Cultural issue Culture can be definedas any shared values, beliefs, identities, and interpretations fromparticular 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’s7th largest national economy, with one of the world’s fastestgrowing country in terms of annual GDP (average 7.5%) (Petroff, 2017). However,there is currently a cultural barrier that are restricting foreign retailcompanies from fully benefitting from the Indian market (Ram, 2017). Themajority of the female population are still wearing traditional clothing likesarees and salwar kameez and are less familiar with the idea of rapidly-changingfashion (Financial Times, 2017). In line with this, India also has a preferencefor colourful and vibrant clothing (Ram, 2017). Zara is a Spanish multinationalfashion retail brand who operate within the Indian market and still face thechallenge 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 subsidiarybrand of their parent brand and fashion retailers Inditex (Indetex, 2016).
The Born Global theory states that companieslike Zara start-up with competitive advantages such as; resources, suppliersand capital. This then gives them the advantage to innovate ways in which theycan quickly spread globally through access to technology (Freemanand Cavusgil, 2007). This explains how Zara quickly was able to reduce impacts of cultural differenceby placing tablet devices in their stores to encourage feedback which wasanalyzed by store managers to defend their position in the market and cater forthe Indian population (Ram, 2017). According to Albert & Micheal (2010) ifa company does not adapt to different cultures they will not be able to reachthe 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 internalizationcan be achieved through building relationships in order to develop networks andincrease access to resources to speed up expansion. This can explain thesuccess Zara has attained, through the partnership deal with Indian retailersInditex Trent in order to expand the international presence which saw sales grewby 17% (Ram, 2017).
By2028, nearly 40% of the Indian population is expected to be moving to urbanareas – adding new consumers to the middle class which forms nearly 50% ofZara’s total customer base (Delloite, 2017). By 2025, The rapid expansion ofprofessional sectors in India means that there will be an increase in thenumber of women entering the workforce to earn a living (Ram, 2017). This giveswomen greater consumer confidence and spending power (Carbone, 2004) as itcreates a need for people to dress smartly, therefore are more willing to neatenup and accept the western apparel. This outlook suggeststhat although Zara may be experiencing a slow growth within the next couple ofyears whilst the Indian population is shifting to urban areas, Zara’s futurewith India does look promising in terms of its expansion prospects, sales andprofits from this rapid expansion in professional sectors which reduces thiscultural barrier.
This means that Zara should remainpatient by continuing to monitor these changes in preferences and clothing andcontinue to create new collections regularly. In the meantime, Zara can createclothes that have a blend of Indian and western preferences to reduce the gapon cultural barriers and ease consumers into western attire. Zara should also focus its attention on availability by identifyingspace to open new stores to prepare themselves for the Indian population toevolve in western apparel. In addition to this, Zara also needs to maintain theircompetitive pricing strategy to increase their market share, as H&M enteredthe Indian market last year offering lower prices. This may cause the novelty factorof Zara to wear off leading to a consumer shift to H&M.