The expansion of business to the global market is a vital growth strategy for fashion brands (Harris 2018). By joining the global market, the fashion entrepreneurs can benefit from many advantages of having a broad demand for their goods. There are also various challenges that the fashion entrepreneurs might face in the international market if they do not have right strategies.
Reasons for Expansion
The benefits from global markets are numerous, but the entrepreneurs must have right strategies on how they will survive in the competitive global fashion industry (Harris 2018). The number of new entrants in the fashion industry is high but so is the number of brands that are closing down. Before joining the global market, it is crucial to determine whether that market is right for your products (Chris 2018). One should understand the needs of the consumers in that market if they are to meet or exceed the consumer expectations. Many fashion retailers join the global markets because the domestic market is saturated with their products (Chris 2018). International consumers are interested in buying global products since they have a different outlook compared to the domestic ones. Expanding business operations to global markets gives the fashion brands a part of the international market and thus increasing sales (Harris 2018).
The fashion brands can also benefit from expanding to countries with untapped markets for their products (Rossum 2017). For instance, the western fashion brands expanding their business operations to Muslim countries have given them a chance to access a market that is still developing. Expansion of business also helps entrepreneurs in building a reputation for their brands (Burton 2017). They give their companies a global outlook, which helps them in the future when expanding to new markets. Expansions also change the perspective of the domestic markets, as they would appreciate these reputable brands. The appreciation of the brand leads to an increase in the local sales. According to Iris communications (2018), the western fashion industry is developing in Pakistan as the people have begun to appreciate the fashion of the west. Various western fashion brands have joined the Pakistan fashion industry such as Levi’s (Branded Girls 2018).
Expansion to Pakistan and other Muslim countries
The western fashion industry is developing in various Muslim countries such as Pakistan (Iris communications 2018). The growth is mainly steered by the youth (Iris communications 2018). The expansion is aimed at establishing a customer base in the untapped market. For instance, Mango has built operations in Iran. According to Paiver and Sadeghzadeh (2015), Iranians have a taste for luxurious products. The imported clothes are quite expensive when compared to the domestic products, but that does not stop the Iranians from purchasing (E-Haider 2017). The same applies to Pakistan and other Muslim countries.
To succeed in the fashion industries of emerging countries, it is crucial to understand the culture of the people in the market and the type of products that might interest them. Zara has expanded its business operations to various Muslim countries such as Afghanistan, Iran, and India (Zara 2018). The fashion retailer has been able to compete in the market because it understands the needs of the consumers.
Porter’s Diamond Model
The model analyzes the fashion industry in Pakistan, which helps firms in understanding how competitive they are in the global market. The elements of this model aid entrepreneurs in making policies and strategizing about the firm’s future.
Factor Conditions
Factor Condition describes the production factors available in a country that are necessary for the development of a particular industry (Claessens 2016). The element analyzes the availability of the relevant factors that make a country or industry more competitive. They are grouped into Basic and Advanced Factors (Mulder 2016). Basic Factors are the natural resources and labor like land and minerals (Claessens 2016). The Advanced Factors are more sophisticated than the Basic Factors like skilled workers and infrastructure (Mulder 2016). The competitiveness of a country in the global market is determined by the availability of both the basic and the advanced factors. The factors can be grouped into human resources, physical resources, capital, knowledge, and infrastructure (Economic Discussion 2018). The resources will determine the competitiveness of the Pakistan fashion industry in the global market. The factor will help in determining whether international brands like Zara will benefit from joining the industry.
Demand Conditions
Demand conditions analyze the interest for industry products in the home market (Tran 2016). When the home market demand is high, it positively influences that of the international consumers (Claessens 2016). High domestic demand results in high levels of innovation as the local companies put more efforts to improve the quality of the products (Mulder 2016). Understanding domestic conditions helps the global and domestic producers in comprehending the global trends of the fashion industry. Global fashion brands will be able to use this information when strategizing on how to expand their businesses into Pakistan.
Related and Supporting Industries
The success of a domestic supporting industry is advantageous to firms in the industry (Mulder 2016). For instance, when the suppliers are competitive, the companies in the fashion industry will benefit from innovative products that come at low costs (Claessens 2016). The growth and development of the suppliers will lead to the expansion of the related industries. If the supporting industries are international competitors, their effect on the domestic market is strengthened (Tran 2016). In the fashion sector, some of the supporting industries are the transport industry and the textile industries. By analyzing this element, the author will be able to understand how the supporting and related sectors affect the fashion industry in Pakistan. The information will be useful to global fashion brands that intend to expand their businesses into Pakistan.
