Entry of Zara into the Indian Market
Zara is considered as one of the most renowned trade name, which is famous for its attractive designs in the world (Tungate, 2008). The brand is also famous for its most modern designs and has been ranked among the leading 100 best international trademarks globally. Zara applies a unique strategy that numerous companies find it strange where it particularly adopted zero advertisement strategy and makes sure that investments using revenues generated in order to establish new stores worldwide. The company has recently become a popular brand that sells its products to both the young and old generation mainly because it is universally known to be a manufacturer of a fashion line that is both comfortable and affordable. It can be clearly analyzed that Zara has been able to victoriously live up to the required values because of its two retail styles that have always succeeded. The first strategy that has ensured Zara’s success is the fact that the company has been able to maintain its fashion line all through. Another strategy that Zara has adopted is reduction of prices which has consequently resulted in a mixture that has been successful in reaching out to their clients. In 1977, Amancio Ortega established the first Zara’s store in Central Street which is located in Spain. Others owners of Zara’s successful stores include Bear, Massimo Dutti and Pull.
We Will Write a Custom Essay Specifically
For You For Only $13.90/page!
Considering the nature of competition and the requirement for sustainability in human beings, operating a brand or a business cannot be considered as a task that is easy to undertake. With the presence of the current brands which are busy and big in the universe, it requires more than what one needs to create a name for them and to thrive in it. Appropriate management and effective marketing approaches are needed together with the comprehensive know how of the economy as well as the spending and earning of a particular locality or the GDP of a country which are used to determine the economy of a country and its ability to grow and spend (Bryce, 2017). These factors are important in determining the ability of a country to develop which should be recognized prior to taking a step and embracing the universe. This paper mainly focuses on Zara’s mode of entry into the Indian market and whether the approach that the company adopted can be beneficial to its operations. This is determined by conducting a PESTEL analysis of Zara in India.
The economic guidelines of a country are considered as the most significant political aspects that have an effect on the policies of a nation (Gilpin, 2016). India, for instance, does not have a similar viewpoint on trade as other companies which are one of the most important aspects that Zara should consider before venturing into the Indian market. In India, the red tape can be considered as a main hindrance to the entry of foreign brands into the country. In the same way, there are other hindrances that are present when a foreign brand that is aiming to expand or enter in an Indian market. India’s political environment might affect the business conditions and operations. Therefore, a peaceful and safe political environment in India will ensure that the brands that are being operated there are happy.
On the contrary, political disturbance of the market has an effect on the economy. Political chaos causes disruptions to supply chain and causes certain complexities for the brands. Zara has the ability to rise above hardships of this nature by edging its operations in the supply chain to its country and the neighboring countries. Zara has ensured that this limitation has been taken care of by controlling its supply chain functions to its country of origin as well as other neighboring countries. In this manner, the company will have the ability to minimize the danger of being exposed to political disturbance. In case there is political turmoil in India, businesses are adversely affected and are usually placed under danger. Additionally, there are state policies that can result to hindering the issue of diverse brands in case they are not friendly. Zara therefore requires a friendly political environment in India to operate.
The economic activities in any country or its market majorly affect the manner in which a business operates in that particular location (Babatunde & Adebisi, 2012). Zara is supposed to formulate a grand approach in India which can effectively ensure that the company is able to attain affordable pricing. In case the economic activities in India reduce and most individuals decide to cost-cut, they might change from brands which are luxurious to Zara mainly because the company offers its services at affordable costs. A stronger Indian currency means that the profits made through trading with other countries becomes significantly reduced. Therefore, Zara should consider the economic conditions of India before venturing into the Indian market.
Social factors are considered to be significant in a business venture. Businesses cannot be considered to be separated from the society that they are operating in. Zara perfectly fits into the Indian market because preliminary research indicates that the culture and markets of India favors new products. The cultures of the Indian people positively influence the people’s buying decisions in India mainly because they believe in purchasing new products.
