Running Head: RELATIONSHIP MARKETING 1

Relationship Marketing in a Global

Context

Module Code:

Word Count: (excluding table of content and references)

 Table of Contents
Task 1: Relationship Marketing ...................................................................................................................... 3
Task 2: Introduction to Zara ............................................................................................................................ 4
Organisation Background ............................................................................................................................ 4
Competitor Analysis and Marketing Objectives for Zara ........................................................................ 5
PEST Analysis of Zara ................................................................................................................................ 6
Political Factors: ...................................................................................................................................... 6
Economic Factors..................................................................................................................................... 6
Social Factors ........................................................................................................................................... 6
Technological Factors .............................................................................................................................. 6
SWOT Analysis of Zara .............................................................................................................................. 7
Strengths.................................................................................................................................................. 7
Weaknesses ............................................................................................................................................. 8
Opportunities .......................................................................................................................................... 9
Threats ..................................................................................................................................................... 9
Summary...................................................................................................................................................... 9
Task 3: Recommendations ............................................................................................................................ 10
High power and high interest .................................................................................................................... 10
High power and low interest ..................................................................................................................... 11
Low power and high interest..................................................................................................................... 11
Low power and low interest ...................................................................................................................... 12
References ..................................................................................................................................................... 13
Task 1: Relationship Marketing
Since the 1990s, the concept of relationship marketing has gained significant attention of
academics and researchers. This is primarily due to increased competition and more demanding
customers in global markets (Sherrell and Bejou, 2007). Due to intense global competition, every
business sector is affected. In such situations, most of the international businesses are using
relationship marketing as a competitive strategy that aims at creating, maintaining and developing
strong relationships with the customers. This is considered an approach that covers all marketing
activities (Casielles et al. 2005).

Berry (1983:26) has defined relationship marketing as a process that “attracts, maintains and in
multi-service organisations enhances customer relationships”. He believes that the attracting the
new customers is merely the first step in marketing mind-set. He argues that developing strong
relationships with the customers and transforming indifferent customers into loyal customers are
the most important steps that need to be taken into account by marketers. Stating in another way,
relationship marketing is development of long-term relationships and improvements in business
performance through greater customer retention and customer loyalty (CRM Today, 2007).
Businesses having successful relationship marketing history are likely to transfer their empathy,
service, communications and trust qualities when they expand their business into international
markets. In every step of internationalisation process, there is a very important role of strong
relationships with customers. Due to increased globalisation, customers are aware of the
companies having successful history of customer relationships in other countries that attract them
towards such companies when they enter into new markets (Khojastehpour and Johns, 2014).

It is vital for businesses to revise their relationship marketing strategies as they become more
global. As international borders are crossed, businesses need adjustments in building satisfaction,
loyalty and trust. The businesses need to develop a better understanding of cultural and social
aspects that can help in developing long-term customer loyalty (Nijssen and Van Herk, 2009).

The value added due to relationship marketing helps the businesses grow when they expand
internationally however; cultural and social differences should be carefully considered. This helps
in developing better plans to cater the needs of customers that are likely to help in developing
better relationships with the customers (Bruhn and Frommeyer, 2004).
There is strong evidence that excellent customer services have a strong impact on customer
satisfaction, trust and commitment. Customers feeling a positive relationship with the company are
likely to rebuy from the company. Customers satisfied with one type of brand transfer their
categories to other categories of same merchant. Once businesses have developed an emotional
connection with their customers then relationship marketing seems to be transferrable (Miquel-
Romero et al. 2014).

A brief review of existing studies illustrates that relationship marketing has a vital role in success
of businesses. Once a business has developed good relationships with its customers then it would
be likely that the customers would stay loyal with the company.

Task 2: Introduction to Zara

Organisation Background
Zara is a subsidiary of Inditex which is one of the leading manufacturers of fashion brands in the
world. The company started its business operations in 1963 from Spain. Zara’s first store opened
in Spain in 1975 (Zara - inditex.com, 2016). The company has more than 2100 outlets in 88
countries combined. The mission statement of Zara states:
“Zara aims to encourage sustainable development in the society and environment it interacts with
through incorporating environmental and social criteria into its business model. (Zara, 2016)”
As the time progressed; it expanded its business operations into every part of Europe, USA,
Middle East, China and India. Its average sales from each store are about Rs 45 million per
annum in India (BI, 2015).

