[SN1]reference on social media. In response, Zara

 SN1reference

Zara are known in industry for their excellent
supply chain system as it provides not only an efficient but cost effective way
in which meets consumer demands of high quality products at a low cost (Lopez,
2009). Zara have gained a reputation for limiting their outsourcing to a few
number of countries mainly within Europe to ensure that delivery across the
supply chain is as efficient as possible. This is seen throughout many global
companies where their aim is to remain competitive, however, in many cases; the
need to remain competitive often leaves a company taking short cuts in order to
beat their rivals. This usually comes at the expense of undertaking unethical
practice which not only tarnishes the band image but it affects the communities
involved. The act of sourcing unethical cheap labour to ensure lower production
and unit costs is increasingly becoming a common business practice especially
in the fast fashion industry (Smestad, 2009). The recent revelation that Zara employees
have been treated unfairly in the outsourced factories in Turkey (Young, 2017)
has brought a lot of attention to the brand for not abiding by their ethical
reputation which resulted in Zara facing backlash from customers on social
media. In response, Zara announced they would be sourcing a ‘hardship’ fund to
cover the costs of the unfairly paid workers (Young, 2017). This highlights the
importance of strong supplier relationships within the supply chain, especially
on a global scale as the global market is evidently quick to respond to
negative media. Moreover, it can be suggested that Globalisation has encouraged
a more transparent supply chain. This means that the global marketing strategy
is not only focused on what the brand is, but the branding itself is also
influenced by who is employed within the company too. Therefore, it makes it
more difficult for brands to act unethically across the supply chain to remain
competitive if they want to keep a positive brand image to the public

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Supply
Chain Issues 327

 

According to Freeman; ‘The triumph of globalisation and
market capitalism has improved living standards for billions, while
concentrating billions among the few’ (Freeman, 2011). This is a theory many
economists argue, that although globalisation appears to be contributing to
boosting developing economies, the reality is that certain groups in society
are benefiting to a larger extent (Jaumotte, 2013). This is due to the fact
that outsourcing goods will benefit only corporations in gaining more profit;
however, high wage workers losing their jobs to low wage foreign workers will
widen the gap between middle and working class (The Balance, 2017). Although
globalisation contributes to global economic development; income inequality is
still present on the global scale (Kuznets, 1955) and so it can be conclude that
regional per real capita incomes very significantly worldwide. As a result, it
is becoming increasingly difficult for brands to meet the demands of a
standardised global consumer due to the varying disposable incomes. Zara have
been able to implement an effective pricing strategy where the price of items
is extremely sensitive to the local market (Cellabos, 2017).  Not only does this help Zara maintain its
standardised reputation of ‘high quality, low price’ but it also meets the
expectations of the consumer everywhere in the world. To sum, although
Globalization encourages the use of standardisation within many markets, Zara has
proven that alternative marketing strategies are just as effective in achieving
a global brand. Globalisation emphasizes the importance of understanding the
market and market demand when designing a successful marketing strategy. This
is because, brands need to understand that although standardisation of goods is
an efficient and cost effective way to reach a wider audience, it is the
strategy of implementing localised tactics to each market that will determine
the success in the long term.  

When
formulating a marketing plan on a global scale, it is vital that the
organisation takes into account the global economic environment as this will
indicate which markets to enter both for commercial and logistical purposes.
According to the IMF (IMF, 2016), global growth is projected to strengthen in
2017 mainly because of emerging markets and developing economies (IMF, 2016).
As a consequence, companies are contributing to globalisation through
outsourcing goods and drawing attention to manufacturing jobs internationally. Zara,
are outsourcing some of their production to Turkey for this reason (Press, 2017) and therefore it can
be recognised that they have contributed in providing more jobs. This results
in boosting the economic development of Turkey as it is reducing the number of
unemployed and therefore improving the quality of life of individuals.
Moreover, from a global perspective, when there are more opportunities for
workers, it leads to more competition for labour and therefore results in
higher wages. This shows how outsourcing can have a significant effect on
economic development if more than one company were to invest in developing
economies in the long term. A developing economy such as Turkey has seen an
increase of GDP to 11.1% in the third quarter of this year (Martin, 2017) which can also help it improve the
attractiveness of the country to other investors. One could interpret this that
Globalisation has created global economic interdependence which from a social
aspect is positive as it promotes global harmony (Gartzke, Li and Boehmer,
2001). However, it could be suggested that this is putting contrasting
currencies at risk if they are relying on the management of other economies to
support their success. The implications to market could mean that they are much
more volatile as external factors have a larger impact on their performance and
therefore this will further impact the performance of businesses within the
markets. Global corporations will need to consider risk management as part of
their strategy in order to ensure minimal destruction to the global business
strategy.

Global
Economic Development 633

In contrast
to competitive advantage, a comparative advantage is when ‘a country produces a
good or service for a lower opportunity cost than other countries’ (Amadeo, 2017). Focusing on the
textile industry from an economic perspective; Asia would always benefit from a
comparative advantage in manufacturing (Worstall, 2015). This is because they
are able to manufacture goods at the lowest cost due to offering the cheapest labour
(Worstall, 2015). However, if you were to eliminate this
economic comparison, then one could argue that since Spain excel in the
textiles industry (Worstall, 2015), this is where they should be specialising. Evidently,
Spain is not the cheapest in producing; however, it holds other factors that
make it an attractive investment choice and therefore contributes to the
development of word trade for Zara. First, Spain is located in the heart of
Europe which enables Zara to implement a logistics system to help maintain
their competitive advantage of fast delivery as they have better access to
their European customers. Second, a European position means that Zara will be
able to transport goods across Europe freely whilst competitors, such as
H&M, who outsource their manufacturing, will likely incur added costs
involved in transporting goodsSN1 . The benefit of this is that it
means Zara will be able to maintain their ‘affordable’ brand image better than
its competitors.

