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1 Global Strategy Paper For Inditex Bharat Singh Khati Master of Global Management, Royal Roads University MGM 561: Political Geography and International Economics Dr. Sean Irwin February 26, 2023

2 Global Strategy Paper For Inditex Inditex, a global fashion retailer headquartered in Spain, operates more than 7200 stores in 96 markets worldwide and has a portfolio of brands that cater to different market segments, including Zara, Zara Home, Bershka, Massimo Dutti, Oysho, Pull&Bear, Stradivarius, Uterqüe and Lefties (Wikipedia contributors, 2023). The company has a reputation for fast fashion and is known for its ability to quickly respond to changing fashion trends. However, as the global economy continues to change, Inditex needs to adapt to seize opportunities and avoid pitfalls in the global market. This essay will outline a plan for Inditex over the next 5-10 years, considering economic growth, international trade, and geopolitics. One of the key strategies is to diversify its product portfolio. Inditex has traditionally focused on fast fashion, which carries a higher risk of market saturation and declining demand. Therefore, Inditex should consider expanding its product range to cater to different market segments, reducing its dependence on any one market or product category. For example, Inditex could expand into the beauty and home decor market, which has high growth potential and complements its fashion portfolio. Personal care is one of the most lucrative product categories, with revenue expected to reach over 188 billion dollars in the United States in 2026 (Statista, n.d.). In addition, they can provide goods at various price ranges to appeal to a wider spectrum of customers. It can introduce a lower-priced line to appeal to price-sensitive consumers or a premium line to appeal to high-end consumers. This can also be done by collaborating with other brands. Countries having large populations, growing economies, and increasing purchasing power, make them attractive markets for Inditex's products. Retailing and retailers' globalization have advanced more quickly in recent years thanks to the confluence of economic and demographic expansion in emerging and less developed regions (Reinartz et al., 2011).

3 Emerging markets such as China, India, Brazil, and Russia represent a huge opportunity for growth for fashion retailers like Inditex. With rising incomes and a growing middle class, these markets have the potential to drive long-term growth for the company. Additionally, emerging markets often have lower labour costs and favourable exchange rates, making them attractive for a company like Inditex that rely on manufacturing and export operations. These factors can help companies expand their operations, increase their profits, and gain a foothold in new markets. Moreover, these countries also have favourable policies and regulations that support foreign investment and business growth. However, Inditex must be mindful of these countries' increasing authority over governance and commerce, including product safety and labour standards. To navigate regulatory requirements and cultural differences, Inditex should work with local partners to ensure compliance with local laws and regulations. According to ( Malviya, ( 2022) “Inditex Trent, that runs Zara in India expands 61% during FY22”. Likewise, collaboration with local partners can be highly productive. Sustainability has become increasingly important for consumers, and fashion retailers are under pressure to reduce their environmental footprint. Fashion is one of the most polluting sectors in the world, using massive amounts of raw materials, producing high levels of pollution, having a substantial carbon footprint, and producing alarming amounts of trash (Brewer, 2019). Inditex should continue to focus on sustainability, using sustainable materials, reducing waste, and implementing circular economy principles. This will enable the business to have a smaller negative impact on the environment while also attracting more environmentally concerned customers. Also, Sustainable practices such as energy and water efficiency, waste reduction, and sustainable sourcing can result in cost savings for the company in the long run. Nayak et al. (2022) said that across many industries, including fashion, Radio Frequency Identification (RFID) technology may change economic dynamics and offer a more sustainable future.

