Pestel Analysis Of Zara

Political Factors

The company that has been taken into consideration in this assignment is Zara[1]. The popularity of the organization has kept growing in the past years. It has become one of the largest growing names in the apparel and fashion industry. It is famous for the excellent designs and the affordable prices. The other major important feature of the organization is the faster fashion cycle. In the past years the brand had gone through a lot of success. Also it has made a progressive development. It is selling online and it has expanded in the other countries as well. The organization has gained a lot of preference from the customers. The crowd inside the stores of Zara has kept increasing to the improved quality of the products. Zara has produced luxury clothes in affordable prices. The business planning of the brand can be held to be successful. It is subjected to certain external as well as internal influences that have been with the help of conducting a Pestel analysis.

The primary external influences of Zara are:

Political:

            The most common political factors that play a major role in the business are many. One of the major aspects is the financial regulation of the country. All the nations have different outlook on any business. All are not open to the Foreign Direct Investment. The laws of many nations do not allow all the companies to make an investment in that particular nation. In many nations the entry of the investors is made difficult by the local laws. There is no way to penetrate into such markets apart from the partnering the local brands. The other barriers might exist when the foreign brands tries to intrude or expand in the local market. The political scenario of any business is therefore extremely important.

It affects the condition of the business in one particular place. The brands can be well operated in such places where the political environment remains peaceful. The political disruption can disrupt the market by affecting the economy. The supply chain can also get disturbed because of the political turmoil. Zara has overcome this difficulty as it has limited the operations of the chsin of supply system to the home-based country and the adjacent nation. By adopting the system the company has overcome the treat of political disturbance. In the countries where the political disturbances occurs on a regular basis the business remains under a constant threat. In many cases it has been observed that when the governmental policies are mot friendly they spoil the name of the brand. This is the reason a friendly political environment is considered to be one of the most essential necessities for any kind of product that is being operated internationally[2].

Economic Factors

Economic:

            Economic factor is considered to be one of the most important factor on any state or any marketplace that has a chief outcome on the way the business are being done in that region. It is considered to be an essential component in terms of business. Zara has a good plan that is actually of reasonable price. The economic range of Zara is so reasonable that even if there is a situation of economic cost cutting they might not switch away from the luxury brands but not from the brands like Zara that sell the products at affordable prices. There are many instances where the world was suffering through a complex web of economic activities.

The economic recessions are affecting the fashion brands. This is the reason Zara might get influenced due to the economic recession. The economic activity that is low reduces the purchasing power of the customers who immediately starts cutting the cost. This has a heavy impact on the sales. The factor that is a burden for Zara is the cost of the production, cost of the raw materials and the cost of labors. The increased amount of economic activity leads to a better business and the growth is made faster. The decline in the economic activity makes the customers upset. It affects their sentiments[3].

Social and cultural factors:

            The social factors can be considered to be one of the most important factors in case of business. Society has a huge role to play in making a business successful. Zara have to follow the social trends in order to survive in the society. The business is required to work according to the social trends and in this process they have to maintain the responsibility towards their society. They have to work hard in order to maintain a good relation with the society[4]. Zara invests a huge amount of money in social responsibility. Society and culture both are important for business as in case they lose attention they might lose their worth. The brands that lose attention in the market might lose the interest of the potential customers. Zara has minded the aspect of the business. It does not try to enter into the unknown without making an extensive research of the market. Zara conducts a detailed research of the market before entering into the market. This is the reason Zara is able to ease a lot of risks for the businesses. The culture that prevails in an area manipulates the decision of the buyers. The company does not believe in experimentation and it makes and sells fashion that is acceptable for the local people.

Social Factors

Technological factors:

            The technological factors include changing things globally making a business transaction easier and faster. It can be mentioned in terms of transport, communication and other aspects of day to day business[5]. Zara has greatly remained affected by the technological factors. Zara partnered with Toyota in the year 2014 for the application of JIT and Lean facilities across the manufacturing operations. Technology increases the responsiveness of the firm. The technological factors have enabled Zara to respond to the demands of their customers in a quicker way. It enables them to coordinate the supply chain and make the logistics service better. This has spelled the supply chain success for Zara[6].

Environmental factors:

            This includes the sustainability of the company. Zara has invested in the sustainability. It was reported that the parent company of Zara has pledged to make the stores 100 % eco efficient by the year 2020. This will result to less consumption of water compared to the other stores. These stores are equipped with better features of recycling and they have efficient energy. Zara has looked towards the elimination of the hazardous wastes from the supply chain system[7].

