Business: Zara’s Strategy for Value Creation
Similar to other industries, the apparel industry is characterized by intense competition across various market segments. Nonetheless, Zara has and continues to develop and utilize varying strategies that enhance their competitive advantage. Michael Porter hypothesized that there are three specific strategies that offer a viable platform through which a business enterprise can gain a competitive edge over its competitors. Often connoted as generic strategies, these strategies include; cost leadership, focus, and differentiation. A reflection on Zara depicts the fact that it generic strategy is differentiation strategy. While much has been hypothesized regarding the differentiation strategy, it is of the essence to realize that it entail the development of varying products or services for different market segments (Porter 76). With the use of the differentiation strategy, the varying products or services devised by a business are promoted and branded differently. This allows the business to restructure the prices of the products or services in a manner that favors the business.
There are various reasons justifying the notion that Zara’s generic strategy is the differentiation strategy. More importantly, the differentiation strategy often aims at a large market size within a particular industry. This is the case in the context of Zara, whereby it targets a large market within the apparel industry. Evidently, Zara has close to 1700 outlets all around the globe, and other outlets are being often opened (436). Establishment of outlets by Zara is not done in isolation; instead, Zara’s outlets all around the globe are established at strategic locations. In most cases, Zara’s outlets are located in prime locations that can guarantee access by a significant portion of its target consumers. The second reason that justifies the notion that Zara’s generic strategy is the differentiation strategy is the fact that Zara utilizes a strong differentiation, which is perhaps the primary reason that makes them a leader in the apparel industry. Zara’s strategy emphasizes trendy products that have a rational adaptability and quality (“Chapter 12” 438). The pertinent focus on trendy products minimizes Zara’s need for advertising and promotions because customers are loyal to trendy products. Zara’s strong differentiation approach is further supported by its well-coordinated supply and value chain. With regards to its supply chain, Zara contracts its garments internally and externally, where they flow through the firm’s distribution centers in Mexico and Brazil. Zara’s value chain is characterized by manager’s sense of customers and their capability to coordinate global activities (“Chapter 12” 238).
International Expansion Strategies
Expansion of businesses into the global contexts entail the use of various strategies including manufacturing, joint venture, exporting, and licensing. A close analysis of Zara portrays the fact that its international expansion strategy is exporting. Zara with it’s close to twenty thousand employees distributed in twenty-three factories manufactures apparels and distributes them across its stores located across different contexts. Despite using exporting as its international expansion strategy, it is of the essence to note that Zara also manufactures its apparels in certain countries. Evidently, Zara has its manufacturing firms in Morocco, Turkey, Spain, and Portugal, whereby the firm has outsourced close to 15% of its manufacturing to these countries. On another note, Zara has outsourced close to thirty percent of its manufacturing to Brazil, Vietnam, China, and Bangladesh (“Chapter 12” 437). This warrants a deduction that Zara uses manufacturing and exporting as its core international expansion strategies. In a nutshell, Zara’s expansion into the global arena is characterized by the adoption of exporting and manufacturing approaches.
Zara’s Internationalization Practices
Product
Zara’s internationalization practices pose immense implications on the product as a core component of the marketing mix. Expansion into the global markets affects Zara’s product (s) in that there is a need to consider the target global customers varying dynamics including religion, culture, socio-economic status, and purchasing habits. For this reason, Zara’s expansion into the global markets requires it to meet the wants and needs of the international consumers. The fact that Zara emphasizes on trendy apparels calls for an analysis of the opinions that international customers have regarding trendy clothes.
Pricing
The fact that international expansion affects pricing component of the marketing mix is apparent. This is evident in Zara’s internationalization whereby despite pricing its products aggressively; Zara is forced to restructure its prices in the global markets. In most cases, Zara has to pass product shipping costs to its international consumers. In European states, Zara prices are higher by 10%, in American countries it is 70% higher, whereas in Japan it is 100% higher (“Chapter 12” 438). Conclusively, internationalization affects pricing because of different factors including import duties, transport costs, and fluctuations in interest rates.
Promotion
A reflection on Zara’s policy portrays the fact that it does not encourage advertising. Zara prides itself in the production of trendy apparels that have a high customer loyalty. Nonetheless, internationalization impacts on promotion because of the variations in advertising approaches across different nations. Internationalization calls for the adoption of advertising strategies that are in line with religious practices, cultural attitudes, political climate, and language of the country that a firm is expanding to.
Place
Place component of the marketing mix is also impacted in as a result of Zara’s internationalization. With regards to this component, it is of the essence to realize that place entails the manner in which a product is distributed to the intended customers. This means that a lot of parties are involved. Nonetheless, Zara should often consider the need to establish its international stores in prime locations that can guarantee access by its customers.
Work Cited
Chapter 12. The Strategy of International Business: Zara’s Strategy for Value Creation in the Global Apparel Industry, page 435-439. Print.
Porter, Michael. Competitive Strategy: Techniques for Analyzing Industries and Competitors. London: Simon and Schuster, 2008. Print.