Technology is considered as a significant aspect in businesses mainly because it has been able to transform business operations on a global scale by making them take place at a quicker rate in form of transport, communication or other features of everyday business (Christopher, 2016). Zara should take advantage of India’s technological advancements in marketing supply chain and manufacturing because they are affected by technological advancements. Zara should also take advantage of analytics and data in India’s businesses to make helpful decisions because technology boosts the responsiveness of a company.
Zara is supposed to consider sustainability as a business concern when venturing into the Indian market. This can be achieved by making sure that the company makes its warehouses and stores 100% eco-friendly through consumption of less water and energy compared to other ordinary stores. Zara should also make sure that all its dangerous waste that is obtained from its supply chain structure in India becomes eliminated. Zara should work together with other companies in India that have invested in the green business to ensure that it takes care of the environment.
Every country is governed by a set of laws which ultimately affect business operations either positively or negatively. India has favorable laws which can allow Zara to focus on sustainability and ethics across the company’s supply chain and business. India also creates a brand image for Zara that is ethical and that ensures compliance to local legislations and local markets.
Drivers/triggers for doing business in India
Having various stores in India would help Zara company to target the young generation in their early twenties as well as individuals who consider themselves young at heart. This would guarantee a wide customers base as a result of other clothing companies ignoring the impact of a young generation in favor of mature customers. The business can use unique approach of involving the generation in their promotions (Michalski, 2015). Through these campaigns, the company will be identified as an influential clothing dealer for the next generation whose it users are also far away from their rivals. There is a prospect of the Zara Company establishing its image in India as the best clothing company dealing with cloth of current generation. This is because the buying power of young generation and the marketing command of superstars are comparable. Through this strategy, the company is likely to garner a significant profit. Overall, the population expansion, economic growth, and the cumulating disposable income and quick development of organized retail infrastructure are some of the main reasons the India market seems to be lucrative.
In India, clothing business has emerged as one of the most significant sector that is witnessing revolution at very high pace. The commencement of clothing revolution is as a result of a new entrant in the market, and a result the retail market is expected to grow rapidly in the next couple of years. One of the triggers causing the market to grow is as a result of increasing number of individuals in India, thus increasing the consumer base and also profit margin. The growth of the organized retail market is encouraging many investors where it is estimated that it growing with 3.5 percent annually (Laufs & Schwens, 2014). It is thus justifiable to note that the current retail business in India is at the point of inflection where various organizations are planning to invest in it. The industry is large in regards to value and size where organized trade is anticipated to gather about 16-18 percent of the entire retail market (the US $ 65-75 billion) in the next couple of years which is very encouraging to various investors planning to invest in India.
Barriers/risks for doing business in India
Nevertheless, introducing various Zara products in the Indian market face some challenges which need to be outlined before implementing any plan. One of the challenges is the present guidelines on FDI in Indi which outline that any foreign single-brand dealer is obliged to surpass a 49% stake to an occupant subordinates (Laufs & Schwens, 2014). This entails the company disclosing some of its confidential information to the government. Also, franchising suppliers infer that the trader loses a particular jurisdiction over how things are operated, which many businesses fear as it may destroy their brand. This means that various retailers such as single-brand stores are frequently watchful of inflowing in Indian market. For a company like Zara, more consideration comprises the comparative need of cyclical alteration and the separate combined means of dress amongst Indian females that varies suggestively to Zara’s offered varieties. Another challenge that may be faced in the market is to do with logistics and infrastructure (Laufs ; Schwens, 2014). The lack of better distribution channels and proper infrastructure in the nation may cause inefficient processes. This would emerge as major interference for traders as non-efficient supply passage is very hard to handle and if not solved may cause huge loss. In India, concerning infrastructure, they lag behind among the most developing countries in the world. Human resources problems are also a major issue facing the Indian market as it is difficult to find trained individuals as well as paying more to preserve them and this also decrease Indian traders profit margins.