Legal factors:

            Law and business are inseparable factors. Zara lays the focus on ethics and sustainability across the business and its supply chain. There are several laws that the business needs to comply with. The company has developed programs that have implemented programs that guarantee the living wages for the labor force.  Apart from this, the company has focused on creating an ethical brand image. This is the reason legal compliance is an important requirement and the brand has invested in compliance throughout the system including the supply chain. It assures that the brand adheres to the local laws in the local markets wherever it operates[8].

Task 2:

Part i:

            Ethics and corporate social responsibility hold very important places in the modus-operandiof Zara, the premium multinational fashion house housed in Spain. The multinational designer adopts ethical ways of operations which encompass customers, manufacturing operations and even social aspects. The corporate social responsibility and ethics are supervised by the apex management which ensure that they accepted and enforced across all levels. The CSR initiatives are ruled by the Code of Conduct and Responsible Practices of Inditex Group, the owner of Zara[9]. The codes of conduct cover social and environment development as inseparable components of core business operations of the Spanish designer. The following are the ways in which Zara enforces and adopts ethics and corporate social responsibilities:

Technological Factors

Apex management support:

            The corporate responsibility and ethics are overseen by the apex management which ensures enforcement of the measures at all levels of the Zara. The CSR committee is composed of three members of board of directors and the appointment of members are done by board resolution. The committee reports to the board of directors who in turn report to the CEO. This means that the corporate social responsibility in Zara is actually supervised by the CEO indirectly. This ensures that the CSR committee makes strong and firm corporate social responsibility. The CSR policies are made from the apical level which is evident from commitment which Zara made with international NGO, Greenpeace Organization. The organization has committed to get rid of toxic chemicals which are used in manufacturing its apparel products. This commitment from the apex management would be adopted by the entire organization across its geographically dispersed branches and all departments. Thus, it can be inferred from the discussion that the corporate social responsibility and ethics have great influences on the business policies of Zara under the stewardship of the apex management[10].

Marketing and distribution:

            Corporate social responsibilities and ethics play important role in the production and distribution of products by Zara. The international follows no advertisement which means it the designer saves its financial resources and allocate it towards opening outlets. The designer uses just-in-time process and takes around a week to design clothes. This results that the designer does not have to hold stock of raw materials which reduces wastage of raw materials. The designer secondly conducts market research to gain information about upcoming trends among the upper class people, its target segment of customers[11]. The designs its new outfits in line with the new market trends among the upper class which ensures its new products sells in the market, thus fetching high revenue to the designer.

This ensures that Zara does not have to hold to a large stock of finished goods which have several benefits.First, this prompt sale of finished products ensures that the international does not lack large portions of working capital in maintaining inventory which renders the firm financial liquidity. Secondly, production of designer outfits aligned with customer tastes ensures minimum holding of finished goods. This means that Zara has to dispose or reuse a small portion of its finished products[12]. The firms also markets products with longer shelf lives to Asia which again that maximum finished goods are converted back into revenue which reduces wastage. This ensures that the operation of Zara have minimum negative impact and  provides third party firms opportunities to earn profit by selling outfits of Zara. This discussion shows that corporate social responsibilities and ethics have influence on the marketed and distribution policies of Zara[13].

Environmental Factors

Manufacturing of products:

            Corporate social responsibilities and ethics have great impact on the manufacturing strategy of Zara. This is clearly evident from the vast range of products that the designer offers to its consumers. The product line of Zara consist of a wide array of products like apparel, glassware, fragrance items and table accessories. The international designer uses a wide range of natural and environment friendly products like wood and chine clay to manufacture these products. The firm uses natural fragrances like jasmine and amber in its products like perfume and hand washes[14].

This ensures that those products cause less harm to the environment when used compared to plastic and synthetic fragrances. Zara acquires the raw materials from producers from all round the world. Thus, the designer brand paves way for economic development of producers of natural raw materials like jasmine and amber. Thus, once again it can be emphasized that corporate social responsibility and ethics have profound influence on the manufacturing strategy of Zara. The marketer of premium designer products does not not only generate high revenue by marketing high quality products but also aid in economic development of local communities. This shows that that designer brand maintains CSR and ethics as components of its main business policies[15].

