As mentioned earlier, one of the main reasons as to why the company has been facing problems pertaining to financial performance while the revenue of the company has been exponentially incrementing. The main reason for this has been the fact that the company has been aggressively expanding in the last decade. The company employed franchising and joint venture based expansion strategy whereby it expanded into the international markets. Now the Zara chain operates in more than ten countries.
This rapid expansion has created problems in terms of management of the chain as well as problems pertaining maintenance of service quality and standards in for all its operating markets as well as those relating to increasing overheads of the company, increasing short terms costs and expenses which even with high revenues, tends to decrease the profitability of the company. Therefore it is recommended that the company should not seek to acquire additional chains for Zara as yet. The company should wait a while out and try to fine tune its operations in the current markets and make the brand of Zara a stringer brand in these markets. In the long run however, after properly establishing the Zara in its target markets, the company can and should seek to acquire additional chains for Zara.
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