Zara International Strategy
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International Expansion Strategy & Advantage
This section will discuss some of the strategies used in the decision to go global, how the management ensured success in entering new markets and at the same time mitigate the risks involved in expansion.
International Expansion History
Through its brief company history of about 50 years, Inditex has globalized itself from the shores of Spain to become a multinational retail store with about 2000 stores worldwide. The rapid expansion of Zara came about starting off with a first foreign outlet in Porto, Portugal in year 1988. Following this, they then entered the US market with a store in New York and then in Paris in 1989 and 1990 respectively. In the following years, Zara continued its global assault through strategic and well planned decisions.
International Expansion Strategies
Geographical Expansion
Zara chose their locations for international expansion initially very strategically based upon geographical location to their warehouse in Galicia. Since their business model revolved around a central operating base and quick turnovers on small quantities of stock, it was imperative that they started their expansion with locations that were close to their base in Spain to reduce the operating cost (no warehouse needed overseas) and shipping costs to their overseas locations.
Within 1992-1997, Zara opened new stores in locations that were within 3000km of Spain at a rate of about one store per year (Exhibit 14). In the coming years, Zara more rapidly opened stores in locations that were within 5000km of Spain. This geographical pattern of expanding outwards away from their central operations shows that the management has taken into consideration the distance of their new stores to the central base, taking a conservative approach in expansion.
Market Study
Zara considers market similarity when choosing their potential foreign locations. Markets that share similar traits to their domestic market and relatively low level of economic development are considered first in the hope of replicating the success in Spain. Studies are also conducted to examine the ease to enter the market
Also, Zara chooses to expand into a new market/country one store at a time. This strategy of opening one store in a major city and then using the experience gained through the operation of that single outlet expand through the rest of the country is self-proclaimed by the management as an oil-stain pattern. As can be seen in Exhibit 14, with the exception of a few nations, Zara has historically entered a new market with one store initially and will then proceed to expand their operation by multiplying the number of stores there over the coming years.
Employing this technique of market study first before entering/selecting a new market helps to mitigate risks via avoiding it after conducting a risk management