Use of ecommerce:

            Zara uses ecommerce to market its products in the market which reflects its corporate social responsibility and ethics. The designer products marketer does not advertise its products in magazine which ensures its saves resources. It instead advertises its products on its official website which also facilitates online viewing. The viewers can get complete detail about the products like their attributes and prices. They can also order them online to purchase them[16]. Thus, the designer brand helps in conservation of paper by not using newspapers and magazines to advertise its products. It instead use ecommerce which ensures maximum penetration in the market and earning of maximum revenue[17]. This the ecommerce strategy on one hand ensures generation of high revenue and on the other it ensures zero wastage of paper to advertise the products of Zara[18].

Part ii:

            An evaluation of the business conduct of Zara would clearly show that the designer brand follows corporate social responsibility to the core of its strategies. Zara, being an international brand serves customers from markets like Europe, North America and Asia. The designer brand exhibits a high level of ethics in its marketing of products in the global market. The firm exhibited its ethics when a design on one of its products hurt sentiments of a certain religious group. The firm exhibited its cultural intelligence and alignment towards upholding customer culture[19]. Zara immediately removed the products depicting the controversial design and apologized for the same. This business conduct of Zara clearly showed its ethical behavior and due respect towards cultural diversity. The strong presence Zara enjoys in diverse markets like Asia and Europe, each having diverse cultures bears testimony to the high level of ethics the designer product firm practices in its day to day business conduct[20].

Legal Factors

            The second instance when Zara exhibited its high level of adherence to corporate social responsibilities and ethics was when it entered into contract with the Greenpeace. The designer product firm committed to shift towards marketing of products free of harmful synthetic chemicals. An evaluation of the commitment would show that it requires complex actions from the side of the company which would attract heavy initial investments. First of all, in order to withdraw products with synthetic ingredients from the market altogether, the firm would require to introduce new replacements of the previous products. Thus, the management of Zara first needs to hold meetings with its branch heads of the geographically dispersed branches[21].

Secondly, then they would have to conduct market researches to locate new sustainable supply chains which would attract making of fresh budgets. Thirdly, the management would then need to acquire new machinery and technology to commence the production of chemical free products. This would attract immense investments towards plants and machinery. Fourth, Zara would require allocating fresh budget and resources towards production of chemical free products. Fifth, the firm would have to upgrade and amend its official websites and brick-and-mortar stores. It is evident that the entire process would require immense allocation of financial resources which would eat into the revenue generation of the firm.

One can also evaluate that the new natural ingredient containing product may not meet the expectations of the upper class customer segments and may result in decrease of sale of products[22]. This clearly points out that embracing corporate social responsibility and introducing new environment friendly products may place the firm under immense capital requirement. This immense expenditure might hit the financial stability of Zara. However, it is evident from the commitment that Zara is ready to embrace corporate social responsibility and ethics as drivers of its decision making process in spite of the financial risks which it might head towards[23]. Thus, it can be evaluated that Zara effectively implemented corporate social responsibilities and ethics in its day to day operations.

Part 3

 Zara is a famous brand and it performs a strong corporate responsibility towards the society. It maintains the ethics and has many positive factors. In spite of that it has many pitfalls that can be rectified. This can be treated as recommendation that might be beneficial for the brand. Zara mainly targets the young and the urban crowd. They also concentrate more on the females. The company can concentrate on the male crowd as well as on the male crowd. Apart from this the stores of Zara are spacious but the stocks that are displayed have limited quantity. They should increase the quantity of the stock so that the customers might always find full stock and their preferred product. By analyzing the research articles it was explored that the customers of Zara had the opinion that they should buy the product once they see it because it might get out of stock next time. This has a negative impact on the consumers. They should focus more on the availability of the product than giving a special treatment to their customers.

Sustainability and Corporate Social Responsibility

            Zara is not a world leader in the cloth designs, but it is a high sensitive and flexible fashion trend follower. They have a poor digital communication. It can be made better with the progress of the time. In order to do this the brand is required to improve the business designs. The other issue that exists in the company is the point that it is difficult for the company to maintain the customer value management. In order to rectify this the opportunities from the current and potential customers. The company can study the preferences and choice of the customers. The company should have an efficient communication with the suppliers in order to reduce the cost of production and maintain the quality.

Zara spends a less amount from its revenue for advertisement. This has a negative impact on the competitive market. Advertisement plays a major role in the marketing of a product. The company should focus on the advertisement strategy in order to promote their products. This will make the product famous in front of their customers. The biggest disadvantage of the brand is the supply chain. Zara should own all the channels of supply chain in order to expand to the far location so that the distribution becomes inexpensive. In order to increase the amount of the customers the company should collect the data of the actual demand that can evaluate the needs of the real customers. It should avoid the possible losses due to the unsold products.

