Zara competitiveness as highlighted in number 4 managed to travel globally successfully. As 55% of Zara revenues coming from abroad, one can see that Zara was successful in migrating its competitiveness globally. By adapting to each culture, Zara has managed to position itself differently in different market. Zara strategy of opening one store for information gathering in the initial phase of entering a new market is one of its key strength points.
By starting with such “information gathering” store, Zara manages to obtain insight of the local market and how best to adapt to it. Relevance: Zara’s value proposition of high velocity fashion appeals to a global audience that is fashion conscious and discerning in price. However, it’s relevance depends on the relative wealth of different countries, as well as the fashion culture. For example, the target class in Spain is 80% of the population while only the upper and middle class in Mexico can afford Zara.
Transferability: Zara has adopted several innovations that facilitate its transferability. These include: 1. Standardized store implementation –this enables Zara to maintain its global image and store quality and quickly allows new store managers to focus on activities that drive store sales. 2. Individual inventory response – each store inventory is uniquely driven by the store clientele, thereby enabling each new store to maximize its value to its local target clientele. Zara’s power is not easily duplicated as they control a significant portion of the value chain.
Even through Zara adopted alternative market entry modes such as joint ventures or franchises, the dependency on Zara’s centralized system ensures that Zara can appropriate the most significant portion of available rents from their markets. Zara has always promoted its products via its stores and it had its own centralized distribution center which will translate to low advertising and logistics costs when it enters new markets Apparel retailing is witnessing increasing concentration which would benefit Zara when it entered new markets.
And there is more homogeneity in fashion which supported Zara’s brand of clothing since its target market is consumers receptive to fashion. Moreover Zara has an adequate system of knowing local trends and tastes which it would reflect in its designs. The strategy of opening one store for information gathering in the initial phase of entering new markets is one of it key strengths. Lastly, economies of scale is another advantage for Zara when entering a new market.