“The wonderful thing about fashion is it will always do the opposite of what you think,” said James Aguiar, co-host of the “Full Frontal Fashion,” a television program.United States of America is one of the growing markets for fashion retailing.
The fashion industry in United States is worth US$250 billion with over 4 million people employed in this sector.The following case study acknowledges how ZARA, a Spanish fashion retailer established itself in a highly competitive market such as United States. The cases also focuses on the challenges faced by ZARA during its venture into the US market and also emphasizes on the micro and macro environment that would have affected this venture.ZARAZARA is a chain of fashion store owned by Inditex Group, Spain.
ZARA is a vertically integrated brand, as the designing, manufacturing and distribution are managed by the company itself. ZARA is known for its quick distribution and adapting to frequent changes in fashion trends. ZARA operates its business through its various outlets from over 68 countries. ZARA being successful in Europe, Middle East and Asian countries it would be a challenging task to walk out successful in United States.
ZARA would also be relying on its previous experiences in this venture.Ref: [http://www.udel.edu/CSC/fashion.
html]Assessing the external environmentAssessing the external environment will determine the variable which would affect the business firm such as market growth or decline, business positions in respect to the competition and directions of operation.The External environment can be defined by the following terms.* Political environment* Economical environment* Socio-cultural environment* Technological environmentZARA will have to do a brief study on these environments before entering in to the US market.Ref: [Doole and Lowe, (2004)]> Political EnvironmentSuccessful companies are those which can understand and capitalize the business environments.
Government and political parties determine the political environment for the business. Government plays the role of a silent partner with maximum control on the business activity by bounding the business by the laws and policies. All the financial aspects also are considered under this, in some ways a national government plays the role of an International banker through membership of International financial organizations or either by granting subsidies is finance based promotional activity.Ref: [Albaum, Duerr, Strandskov (1998)]Political environment can be categorized in to two parts1.
Stability of the government policyStability of government policy will prove to be beneficiary to the business firm. New government can be elected or the existing government may change the policies, but this does not necessarily leads to the political risk.ExamplePepsi was successful in 1980`s in Sevier Union under most extreme political systems.Ref: [Philip R Cateara, (1993)]United States being a developed and a political stable country, it would be easy for ZARA to pave its path in to the political environment of the host country.
ZARA would also be benifited by the trade and globalization policies adapted by United States.2. Political PartiesPolitical parties play a major role in determining the policies and regulations of the country. If a country has two strong political parties and one succeeds one after another to form a government, it would be tough task for ZARA to assume the policies of the new Government.
Example: Great Britain has 2 strong political parties’ Labor party and conservative party; during power Labor party followed a policy which would limit imports where in the Conservative party was very liberal on the trade policy.Ref: [Philip R Cateara, (1993)]ZARA is successfully running its business in many countries and have adapted to the changes prevailing in these host countries, thus ZARA have to rely on its previous experiences to overcome such problems relating to political environment of United States. ZARA being so successful at UK despite of the change in government and trade policies it wouldn’t be a haunting task for ZARA to survive the possible political changes in United States.Ref: [Philip R Cateara, (1993)]> Economic environmentEconomic environment depends on different variables such as balance of trade, Market orientation, foreign investment, currency systems, the standards of living of the people, their purchasing power etc.
Economic development of a market influences the lines of businesses with which the consumers and the business firms are affected. Economic status of the nation plays a vital role in International marketing. There are various economies to be considered in International marketing, whether the nation is a developing nation, a developed nation, emerging or under developed.Ref: [Dahringer and muhlbacher, (1991)].
United States with the population of 301,139,947 and GDP of 2.2% will prove to be a perfect economically stable environment for the fashion retailing business. ZARA follows market oriented target pricing system, the consumers spending power is determined and then the prices are fixed in consultation with the sales department. This helps ZARA to be more cost effective.
