Zara Case Study
Pre-course Assignment | International Business
INTRODUCTION TO THE CASE
Zara is a retail chain company which operates in the fashion industry. It's
owned by Indixt group in North West Spain. It holds the ownership of some
world famous brands such as Massimo Dutti, Pull & Bear, Oysho, Uterqüe,
Stradivarius and Bershka. The very first Zara shop was open in 1975 and
their specialty is frequent innovation of new product lines. Also they
decided not to outsource their production to low-cost countries which is a
trend in the same industry. At the same time they followed up a special
policy of investing on opening a new store instead of investing on
advertising which ultimately causes them to spread their branch network
and make their products available everywhere.
Zara controls most of the steps on their supply chain. Also they get the
customer feedbacks and respond to them in an impressive manner.
Through this, they are maintaining a loyal and frequently aware customer
base.
INTERNATIONAL BUSINESS
1
Pre-course Assignment | International Business
CASE QUESTIONS
Which theory is the best representative of Zara's internationalization?
When considering about the internationalization theories, there are three
main theories to be taken in to consideration.
1. The Uppsala internationalization model 2. The transaction cost analysis
model 3. The network model
The Uppsala Internationalization model In this model, a firm is willing to
intensify their commitments towards the international market when they
grow up by experience. When they grow up their experiences in their own
territory, they are tend to spread their business in to nearby markets and
then to the foreign markets which got similar features to their operating
country. Those similar features will be the culture, language and political
system. There are three stages in this Uppsala Internationalization model.
These steps shows how a company moves to an international market.
Stage 1: no regular export activities (sporadic export). Stage 2: export via
independent representatives (export modes). Stage 3: establishment of a
foreign sales subsidiary. Stage 4: foreign production/manufacturing units.
Zara's Internationalization Theory After Zara opened its first store in 1975 in
Spain, Zara started to open up new stores in every high populated city in
Spain. When they covered their territory, they started to search for
international opportunities in 1988. They grow up by their experience,
expanded in their country and then reached the foreign markets. They
selected Portugal as their new destination as the culture and geography is
almost same as Spain. While experiencing their first international
experience, they had to change their business model accordingly.
INTERNATIONAL BUSINESS
2
Pre-course Assignment | International Business
They identified the countries with less geographical and psychic distance,
open up a new store in there and spreading all over in that country. They
expanded to Northern Europe by opening a store in Paris, the capital of
fashions. Mexico was geographically in distance by they found it closer in