New Potential Market for Zara

Pakistan is potentially a big emerging market with population of around 199 million. (CIA, 2016).It
is sixth most populous country with over 50% populations under the age of 25. The target segment
of Zara, which is particularly youth, is found in millions. As result, the company is expected to
earn a huge amount of profit and acquire massive market share. Apart from that, Pakistan is
blessed with significant natural resources, educated workforce, low production and labour cost and
strong background of textile and garment sector.
In Pakistan, more than 600 foreign companies are operating with lucrative profit margins. The
successful operation is a result of friendly policies that incorporates the interests of foreign
investors. Besides, the retail sector of Pakistan has a worth of £42 billion with the expansion rate
of 7% per annum. As result, the western luxury brands such as Zara have a significant opportunity
to operate in Pakistani market with noticeable profit (Department of International Trade UK,
2016).

Competitor Analysis and Marketing Objectives for Zara

Due to increased globalisation, Pakistan has secured the penetration of numerous international
brands namely Splash, Levis, Timberland, Mango, Dockers, Addidas, Clarks, Nine West,
Debenhams , Mother care, The Body Shop, etc. (IBP, 2015).Mango has already captured 2%
market share in Pakistan since its launch in 2016.Zara might face intense competition with local
and international brands in Pakistan.

Local Brands International Brands

Outfitters Levis Strauss

Stone age Dockers
Breakout Timberland
Cambridge Next
Mantra Pedro
Chen One Charles and Keith
Leisure Club Debenhams
Mango

In these situations, the author has designed the following objectives for Zara in Pakistan.

 To enter into every geographic zone of Pakistan especially into the smaller cities
 To gain loyalty of customers in the country
PEST Analysis of Zara
The PEST Analysis is conducted in order to provide an insight of an external environment that
Zara will encounter in Pakistan.

Political Factors
An uncertainty regarding the political situations in Pakistan has minimum impact on foreign
businesses in Pakistani market as every new government supports foreign companies. Such as
recent Government support businesses through subsidized Energy and Related Utilities (Dawn,
2013). However, political instability increases the probability of fluctuating taxes on importing the
products from abroad that would affect business situation of Zara. Similarly, changing political
situation in Pakistan can affect business situation of the company in terms of being selective in
opening new outlets.

Economic Factors
According to Jim Yong, the President of World Bank, Pakistan is now on the path of increased
economic growth and prosperity (Dawn, 2016). The country has multiple shopping malls, which is
a clear evidence for growth in retail industry (IBP, 2015). The buying power of customers in
Pakistan has been improved gradually. As evidence, demand for readymade clothing in Pakistan
increased by 81% regardless the inflationary effects (Baloch, 2012). GDP growth was 4.2 percent
in FY15 and expected to pick-up to 4.5 percent in FY16 (Forbes, 2016). In addition, decrease in
unemployment was reported from 5.3 million to 3.6 million, which further increased the strength
in buying power (PT, 2016).

Social Factors
In the last few years, there have been tremendous changes in lifestyles of people. Many people in
Pakistan prefer readymade global fashion garments. Exposure to global media & internet has
transformed the general perspective on a massive scale. Increased globalisation has led to better
communication that increased the awareness among people regarding the fashion brands leading
worldwide (Baloch, 2012). The modern culture of megastores in Pakistan has a major contribution
in the institution of brand consciousness (Rehman, 2016). Growing urbanisation & increasing
number of women in the workforce is an additional advantage for Zara in the retail industry of
Pakistan (Euro Monitor, 2016). For Zara, the instituted awareness in the target market is potential
edge to penetrate in the industry with minimal consumer efforts.
Technological Factors
The dimension of technology has excelled in Pakistan since past decade (Rizwan, 2014). A large
numbers of businesses have started using modernised technology to increase their business
performance. In the fashion industry of Pakistan, modernised technology is used for designing,
manufacturing, packaging, and quality control checks. Modernised technology has allowed the
suppliers to check stock levels at retail outlets and send more supply when the stock levels come
below a certain level. Precisely, the supply chain conduct in Pakistan is currently enhanced
nationwide. Moreover, the influence of social media and digital Shopping became common and
stronger in Pakistan. Audience visit physical and digital malls with highest frequency allowing the
companies to earn maximum profit and interact with customers routinely (Daily Times, 2016). As
evidence, Pakistan has innumerable and independent fashion portals for the target audience such as
Fabbitt.com (Daily Times, 2016).

