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JOINT VENTURE AND

AQUISITIONS
Trent ties up with Inditex to bring Zara
Assignment 1

Shrishti Agarwal
BFT/15/158
Trent ties up with Inditex to bring Zara
Introduction
According to the Indian policy on foreign direct investment (FDI), Zara teamed up with the
Tata Group, India, to form a joint enterprise in February 2009. Inditex has a share of fifty
one percent of this collaboration while Tata’s subsidiary Trent Limited holds forty nine
percent.

Tata Group
Tata is one of the largest conglomerates in India, with a corporate history dating back more
than 140 years and operations spanning seven industries: information systems and
communications, engineering, materials, services, energy, consumer products and
chemicals. In many of these industries, Tata Group companies are among the largest in the
world. The group estimates that its 2007/2008 revenues totalled $62.5 billion. Tata employs
more than 350,000 people worldwide.

Inditex
Inditex is one of the world’s biggest fashion retailers. Its retail presence under the Zara, Pull
and Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe concepts
encompasses more than 4,200 stores in 73 countries worldwide. The company has more
than 86,000 employees throughout the world and posted sales of 9.4 billion euros in 2007.

Note: their 2007 data is given to understand scenario why both company form joint venture
rather than partnership or acquisition.

Reason for inditex opting for joint venture


 Too much of risk on the basis of the region involved. Market was alien to them.
 Culturally there was a huge difference ...
 Indians relate to and believe in Tata. Brand name...
 India is a potential market for fashion lovers... Also for quick changing fashion.
 Also the year before India was rated top most in the global retail development
index(GRDI)

Reason for Tata opting for joint venture


 Zara being an amazing brand and dominant in the world from nook to corner
 Tata saw great opportunities for Zara in a country which is becoming increasingly
fashion conscious. Zara has proven itself capable of quickly adapting to changing
consumer tastes across geographies. It will satisfy the discerning Indian consumers’
demand for the latest fashion trends very well, Trent Ltd managing director Noel
Tata said.
 Tata wouldn’t have wanted to let go off this opportunity to any competitor and
seized it as soon as possible.
Capital investment
Although Zara is very big company but since market like India is huge, complex as well as
new to them it would take great effort to start from scratch whereas their competitors are
planning to settle up in India with local company’s support. Also it would be great risk and
more money would be on stake as compare to joint venture.

Partnership
Since both company are master in their field and have almost equal market value it may
seem like partnership can be one of the option but Inditex has never done any work with
Tata previously therefore gaining that much trust can create problem to them. Also since
Tata at that time was already with Europe Company Tesco therefore according to Indian law
it cannot form any partnership with another Europe base company.

Success story
The Indian unit made profits of Rs. 38.3 crore and Rs. 22.5 crore during two financial years,
documents filed with the registrar of companies show. Customers visit Zara stores - there
are nine of them - some 14 times on average in a year, resulting in 85% of merchandise
being sold at full price compared with the industry average of 60%. (Provided data is
mention in the Hindu business line Apr 29, 2013, 05.00 AM IST).
Inditex Trent, a joint venture (JV) of Zara-owner Inditex and Trent, posted a jump of 21 per
cent in sales to Rs 1,023 crore in 2016-17 (FY17) compared to Rs 842.5 crore in FY16.
(Provided data is mention in the business-standard.com July 5, 2017 00:27 IST).
In my opinion the success of this joint venture is because both company are handling their
work only without lot of intervention for example Most of Zara's back-end and merchandise
sourcing are handled by Inditex while the Tata expertise is mainly for identifying real estate
and locations.
References

 http://www.business-standard.com/article/companies/for-tata-s-trent-zara-is-just-
a-financial-investment-115071000010_1.html
 http://www.livemint.com/Companies/cJfQFvS6hCSrE2WtQz1AbJ/Trent-and-Inditex-
forms-JV-to-bring-Zara-to-India.html
 https://economictimes.indiatimes.com/industry/cons-products/fashion-/-cosmetics-
/-jewellery/spains-inditex-makes-another-pitch-for-jv-with-tatas-trent-to-open-
massimo-dutti/articleshow/19773742.cms
 http://www.tata.com/company/profileinside/Trent
 http://www.business-standard.com/article/companies/trent-s-jvs-grapple-with-
bottom-lines-117070500029_1.html