What Is the Best Way to Grow the Zara Chain?

1. What is the best way to grow the Zara chain? How, specifically, do you see prospects in the Italian market? And, more broadly, what do you think of the strategy of focusing on Europe versus making a major commitment to a second region?

Zara is the largest and most internationalized of the six retailers that Inditex owns which are the following: Zara, Massimo Dutti, Pull & Bear, Bershka, Stradivarius, and Oysho. Since Zara accounted for 2/3rd of the total selling area added by Inditex across all its chains in 2001. The decision about Zara's expansion, would have important group level implication, has to be taken considering the Porter's Diamond for national advantage

Also, considering the fact that Zara does not compete on Price and the usual Zara customer is not very price sensitive, Zara rather competes on fashion and they can do it by having quick response capability. As given in the case, the growth options for Zara within its home market of Spain are limited. But Zara had only a 4% share in the domestic market and the company should try to increase it.

Zara is the most internationalized chain of INDETEX. During the 1980s, Zara expanded within the domestic market, opening stores in all Spanish cities with population greater than 100,000 inhabitants.

Firstly it should enter geographically or culturally close markets before taking opportunities in more distant markets.

The entrance on international market can be undertaken through three entry modes:

* Own subsidiaries: This expensive strategy was adopted in Europe and in South America because there is a high growth potential and low business risk of these countries.

* Joint ventures: If Zara has not knowledge about the market it prefers to use Joint ventures approach in order to make synergy with the local companies. For example, in 1999 Zara entered into a joint venture with the German firm Otto Versand and benefited from the latter's experience in the distribution sector and knowledge of one of the largest markets in Europe.

* Franchising: This strategy is chosen for high-risk countries which are culturally distant or have small markets with low sales forecast like Saudi Arabia, Kuwait, Andorra or Malaysia. Zara's franchisees follow the same business model regarding the product, store location, interior design, logistic, human resources, etc (source http://www.iei.liu.se/fek/723g10/upload-presentation-for-assignment-3/1.226718/ZARAcase-Group10-Assignment3.pdf)

PESTEL model helps in Internationalizing the Brand Zara.

The strategy around expansion has to be Short Term and Long Term. In the short term Zara should focus on European markets in addition to domestic market especially Italy