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countries that were perceived to have high growth potential and low business risk.Joint ventures: In 1998 Zara entered into a joint venture with Japanese firm Biti, In 1999 with German firm Otto Versand and in 2001 with Italian firm Gruppo Percassi . In Germany and Japan the deal was 50/50 and in Italy Inditex held 51%.Zara has increased its ownership since then to 79% in Germany, 80% in Italy and 100% in Japan.Franchising: This strategy is chosen for high-risk countries which are culturally distant or have small markets with low sales forecast like Iceland, Andorra, Poland and middle eastern countries
Market Entry StrategiesZara's international expansion involves what they call the “oil stain” strategy. It begins with the opening of a flagship store in a major city. After developing and gaining experience to operate locally in the country, they then proceed to open stores in adjoining areas.An example is the flagship store in Paris, started opening up stores regionally before expanding nationally. There are 16 stores in Paris alone.
Market Entry StrategiesIn the early stages of internationalization, the management at Zara was following an ethnocentric orientation where the stores had to be a replication of the Spanish stores.This approach encountered unexpected difficulties in some countries due to the cultural differences. Zara decided to move towards a geocentric orientation, allowing the company to adopt in some cases local solutions rather than replicate the home market.•Customer size differences in Asian countries•Laws that required availability of garments for youths in all sizes in Buenos Aires•Cultural differences in Arab countries where some garments cannot be sold•The different season in the southern hemisphere
Models for ExpansionMarket development strategy in which they are entering new market, China, India and Indonesia, Market penetration strategyespecially in European and American markets by improving its online store and increase customer service.Diversification strategies:to complete its product lines Zara sells accessories to complement their main product which is apparel, unrelated diversification in the form of Zara HomeVertical integration: Zara manages design, production, shipment, display, promotion, sales, and feedback itself, relying very little on outsourcing. This vertical integration approach gives Zara a lot of control over how it operates.
Locations•The stores are located in main commercial areas, the interiors are designed to create a unique atmosphere and with attractive window displays.•Zara spends only 0.3 percent of its annual turnover on advertising.•During the 1980s, Zara expanded within the domestic market, opening stores in all Spanish cities with population greater than 100,000 inhabitants•First international store opened in 1988 in Porto, Portugal•By the end of Jan 2006 Zara was operating in 59 countries with 852 stores.