Pricing  Strategic Option

Pricing  Strategic Option

        One of the strategic options used by Zara is maintaining high price competitiveness. As the sector becomes increasingly competitive with the entrance of new players, it becomes increasingly imperative to charge affordable prices for high-quality products. Competitive pricing becomes more critical as the level of competition intensifies and as an increasing number of players find cheaper means of production overseas. While the number of players has increased dramatically, most of them rely on strategies such as sales and marketing to capture s more significant market share. Zara has the strategic option of using its marketing techniques to push sales (Sääskilahti, 2015). More specifically, the brand can design it’s marketing campaigns to target the rising middle class. This customer demographic is more interested in stylish and trendy products offered at affordable prices. Since they are more price-conscious, Zara can align product design and portfolio to match the need for affordable products. To this end, the marketing techniques should advertise products that are created from high-quality fabric, among other attractive features such as the styles and latest trends. These features will appeal to the middle class in different markets, while affordable pricing will guarantee high sales volumes. The strategy will also appeal to the middle class who are interested in making bulk purchases from the broad product portfolio.

Using the appropriate techniques to make affordable products will also provide the needed competitive edge to compete in the increasingly competitive fashion world (Sääskilahti, 2015). Tackling the price challenge and providing the customers with an endless array of products will boost the competitive advantage to increase brand awareness and brand popularity. The strategic option will ensure that the customers are not forced to compromise on sale, and they can buy many products from their current budget. The strategy will result in a large following of loyal customers.

Zara should consider using the competition based pricing system. The strategy is keen on the current rate of the products and services of the company and pays less attention to the production costs and customer demand. When using this pricing method, Zara should assess the prices of competitors and use them as the benchmark. The pricing strategy would be suitable for Zara since it operates in a saturated market, and small price differences would be the determining factor for customers. For instance, Zara could place the prices slightly lower than the competitors of somewhat above them. Regardless of the selection, this model of competitive pricing would be one of the most effective ways to remain ahead of the competition and maintain dynamic pricing.

Alternatively, Zara could use the cost-plus pricing system in which the focus is on the costs of production. Also referred to as the markup price, the system would enable Zara to optimize revenue generation (Sääskilahti, 2015). The strategy would be suitable for Zara since it deals with the retail of physical products. Zara could also use the dynamic pricing strategy in which the prices fluctuate depending on the levels of market and customer demand. Zara could apply the pricing algorithms to take the competitor pricing demand and other factors into consideration. The pricing algorithms will allow the customers to change the prices to align with the market and customer demand

Quality Products Strategic Option

Aside from price competitiveness, the brand can also improve the quality of its products. These strategic options will make the brand more competitive in the market by appealing to customers who are interested in high-quality products. The brand should slide towards the manufacture of quality products that meet the Dynamics needs of the full spectrum of customers regardless of demographic factors such as culture and age. Zara should pay closer attention to the various factors which will lead to its success, including strengths such as prioritizing the needs of the customers.

One of the quality challenges faced by the company is continually delivering more organic goods. This involves focusing intensely on product creation, choosing the best methods and raw materials to be used and, besides, on the entire manufacturing phase,  to the end of the development cycle of the product

High product quality is directly related to sustainability: the fashion brand holds that high quality implies sustainable goods that are processed under acceptable environmental and social conditions. To achieve this, the designers operate at all points in the supply chain – ranging from the concept to the right decision in raw materials and production and delivery methods correct through to the end of the product lifecycle. These processes utilize the best possible strategies to minimize demand and effect on the environment, especially concerning greenhouse gases. Completion of Zara  2011-2015 Strategic has helped us to implement and simplify diverse workflows across all stages of the global supply chain (Inditex, 2020). Building on the successes and gains achieved in this phase, in a current strategy for 2016-2020, Zara has set new sustainability goals (Inditex, 2020). These processes boost the quality of products and make them more appealing to the customers. The operations also ensure minimal utilization of resources to manufacture high-quality products. Therefore it becomes possible to charge less for top quality products.

To maintain high standards of quality, the brand should train and empower the employees to be keen on the needs and wants of the customers (Sääskilahti, 2015). Zara should enable the sales associate, for example, to carry out continuous customer research by listening intently to the ideas of customers, including cut designs and new styles.

