Zara Corporation
I have chosen Zara Corporation based in Coruna, Spain in preparation of a case study when entering into a new market in US. Zara Corporation is an international clothing retail company that sells clothing attires and accessories. It was founded in 1975 by Rosalia Mera and Amacio Ortega. Zara is considered to be the largest clothing retail company in the world with ownership of fashion brands such as Bershka, Pull and Bear, and Dutti. At the moment, Zara has several outlets in Europe and the Middle East. It has a strong presence in these two regions but needs to expand to other regions such as North and South Africa, South East Asia, Oceania, Latin America, and North America.
In order to keep up with the trend, the company ensures that it launches new products and designs of cloths to meet the ever changing demand in the fashion industry. The company conducts regular market research for both domestic and global markets in order to develop designs that meet the market trend. Zara is known for its leadership in selling the highest quality clothes bearing in mind the purchasing power of different customer segments. This implies that the company has low end market products aimed at customers with price sensitivity. Similarly, the company has products for the high end market and the medium price levels.
Target Market
I chose the US market because Zara brand and name are well known in the world giving it an advantage in any effort or intention to expand to a new market. The need to open up outlets in the US is driven by this fact. The US market is very diverse and standard. It will enable the company to have few considerations in its intention to venture into this market. The US has the fourth largest population in the world with the highest level of consumerism by its citizens ('From Prada to Zara, 2009, p.4). This implies that consumer goods have a high chance of selling in the US due to the fact Americans love to buy things. The US also has the largest economy in the world ('Zara Launches MTV Streetmuse for Men' 2009). The rising levels of domestic demands for consumer goods have lead to an increase in the value of the goods and services over the past few decades. The US has a free market policy which encourages both foreign and domestic investments in the country. It imports an almost equal value of goods and services as its exports (Cavusgil, Deligonul, & Yaprak, 2005).
Industry Analysis
The fashion industry in the US is among the largest individual national fashion industries in the world. It is estimated that Americans spend up to 250 billion dollars every year on cloths and accessories. More than four million people are employed in the industry and the number keeps on growing every year.
Despite the fact that the US market is standard and diverse market, there is need for Zara to first understand the nature of this market. It needs to understand its cultural framework in order to make a successful venture. This implies the team that will ensure the company’s operation functions well in this country, must have an international experience, particularly in open markets such as the US. They must also have experience in interacting with people from different cultures all across the globe. Understanding the cultural background of the US market is not only limited to the consumer spending habits, but also the aesthetics, policies, laws, politics, technology and material culture, social organization, education, values and attitudes, religion, and language (Jiale, 2012; Homburg, Cannon, Krohmer, & Kiedaisch, 2009).
Cultural aspects
Culture affects markets differently. Zara, having a strong presence in Europe and Middle East understands the cultural background of these regions and how they affect the market. The same knowledge needs to first be acquired in the US market in order for a successful venture. The government regulates the market even though there is a lot of freedom to compete for a share of the market. Majority of the businesses in the fashion industry are private owned with a small presence of foreign companies. The US has some of the largest fashion companies and well known brands in the industry.
Language
Language is a critical aspect to consider when venturing into a foreign market. English is widely spoken in the US however other languages such as Spanish and French are also spoken by a small section of the population. Zara is a Spanish company with presence in Arabic nations and other European nations. Considering the fact that English is the dominant language in the US, the company will have to consider branding and advertising itself in English as this is likely to have an impact on the way its products will be used. Through the expansion, the company wishes to generate 30 percent revenue in the new North America market by the end of the third year. Basically, the goal of venturing into a new market is to improve business and increase profits for the company.
The fashion industry is estimated to be a 250 billion US dollar industry. However, economic forces that dictate the market have a potential to affect the business. Inflation rates in North America can lower the potential for institutions to purchase the software. Fluctuation in currency could increase cost of operations. The company will be affected by fluctuations in the cost of wages, oil prices, and transfer of materials.
Market Entry Strategies and Objectives
The process of entering any international market is a vital one for any business. International markets are different from domestic one thereby the business requires managers with international experience to run its activities in the new market. Marketing the company’s products in a foreign market has a lot of complexities and uncertainties compared to domestic markets. The political environment has to be evaluated to ensure that the business can achieve its goals in a stable political environment. Politics greatly affects the economy of a country especially in developing nations. Product positioning is important for the establishment of brand presence. This is particularly important for products that are driven intellectually. In its effort to position itself in the new market, the company will allow first hand exposure by giving free trials products for a limited period of time.
The company got the right balance of market mix elements. It defined a gap within the market and came up with a product that fills it. Using an effective balance of place, promotion, price, and product, Zara products are expected to make successful launch into the market. Marketing management orientation focuses on the techniques of developing, producing, and marketing goods to consumers . The orientations are used to support campaigns for marketing. Zara assumed a marketing orientation that focuses on the production and marketing of the new product. With regards to market orientation, the company created a gap in the market and created a product that would fill this gap more efficiently than what its rivals offered.
Another approach that the company could have used is the product oriented approach where the company could have first created a product that is perceived to be good and introduce it to the market without first developing a need within the market . The main difference between the two approaches lies on market research. Product orientation uses innovation in the production of a good and service. It is efficient for industries that rely on high product features to satisfy consumer demand.
A market mix involves the four ‘Ps’: product, price, place, and promotion. With regards to product, the first step for an effective mix is to develop an understanding of the market. The company relies on information from comprehensive market research to develop a product that specifically targets a segment of the market. The information retrieved from the market research study is used to develop a product that suits the needs of consumers. The company conducts market research with direct involvement of consumers. For instance, it can use a focus group to engage with consumers, listen to them, gather data, and conduct testing for products before launching the products into the market. With regards to pricing, the company used a strategy that offered consumers a value for their money (Zhang, Song, & Qu, 2011). The pricing was made to reflect product range, packaging, and formulation.
