International Market Assessment Of Zalando: Identifying The Best Market To Enter

A Logical Outline Strategy

The global competitive environment now days requires not only competing in the ability to enter new markets but also achieve economies of scale. The challenges are faced in pursuing global efficiency in order to enhance competitiveness. The global competition is the existence of the competing organizations which serve international customers. The access to international customers has improved with the help of increased communications, improved shipping channels, reduction of obstacles and centralized finance authorities.

This report defines the international market assessment of Zalando, an international retailer of branded clothing and footwear for men, women, and children. Zalando offers an extensive range of products in the standard and premium segments. The company is expanding the number of exclusive brands offered by the internet shop. The company expanded its product range in 2010 and 2011 by adding children wear and perfumes subsequently.

It is a rapidly growing company. The company has extended its target customer group by the acquisition of MyBrands in May 2010. Zalando is determinedly established in the European market the company decided to expand products to the Middle Eastern Region. As a marketing consultant, the responsibility is given by the Zalando to access opportunities in the three countries Turkey, Egypt, and UAE as potential markets.

A logical outline strategy

Zalando is a rapidly growing internet retailer of branded clothing and footwear. The company is expanding its exclusive brands offered by the internet shop. The company was established in 2008 and offers customer service hotline, free delivery and the return of goods. Zalando is firmly established in the European market. The company has decided to expand in the Middle Eastern Region in order to compete in the international market. The potential markets of the Middle Eastern Region are Turkey, Egypt, and UAE.

The strength of the Zalando can be attained in the form of accessibility and scalability. The company offers 24-hour access for the customers. Even the online order entry component can be tied to the real-time inventory tracking program. The customers can also place orders with the updated information at any time of the day (Aldieri and Vinci, 2018). It also allows tracking logistics which has an important role behind the success of the company. The company makes shopping easy and quick which helps to gain competitive advantage. The company has also lower operational costs as it does not have a physical store. It is better customer support, lower prices, quick shipping and better terms and conditions which represents the strength of the company.

The company can grow as e-business component because it fits into the needs of the customers along with the needs of the growing business. The business of the Zalando can be expanded in any range because it does not require office space. There is no immediate satisfaction with e-commerce due to shipping times. The heavy goods are expensive to ship. The shipping costs are always a headache for the company. Some people are also unwilling to use credit cards online due to security and fraud concerns. Enabling customers to pay using PayPal can dull this concern. The excessive chargebacks are also the concern which is faced by the company (Miller, Kyriazi and Paris, 2017). The shipping duration also opens the customer’s opinions to purchase the products somewhere.

Strengths of Zalando

Research 

Zalando is a medium sized company and interested in the further expansion cautiously step by step. It is a long-term objective of the company to operate in the whole Middle Eastern Region. The company has first identified the three regions to enter in the Middle Eastern Region. These prospective market are Turkey, UAE, and Egypt.

Market opportunity assessment at Turkey 

The investment environment in Turkey

The e-commerce market in Turkey is growing rapidly. In the future, it seems to gain an important position not only in the country but in the world. The increase in the purchasing power of the customers has increased the personal expenses which are important growth in the e-commerce sector. The widespread use of the internet is also an important reason for the e-commerce market. The vast majority of internet users are credit card users that contribute to the growth of e-commerce (Momoh and Ishaku, 2017).

Turkey supports international investors by offering them access to the local market. It has even permitted a legislative restructuring series to streamline foreign investment. Turkey has even agreed on a series of European regulations and trademarks in an attempt to join the European Union. The local government of Turkey is making efforts to fascinate FDI into retailing, electronics, technology and services like health, education and public transport. Turkey has more of the young population which belongs to the middle class. They have increased purchasing power.

The government at Turkey has made efforts to make the country a striking destination for the business operations (Mata and Portugal, 2015). The country has clearly specified in its legislation that the companies making profits are required to pay profit tax. The implementation of principles is regulated in terms of income tax, corporate tax and value-added tax (Uyar and Kuzey, 2014).