 Global Expansion Strategy

Globalization is the third strategic options available for Zara. The current Internationalization strategy comprised two distinct phases, which are cautious and aggressive approaches. Since it’s the establishment, the company first launched a global expansion strategy thirteen years after a detailed evaluation of the business strategy. The move also came after the firm gained expertise and developed the necessary capabilities and competitive advantages. Zara initiated a robust local business expansion first in Spain by opening 82 stores within eight years (Inditex, 2020). Once the company was done with regional development, it ventured into the first Internationalization phase, which took place between 1988 and 1996 (Inditex, 2020). During this era, Zara launched new stores in adjacent markets, including Portugal, France, and Cyprus (Inditex, 2020). The gradual process resulted in the launch of 107 stores (Inditex, 2020). The second phase of aggressive expansion began in 1998 and is still used to date. It was easier to execute the second page of global expansion since the firm already had the necessary knowledge about the international market and the technicalities of market expansion. Thus far globalization has resulted in worldwide recognition as one of the leading brands with more than 2740 stores opened in 93 countries (Inditex, 2020)

.         To improve the current globalization strategy, Zara should consider incorporating cultural considerations. Since the firm operates in different countries, it becomes imperative to find how the local culture affects the demand for products. Currently, more than 90% of the products are similar in global stores with small variations for each country. The brand could ask the managers to select products suitable for the local market from a comprehensive product portfolio. Final product allocation should be determined based on the local sales and the product data held at the headquarters. Zara should also consider designing and manufacturing products to meet the unique demands of local markets. The current focus is on producing clothes that are suitable for different climatic seasons, which makes it hard to customize them to meet domestic demand. Research shows that cultural considerations are the most when planning for the Internationalization of the company (Puck and Filatotchev, 2018). Although the current approach focusses on selling global products for everyone, they can appeal to the local customers by customizing the products to match their tastes and preferences.

Zara should apply the EPRG framework to design its globalization strategy. The structure comprises four strategic orientations, which are the ethnocentric, polycentric, regiocentric, and the geocentric orientations (Meyer and Estrin, 2014). Using the ethnocentric orientation means that the firm would implement a decentralized system of making decisions in the host country. The company would also realize the concepts strategies and the local practices that were successfully used in the host country and subsequently apply them to the subsidiaries.

Zara should combine the ethnocentric approach with the polycentric orientation, which provides the subsidiaries with high levels of autonomy by allowing them to be run using personal management styles. Managers at the foreign subsidiaries would recognize and evaluate the peculiarities of the business and make decisions using the ethnocentric approach described above.

The third orientation concerns the regionalization of the global economy. In this orientation, Zara’s center of attention would be to enhance the internal homogeneity. More specifically, the firm would focus on ensuring the same degree of purchasing power alongside similar consumer structures. The regiocentric approach combines the attributes of the polycentric and the geocentric approaches.

Lastly, Zara should align the three orientations with the geocentric approach. The approach focusses on optimizing the allocation of resources through standardization. This approach does not view the parent company and the foreign subsidiaries as independent entries by as one conglomerate of global networks. The strategy would allow Zara to run the subsides using the same management styles used at the parent company, which will make decisions making increasingly seamless. The other benefit of the geocentric approach is that it allows the company to be more involved in terms of operations and mutually dependent. The plan aligns well with the current vertically integrated system of management whereby the parent company oversees all aspects of the supply and value chains (Puck and Filatotchev, 2018). This system of governance allows for a sophisticated management system suitable for decision making and a more efficient allocation of resources. The advantages of the centralized system of decision making enhance mutual dependence by allowing the subsidiaries to run based on the decisions made by the parent company (Meyer and Estrin, 2014). The system also allows the company to execute both universal and local performance standards, including the standardized design of products. The firm can secure the local rules by enabling the production of the product at the home market, coupled with the close monitoring of the value chains.

Zara can improve the geocentric approach of globalization by enhancing communication intensity as well as the flow of information at the company. The two will ensure constant end the accurate flow of information among global managers at domestic stores and those at the headquarters. Managers will use the system to forward the suggestions of customers and to request product customization by observing the shopping behaviors of customers.