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4 Therefore, Inditex should also consider investing in new technologies such as RFID, 3D printing and AI-powered supply chains to reduce waste and improve efficiency. Inditex, a global fashion retailer with a large manufacturing presence in Turkey and Bangladesh, faces potential risks to its supply chain and operations due to recent events in these countries. A devastating earthquake in Turkey and a projected recession in Bangladesh necessitate a re-evaluation of Inditex's manufacturing strategy. To mitigate these risks, Inditex should consider diversifying its manufacturing base to other countries. One potential option for Inditex is to expand its manufacturing operations to other countries in Southeast Asia such as Cambodia, and Laos. Despite being the primary export industries in Cambodia, Laos, and Vietnam, clothing and footwear have a low representation in small and medium-sized businesses (Uchikawa & Keola, 2009). These countries have a strong textile and apparel industry and offer relatively low labour costs. They have also been improving their infrastructure and regulatory frameworks to attract foreign investment in manufacturing. By diversifying its manufacturing base to these countries, Inditex can avoid disruptions in its supply chain and operations in case of natural disasters, political instability, or economic downturns. Another option for Inditex could be to restore some of its manufacturing back to Europe. While this may result in higher labour costs, it would allow Inditex to have greater control over its supply chain and reduce the risks associated with working with overseas suppliers. Additionally, it can help the company appeal to consumers increasingly concerned with sustainability and ethical sourcing. Reshoring can also create jobs and stimulate the local economy in the manufacturing regions. According to Lin et al. (2021), being resilient during times of crisis is crucial for survival in today's turbulent business environment. Resilience has now become the utmost factor to continue productivity. It's time to make retail and consumer goods supply chains more resilient

5 (Vu et al., 2020). Therefore, Inditex should also build resilience in its operations. by investing in risk management, diversifying its distribution networks, and developing contingency plans for disruptive events such as natural disasters or political instability. This will help the company minimize the impact of disruptive events and ensure the continuity of operations. In conclusion, Inditex can navigate the changing global economy and continue to grow its business over the next 5-10 years by implementing strategies like diversifying its product portfolio, expanding into emerging markets, focusing on sustainability, and building resilience. By investing in these key areas, Inditex can mitigate risks and seize opportunities to drive long- term growth and profitability. The paper is an interesting read, it is well written and uses concepts from the course. It clearly states the problem and offers strategies. For making it more compelling, my suggestion is that the paper should narrow down ideas to one emerging market, and provide more knowledge about the reasons for choosing that specific country. The key is to be more precise and in-depth so as to address some of the logical outcomes of the proposed strategies, which at times may be counter-productive. 76

6 References Brewer, M. D. (2019). Slow Fashion in a Fast Fashion World: Promoting Sustainability and Responsibility. Laws, 8(4), 24. https://doi.org/10.3390/laws8040024 Lin, Y., Fan, D., Shi, X., & Fu, M. (2021). The effects of supply chain diversification during the COVID-19 crisis: Evidence from Chinese manufacturers. Transportation research Part E- logistics and transportation review, 155, 102493. https://doi.org/10.1016/j.tre.2021.102493 Malviya, S. (2022, May 15). Inditex Trent, that runs Zara in India expands 61% during FY22 . The Economic Times. https://economictimes.indiatimes.com/industry/cons-products/ garments-/-textiles/inditex-trent-that-runs-zara-in-india-expands-61-during-fy22/ articleshow/91581944.cms? utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst Nayak, R., George, M., Haq, I. U., & Pham, H. C. (2022). Sustainability benefits of RFID technology in Vietnamese fashion supply chain. Cleaner logistics and supply chain, 5, 100086. https://doi.org/10.1016/j.clscn.2022.100086 Vu, M., Nair, G., Goldman, K., Minicola, R., & Backus, T. (2020, October 20). It’s time to build resilience into retail and consumer goods supply

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7 Chains . https://www.bain.com/insights/its-time-to-build-resilience-into-retail-and- consumer-goods-supply-chains Statista. (n.d.). Beauty & Personal Care - Global | Statista market forecast . https://www.statista.com/outlook/cmo/beauty-personal-care/worldwide Reinartz, W., Dellaert, B. G. C., Krafft, M., Kumar, V., & Varadarajan, R. (2011). Retailing innovations in a globalizing retail market environment. Journal of Retailing, 87, S53S66. https://doi.org/10.1016/j.jretai.2011.04.009 Uchikawa, S., & Keola, S. (2009, January 1). Small and medium enterprises in Cambodia, Laos, and Vietnam. ResearchGate. https://www.researchgate.net/publication/255611723_small_and_medium_enterprises_in _cambodia_laos_and_vietnam Wikipedia contributors. (2023, February 11). Inditex. Wikipedia. https://en.wikipedia.org/wiki/Inditex

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