The paper "Critical Analysis of Zara as a Fashion Store " is a good example of a business case study. Zara is part of the chains of Inditex that are internalized. This report gives a critical analysis of Zara as a fashion store that seeks to expand in the international market after fishing its rollout in the Spain market. The introduction provides a brief history of Zara and outlines the challenges to be discussed in the paper. The body discusses the challenges in details and alternatives are provided in the recommendations. The conclusions draw attention to important elements pointed out in the case. Introduction Zara fashion retail store that was started in Spain by Ortega.
The store rolled out nationally and reached the capital of Madrid in 1985. It later expanded beyond the Spanish market. By 2001 Zara had 507 stores in various countries across the world. The company moved overseas in 1990 after completing its rollout in the local market in Spain. Zara got in production internally. Zara creative team designed products for women, men and children. The chain store faces the challenge of distribution, manufacturing and meeting demand, and choice of method to expand geographically in the global market.
This report analyzes the situation at Zara and provides alternatives to prudent ways of expansion without jeopardizing the position of the company. Case Analysis Zara is part of the fashion chains that were founded by Amancio Ortega and are based in Spain but operate globally. The first Zara store was launched in 1975 in La Curuna in an effort by Ortega integrate forward into retailing. Zara began by positioning itself as a store engaging in medium quality fashion clothing at prices that are affordable.
Zara sources its fabric and other inputs from external suppliers through the help of Hong Kong and Barcelona. Zara has a centralised distribution system that poses a challenge to its operations. Zara’ s business system comprises of design, sourcing and manufacturing, distribution, and retailing to the end consumers. All the merchandise for Zara from external and internal suppliers went through the distribution centre in Arteixo. As observers have noted the centralised model may lead to diseconomies of scale with an increase in the number of stores to handle.
Building a distribution centre at Zaragoza may not be the best solution to ease smooth distribution. Inventories were strictly controlled and production runs limited hence leaving some demand unsatisfied. The company emphasizes on rapidly changing product lines and has segmented into men, children and women market segments. Zara spent only 0.3% of realised revenue on media advertising. The advertising was confined to the commencement of the sales period and this is id not strengthen the presence of the Zara brand. Limited spending on promotion is worrying. Zara used joint ventures, franchisees and company-owned stores as modes for market entry into the international market.
Joint ventures and franchises were widely used to enter into various countries like Cyprus. It used joint venture to enter into the German market. Differences in positioning had an effect on the stores where Zara products were sold. Zara also faces a challenging of either using startups or acquisitions in its geographical expansion to other parts of the world.
Chen, M. K., & Wang, S. C. (2010). The critical factors of success for information service industry in developing international market: Using analytic hierarchy process (AHP) approach. Expert Systems with Applications, 37(1), 694-704.
Lee, G. K., & Lieberman, M. B. (2010). Acquisition vs. internal development as modes of market entry. Strategic Management Journal, 31(2), 140-158.
Morschett, D., Schramm-Klein, H., & Swoboda, B. (2010). Decades of research on market entry modes: What do we really know about external antecedents of entry mode choice?. Journal of International Management, 16(1), 60-77.
Moore, C. M., Doherty, A. M., & Doyle, S. A. (2010). Flagship stores as a market entry method: the perspective of luxury fashion retailing. European Journal of Marketing, 44(1/2), 139-161.
Prashantham, S., & Young, S. (2011). Post‐Entry Speed of International New Ventures. Entrepreneurship Theory and Practice, 35(2), 275-292.