Zara Advertisement Marketing Finance

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Political-legal

In terms of Zara opening stores, they have three strategies in order to deal with regulations (Lopez & Fan, 2009). These strategies are franchising, subsidizing and joint ventures. Zara mostly owns it stores however it does do some franchising, but the company only does franchising in countries with strict foreign regulations (Vincent et al. 2013). They also have joint ventures in countries with high competition, which makes it hard to gain access to retail space, and there are barriers to entry to the new country (Lopez & Fan 2009). Lastly, they own subsidies if they are trying to establish a store in countries that have high growth potential and low risk (Lopez & Fan, 2009).

                      In the textile part of Zara, the industry was deregulated resulting in the disappearance of the import quotas (Lopez and Fan, 2009). Thus, allowing Zara to have economies of scale (Lopez & Fan, 2009). This means that the more they produce the lower their costs would become essentially enabling Zara to be able to produce more at a better price for the consumer.

Economic

More than half of Zara’s sales come from Europe especially Spain, which accounts for 22% of revenues (Vincent, Kantor, Geller, 2013). Since, Spain’s economy has slowed this has had a big impact on Zara leading the company to find more markets (Vincent et al. 2013). However, Zara produces most of its cloths in Spain, Portugal and Morocco (Vincent et al. 2013). This allows Zara to spread its risk of foreign currency fluctuations because it is not dependant on one area of production or in other words one currency.  In addition, on the retail side of Zara it has 80% of its locations outside of Spain allowing foreign currency fluctuations, inflation and interest rate risk to be spread over an abundance of countries (Vincent et al. 2013). This make Zara’s revenues less tied to macroeconomic factors than if it only had locations in Spain (Vincent et al. 2013). In terms of the consumer, economic recessions will help Zara in Spain because of their relatively cheap and competitive pricing (Vincent et al. 2013). If foreign countries are in an economic recession than it would be worst for consumers because prices would be relatively higher (Vincent et al. 2013).

References                                                        

Lopez, Fan, (2009),"Internationalisation of the Spanish fashion brand Zara", Journal of Fashion Marketing and Management: An International Journal, Vol. 13 Iss 2 p.. 279 - 296

Vincent, Kantor, Geller (2013).”Inditex Strategy Report”, Bridge Consulting, p.3-42                

Demographic

In term of demography, the global population is 7.4 billion with the growth rate of 1.8% per year in 2016. It is expected that the population will grow with a slower rate. Generally speaking, a country with a greater population tends to have a larger group of potential customers and a greater demand on clothing. For example, China has the biggest population in the world and its people have huge demand on clothing. To capture the massive profit in China, Zara has expanded its market in China since 2006 and now China is the second largest market for Zara having 189 stores just after Zara’s Spanish home market. The developed countries, such as Canada, UK and Japan, have a low population growth rate than developing countries such as China and India. It implies that the expansion of the market in these countries will meet a bottleneck as the need of the clothing can be satisfied by the existing stores. Besides, the World Health Organization estimated that 54% of the world’s population is living in urban area. Zara is aware of it and its marketing strategies emphasize at urban area as its stores are located at cities. Furthermore, the aging structure has also a great effect on Zara. For example, Europe, one of the most important market for Zara, is facing a serious problem with population aging, is expected to affect the sales of Zara since the size of target customers aged between 20 to 40 shrinks. Meanwhile, India will have one of the youngest population on the earth with the median age of 28 in 2025, which implies that India will be likely to have dynamic economy and a larger group of young people who are interested in fashion clothing provided by Zara.