MANAJEMEN PEMASARAN

MINGGU KE-6
CASE STUDY
Internationalisation of the Spanish Fashion Brand Zara

Anggota Kelompok:
[1] 134119001 Livia Marsha Sarengat
[3] 134119004 Christian Hendra Setiawan
[4] 134119005 Stephanie

PROGRAM STUDI MAGISTER MANAJEMEN

FAKULTAS BISNIS DAN EKONOMIKA
UNIVERSITAS SURABAYA
2019
 STATEMENT OF AUTHORSHIP

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No. Presensi Nama Mahasiswa NRP

1 LIVIA MARSHA SARENGAT 134119001
3 CHRISTIAN HENDRA SETIAWAN 134119004
4 STEPHANIE 134119005

Mata Ajaran : MARKETING MANAGEMENT

Kelas : PS 1.2

Judul Makalah/Tugas : ARTIKEL KASUS – Internationalisation of the Spanish fashion

brand Zara

Tanggal : 19 SEPTEMBER 2019

Dosen (PJMK) : Dr. Dudy Anandya, S.T., M.Si.

Surabaya, 19 September 2019

Tanda Tangan

(.........................................)
I. CASE STUDY
Zara is a Spanish fashion brand that has become one of the world’s most successful
fashion retailers. Zara was established in 1975 as a flagship of Inditex (Industria del Diseno
Textil, SA), a holding company located in Galicia (Northwest Spain). The aim of Zara,
according to Amancio Ortega (founder of Inditex), is to democratize fashion by offering the
latest fashion in medium quality at affordable prices. The differentiation of Zara’s business
model is the turnaround time and the store as a source of information. Zara’s vertical
integration of design, just-in-time manufacturing, delivery and sales, flexible structure, low
inventory rule, quick response policy and advance information technology enable a quick
response to customer’s changing demands. (Castellano, 1993, 2002).
Zara’s production cycle starts with customers’ judgments on the new design of clothes
and the information collected by staff members who travel to fashion cities, observing people
on the streets, browsing publications and visiting the venues that are frequented by their
potential customers (Fabrega, 2004). The information will be reported to the headquarters on
daily basis, and then the design group will use the information to create new articles or
modifications to the existing goods and deliver the items to the store. Every Zara store will
receive small batches of products twice a week – to avoid large inventories and creating a
“climate of scarcity and opportunity”. The firm spends only 0.3% of its annual turnover on
advertising (Ghemawat & Nueno, 2003), it considered the store as the most effective
communication tool. Also, Zara follows a market-based pricing strategy (sets the target prices
that the buyer is willing to pay).
The internationalization process of Zara is focusing on three issues:
1. Motivation
Push Factors Inhibitors Facilitators Pull Factors
Saturation Administrative barriers International status Spain joined the EU
Low growth Geographic distance Learning process Economics of scale
opportunities
Changes in consumer Low economic Spreading cost and Globalization
behavior development risk Abolition of economic
Different seasonality barriers
Cultural distance Growth chances
Lack of experience Cultural affinities
Risk perception Information
technologies
Source: Adapted from McGoldrick (1995)
2. Market Selection
The following are three phases of Zara’s internalization:
 Reluctance and trial (1975 – 1988)
Zara focused its expansion in the domestic market and reach the maturity stage in
1988.
 Cautious expansion (1989 – 1996)
Zara expanded into markets geographically and/or psychologically proximate and
with a minimum level of socio-economic development, adding one or two countries per
year to its market portfolio.
According to Bonache and Cervino (1996) and Martinez (1997), cautious
expansions that Zara had done are:
1989: open a store in New York
1990: operating in Paris, France;
1992: expand to Mexico
1993: open a store in Greece
1994: expand to Northern Europe (i.e. Belgium and Sweden)
1995: expand to Malta
1996: expand to Cyprus.
 Aggressive expansion (1997 – 2005)
Fabrega (2004) had listed Zara’s movements during aggressive expansion as
follows:
1997: open a store in Israel
1998: expand to eight countries (Kuwait, Lebanon, the United Arab Emirates,
Argentina, Venezuela, Great Britain, Japan, and Turkey)
1999: expand to nine countries (Germany, The Netherlands, Poland, Canada,
Chile, Brazil, Uruguay, Saudi Arabia, and Bahrain)
2000-2003: Zara consolidated its position in the European market
2004: Zara justifies the considerable number of European countries that were
incorporated that year.
2005: expand to Costa Rica, Monaco, Philippines, and Indonesia
2006: Zara was operating in 59 countries with 852 stores.
 3. Entry Options / Market Entry Strategies
The international expansion of Zara has adopted three different entry modes as
follow:
1. Own subsidiaries
This method is the most expensive and involves prominent levels of control and
risk. This direct investment strategy only applied for most European and South
American countries with high growth potential and low business risk.
2. Joint ventures
Zara entered into a joint venture with three firms, they were Otto Versand
(Germany), Gruppo Percassi (Italy), and Biti (Japan). Until recently, Zara has
increased its ownership to 78% in Germany, 80% in Italy, and 100% in Japan.
3. Franchising
This strategy applied on 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 as its own subsidiaries
regarding the product, store location, interior design, logistic and human resources,
however, they are responsible for investing in fixed assets and recruiting the staff.
The franchisees have the chance of returning merchandise and exclusivity in their
geographic area, but Zara still has the right to open its own stores in the same
location.