            The company is going through certain major threats of corporate social responsibility. It has been discussed above that the company is using unsafe materials in the production of the clothes. The synthetic material is harmful for the customers. The company should take steps of using the safe raw materials and instead should ban the use of synthetic materials. The materials should be safe and they should be tested before using it. The other area where the company should improve is the reduction of deforestation. The raw materials are collected from the forests from the trees. It should be checked and controlled by the organization. The organization should study the actual demand of the existing customers so that they can satisfy the needs of the individual customers.

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[1] Dickson, Tereza. “How to Brand and Market a Fashion Label: New lifestyle brand 48.” (2017). 

[2] Evans, Nathalie NF. The internationalisation strategies of small and medium-sized enterprises (SMEs) clothing suppliers in the UK. Diss. Manchester Metropolitan University, 2017. 

[3] Fernandez-Stark, Karina, Penny Bamber, and Gary Gereffi. “Peru in the High Quality Cotton Textile and Apparel Global Value Chain: Opportunities for Upgrading.” (2016). 

[4] Sanchis Sánchez, Natalia. “Analysis of the main groups of textile distribution in Spain.” (2015). 

[5] Moutinho, Luiz, and Paul Phillips. “Strategic analysis.” Contemporary Issues in Strategic Management. Routledge, 2018. 46-79. 

[6] Gander, Jonathan. Strategic analysis: A creative and cultural industries perspective. Taylor & Francis, 2017. 

[7] Gremme, Madeline. “Zara. Global Fashion at Local Prices.” (2014). 

[8] Hammoudeh, Rima. “Zara, from Spain to the big wide world. Company analysis, markets and competition.” (2014). 

[9]COASTERS – TABLEWARE | Zara Home United Kingdom”. Zarahome.Com, 2018,  

[10]Five Greenpeace Campaigns Against Companies: Lego, Barbie And Shell”. The Guardian, 2018,  

[11]Schwartz, Mark S. Corporate social responsibility. Routledge, 2017. 

[12]Tai, Fang-Mei, and Shu-Hao Chuang. “Corporate social responsibility.” Ibusiness 6.03 (2014): 117. 

[13]Carroll, Archie B. “Corporate social responsibility.” Organizational dynamics 44.2 (2015): 87-96. 

[14]Clapp, Jennifer, and Ian H. Rowlands. “Corporate social responsibility.” The Essential Guide to Global Environmental Governance. Routledge: London (2014): 42-44. 

[15]Ruggie, John Gerard. “The theory and practice of learning networks: Corporate social responsibility and the Global Compact.” Learning To Talk. Routledge, 2017. 32-42. 

[16]Dissanayake, D. G. K., SrimalaPerera, and ThushariWanniarachchi. “Sustainable and ethical manufacturing: a case study from handloom industry.” Textiles and Clothing Sustainability 3.1 (2017): 2. 

[17]Cheng, Beiting, IoannisIoannou, and George Serafeim. “Corporate social responsibility and access to finance.” Strategic Management Journal 35.1 (2014): 1-23. 

[18][18]Salvioni, Daniela, Riccardo Astori, and RaffaellaCassano. “Corporate sustainability and ethical codes effectiveness.” (2015). 

[19]Lins, Karl V., Henri Servaes, and Ane Tamayo. “Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis.” The Journal of Finance 72.4 (2017): 1785-1824. 

[20]Petrenko, Oleg V., et al. “Corporate social responsibility or CEO narcissism? CSR motivations and organizational performance.” Strategic Management Journal 37.2 (2016): 262-279. 

[21]Benavides-Velasco, Carlos A., Cristina Quintana-García, and Macarena Marchante-Lara. “Total quality management, corporate social responsibility and performance in the hotel industry.” International Journal of Hospitality Management 41 (2014): 77-87. 

[22]Clarkson, Peter M., et al. “Voluntary external assurance of corporate social responsibility reports and the dow jones sustainability index membership: international evidence.” Unpublished working paper, UQ Business School (2015). 

[23]Schaltegger, Stefan, and Roger Burritt. “Business cases and corporate engagement with sustainability: Differentiating ethical motivations.” Journal of Business Ethics 147.2 (2018): 241-259.