Academic Master

Business and Finance


Zara is a fashion company that deals with a line of various clothing and accessories that are known for their high fashion sense. The company is based in Spain, Arteixo, (Galicia). Founded in 1975, it has grown to become one of the worlds leading fashion houses known for their high quality, quality branding.
Zara is currently owned and controlled as part of the worlds biggest apparel retailer company Inditex that manufacture globally more than eight hundred and forty million garments annually in the more than 6300 retail shops. The company has currently established a presence in 85 countries and is looking to expand more with an estimated annual growth of 500 new retail shops. Their trading environment is one that is faced with many hurdles being that it is a worldwide company having to deal with so many different political, economic, social-cultural, technical and demographic environments. In each country, Zara has had to adapt to the specific regulations that are in place. In doing so, however, the company has kept to its Mantra `high fashion at a low price`. Its strategy to reach a more profitable demographic has been to locate its stores as close as possible to other high-end fashion stores like Chanel, Hermes and Cartier. This was the customer who visits those stores are likely to visit Zara too.

Zara is a global company it will engage in imports and exports all in its bid to achieve its objective which is to sell as many apparels as it can. Many apparel companies have ought to outsource its productions to other countries like China, Bangladesh and Vietnam but Zara has stuck to its guns and is doing most of its production in factories in Europe; mainly Spain, Turkey and Portugal. The biggest factory yet is in Galicia, Spain where most of its production is done. The clothes once produced are exported to many countries all around the worlds in many of their stores. Zara then exports to countries like Saudi Arabia, United States, China and the United Kingdom.

Zara has taken the route of franchising with many partners this means the partners will buy into the Zara brand and be able to trade with Zara products and both partners sharing in the profit. The international integration sense of the Zara brand is achieved by their spread in many countries and having a controlled product that is controlled by the company and then exported to the various markets it is present in.
The company has some drawback however with the tariffs that it has to pay for export to other countries, import to the country, tax on the income among other taxes paid to the government like licensing.

Trading barriers in some instances have been a great challenge. Some of these trade barriers are high taxes. In some countries, they prefer if companies would produce within the country other than import ready goods. To achieve this, they may impose high import taxes, increase the licensing fee or even establish quotas. Other governments, on the other hand, have been trying to get Zara to produce within their borders and not to outsource. They have employed strategies like low taxes on production companies. These companies that manufacture, employ many people and if a government like Vietnam for instance, has reduced the tax payable by companies like this. This was many people are employed and the country becomes a hub for business. Other strategies like reduced bottlenecks, favourable fiscal and monetary policies, import incentive schemes and provision of industrial sheds have made Zara stick to the current manufacturing zones.


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