In the Indian market, the various entry strategies that Zara Company may use include: establishing its independent subsidiaries, business contracting and joint business venture. The direct foreign investment (FDI) applied by India allows the formation of joint enterprise which would be very crucial in the growth of the company. The strategy of perusing a joint venture with other organization in the clothing industry is very essential. The joint undertakings is very obliging strategy where the manufacturing amenities and the company reputation as well as its proficiency of the foreign company in the industry, particularly in huge, competitive industry where it is hard to obtain resources to set up retail channels or regions having other types of hindrances that need an association with a native corporation to which Zara reputes its retail as one of the connected basics in its corporate mold (Laufs ; Schwens, 2014). The only concern that may affect the company in its effort of entering the market is the issue with cultural and demography concerns. In India for instance, the target market would obviously be more comprehensive than anticipated as the country has a populace of about 1.2 billion individuals. The Indian national income is anticipated to increase and therefore increasing demand for fashion clothes. It is important to pay attention to cultural concern especially when making an expansion plan to an oversea country . The business has to follow the beliefs and perspectives of part played by culture in control since in India, for instance, social safety is given distinct consideration.
The strategy applied in Zara which entail diverse local and international fashion clothes while retaining Zara as the significant brand in the country will assist the company to efficiently realize its set goals. Being new in the market the company would try to target the bigger positions comprising the initial or subsequent position in the whole of the marketing wear lines (Ang, et.al.2015). This is because acquiring one of these positions would assist the company in creating an exceptional level with respects to manufacturing, distribution, and marketing. Therefore, these positions would form a stage where Zara may vend their wear lines, and other unique cloth wears.
Furthermore, in order to endorse the company and its clothing positions, the company needs to use a video advertisement, e-marketing and print ads which would fulfill the different needs of clients from India and surrounding locales; mainly that priority in Indian markets or the customers living in the urban regions (Quer, 2015). Throughout the campaign period, the ideal info the Zara would be utilizing is the fashionable and quality clothing lines that meet the needs of clients. The company would efficiently penetrate the Indian market just the way it been able to dominate the Spanish clothing industry for a couple of years now. The company is strategically positioned such that it is able to handle business challenges by simply utilizing effective positional as well as promotional techniques which are essentially applied to sustain larger profit margin and also forms basis for the company fashion trends. In India, the promotional approaches of Zara would be implemented by the local workers hence enabling the business to enormously advance without the problem of applying expensive technologies.
Zara is one of the most recognized fashion brand worldwide and it seeks to expand its operation to India in order to tap a new market for its brands. It would be significant to conduct the Pestle analysis of India before implementing its plan to enter the Indian market. Political business environment of India has a direct impact on the business conditions and operations. Thus, a peaceful and safe political environment in India will ensure that the brands that are sold smoothly without interruption. The economic perspectives of India shows that the country has a stronger currency that guarantee profits through trading with other countries becomes significantly reduced. Therefore, Zara should consider the economic conditions of India before venturing into the Indian market. Social factors considered before any business plan is implement. Zara flawlessly fits into the Indian market because since past studies shows that the culture and markets of India favors new products. Technology is another factor that need to be considered when making decision to enter foreign market. India has advanced technological structures and thus Zara should take advantage of such technological. .Zara should consider enviroenmtal factors in order to make sure that all its dangerous waste that is obtained from its supply chain structure in India becomes eliminated. Each country is ruled by a set of laws which eventually affect business operations either positively or negatively. India has favorable laws which can allow Zara to focus on sustainability and ethics across the company’s supply chain and business.
Ang, S. H., Benischke, M. H., & Doh, J. P. (2015). The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), 1536-1553.
Michalski, E. (2015). Foreign market entry strategy. Acta Scientiarum Polonorum. Oeconomia, 14(2).
Quer, D. (2015). International Corporate Strategy and Management. Unit 2: Foreign Market Entry Modes. Estrategia y Dirección Internacional de la Empresa.