ZARA must be aware of the ability of the customer to buy.Example: If Ferrari wants to launch itself in an under developed nation, the chances of seeing success is very low and may be nil. This is mainly due to the purchasing power of the host nation is not suited for high cost and luxurious brand like Ferrari.Ref: [https://www.
cia.gov/library/publications/the-world-factbook/print/US.html]> Socio-Culture EnvironmentFamily, religion, values and attitudes, aesthetics and education determine the socio- cultural environment of the countryThe following points will help ZARA to understand the cultural environment prevailing in United States1. Family:Work has more importance than family; culture is hardly passed on the next generation, leading to a fast changing trend in fashion, testing ZARA`s production and distribution capabilities.
html]2. Religion:United States has a mixed religion with Protestant 51.3%, Roman Catholic 23.9%, Mormon 1.
7%, other Christian 1.6%, Jewish 1.7%, Buddhist 0.7%, Muslim 0.
html]3. Education:Education determines the sophistication of the target market. United States has a literacy rate of 99% and the people have an analytical approach toward new things. This culture will impose pressure on the quality and quick distribution of the products.
Aesthetics:The people of United States are more performance oriented.Ref: [http://www.stuff.co.
nz/4386837a1864.html]ZARA would be testing its production and distribution capabilities, this change in trends and large potential market, ZARA would also be facing a good competition from the well settled competitors as US being one of the biggest markets for the Fashion retail and presence of all major brands in the country. ZARA will also have to maintain the social and ethical values.Ref: [Doole & Lowe, (1999)]> Technological environmentTechnology is one of the powerful sources of marketing in today`s era.
Internet alone caters to a large number of consumers; this environment helps the business firm to reach a large target market within short time span.In 2000 a study proves that Approximately 40 million US households Use online services with an annual income of US$75000. The US online retail sale is predicted to reach US$ 316 billion in 2010 compared to US$ 3 billion in 2000. The US e-retail sales forecast for the year 2004 was estimated to be US$114.
Ref: [http://www.brandchannel.com/images/papers/269_Lux_Goods_Online.pdf ]United States proves to have a strong technological environment; with large number potential audience involved in e-business ZARA will have to work on this technological environment to build a good e- commerce structure, so as to invade in to new market and also to retain the existing consumers.
ZARA also needs to build u a strong e-retail network to have a good edge on its competitors.Importance of marketingAdvertising, public relations, promotions, product design, pricing etc determines marketing. Marketing on a whole is a broad term.International marketing is one of the major terms used in world economy.
It not only helps in development of business but also helps in developing the host country. The company has to go through various study and research before launching itself International. The company has to adopt a proper marketing mix including people, physical evidence and performance before launching itself in the host country. The company is also expected to know the rules and regulations of the host country.
ConclusionThe pest analysis will help ZARA to understand the business environment prevailing in a particular geographical area. Pest analysis will also help ZARA in understanding the market, customer behavior, governmental policies which indeed will help ZARA to predict the possible growth or decline of the market and the company can act according. Fashion retailing being a highly competitive market ZARA will have to make constant research on the market which helps the company to have an edge on its competitors. ZARA follows an unconventional pricing stratergy (market oriented pricing) and pest analysis will a handy tool for this stratergy.
The International trade for textile and textile product is monitored by the rules of World trade organization. ZARA needs to understand these trade rules before entering in to the US market.United States has a high competitive market, with brands like Gucci and Versace having their presence since decades. ZARA will have to constantly research on the business environment so has to be competitive to these big brands.
ZARA will also be testing the laws of demand and supply, the company`s manufacturing unit is located in Europe. ZARA will be looking at a cost effective and efficient logistic system for the company to maintain there a reputation of stocking the shops several times a week. There will also be an added pressure for the logistic department to make a detail study for the transportation and trade rules prevailing in US.ZARA needs to adopt proper planning, promotional strategies, distribution channel and pricing.
This will help the company to determine the ways and means how it is going to serve the US market. Basically the company needs to take a proper marketing mix decision to establish itself. ZARA can be successful in a vast competitive market of United States by understanding the environment. This detail study would also help ZARA to overcome the problems and create a good brand image in US.
The understandings of this macro environment will also help ZARA to make good marketing and positioning strategies which would reap profit for the group .Better understanding will also help ZARA to have an edge on its competitors for a longer run.