Organizational Strategy, Structure, and Rivalry
The structures, strategy, and rivalry depend on the local conditions that exist in a country (Tran 2016). Various countries, regions, or even industries have different strategies, structures, and rivalry. The structure and strategy describe the formation, organization, and ownership of firms in a particular sector (Tran 2016). Rivalry represents the level of competition in a country. Many investors will be attracted by low rivalry in a particular industry because they would have a large part of the market share. However, in the long run, high levels of competition are advantageous as they encourage creativity and innovation in production (Mulder 2016). Innovative products increase the chances of success in the global market. Organizational Strategy, Structure, and Rivalry will help global fashion brands to identify the strategies, structures, and rivalry that exist in Pakistan.
Government
According to Value-Based Management (2016), the state determines the competitiveness of a firm in the global markets. The government sets the policies and procedures that guide the operations in a country (Value based management 2016). For instance, the government can encourage or restrict importing and exporting. Some industries will suffer when the government regulates imports, as they will not able to get raw materials. The state also influences the demand for the local products by the domestic consumers. Understanding the government will help potential investors to make appropriate plans for the expansion into Pakistan.
OLI Framework
The OLI framework helps companies that would like to expand their operations into the global markets (The write pass journal 2017). Investing in a foreign country is ordinarily costly as there are many things that the investor has to understand, such as the cost of expatriate personnel (The write pass journal 2017). These costs determine the chances of success that the company has in the foreign market. Businesses investing in foreign countries incur more costs than the domestic firms do. Therefore, they ought to have various benefits that are keeping them in the industry (The write pass journal 2017). The OLI framework describes the benefits gained by a company from investing in a foreign country. Zara has decided to expand its businesses into Pakistan to capture part its fashion market. The market is rapidly developing, and it would be advantageous for the company, as it will increase its net earnings. The company will also enhance its reputation in the global market by joining the Pakistan fashion industry. The firm will use the OLI framework to gain higher earnings in the industry.
Ownership Advantage
Ownership Advantage is the specific investment made by a multinational corporation that gives the company an advantage in the foreign market (Business-to-you 2017). Such an investment is mainly something unique that only the company has such as patent and copyrights. The advantage enables the companies to generate higher profits that will be able to offset the additional costs of operating in a foreign land (The write pass journal 2017). Zara has various assets that it can use to protect its earnings including patents, copyrights, brand name, and many more (Bailey 2015). These assets will ensure that the company’s products are not counterfeited. The brand is known to produce the most stylish fashion products (Shah 2014). The reputational status will ensure that Zara gets part of the market share in Pakistan.
Location Advantage
Firms need to establish the best locations for the sale of their products (Business-to-you 2017). The location must be of specific advantage to the company if it wants to succeed in the industry. Zara has chosen Lahore as the best location to start its business. The city has many potential customers as the people there value luxurious products (Times 2017). At Lahore, charging premium prices for high-quality products does not change the demand. People appreciate quality and are willing to spend a higher amount of money to get such products (Zafar 2018). In addition, Lahore has skilled and semi-skilled labor as various schools offer fashion related courses (Zafar 2018).
Internalization Advantage
Companies that intend to expand their business operations to other countries should determine whether it is advantageous to produce a particular product or to outsource the services (The write pass journal 2017). Zara usually outsources part of its production process (Lu 2014). Outsourcing has helped the company in ensuring that its products that appear on the runway reach the customers within 2.5 months (Shah 2014). The company intends to continue outsourcing part of its production process while in Pakistan. By doing so, the Pakistani will be able to get the stylish products faster, which will lead to customer satisfaction and eventually an increase in its clients.
Hofstede's Cultural Dimensions
The theory describes the cultural similarities and differences between individuals from different countries (Gill 2017). Hofstede's Cultural Dimensions shows the relationship between different people through their behaviors and the values they uphold. The theory helps organizations that would like to expand their businesses into foreign countries to understand the cultures that exist in those countries (Cleverism 2015). Understanding the culture enables them to grow the relationship between the companies and the suppliers, consumers, authorities, and potential investors. The theory has six cultural dimensions that guide multinational corporations as seen in figure 1 below.