Geographical identification would also be helpful for the globalization process. Although the brand remains to be a global retailer, its entire production system is in Spain and neighboring countries. To be more productive, the system can employ managers from the local state to provide a better understanding of the local market.

Part of the globalization strategy should be positioning the brand and the products according to advanced differentiation levels as Zara strategizes its competitive moves or should consider using both the cost leadership and the differentiation strategies. Since the firm already used the differentiation strategy at the global level, it should also consider the aggressive differentiation of the brand experience for its global customers. Unlike mainstream companies, luxury and fashion brands such as Zara have excellent customer loyalty. These key attributes mark their identity and secure connections with the primary intermediaries in the luxury products market (Meyer and Estrin, 2014). These attributes mandate that the degree and form of differentiation be more substantial, unique, and focussed on the symbolic values delivered to the customers.

Zara should also consider creating exclusivity perceptions among customers. These perceptions will make the Zara brand appear as holding symbolic values, which will, in turn, attract more customers at the global level. A significant number of luxury brands attempt to boost the sense and perception of exclusivity among customers (Meyer and Estrin, 2014). Zara could, for instance, charge different prices, limit its geographic availability, implement possession barrier, and limited supply in some markets. These strategies of developing perceived exclusivity should create a sense of demand for Zara products among global customers who will associate the brand with special status. The exclusivity perception will also allow the Zara brand to maintain it’s positioning during extreme external shocks likes increased competition and recessions.

One of the critical considerations for Zara managers concerning the global expansion strategy will be the trade-off between international integration and local responsiveness. Global integration describes the extent to which Zara will be able to manufacture similar products  using the same methods in different countries. On the other hand, local responsiveness refers to the area to which Zara will customize its products and processes to align with those used in foreign countries. To meet both considerations, Zara should implement the global expansion strategies of Standardisation export, multinational, and transnational approach.

Using the Standardisation strategy, Zara should consider the entire global market as a single market with only considerable variations. This comprehensive expansion strategy assumes that Zara’s products would be able to meet the same needs of all global customers. In this strategy, the firm will use universal tools equipment and technologies with only considerable customization to meet the local conditions. In this strategy, although the designs and fabrics may vary the match considerably the local tastes, the manufacturing process would remain the same (Meyer and Estrin, 2014). This approach would allow Zara to increase production efficiencies since it will centralize the popular activities, including product design, a simplified supply chain, and reducing the costs of marketing.

Zara should also use the transnational strategy, which combined the multi-domestic and Standardisation approaches. This strategy is suitable for Zara since globalization involves cost pressures that derive from global competitors, and they also have to deliver products that can satisfy the needs of the local customers. However, this strategy is no way to implement primarily because Zara would have to attain specific economies of scale using Standardisation and, at the same time, adapt to the local conditions. Zara would have to incur invisible costs, such as the charges did the customizing elements of local legal requirements and to customize the marketing strategies do align with the local markets.

Conclusion

In the contemporary global economy, Zara, as a fashion brand, should consider the immense opportunities created by universal expansion. However, Zara should be tactical in implementing the global expansion strategic option because international operations entail various risks. Therefore Zara should carry our detailed research and make plans before the execution of global operations. To that end, Zara should select strategies that align capabilities with the objectives. More specifically, Zara should resolve competing pressure such as Standardisation economies kcal responsiveness and get challenges of customization. This report recommends the strategies that can be used successfully to execute the global expansion strategic option.

Bibliography

Inditex, 2020. The Quality Of Our Products | Inditex. [online] Static.inditex.com. Available at: <http://static.inditex.com/annual_report_2015/en/our-priorities/the-quality-of-our-products/> [Accessed 6 April 2020].

Meyer, K., and Estrin, S., 2014. Local Context and Global Strategy: Extending the Integration Responsiveness Framework to Subsidiary Strategy. Global Strategy Journal, 4(1), pp.1-19.

Puck, J., and Filatotchev, I., 2018. Finance and the multinational company: Building bridges between finance and global strategy research. Global Strategy Journal.

Sääskilahti, P., 2015. Buying Decision Coordination and Monopoly Pricing of Network Goods. Journal of Economics & Management Strategy, 25(2), pp.313-333.