At the early stage of internalization, the subsidiary companies had to be a replication of

the Spanish stores. However, this approach met unexpected difficulties due to cultural
differences in some countries. Therefore, Zara decided to let the company to adapt and adopt
in cases local solutions rather than merely replicate the home market. There also adjustments
to its product offerings due to customer’s size differences in Asian countries, laws issued in
Buenos Aires, cultural differences in Arab countries, and different season in the Southern
hemisphere.
Although there are differentiations, the promotion strategy is the same in each country.
Advertisement campaigns conducted only at the start of sales or the opening of a new store
while keep relying on the sore as its main promotional tool. The prices of Zara’s products
may differ between countries – with Spanish as the lowest prices market – but are set
centrally following a market-oriented strategy.
 Zara chose prime locations whenever it wanted to open a store, with chance to achieve a
maximum level of profitability. Hence, Zara standardizes the key strategic elements, namely
the location, window display, interior design, store layout, store display rotation, customer
service, information systems, and logistics, to be applied in all international shops while the
rest of elements are customized to the market to suit local preferences. To keep Zara’s
concept across its international markets – share the same corporate values, Zara’s Head Office
in Spain controls the subsidiaries and transfer know-how greatly.

II. OTHER SIMILAR CASE WITHIN THE MARKETING THEORY USED

 Marketing to The Emerging Middle Class
According to Maharani (2012), the biggest market in Indonesia is middle-class market.
In 2010, 56.5% of Indonesian is fallen into middle-class category in term of economy.
Asian Development Bank classifies “middle-class” as people whom earning is between $2-
$20 per day, while World Bank classifies it as people who categorized being above the
poverty line. To specify the target segment, middle-class is divided into more detail
category. For example, based on a person’s earning, middle-class can be divided into 3
categories, namely: (1) lower middle-class or functional middle-class; (2) value-conscious
middle-class; and (3) higher middle-class or people with high expectancy toward products’
features and services. Companies also need to consider the potential competitors as follow:
(1) upstarts – low-class brand/company who just enter the middle-class category; (2)
defender – company/brand who has stayed in the middle-class category for a long time; (3)
prospectors – company/brand who wants to expand their market through middle-class
market.
Middle-class market has the characteristic as follow: (1) innovative & progressive –
they want and have the buying power (or believe so) to purchase something that believed
can make better future for them; (2) consumptive – they tend to be more consumptive and
not price-sensitive than other classes; (3) future planning – they have built the awareness
of better future for themselves and the next generation(s).
Nowadays, to attract the middle-classes’ attention, producer needs to be as creative as it
can. Low price products might be attractive, but the ones who can answer consumer’s
desire will lead the market. As tempting as it seems, the opportunity in the middle-class
market requires a great amount of efforts. Companies cannot just depend on the reactive
strategy, but also need support from other elements to achieve the sustainability.
Maintaining the sustainability in the middle-class market can be tricky, usually a company
will try to preserve products development, preserve costumer’s loyalty, and/or increase
customer’s buying powers in order to maintain it.
To sum up, producers must analyze their consumers and competitors and be attentive to
the trend happening in the market (for example: urban lifestyle trend, affordable luxury
trend, and innovative channel trend) before choosing their marketing strategy. Also,
producers can maintain the sustainability of middle-class market by keep innovate products
and services, be creative in managing customer’s loyalty, and improve the quality of
products and services with customer’s buying power as a consideration.
REFERENCES

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J.J. (Ed). Multinacionales espanolas I. Alugnos casos relevantes. Piramide.
Madrid. Pp. 51-86.
Castellano, J. (1993). Una ventaja competitiva: el factor tiempo, El caso Inditex-
Zara. Papeles de Economia Espanola, 56, 402-4.
Castellano, J. (2002). El proceso de internacionalizacion de Inditex. Informacion
Comercial Espanola, 209-17.
Fabrega, F. (2004). Zara. El modelo de negocio de Inditex. Madrid: Claves de
gestion.
Ghemawat, P., & Nueno, J. (2003). Zara: Fast Fashion. Case No. 703-497.
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Hsiu-Ju Chen, (2018). "What drives consumers' mobile shopping? 4Ps or
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