Figure 1. Pakistan Scores on Cultural Dimensions
Source: Hofstede-Insights 2018
The Power-Distance Dimension determines whether people in the society admit that power is distributed unequally (Leibensperger 2015). According to figure 1, Pakistan has a cultural dimension score of 55 in power-distance which means it is hard to determine their preferences in this regard (Hofstede-insights 2018).
The Individualism Dimension determines how interdependent the people in the country are (Leibensperger 2015). According to Hofstede-insights (2018), Pakistan has a cultural dimension score of 14, which means that the people are very interconnected and loyal to each other. The third dimension is Masculinity, which determines whether the people are competitive and success-oriented (Leibensperger 2015). Based on the cultural dimension score of 50 on masculinity by Hofstede-insights, Pakistanis are indifferent between competitiveness and caring for others in the society.
The fourth dimension is uncertainty avoidance, which describes how the people handle uncertainties about the future (Gill 2017). The Hofstede score on uncertainty avoidance is 70 points, which means that Pakistan has a higher tendency to avoid risks about the future (Hofstede-insights 2018). The long-term orientation dimension determines whether people like to keep the links of their pasts when handling the current and future challenges (Cleverism 2015). Pakistan lacks an explicit preference in this dimension. Lastly, the indulgence dimension determines whether people are controlled by social norms (Gill 2017). Pakistan has the lowest score of zero as seen in figure 1 above, which means that people do not indulge in the actions considered wrong by the society (Hofstede-insights 2018).
Limitations
The study will be critical to Zara, as it will guide the company on what to do to become successful in Pakistan. The research outlines the possible challenges that the business will face and thus enabling it to come up with practical expansion strategies. The study will guide Zara in making informed decisions that will allow it to succeed in the Lahore fashion market. Other companies that plan to join the Pakistan fashion industry can also use this paper as their guide.
Spanish Fashion Brand in Pakistan
Mango fashion brand has been able to get a share of the Pakistan fashion industry market. According to Soofi (2017), the retailer has been able to open three stores in Pakistan. The latest store was opened on 28th October 2017 (Soofi 2017). The success of the fashion brand is attributed to its understanding of the market and the cultural diversity in Pakistan. According to Overstreet (2013), the company’s vice president Jose Gomez said that the company looks at the needs of the people to make products that the market will appreciate. Jose Gomez stated that the company faces many challenges in its business operations such as the different tastes of clothing that exists in various countries (Overstreet 2013). One of the company’s strategies is to take the challenges positively and come up with solutions that will benefit the company.
Why Foreign Brands Fail In Muslim Countries
All the companies that intend to expand their businesses to the Muslim communities need to understand the Muslim culture that exists in the particular country (Lewis 2016). Most firms that join the Muslim markets for business are faced with language, culture, and power distance related challenges. Some companies fail to find solutions to such difficulties and end up closing their businesses. For instance, Factorie had to close down its operations in Malaysia (Marketing 2018). The company failed to understand the cultural practices of the people. The needs of the customers were not met hence the low earning. If the company had researched and understood the industry, it would have succeeded in Malaysia.
Impact of Literature Review to the Survey
The literature review will guide the survey that will be sent to Muslim women in various ways. Firstly, it will direct the study to incorporate questions that relate to the Pakistani culture. The questions should cover all the cultural activities that the Pakistan women might be practicing. For instance, it should ask if they would prefer to purchase modest clothing. The survey should also ask questions that will determine whether the Pakistani think Zara designs modest clothing. Secondly, the literature review will guide the survey to incorporate questions regarding the demand conditions in the market. The study should ask about the number of times the Pakistani women shop for clothes and the amount that they spend. The research should also show how much the people are willing to pay for the stylish and high-quality product. Lastly, it will guide the survey to add questions about Zara’s reputation.
Conclusion
The Pakistan fashion industry is developing rapidly. International fashion brands are expanding their businesses to Pakistan to get a slice of the market share. For global companies like Zara, they can get many benefits from investing in Pakistan. For instance, the fashion retailers will increase their sales. The companies also face cultural, language, and power distance challenges. To succeed, they need to understand the Pakistani and their needs.
Summary
Having a share of the global market is essential. Zara would like to expand its operations to Pakistan. The fashion industry in the country is booming as many people are embracing the western culture. To succeed in the industry, Zara will take into consideration all the factors discussed, as they will help the company in making the efficient entry strategies. Also, various advantages that will help in covering the additional costs that it will incur. They include Ownership Advantage, Location Advantage, and Internalization of the production process.
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