that, Zara needs to
analyse the external environment to maintain its market position (Gap (2016)). Above mind
mapping model shows that Zara needs to acquire all those advantages to enhance the company
image and share in the market (Moore, (1999)). Moreover, the main issue of the company is to
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Compete in
global
Market
Strong Market
Strategies.
Good Source
Of funds and
Resources.
Customer
Oriented
Services. Good Brand
image
Financial
Resources

get better services for their customers. Besides, company also need to determine the external
environment to mitigate the negative impacts such external factors are political, legal, social,
technological and environmental (Huber and et.al., (2010) ). Before, entering into the new
country these factors should be recognisable.
PART C
On the basis of Zara case study it can be concluded that Zara is a well known brand
which provides their services in across the world (Kilbourne, Beckmann and Thelen, (2002) ).
They need to provide more services in other countries as well. This helps company to expand its
business into new level. Overall case studies based on the global market for the Zara. For that
company needs to adopt several strategies and approaches to sustain their business into
international level (Klein, (2000)). Moreover, they need to adopt some more effective strategies
and market plan to enter in the market of china and other places as well. For that company needs
to adopt various exchange rate services and face issues of that policies as well (Milbrath,
(1984)).
CONCLUSION
From the above discussion it can be concluded that, Zara has to operate its business at
local and global level in order to accomplish the needs of other customers as well. Above case it
discussed about the threat and opportunities of Zara and expansion issues in international market.
This was discussed that international market involves various risk and opportunities.
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REFERENCES
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