Zara Company Assessing Global Opportunities

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When examining the potential of entering the new market in a different country and thus further increasing the firm’s global reach, multiple factors are to be considered. As any expansion is a costly project, Zara’s management team would first pay attention to factors that increase expenses associated with it. An example of one of these factors would be the minimum and average rate of pay for the relevant positions in a country of interest. Depending on these rates, Zara managers would be able to calculate their upcoming Human Resources costs. Although high average salaries in the industry, by extension, signify a well-developed economy and an established customer base, it naturally creates concerns with regard to expenses. Consecutively, if the firm was to decide where to open its outlet next, these rates could have become a deal breaker, with managers being swayed towards the cheaper option.

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Another logical factor to consider concerns the competitors’ presence and the saturation of the fast fashion industry within a country. Zara is a well-known brand in the affordable fashion segment and would not have to deal with the costs associated with making a name for a completely new company. Nevertheless, it is primarily known within Europe and America, where it has already been operating for several years. Every new market entry is associated with having to compete with familiar successful names, so managers might assess the potential options from the perspective of risking the least. Local companies would naturally be better versed in the various trends and preferences of the customer base in a new market. This would inevitably put Zara at a disadvantage, and thus managers would look for places where the fast fashion industry is relatively not saturated. On the other hand, by entering a market with a low number of globally known firms, Zara could stand out through its international reputation and experience. When entering a new market that has not yet been penetrated by a variety of multinational firms, Zara could benefit from a degree of glamour associated with it.

With the main risks accounted for, Zara managers would look for the most developed economies with high disposable income available to the majority of people. As a fast fashion brand, Zara markets its affordability and a wide variety of clothing options. The brands’ clothing items are not being sold as a luxury; instead, the branding and multiple marketing campaigns stimulate the consumers to return for more each season. Hence, since Zara is targeting people who are willing and capable of buying its clothes frequently, its managers are primarily focusing on countries with high levels of disposable income. Pursuing this factor would involve the general economy assessment with accounting for factors such as the levels of employment within the country and the general spending habits of the residents.

To screen the opportunities outlined above, Zara should conduct detailed research on each of the aforementioned factors of influence. It could test whether the employment rates and average salaries on the market are complimentary to the firm’s outlined human resources budget. It is important that while looking out for its financial interests and attempting to maximize the company’s profit, Zara does not lose out on quality. Hence while analyzing the savings potential, Zara’s management team could also research the skills provided by workers at the rate they find satisfactory. The market with the best balance between an ability to cut costs and the availability of high-skilled service workers would be the best opportunity for the firm.

Identifying and confirming the second factor, namely the availability of a sufficient market niche, would involve detailed and multi-layered market research. Zara would have to study its potential competition, gathering and analyzing data on both fast fashion brands and clothing firms in general. Furthermore, research into public perceptions of fast fashion might be needed, as the consumption evolution has put it under severe criticism within the last few years. The opportunity of standing out in a positive light as an international firm within a relatively tame market should be screened with the utmost attention (Linden, 2016). Marketers and managers should look into the customers’ needs, wants, and opinions on the industry in general, its state within the market, and Zara as a firm.

When assessing the opportunity of utilizing customers’ high disposable income and spending habits, Zara managers could rely on the combination of data analysis and field research. They could review the statistics on non-essential purchases their target demographic is most likely to make and assess whether Zara could factor in successfully. Furthermore, they could design and implement a number of surveys assessing the levels of customers’ enthusiasm towards a Zara shop in their proximity. When evaluating the results of these surveys, it is important that managers account for all the relevant biases and are not too influenced by the inevitable false positives.

The macro trends within the fast fashion industry are focused on the concerns related to supply chains and overconsumption. Due to the constraints of the need to produce a wide variety of clothing quickly and for as affordable a price as possible, the fast fashion industry has historically struggled with sustainability and fair practice. As these factors begin to influence consumers’ decisions more and more, Zara is on the outlook for new suppliers with ethical labor practices (Linden, 2016). The brand should consider partnering with local suppliers directly without the costs associated with middlemen and agents in such agreements. It could substantially increase the expenses in Research & Development for a period of time but would guarantee the return on investment in the long term. Namely, the more extensive market research would allow Zara to no longer pay middlemen and agents when dealing with suppliers, instead opting out for sources that pay workers fairly.

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Other companies have learned that even the most successful brands find global expansion challenging, as no matter the amount of research, one can not see the future. It is impossible to fully forecast the perception of the brand in a new market, as no amount of learned expertise equals an understanding of the local mentality. Even for a firm that operates in multiple countries, such as Zara, the new market penetration remains challenging, especially in the quickly evolving business world of today. Consecutively, the firm’s managers should keep an open mind and be flexible in their marketing campaigns and brand positioning in a new market. It is always better to lose money on developing a replacement advertisement campaign then it is to experience an overall failure of the expansion. Zara could benefit from prioritizing the extensive market research and flexibility in its new market penetration above the immediate returns.

Reference

Linden, A., “An Analysis of the Fast Fashion Industry”. Senior Projects Fall 2016. 30. Web.

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