Place may refer to the point of sale. The concern is the distribution strategy that will ensure the product reaches the point of sale at the right time. The company has used a wide range of distribution channels to ensure that its products reach all the places where it is supposed to be sold. This includes the use of major retail outlets and high street shops. The company is aware that teenagers love book shops and software retail stores. It also offers an online capability to purchase and download its products.
Promotion entails the communication aspect of the product. Customers need to be aware of the availability of the product in addition to being persuaded to buy the product. There is a wide range strategies used to promote a product. This includes the use of events such as product launch, direct mails, public relation, branding, and sales promotion. During the product launch, the company will invite celebrities and motivational speakers with huge influence. Associating the product with influential figures is strategic in luring schools to buy the company’s products.
The Zara brand has a wide range of products that target various demographics of the market. It is important for consumers to get a value for their money when they purchase any particular product or service. If the purchase of a particular product helps to save money that could have been spent elsewhere, the product then gives consumers a value for their money. A consumer need is a basic requirement. Companies making products that fall under consumer need do not have to push to sell the products (Evers, Andersson, & Hannibal, 2012). The only need for pushing may result from the competitive nature of the market environment. Customer wants are drawn from customer needs. For instance, if students need to wear shoes, the shoes may require polishing. The polishing aspect is the want and it is generated from the need to wear shoes. Customer demands are the things that customers desire. For instance, the need to live a luxurious life may be classified as a demand (Eldring, 2009).
Management orientation
Global strategic management involves configuration dimension, integration of goods, and standardization of goods (Hill, and Gareth, 2007). Standardization implies the level required to develop standardized goods across all countries whereas in integration, a company has to determine the extent in which it needs to integrate its competitive nature in all countries of operation (Lodato, 2008). For instance, the US is a highly competitive market due to the free market policy. The same level of competitiveness may not be required in a market that is not controlled by the free market policy (Tokatli, 2008). In ethnocentric management orientation, a company assumes that its products will be as successful in a new or foreign market as in the domestic market. This assumption is made without the consideration of adapting the product to the new market. From a common case analysis, ethnocentric management orientation is seen in car industry where a car company makes standard cars and assumes they can be used in a different market without any problems.
A polycentric management orientation involves the demands and needs of a foreign market. Sometimes, a company intending to begin operations in a new market is forced to adapt its products to the standards of that new market. For instance, electric goods use different levels of voltage in different parts of the world. The amount of voltage used by television set in US is different from the amount of voltage used by a television set in South Africa. This implies, that a US television making company intending to sell its products in South Africa, must adapt the product to meet the voltage requirement in South Africa. Otherwise, the product may not be used well in the new market. Looking at the case of Zara, there is little need to adapt clothing. However, the company may be required to adapt some accessories products such as shoes. Shoe size numbers are done differently in US, Europe and Japan.
Action plan
The Marketing Budget
Monitoring and control
In order to analyze the effectiveness of the plan, it is important to make comparison between the objectives and the performance. The procedure for monitoring is developed from the activities that bring the plan to success.
Changes and strategies will be made where necessary as the marketing plan progresses. Information and feedback collected from our market evaluations and analysis of our performance will guide the upgrading process. Marketing objectives will also be evaluated on a constant basis. Zara hopes that all plans stated in this marketing plan will be executed as planned in order to assist the company to realize its goals and objectives.
Critical Factors
In order to ensure success and realization of all objectives, the company will emphasize on the following factors:
- Revision of our advertising and marketing objectives on a monthly basis
- Focusing on the marketing objectives and needs of the target market
- Paying attention to responses from consumers and other forms of market feedback
- Continued investment in research and development to ascertain market metrics
Reducing costs on advertising and improving the profit margin
Reference List
Cavusgil, S, Deligonul, S, & Yaprak, A 2005, 'International Marketing as a Field of Study: A Critical Assessment of Earlier Development and a Look Forward', Journal Of International Marketing, 13, 4, pp. 1-27
Eldring, J. (2009). Porter’s 1980 Generic Strategies, Performance, and Risk: An Empirical Investigation with German Data. Diplomica Verlag
Evers, N, Andersson, S, & Hannibal, M 2012, 'Stakeholders and Marketing Capabilities in International New Ventures: Evidence from Ireland, Sweden, and Denmark', Journal Of International Marketing, 20, 4, pp. 46-71
'From Prada to Zara: Is the global recession out of fashion?' 2009, Strategic Direction, 25, 3, pp. 9-11
Hill, C. W. and Gareth, R. J. (2007). Strategic Management: An Integrated Approach. Cengage Learning
Homburg, C, Cannon, J, Krohmer, H, & Kiedaisch, I 2009, 'Governance of International Business Relationships: A Cross-Cultural Study on Alternative Governance Modes', Journal Of International Marketing, 17, 3, pp. 1-20
Jiale, P 2012, 'The Marketing Exploration of Knockoff Garments, Exemplified by Adivon in the Comparison of Zara', Modern Marketing, 2, 1, pp. 12-17
Lodato, M. W., 2008. Management of New Product Launches and Other Marketing
Projects. Boston: Pearson.
Tokatli, N 2008, 'Global sourcing: insights from the global clothing industry–the case of Zara, a fast fashion retailer', Journal Of Economic Geography, 8, 1, pp. 21-38,
'Zara Launches MTV Streetmuse for Men' 2009, License! Global, 12, 2, p. 15
Zhang, C, Song, P, & Qu, Z 2011, 'Competitive Action in the Diffusion of Internet Technology Products in Emerging Markets: Implications for Global Marketing Managers', Journal Of International Marketing, 19, 4, pp. 40-60