Comparative
Advantage 221

It is a
common misconception that globalisation results in cheap labour and therefore
companies focus on competing on price (Bruce, 2004) which ultimately leads to
failure, as this isn’t a sustainable growth strategy. This is because within a
global fashion market, there will always be aggressive competition on price
since manufacturers are also competing on cheap manufacturing to attract brands
to work in their factories. Therefore, in order for a brand to differentiate
themselves from rivals they will need to focus on other points of difference. Zara
proves that there are other methods of competing in the global arena through
focusing on the other factors such as speed of delivery or proximity. According
to Porter, the underlying factor that unifies all globally successful brands is
that all the strategies focus on some type of innovation (Porter, 1990). This innovation can be, and is
interpreted by each brand individually as it can range from implementing new
production techniques to targeting a market segment others have not focused on.  Zara vertically integrate with the aim of
achieving greater flexibility along the supply chain (Lopez, 2009). This has
helped them achieve a competitive advantage because their manufacturing process
has a shorter turnaround time than competitors which means they are able to
react to consumer demand a lot quicker and stay up to date with the latest
trends on the market (Tokatli, 2007). Moreover, this flexibility allows for
targeting cultural fashion trends across the world due to the nature of the manufacturing
process and therefore strategy and designs can be altered easily whilst still
focusing on homogeneous products across the globe. Although, Zara has a reputation
for being good value, the economic environment impacts how the euro stands on
the global economic scale. Zara can risk their reputation to new entrants who
are able to replicate similar products cheaper if the euro increases in selling
price at any given time. Therefore, it proves that a global strategic business
model solely reliant on price will likely fail in the long term as there will
always be cheaper alternatives provided on the market. One could argue that
Zara are also putting themselves at risk over competitors as they only spend
0.3% on advertising each year (Economist, 2005) which means they are
giving customers a lot of control over the brand reputation. As a result, most
of the marketing strategy consists of ensuring the product quality is high
standard so that word of mouth is powerful enough to help achieve sustainable
growth (Rageh, 2012). This could be a risk in the global market as a single bad
publicity stunt could taint the reputation of the brand worldwide and therefore
stunt the growth the brand already accomplished. Focusing mainly on research
(VARMA, 2017) means that Zara have a very good understanding of consumers need.
This gives them a competitive advantage as they are able to predict changes in consumer
demand which helps them to coincide with their manufacturing plan. To sum,
globalisation has allowed brands in saturated markets to expand internationally
with the hope of achieving growth. When the brands operates internationally, there
are a number of factors that will need to be taken into consideration when applying
the strategy as culture, trends and expectations differ between consumers.

COMPETITIVE ADVANTAGE 540

The development of Globalisation in the 21st
Century has erased the barriers of business security and exposed local
economies and businesses to the world market (Brooks, 2011). All business areas
are being disrupted due to technological advances altering the way business operations
are handled (Brooks, 2011). This means that companies are adapting their
strategy to meet the requirements to the global consumer which has led to the
standardisation of many markets and marketing efforts (Levitt, 1983).  Undoubtedly, the fashion industry is highly
impacted by the new wave of globalisation, as customers are becoming more
demanding in their expectations of speed, quality and price (Bhardwaj, 2010). This
is mainly due to the fact that consumers are more knowledgeable due to having
more resources available to them such as the internet. Consumers also have a
larger choice of retailers they can choose from globally and therefore hold the
power over local retailers. As a result, fast fashion companies are finding
themselves performing in a highly competitive market which has also led to a
highly standardised market of goods (Bhardwaj, 2010). The Spanish multinational
company; Zara, has transformed itself from a local Spanish brand to being a
transnational retailer (Alexander, 2000) operating in 93 markets worldwide with
a net sales of €15,390m in 2016 (Inditex, 2016). The brand has managed to achieve a
global reputation through applying the strategy of vertically integrating into
the global market and disrupting the fast fashion industry through using
modernised product techniques (Lopez, 2009). To maintain a global image, it can
be argued that Zara has been impacted by the standardised formality of the
market and therefore all marketing efforts are aimed to maintain this new business
practice.

GLOBALISATION & THE FASHION
INDUSTRY 280

In the past
two decades, it has become common practice in business to treat the world as
one global market place (Levitt, 2017). As a consequence,
there has been the rise of global brands as more corporations understand it is
becoming increasingly important to be internationally competitive in order to
achieve sustainable growth both in domestic and global operations. Strategy,
however, is a fundamental element which many corporations fail to execute effectively
in order to achieve a global position. This report aims to analyse
Globalisation and its effects through one of the top 100 fashion brands in the
world; Zara (Forbes, 2017) and asses how its strategy has helped
it become a leader in disrupting the fast fashion industry (Laws, 2016).
In particular, there will be careful consideration of competitive and comparative
advantages, global economic development and brand ethics which also have an
impact on market demand and world trade.

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