Business and Business Environment - Zara

Business and Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Different type and purpose of organization: private, public, voluntary and legal structures.3
P2 Size and scope of different types of organisations................................................................5
P3 relationship between different organisational functions.......................................................8
TASK 2..........................................................................................................................................10
P4 positive and negative impacts the macro environment has upon business operations.......10
P5 internal and external analysis of specific organisations.......................................................12
P6 strengths and weaknesses interrelate with external macro factors.......................................13
CONCLUSION..............................................................................................................................16

INTRODUCTION
Business environment is refers as the aggregation of both micro and macro element that
determine firm operation exists in it. It is dynamic in nature that gives direct impact upon firms
working (Hilton and Platt, 2013). For this report the choosen company is Zara which is a private
sector and retail sector company. It is established by the Americo Ortega and Rosalia Mera in
year 1975. Its headquarters is in Arteixo, Spain. In this assignment, public, private and voluntary
sectors are discussed. This assignment is going to describe various types of organisations
involved in business environment along with their purpose as well as legal structure. There are
various division within firm and their working is interconnected is highlighted below. Moreover,
factors of macro environment has huge effects on the business operations in both context positive
as well as negative. Apart from this SWOT and PESTEL is performed for finding the external
and internal environmental factors.
TASK 1
P1 Different type and purpose of organization: private, public, voluntary and legal structures
Business environment includes different types of organization in which these are doing
their business activities (Bharadwaj and et.al., 2013). As every business organization have their
own decided goals, objectives mission and vision. Business environment includes mainly three
types of organizations such as public, private and voluntary. Apart from that, organisation is a
group of those peoples who are together for achieving a common goal. There are a wide range of
external factors which gives various impact on business organization. These factors are as
follows:
Private organisations: This includes the small entities including LTD and private
limited firms in which owners have limited liabilities and these companies may consist around
50 shareholders accordingly. These companies have imposed prohibition towards shares policy
as well as on trading. For instance, the private organisation can consider Zara company that has
business of providing clothes and accessories to desired customers. Zara is the private sector
company which deals in clothes and accessories. Legal structure of that type of organization are
as follows:

 Sole trader: These type of traders are individuals who run their business activities by
their own and also these traders have no separate legal entity from their business. The
owner of that type of business is solely responsible for all the business activities.
 Partnership: partnership refers to the involvement of two or more than two persons,
same as in partnership business the two or more than two person invest capital jointly in a
specific ratio to run a business. In that type of business, all the partners are liable for
business activities as per according to pre decided criteria.
PLC (public limited company): That type of business organization is running by Govt.
for enhancing the economic situation by introducing new product and services to people for their
high living standards (Berg and Kilambi, Siebel, 2014). For example, NICE is public sector
company and they are providing services to required person as well as most important is that,
they focus on health and care for public. Main basis behind providing services is to upliftment of
United Kingdom population. Legal structure of that type of organization are as follows:
 Central Govt. department: The organization is running by the central Govt. bodies.
 Local authority: These authorities are those who manage and run organization of
particular city.
Voluntary organizations: These are also non-profit organization that are working for the
social welfare of society. For example, wellcome trust is a type of voluntary organization of
England. It is the largest research providing companies. Legal structure of that type of
organization are as follows:
 Trust: That type of business organization has not any members but these have trustee
who donate some funds for running out these organization.
 Unincorporated association: These business organization can be called as management
committees which have don't distinct identity from trustee.
 Others: Royal charter bodies, community and several others.
There are various factors which leads to growth of international environment,
which are as follows:
 sales and profit: As in the international market the business get a higher sales and large
profit volume so that the international business environment grow day by day.

