Cultural issue

 

Culture can be defined
as any shared values, beliefs, identities, and interpretations from
particular group or societies that are carried across generations (House, et al., 2004)

 

India is a newly industrialised country and emerging market, who is the world’s
7th largest national economy, with one of the world’s fastest
growing country in terms of annual GDP (average 7.5%) (Petroff, 2017). However,
there is currently a cultural barrier that are restricting foreign retail
companies from fully benefitting from the Indian market (Ram, 2017). The
majority of the female population are still wearing traditional clothing like
sarees and salwar kameez and are less familiar with the idea of rapidly-changing
fashion (Financial Times, 2017). In line with this, India also has a preference
for colourful and vibrant clothing (Ram, 2017). Zara is a Spanish multinational
fashion retail brand who operate within the Indian market and still face the
challenge of encouraging and attracting the Indian population to adopt western attire
(Ram, 2017).

 

Figure
3 showing the Born
Global Model (Hollenson, 2011)

Zara, are a born global company who are a subsidiary
brand of their parent brand and fashion retailers Inditex (Indetex, 2016).  The Born Global theory states that companies
like Zara start-up with competitive advantages such as; resources, suppliers
and capital. This then gives them the advantage to innovate ways in which they
can quickly spread globally through access to technology (Freeman
and Cavusgil, 2007). 
This explains how Zara quickly was able to reduce impacts of cultural difference
by placing tablet devices in their stores to encourage feedback which was
analyzed by store managers to defend their position in the market and cater for
the Indian population (Ram, 2017). According to Albert & Micheal (2010) if
a company does not adapt to different cultures they will not be able to reach
the full potential of successfully expanding.

Figure
4 showing the Network
Approach Model (Hollenson, 2011)

In line with this, the Network Approach (Hollenson,
2011) acknowledges the activities of market entry and states internalization
can be achieved through building relationships in order to develop networks and
increase access to resources to speed up expansion. This can explain the
success Zara has attained, through the partnership deal with Indian retailers
Inditex Trent in order to expand the international presence which saw sales grew
by 17% (Ram, 2017).

 

By
2028, nearly 40% of the Indian population is expected to be moving to urban
areas – adding new consumers to the middle class which forms nearly 50% of
Zara’s total customer base (Delloite, 2017). By 2025, The rapid expansion of
professional sectors in India means that there will be an increase in the
number of women entering the workforce to earn a living (Ram, 2017). This gives
women greater consumer confidence and spending power (Carbone, 2004) as it
creates a need for people to dress smartly, therefore are more willing to neaten
up and accept the western apparel.

 

This outlook suggests
that although Zara may be experiencing a slow growth within the next couple of
years whilst the Indian population is shifting to urban areas, Zara’s future
with India does look promising in terms of its expansion prospects, sales and
profits from this rapid expansion in professional sectors which reduces this
cultural barrier. This means that Zara should remain
patient by continuing to monitor these changes in preferences and clothing and
continue to create new collections regularly. In the meantime, Zara can create
clothes that have a blend of Indian and western preferences to reduce the gap
on cultural barriers and ease consumers into western attire. Zara should also focus its attention on availability by identifying
space to open new stores to prepare themselves for the Indian population to
evolve in western apparel. In addition to this, Zara also needs to maintain their
competitive pricing strategy to increase their market share, as H&M entered
the Indian market last year offering lower prices. This may cause the novelty factor
of Zara to wear off leading to a consumer shift to H&M.