SWOT Analysis of Zara

The author focused on identification of current situation of Zara at global and local scales in
Pakistan by conducting a SWOT analysis. Zara’s products are available in Pakistan through local
importers who sell these products online but this is restricted to major cities of Pakistan. There are
limited numbers of stores that stock its products in larger cities only. Most of its sales come
through some leading sales portals such as Brandsz Outlet that provide nationwide shipment in
Pakistan. The author conducted interviews with some of the retailers in Karachi over the phone
who stock global fashion brands in their shops. The results are discussed below:

Strengths
Core Strengths: The Company uses latest designs and high quality products while manufacturing
that play an important role in attracting the customers. Moreover, the company focuses on
recruiting highly skilled workforce that has been playing a vital role in producing quality products
and successful marketing campaigns (Zara Success Story, 2016). Zara produces 10000 lines over a
year .They create new designs and get them into stores within two weeks. Customers know that if
they fail to buy a product they desire, it will be removed from shelves until next visit since the
stock rotation is rapid. This rapid turnover of the designs has helped the company to establish a
very strong relationship with its customers that allow Zara to save intense marketing expenditures
on extensive intervals (Morgan, 2009). Hence, the successful market penetration in East Asia,
particularly India, Pakistan is suggested as a potential market for Zara.
Successful history in Europe: Zara started receiving business from Pakistani market more than
10 years ago. It was a time when the company was perceived as the one of the best European
fashion company not only in Europe but in other parts of the world as well.

High quality products: Zara has a history of selling high quality products. Most of its products
are highly in demand on global scales.

Cost leadership: In terms of its comparison with same fashion designers, Zara has always
attempted to take cost leadership in the markets of Europe and Pakistan. This is one of the major
reasons that the company attracted a large numbers of customers in European market. Besides an
increase in inflation, Zara always attempted to maintain the prices of its products.

Strong distribution in Europe: Zara has effectively been distributing its products in Europe
where it not only sells online but it has outlets almost in every region. The distributors of the
company have always assured that all of its products are promptly distributed. However, this
strategy lacks in Pakistan.

Weaknesses
Poor packing: In order to save cost, Zara use to offer poor packaging to the customers in Pakistan.
The conduct minimizes the effect of persuasion among the target audience, which simultaneously
creates an opportunity for the competitors, both local and international.

No distribution in smaller cities of Pakistan: In addition to Karachi, Lahore and Islamabad

where Zara has focused in past, a large numbers of customers in smaller cities prefer buying
famous global fashion brands. However, there has been no supply of Zara in these areas. This has
been one of the weaker components of marketing strategy of Zara in Pakistani market.

No visits to retailers: The Company fails to conduct a monitoring process at the retail stores in the
urbanized cities of Pakistan since the products are delivered as per the prior request. This fails Zara
to update the stocks and maintain the availability of quality products in the local shelves.

Minimum incentives to retailers: Zara has been offering very low incentive to retailers to keep
the prices of its products at minimum level. This has been one of the major reasons that the
company has been unable to improve its market position in Pakistan in comparison to its leading
rivals in Pakistani market.
No advertisements in media: The Pakistani target audience is a media driven by perception and
Zara does not focus on promoting its products on local media, which is an adverse conduct. The
primary objective has been to keep the costs at a minimum level and offer cheaper rates to the
customers, which discourages mass scale marketing for the company.

Opportunities
Expansion to smaller cities: Expanding to other parts of Pakistan especially smaller cities such as
Faisalabad, Multan and Gujranwala can be an effective strategy for the company to gain business
from different market segments in these areas.

Advertisements: In the last few years, a numbers of new TV channels have been launched in
Pakistan. In addition, cable channels offer cheaper advertisements. The company can focus on
advertising its products through these channels. In addition, the company can feature its products
on newspapers’ websites.

Threats
Competitors: Zara faces a tough competition from its rivals in the market such as Mango, Marks
and Spencer and “Next” that have established in almost every part of Pakistan.

Increased inflation: Customers’ buying powers are adversely affected due to increased inflation
that has also increased due to recent financial crisis. In these situations, Zara should focus on
reducing its expenses when improving quality of packing and distribution systems.