 Diversification: Diversification is the way of expanding any business in many other
areas and outside the boundaries of a country. It helps in entering into a new market with
the existing products to attract various targeted potential consumers. Demand for various
products are affected by many cyclical as well as seasonal factors. The consequences of
such factors leads to sales fluctuation and various risks in operation of any business.
Difference between public, private and voluntary sector:
Public sector Private sector Voluntary sector
Public sector is government
owned and different from
publicly held entity.
Private sector is not
government owned and goods
are delivered outside of
organisation.
Voluntary organisations is an
non profit organisation that ar
not government organisation
and makes grants on basis of
other charities.
In public sector includes
organisation that provide
public services such as armed
forces, policing and roads and
education with health.
They work for both profit
making and social welfare.
The private organisation in
which individual and group of
individuals with primary aim
to earn profit. Example shops,
manufacturers, financial
services.
They work for only profit
making objective.
Voluntary sector is different
from both these sectors
because they are not
government controlled.
They only work for
development of citizens.
P2 Size and scope of different types of organisations
Business environment studies various type of organization such as public, global ,
Cooperatives, private, transactional, MNC and so on. Such types of organizations has various
features which are discussed below:
Private limited: As discussed above that, this type of organization is only working for
more and more profit. The shares of these companies can't be traded publicly. The owner of the
organization is liable for all the business activities. Zara is a private sector organization and
constitute the following features:

 Background: The company is established in year 1975 and owner of this organisation
is Amancio Ortega and Rosalia Mera. The products which the company serving
worldwide are clothing and accessories.
 Products: the company currently offering the clothes and accessories for all the
categories.
 Size: The organization have approx. 7500 stores all over the world according to the data
of year 2016.
 Objectives: The main objective of Zara is to contribute towards sustainable
development of the society and to the environment with which they can interact.
 Structure: Zara operates in such an organisational structure which adds more customers
value by utilising less resources rather than traditional.
 Vision: Provide best and attractive services at every store.
 mission: "Zara Textile mission is to achieve consistent improvement in the system by
providing products & services to its customers through on time delivery & enhancing
customers satisfaction by means of quality and value."
 Scope: The Scope of Zara brand is very wide as it provides wide variety of products.
Public limited company: These type of organizations are running by the Govt. bodies
for upgrading the living standards of people with the help of providing better products and
services (Schaltegger, Lüdeke-Freund and Hansen, 2012). For example, NHS ltd. is the public
sector enterprise and it is one of the largest company. The major stakeholders of company are
BlackRock, Inc., Norges Bank, Schroders plc, etc.
Public limited company: These type of organizations is running by the Govt. bodies for
upgrading the living standards of people with the help of providing better products and services
(Schaltegger, Lüdeke-Freund and Hansen, 2012). For example, NICE ltd. is the public sector
enterprise.
 Background: NICE organization was founded in 1986 and its headquarter in Israel.
 Products and services: The services and products are offerning by that respective
organization such as, Software, business intelligence, speech and video analytics,
business and IT consulting.
 Size: The organization provide its services first in 1989 in Israel and after that it formed
partnership with Tekelec enterprise which is US based company providinbg

telecommunication services. According to the statistical data of 2016, respective
organisation has approx. 5000 employees. And its operating income is approx. $135
million and net income is $ 177 million.
 Vision: The organisation wants to become the most famous and prestigious organization
through all over world performance so that the values for their stakeholders also be
created more and more.
 Objectives: The main objective of the company to provide high standard products and
services to its customers.
 Mission: NICE LTD. Mission is to be produce products and services as innovative and
informative.
 Structure: The organisational structure of respective organization is Matrix
Voluntary sector- These organizations mainly work for the social welfare. Wellcome Trust is
based on biomedical research in United Kingdom which working with the approx. 2100
employees according to data of session 2017 (Ballard and et.al., 2012). the main principles of the
organization are to provide best service to its customers and improve their health issues.
 Vision- respective company vision is to achieve extra improvement in health of human
beings and animal for whom they are doing research.
 Mission- to do work in such a manner that no other and bring brightest mind in the field
of biomedical research and medical humanities.
 Objectives: the main objective of the respective firm is to provide high class medical
facilities to its clients.
 Size: Approx. 2100 employees working in the organization according to the statistical
data.
 Products and services: The company providing research about health issues so that the
better medical services can be provided to its clients as human beings and animals.
 Scope: it has wide scope in future due to innovative and informative work.
 stakeholders: Baroness, Eliza Manningham-Buller (Chair) Dr Jeremy Farrar (Director).
The Wellcome Trust has a £25.9 billion investment portfolio (at 30 September 2018)
which funds all the work.
 Background: The organization founded in 1936 by sir Henry Wellcome. Its headquarter
in London, United Kingdom.