Effects of government intervention policies

Turkey represents the long-term opportunities to the foreign companies. The study growth of the economy has advantageous conditions. The government policies are legalist in Turkey. The government has minimized the time taken in registering a company. The political uncertainty and security concerns can affect the business operations in Turkey. The country has even adopted Europe’s common external tariff for industrial products.

It has resulted in the lower deities from the third country. The Turkish government has just a few piece controls and prices fixed for the products approved by the state government (Kuzey and Uyar, 2017). The companies investing in Turkey face bureaucracy and variation in the legal and regulatory environment. The reforms take place in the country time to time and maintain transparency and competitiveness in the business environment.

Market potential

Turkey is a growing economy and currently, it is the 17 largest economy. The country is anticipated to become ten top economies by 2023. The country is making an investment in the various sectors to satisfy the demand of the customers. There are strong market opportunities for foreign companies in Turkey. The country has also assisted various small and medium-sized companies in exporting or expanding in the Turkey (Ozturk, Joiner and Cavusgil, 2015).

Weaknesses of Zalando’s E-commerce Model

On the other side, the country experienced strong economic growth even after the global crisis. The fiscal stability has increased employment in the country. Turkey has more than 70 million customers which makes it one of the renowned markets. It has adopted a legal framework which is very close to the European standards (Durst, Hinteregger, Temel and Yesilay, 2018). Turkey has maintained significant tax policies which attract foreign companies to invest in Turkey. Several initiatives and administrative reforms are placed on a regular basis in the country.

Impact of regional integration initiatives

The regional integration is a process in which neighboring states enter into an agreement to cooperate and work closely to achieve some common objectives. Usually, integration includes one or more written agreements which describe the areas of cooperation and coordinating bodies showcasing the countries involved. Such co-operation generally begin with economic integration when it comes to including political integration (Dai, Herran, Fujimori and Masui, 2016).

The trade flows in Turkey have been simplified by the removal of the trade barriers and lowering tariffs. A new Turkish foreign policy has been emerged in the country to influence the justice power and development. The zero problem policy is focused is taken place by Turkey with the neighbors. The country is even making efforts to improve bilateral relations with the neighbors and conduct initiatives in the region. Turkey has executed policies like ‘zero problems with neighbors’ and verified capability to deal with the regional instability (Kurfal?, Arifo?lu, Tokdemir and Paçin, 2017).

Identification of opportunities and threats

Turkey is one of the complex emerging markets and experiencing much of the growth. The investment in the industrialization, shopping malls, and e-commerce has helped to grow significantly. Turkey has more of a young and growing population which creates opportunities for the Zalando to make the investment. The country has also well-developed industrial base along with the dynamic internal market. Zalando can only face threat in the terms of the experimenting new markets. The generation in Turkey prefers to wear international and luxury brands which creates opportunities for retail companies. The threats can be faced by the company in Turkey as there is internal and geopolitical instability (Colak, et. al. 2014). There are heavy bureaucracy and high import dependency of the industry. There is an increase in the foreign investments in Turkey but the rates are low due to the fiscal policy.  

Market opportunity assessment at UAE 

The investment environment in UAE

The foreign investment inflows have recovered even after the global economic crisis and regional instabilities in 2013. The political and economic stability of the UAE helps to attract foreign investors. The UAE government focuses on promoting the development of the private sector. It has even implemented various rules and regulations to develop an encouraging environment for foreign investment (Uysal, Demir Askeroglu, and Kastaci, 2018). The country has maintained its position as the leading trade and investment hub which encourages the company to make the investment.

The political and economic stability, GDP growth, growing capital markets and the absence of the corporate taxes make businesses to conduct business operations smoothly. UAE is constantly engaged in attracting foreign investment in the wholesale and retail segment. The regulatory and legal framework of the country favors to the foreign investors which makes sector to make progress. The government of the UAE has established no barriers in the form of sponsorship and distribution (Eid Mohamed, Elkaftangui and Farouk, 2017). There are ample opportunities for the multinational companies to conduct business operations.

