Zara-International Expansion Option

Zara's challenges to expand and grow have amplified multifold after the recent increase in stock price of Inditex which proves very high expectations that customers have on Inditex's future growth. Zara has to take a call on its long term expansion strategy to ensure that profits keep coming in. Looking at the options we have, focusing on the rest of Europe is a great option as European markets are the largest consumers of apparel in the world (34%) closely followed by United States (29%).

The outcome of entry into Italian market next year will play a great role in Zara's expansion into high quality and highly fashionable world. Zara must look at further opening new stores across major countries in Europe such as France, United Kingdom and Germany as the huge population in these countries, the proximity of these countries to Spain and relatively fewer apparel outlets per million inhabitants will help Zara's chances of profitability and growth. The success in Italian market can only boost the growth and help improve its image across all of Europe.

Expansion in United States seems like a big challenge as of today but the conditions will have to change. Zara may need to do some aggressive advertising in the US markets to instill a greater sense of fashion comparable to that in Europe. Since GAP has clearly failed in fashion positioning and H&M has slowed down expansion into US market, you may want to consider improving Zara's fashion positioning in the US market first before opening new stores in the long run. While US markets will not have any pricing and cultural issues, Asian markets clearly have cultural barriers, regulations and price sensitivity issues and hence entering Asian markets may not be a viable option for the next few years.