P3 relationship between different organisational functions
It is the blueprint of overall organisation which shows interrelation of each and every
department in the company. In general term, it can be said that organisational chart is the
diagram which directly shows internal structure of the organisation.
Illustration 1: Organizational chart
Source: Organisational Chart of Company. 2013.Every type of
organisation has various divisions and all these are interlinked with several objectives of the
organisation (Werbach and Hunter, 2012). Every department is linked in the sense of working
done by them at every phase. Same as, Zara also have different departments and these which is
linked with goals and objective of respective organisation. Description is as follows:-
Finance department
Finance department is a department in an organisation that manges the inflow and
outflow of the money, this department helps the organisation to check its resources and raise the
funds. Some function of the finance department is to control the cost, credit controlling and
billing is also done by the finance department. This department helps the organisation to pass the
project through application of different techniques such as investment appraisal techniques and
capital budgeting techniques. Main function of the finance department is to handle the tax issues
of the company and preparation of the final accounts. Finance department has close relationship
with other departments such as marketing department. Finance department give and take

important data and information to other departments such as HR department to select candidate
for finance department and accordingly they choose the best candidate.
Human resource department: It is most important department of the company. Because it
manages all the manpower in the organization so that the all of business activities can be done
impressively. It is related with all the departments because without it every department is
meaningless. The all of the activities are depend on the manpower of the company which will be
managed by human resource department. Human resource department has close relationship
with every department it gives important insights and information to other departments and other
departments also gives information to recruit best candidates so that majorly contributes in
organisational development.
Marketing department
This department of Zara helps in doing its promotional activities such as advertising,
brand promotion etc. Marketing department is related with the production and manufacturing
department as well as sales department because without the promotional activities sales can't be
enhanced and without increment in sales the production and manufacturing workload can't be
measured. Marketing department also relate with other departments and grab knowledge and
information from other departments such as it take permission about investment in particular
field before investing money that an organisation have capacity or capabilities. On other hand it
gives information to departments of organisation about recent changes and development and
accordingly they produce goods.
Research & development
The research and development is interrelated with production department because if that
department of Zara can't do proper research then appropriate production is not possible. The
main reason behind conducting proper research is that, the appropriate product can be produced
according to customer’s specification. Research and development department is closely relate
with other departments and share information to them to take important decisions. It by taking
data from finance department take important decision before conducting research.
Production department
same as other department Zara have its distinct production department because the sales
department and finance department is dependent on this department. If the appropriate
production unit is not measured, then financial resources can't be acquired timely for producing

required standard production and sales department also depend on that because without
production sales are meaningless. Production department is one of the important department
which take important insights from marketing department by knowing taste and preferences of
consumers and accordingly produce goods and services for them.
Hence all departments relate to each other and closely related to gain goals and objectives so that
they can enlarge business opportunities and grab large market share. In case of Zara they have
different departments that share roles and responsibilities to each other.
TASK 2
P4 positive and negative impacts the macro environment has upon business operations
Introduction: Macro environment factors are considered as the external components of
enterprise surroundings that provides huge effects on Zara in both the way positively and
negatively (Vitale, 2011). So, PESTLE analysis is done to identify the negative and positive
impact upon business activities.
PESTEL – It includes various macro environmental factors which effect the company.
PESTEL of ZARA are as follows:
Political Factors
It is the factors which includes government policies and various lawful features. If these
factors changes then it effects the operations activities of Zara.
 Negative impact: Zara wants to expand its roots of enterprise into several another
countries. Also in this changing government policies of other nation impact operation of
selected organisation in negative way. Hence, Zara must has understanding regarding
whole system of expansion before taking kind of permanent action.
 Positive impact: European country political factor are changing rarely so, the expansion
in that country is effective for company Zara. This provides positive effects upon their
operations.
Economic Factors
It is the factors that involve the changing tax rate, inflation of economy, interest rate and
exchange rate. It impact the business activities of Zara positively and negatively that are as
follows:

 Negative impact: This effects have been rising into economy so, few retailers are
accessing the large items of company because of Brexit money effects.
 Positive impact: In case of enlargement gaining individuals intensity have been
increased because of expandable assets accessibility. Social Factors
It is the factors that highlight changing trends into communities and their impact upon
company's customers.
 Negative impact: Continuous changing trends provides negative impact upon operations
of Zara as it has to produce new dress as well as accessories as per recent requirement of
consumers.
 Positive impact: This factors helps Zara to connect with clients for developing the
effective connection with them.
Technological factors
This concentrates mainly on technology advancement as well as improved technology
effect on Zara and their consumers.
 Negative impact: Advance technologies are generally expensive and for companies this
is not so simple to execute this types of technologies into their operations.
 Positive impact: Due to advancement in technology Zara introduce its application for
online shopping. That outcomes in negative way as well as clients will not prefer to visit
shops. Rather than this it initiated to buy products from apps.
Legal Factors
This factors includes the rules and regulations and also legal proceedings which Zara
have to go through. Changing upon this factors provides huge effects on respective firm
operations.
 Negative impact: Various nation has its own firm policies version because of this Zara
has to change its operations as well as set policies according to the specific country
judicial policies.
 Positive impact: The firm Zara is considering overall legal factors so it can grow its
business in various another country easily.
Environmental factors

It is the factors that connect environmental as well as ecological aspects which will
effect the demand for organisation products.
 Negative impact: Natural calamities effects the operation of Zara negatively. So,
earthquake in Japan effects chain of supply as well as sales of chosen firm.
 Positive impact: In Asian weather are changing oftenly as well as population of that
countries need clothes as per its climate that outcomes in enhancing sales and producing
profitability.
As per the above task it have been find out that factors of macro environment has impact
Zara operations in positively and negatively manner. So, PESTEL analysis tool are utilise to
identify all these factors.
P5 internal and external analysis of specific organisations
Zara is a very famous and prestigious company in clothing retail brand. It has to analyse
its internal as well as external environmental factors for better performing its business activities.
These factors can be analysed through SWOT because strength and weakness are internal. On
the other hand, opportunity and threats are external. Discussion of about these factors are as
follows:-
Strength:- High quality and trendy products: Zara attract their customers by providing exclusive
designers products and accessories. The respective company design and introduce
products on regular basis and with attractive designs. Operating business at global level: Zara have strong presence because they are
expanding their business around the globe. They serve there products ranges across
various countries such as India, United Kingdom and many more.
 Launch latest design : It launches approx. 1000 of new design and collection of various
ranges of products every year in the market which is its major strength (Janita and
Miranda, 2013).
Weakness:- Lack of advertisements: Respective company not so investment in advertisement and
promotional activities. Due to which they are not able to attract more potential customers
on high ratio.

 Not specific in particular field: Zara is not specialized in every field of fashion so that
the customer doesn’t find products according to their specification and move towards its
competitors.
Opportunity:- Online selling:- Digital portfolio is very foremost opportunity for it to sale its products
on online sites as with their store outlets. By this they also able to attract those group of
customers who not able to visit stores on regular basis.
 Expansion:- The expansion in the size of market is also opportunity for respective
organization because it provide new business opportunity. They can expand there
business by introducing new range such as traditional wears. By this they attract those
customer who prefer traditional cloths in order to enlarge there customers bases.
Threat:- Increase Advertisement: Zara have to increase their advertising skills because for them it
became threat (Avramenko, 2012). So it responsibility of managers of ZARA to develop
strategies related to advertisement and promotions by which they cover and attract more
customers.
 Competitors: There are lots of competitors for Zara such as M&S, H&M, Mango and so
on. Those are dealing and offering same products range in almost same pricing which
attract customers and reduce customers loyalty.
From the explained SWOT analysis it has been evaluated that Zara is an multinational
brand name and It has vast opportunities and opportunities that help it to grab attention of large
no. of consumer base. It has the ability that it can easily change weaknesses into strengths and
grasp large market share.
P6 strengths and weaknesses interrelate with external macro factors
Political Factors
These factors are related to policies of government which involves various legal and
economic aspects. When these political factors get change it give wide impact on working of the
Zara.
 Strength: it is one of the multinational organisation that can easily expand in intenational
market with their resources. In its brand loyalty UK government also give large
contribution to establishing into that sphere.