Market Opportunity Assessment at Turkey

Effects of government intervention policies

The government interventionist policies have a role in governing the business in the UAE along with the consumer rights. The businesses units in the country are governed by the free zone authority. The foreign companies can be affected by the intervention policies as an environment is created conductive to the foreign investment. Zalando can be affected by the intervention policies as it provides strong corporate regulations.

The UAE government keep on upgrading its federal legislative framework in order to work closely with the international organizations. There are foreign investment laws in the country which reduces a large part of the regulatory and administrative compliances. It helps in attracting foreign investment. The government intervention policies create a united regulatory framework such as registration, licensing and investment procedures. The policies have an impact in the form of tax exemptions and guarantees for the foreign investors enabling their rights and obligations.

Market potential

UAE has a reputable political system and liberal trade regime. The business scenario in UAE continues to be appropriate and attractive to the businesses around the globe. The e-commerce industry of UAE is the fastest growing industry. There are ample opportunities in the UAE market. It is made possible by the adult population of the country that is engaged in the making purchases online. Nowadays the younger generation like to make purchases online due to convenience and lack of time. The discounts offered by companies help to encourage sales online. 50% of the population of UAE fall into this segment (Kaba, 2017). This segment is influenced by social media and likes to adopt modern shopping options. The online consumers are expected to grow in the coming years.

The impact of regional integration initiatives

The country has major potential for economic growth. The neighboring states enter into the agreement with the UAE in the regional integration initiative. UAE is WTO member since 1996 and shares proper economic leadership with the neighboring nations. UAE is negotiating a trade agreement with the China and other countries in order to develop trade and service sector. These agreements help to enhance industrial and service sector of the UAE. The country is negotiating agreements with some neighboring countries to moderate barriers, liberalization of the services, trade, and agreement (Jaradt, 2018). All the agreements done by the country leads to internet penetration. It has been concluded from the research that 64% of purchases are made online in UAE.

Identification of opportunities and threats

UAE has an agreement with the major industrial countries like Turkey, China, India, Japan, Singapore and more. The country is looking forward to doing an agreement with the more countries. The friendly policies in UAE help Zalando to conduct business activities and encourage entrepreneurship. The country offers an environment for e-commerce businesses to make development. The infrastructure and of the UAE is capable enough to attract the foreign investors in the country (Kortunay, 2016). It is also successful in appealing capable talent from the world.

The foreign investors in the UAE felt concern over the weak dispute resolution, mechanism, laws and the regulatory. On the other side, foreign investors are required to have a national agency with the 100% UAE national ownership (Seetharaman, Niranjan,  Saravanan and Balaji, 2017). As per the laws of UAE, the foreign principles can sell their products with the help of only exclusive commercial agents.

Investment Environment in Turkey

The market opportunity assessment of Egypt

The investment environment in Egypt

The Egyptian economy mainly relies on agriculture and tourism. Although the investment climate in Egypt has improved extraordinarily from 2017. The encouragement to the foreign direct investment has witnessed significant structural reform. The investment laws of the UAE offers a new framework to the investors regarding the investment related rules and streamline procedures. Many ups and downs are faced in the UAE economy nowadays and there was never a better time for the investment in Egypt (Barsoum, 2015). It is due to the lack of the potentials in the consumer market. The Egyptian economy can only be appealing if foreign investors build successful partnerships with them. It is an emerging location for the foreign investors to make the investment.

Egypt has trade opportunities due to the close ties with Europe. The investment can be made in both downstream and upstream sectors. The online platf0orm is a great resource for small and medium businesses. The business opportunities can be availed in Egypt by simply registering on the internet. Zalando can conduct its business successfully online. It does not have any need to relocate to any city. The purchases can be made online (Barsoum, 2016).