Summary
The analyses of Zara state that the company has a strong potential in Pakistani market. Zara is a
recognized brand in the world, while the awareness creation in Pakistan is not required. The
audience is media driven, which will require the company to perform intense marketing campaign
for effective brand management. It must be notified that Zara is attempting to reduce its costs in
Pakistan through cheaper packing materials but sabotaging the appeal simultaneously.
A significant lack is present in the distribution of Zara but the national supply chain is enhancing
at a stronger pace. Hence, Zara would be able to achieve an expanded reach in Pakistan and have
equity to acquire noticeable market share concurrently.
Task 3: Recommendations
Based on the findings of environmental analysis, the author has developed Mendelow’s Matrix for
Zara below that would suggest which stakeholders will be important for the company.

High High power and low interest High power and high interest
Government Customers
Media Wholesalers
Shareholders Retailers
Power Competitors
Low power and low interest Low power and high interest
Community groups not keen in Management
Low
fashion brands Employees

Low High
Interests

High power and high interest

Due to increased globalisation and modernised technology, customers are aware of most of the
leading brands at global scales and they look for new designs to be introduced in their countries as
well. In the case of Zara, customers, retailers and wholesalers will be the most important
stakeholders for the company when developing relationship marketing strategy. According to
Mitchell et al. (1997), organisations need giving utmost importance to urgency stakeholders to get
the best possible results in the market.

Achievement of customer satisfaction should be the prime objective of Zara and this would not be
possible without knowing the needs and demands of local market in Pakistan. This can be done
through collection of feedback not only from customers but from retailers and wholesalers as well
who are also high power and high interest stakeholders in the context of Zara in Pakistani market.
Most of the leading retailers are already selling famous global brands in Pakistani markets. In
these situations, the company will have to offer better incentives to these wholesalers and retailers.
When developing relationship marketing strategy, these stakeholders should be given prime
importance and all of their needs should be catered as this is likely to help the company gain
success in Pakistani market.

High power and low interest

These stakeholders have been categorised as government, media, shareholders and competitors.
Some of these such as competitors and media can be classified as dangerous stakeholders if
assessed by stakeholders typology defined by Mitchell et al. (1997). Pakistani market has well
established competitors that not only include local companies but some leading global names such
as Marks and Spencer and Next that are well established in Pakistani market. These competitors
can give very tough competition to Zara when it plans to expand its business in the market. There
are almost 50 news media channels that mainly operate through advertisements in Pakistan. In
spite of the fact that these channels are monitored by the government, these channels keep on
publishing adverse news about businesses that may well be due to exploitation.

In above mentioned situations, Zara will have to focus on devising a plan to identify the strategies
that its rivals are using in the market. Another important factor that needs to be taken into account
by Zara is that there are many local manufactures in Pakistan who make replicated copies of
branded products. However, they cannot sell using the same brands. In these situations, the
company will have to make sure that its designs are not leaked out during manufacturing process.
In order to overcome this situation, the company will have to develop close and strong
relationships with local governments and media that can identify such manufactures in the market.
The government of Pakistan protects foreign businesses and the government has been cracking
down against people in past. In order to assure that replicated copies of its designs are not sold in
the market, Zara will have to focus on local market and have close relationships with local
authorities to point out any issues faced by the company.

Low power and high interest

Management and employees of the company fall under this category in the case of Zara. Though,
these stakeholders will have least power but they would have maximum interests in the company
as they would benefit from success of the company. Besides, Zara needs to conduct a successful
marketing campaign on digital and traditional media in Pakistan. A good relationship with these
stakeholders is necessary in order to attain promotional success and better services to customers.
The company should use effective motivational strategies such as training, promotions and
rewards. In addition, these stakeholders should be encouraged to provide active feedback to the
company.

Low power and low interest

Consumers that are not conscious in buying foreign brands would fall in this category. A vast
majority of the people use traditional dresses in Pakistan. In order to attract and develop interests
amongst these people, Zara may consider manufacturing of some elegant designs of local dresses.
In addition, advertisements through local media can help Zara increase interests of these customers
in the products sold by the company. To summarise, Zara will have to focus on needs and
preferences of its customers in the market in addition to local wholesalers and retailers in the
market.
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