 Weaknesses: it is new in market and there are huge competitors that localised in UK that
have better strategy from zara.
Economic Factors
This factor mainly exhibits the modification in taxation, inflation in growth of economy,
rate of exchange as well as rate of interest. These factors give positive as well as negative impact
on the operation of Zara.
 Strength: it economically sound and easily face any type of depressions that arise in
economy and grab attention of large consumer base.
 Weaknesses: By using its brand loyalty it can increase price of their products and easily
enlarge business opportunities.
Social Factors
This highlight changing trends in the society and its impact on the company's customers.
 Strength: it became the strength for organization as to connect with clients for building
up long haul connection with them. By its huge investment power it can easily develop
products according to consumer interest.
 Weaknesses: Zara is not able to provide a variety of innovative products so it become a
weak point for them, because continuous changing trend brings a high demand for new
collection. It has large product chain which can it to manage simultaneous is very
hazardous work for them. So sometimes build various products according to consumer
demand is very difficult for them.
Technological factors
It concentrates mainly on advancement of technology and the developed technology
effect on Zara as well as its customers (Weiss, 2014).
 Strength: The respective factor is also a major strength of Zara because it provides an
online platform for the organization to expand its business operation. It uses advance
technology by using social media and other sources which work as a strength to enlarge
business opportunities because it can expand
 Weaknesses: Technological change is also a weakness for the organization because
latest technologies are expensive and for companies it is not easy to implement these
technologies in business easily.
Legal Factors

It is related to laws and legislation as well as legal procedure that Zara has to undergo.
Modification on these factors give wide impact on operation of same organisation.
 Strength: it is the major strength of the organization because it has a separate legal
department for maintaining regulations perfectly.
 Weaknesses: legal factor create a weak point for the organization because Several
countries have their own version of corporate policies due to these Zara have to alter their
operations and set policies as per the particular nation setted legal policies which is very
complex step for the organization. It has flexible legal structure in which they can mould
according to the country to country and accordingly set up their business in different
spheres.
Environmental factors
It includes factors related to environment such as global warming, greenhouse effect,
natural calamities and etc.
 weaknesses: Natural calamities gives negative impact on working of the Zara. For
instance, earthquake in Japan affect supply chain and sales of respective organisation. so
it is a weakness of the organization because it is unable in maintaining/ignoring these
factors. But it is strong enough to deal in adverse circumstances and reap opportunities
out of them. It is an multinational organisation that deals in different nations by different
product chain so it can easily adopt any changes that are necessary for market. Strengths: it is a major strength for the organization that in Asian Countries weather
rapidly change and population of those nation require clothes according to atmosphere
which result in increasing sales and generating profit. By its strength it can make its
consumer base loyal enough and enlarge business opportunities. It position is sound in
market so that it can easily adopt any changes.
Strong brand: Zara have strong presence in global market because they are offering or
serving their products and service around the globe. Which attract more and more customers that
help in increase in profitability. Along with this it also help company in gaining competitive
advancement in effective manner. By this respective company able to attract more and more
customers which reduce there threat of competitors. Strong brand image help a company in
attracting customers even if they not doing advertisement.

Product Differentiation: The respective provide variety of products for all range peoples
such as kids, women and men. Which attract customers on the high ratio and increase
profitability. By various type of products and services ZARA able to attract more customers and
gain competitive advancement. By this also they can expand there business in large marketplace.
Customers Loyalty: Customers of respective company know that the products offered by
ZARA are of high quality and they also introduce new and attractive designs on regular basis.
That makes customers loyal towards brand and products. This will help respective company in
gaining competitive advancement in effective and appropriate manner. Even if they introduce
online shopping sites they able to attract more and more customers.
Business Action Plan:-
GOAL
To enhance promotional activities through social and digital media.
Action Department
Responsible
Date of
Begin
Date Due Resources
Required
Outcome
To enhance
promotional
activities to
attract more
customers.
Marketing
Department
14th march
2019
5 months Digital market
experts,
Social media
professional
By this company
able to attract more
population which
leads to increase in
sales and
profitability.
CONCLUSION
From the above discussion it has been concluded that, business environment is full of
external and internal factors which gives direct impact on working of organisations. There is
requirement of analysing all these in effective manner for getting higher benefits. Moreover,
external factors are beyond the control of individual and give positive as well as negative impact
on working of the organisation. Whereas, internal factors are in the control and can be managed
by the owner of the business. For identification of internal elements an enterprise can do SWOT
analysis. On the other hand, for external factors PESTEL can be conducted.