Case Study: Zara’s Entry into
Indian Retail Fashion Market
Zara is an extremely renowned brand, known for its latest designs and is among the
top 100 best global brands in 2010. It uses the unusual strategy of zero advertising
and instead invests the revenue in opening new stores across the world. Zara is popular
amongst old and young generations too because it is affordable fashion. It is crystal
clear that Zara is successfully living upto the standard of its two winning retail trends
firstly, it is fashionable and secondly it is low in price thus resulting in a very effective
mixture out of it.
The first store of Zara was opened in a central street in Spain in 1977 by Amancio
Ortega who also owns, other brands such as Massimo Dutti, Pull and Bear and many
others. Spain is the headquarter of Zara. Zara have opened 95 stores around the world
in quarter 1 of year 2009 alone, bringing the total to 4359 stores in 73 countries
worldwide.
Zara adopts a ‘Fast Fashion’ supply chain model. The latest fashions are supplied from
design to delivery in just 2 weeks, compared to the 6 month industry average. They
operate a vertical supply chain, so they themselves undertake everything from design,
manufacture, sourcing and distribution. This allows them total control over the
business, and leaves them less vulnerable to accusations of unethical practices such as
sweatshop labor. While Zara owns a majority of its stores in Spain, the international
expansion has adopted three different entry modes: Own subsidiaries, Joint ventures
and Franchising.
According to the Indian policy on foreign direct investment (FDI), Zara teamed up with
the Tata Group, India, to form a joint enterprise in February 2009. Zara took up joint
ventures as its mode of entry in India because this is a co-operative strategy in which
the manufacturing facilities and know-how of the local company are combined with
the expertise of the foreign firm in the market, especially in large, competitive markets
where it is difficult to acquire property to set up retail outlets or where there are other
kinds of obstacles that require co-operation with a local company to which Zara
regards its stores as one of the related elements in its business sculpt. The shop is
regarded as the boundary among the buyer and the motor of the whole business –
mode design, development, logistics and finally retail.
In order to effectively achieve their goals, Zara pursued a strategy of selling a variety
of its local clothing lines and international clothing lines, but maintaining Zara as the
primary brand in India. Zara also targeted the larger positions including either the first
or second positions in the Indian market of clothing lines. Any of these positions would
be sufficient enough for Zara to create an outstanding level with regards to
manufacturing, marketing and distribution.
To promote the organization and its clothing lines, Zara utilized video advertisements,
print ads and the idea of e-marketing which fulfilled the varying needs of consumers
from India and beyond; particularly those priority Indian markets or the consumers in
the urban India areas. For this promotion campaign, the perfect information that Zara
Company utilizes is “Providing quality and fashionable clothing lines that fulfills your
needs. Zara has been able to set up its reputation as one of Spain’s primary clothing
line companies for several years now. It is able to rise up to the challenges in most of
its markets directly. This is made possible through the efficient promotional and
positional strategies established in order to maintain not only large profits, but also
on establishing the foundations of Zara’s clothes and fashion trends. The promotional
strategies of Zara in India are easily implemented by the local employees themselves
which enables the organization to vastly improve without the burden of implementing
costly technologies. These initiatives can also lead in improved financial profit for the
organization and will enable the foundation of networks for Zara clothing lines in India.
Zara has maintained a reputation for targeting the teenagers, those in their twenties
and even the individuals considered young at heart. This is a customer sector that
other clothing companies have previously ignored in place of the adult consumers.
Zara Company also has the unique strategy of portraying the generations in their
campaigns. Zara Company can establish an image for itself in India as the clothing line
for the present generation. It has discovered that the purchasing power of the youth
and the marketing power of celebrities were similar. They have garnered significant
profit gains out of this strategy, and there is no reason why this won’t also work in
India. Nevertheless, Zara undergoes quite a few hurdles like the existing rules on FDI
in India require that foreign single-brand suppliers are obliged to surpass a 49% stake
to a resident associate.