Effects of government intervention policies

The government intervention policies impact investors by enhancing the confidence of the investors. There is an increasing trend of takeovers in Egypt in order to safeguard the nation’s interest. The government intervention policies impact the operations of the business conducting in UAE. Egypt depends on the foreign investment and favors pro trade approach. The government also intervenes to avert takeovers in the key industries. The government time to time raises concern for the foreign investments (Caiazza, 2014). The government has also the power to provide non-binding opinion on such investments. The foreign investment is also reviewed by the Egyptian government affecting the interest of the country.

Market potential

The Egyptian government is executing a number of transformational reforms in the country. It has even started to yield positive results. The government efforts remain difficult because of the high inflation and erosion of the real incomes. The market of Egypt is growing in a significant manner which makes it one of the fastest growing companies (Ramzy and Eldahan, 2016). The small and medium businesses have dominance in the private sector of Egypt. It showcases vast marketing opportunities for the Zalando. The foreign companies are even supported by the credit facilities. The country has launched suitable reforms to attract foreign investors from various parts of the world (El-Gohary and El-Gohary, 2016).

The impact of regional integration initiatives

The regional integration initiatives taken by the company helped the country to move towards a liberal trade regime. Egypt made a contract with Europe in 2004. It resulted in elevating all the trade barriers in the Egyptian industries. The country is further committed to removing trade barriers in the coming ten years (Barsoum, 2017). A number of trade agreements are signed by Egypt to enable exports. The bilateral trade agreements are signed to offer improved market access. Some changes are facilitated in the country to authorize economic operator system.

Effects of Government Intervention Policies

Egypt follows WTO code of good practices in order to adapt and apply standards. The technical regulations are also followed by the country in the e-commerce platforms (Salehi-Isfahani, 2016).

Identification of opportunities and threats

Egypt is a developing market and offers good returns on foreign investments. So Zalando can make an investment by capturing the target segment in Europe. On the other side, there are some risks which can cause the problem to the expansion of the company. There are some factors which can cause the problem to the company like high market transaction costs, random decision making, and the unresponsive commercial court system. Both corruption and fraud also have a serious concern in the market scenario of Egypt (Burt, Johansson and Dawson, 2017).

Analysis 

After the assessment of the market opportunities of the Middle Eastern Region, it can be concluded that Turkey is the most suitable option where Zalando can expand its market first. The e-commerce companies in Turkey are growing at the fast speed. E-Commerce is anticipated to grow at the rate of 18.5% by the end of 2018. There is a conscious consumer profile which prefers to purchase products online. There is huge potential for the retail and e-commerce companies in Turkey. The internet is giving power to the companies and helps in the expansion. There are some factors which promote the functions of the e-commerce companies are consumer awareness, internet penetration and consumer trust (Fujimori, et. al. 2014). The appropriate marketing strategies for Zalando to enter the market of Turkey are:

Partnering: The partnering is necessary when it comes to entering the foreign markets. The partnering takes a number of forms like simple co-marketing arrangement to the refined strategic alliance for the production. Zalando can make use of the partnering in Turkey as there is a different culture. The partners can help to the Zalando in bringing the local knowledge, contacts and the customers.

Joint ventures: A Joint venture is a form of partnership. It is the creation of a third independent company. The two companies agreed to work together for the common purpose. Both the companies are liable to share risks and profits equally (Khan, Shenkar and Lew, 2015). It is the best option for the Zalando to gain knowledge of the Turkey market (Jabeen, Faisal and Katsioloudes, 2018).

Conclusion 

Zalando is making progress on the regular basis. The company has expanded its product range by adding children’s wear and exclusive perfume brands. Out of the three options in the Middle Eastern Region, Turkey is the most suitable option for the company to take the entry. There is an increasing trend of the online platform for the retail companies. It appeals to the interest of the customers in Turkey. The company can make use of partnering and joint ventures to take entry in Turkey. Zalando is suggested to enter in UAE and then Egypt after making expansion in Turkey. UAE is ranked second because foreign investors in UAE feel concern over the laws and regulations. On the other side, Egypt faces more corruption and fraud in online transactions. The company can succeed in UAE and Egypt if it produces products as per the target segment otherwise Zalando can fail to enhance its market share.

Market Potential at Turkey

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