Impact of External Factors on Zara's Business

The given assignment analyzes the impact of external factors on Zara's business in the UK. It conducts a PESTEL analysis to determine the macro environmental factors affecting the company, such as economic, social, technological, legal, environmental, and political factors. The SWOT analysis is also conducted to analyze internal strengths and weaknesses of the company. The assignment concludes that external factors can be both a strength and weakness for Zara, and it is essential to develop strategies to mitigate negative impacts.

BUSINESS & BUSINESS
ENVIRONMENT

INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1.................................................................................................................................................3
P2.................................................................................................................................................5
TASK 2............................................................................................................................................9
P3.................................................................................................................................................9
TASK 3..........................................................................................................................................11
P4...............................................................................................................................................11
TASK 4..........................................................................................................................................13
P5...............................................................................................................................................13
P6...............................................................................................................................................14
CONCLUSION..............................................................................................................................16
REFRENCES.................................................................................................................................17

INTRODUCTION
Business environment is the mixture of internal as well as external elements which give
impact on the working of organisations. It is dynamic in nature which gives direct impact on
working of organisations which exist in it. Moreover business environment is divided into two
parts i.e., micro and macro. This report is based on private sector organisation Zara and it is retail
sector company. It is founded in 1975 and founder is Amancio Ortega, Rosalia Mera. Zara is
serving there goods and services worldwide as well as they are offering clothes and accessories.
Apart from this, in the assignment there are public and voluntary sector enterprises are also.
Below mention report going to explain different types of organisations along with their purpose
and legal structure. Moreover, there are several department in the enterprise and they all are
interrelated with each other is also enlighten (Hilton and Platt, 2013). Apart from this, macro
environment factor on positive and negative impact on business operations. In the end SWOT
and PESTEL is conducted for identifying internal as well as external environmental factors.
From: Managing Officer
To,
CEO Of ZARA
Subject: Analysis of business environment
TASK 1
P1
Introduction - There are several type of companies in the business environment which are
running in the present changing trends. Every organisation have their own objective and purpose
for carrying out daily activities. Business environment involves basically three sector companies
i.e., partnership, sole proprietor, PLC and so on.
Organisation is group of people who are working for achieving common goals and there
are several external factors which affect business organisation. There are several types of
organisations in business environment description of those are as follows :-
Partnership – This can be described as that business which has two or more than those
persons who contributed their money for starting an organisation is known as partnership
business. In such organisation every partner have right of taking decision and profit as well as
losses are divided according to the amount of capital invested.

Sole proprietorship – Sole proprietor is the person who carrying overall operations of
the company and its his/her responsibility to achieve desired outcomes as well as objectives.
They are mainly working with the motive of generating profit and satisfying own needs and
wants. For instance, KURT GEIGER is an sole proprietor who deals in footwear and other
accessories.
Private limited – LTD and private limited companies is the type of small entity. LTD
organisations which limits liabilities of owner shares and there can be approx. 50 shareholders.
There are restrictions on trading shares publicly. For example, Zara is the private sector
organisation which deals in clothes and accessories.
PLC (public limited company) – These are the organisations which is running by
government and motive behind introducing are to supply goods and services to people for
improving there living standard as well as uplifting the economy. Public companies are not
constituent for earning profit but to fulfil needs and requirement of public. For instance, NICE is
public sector enterprise and there are providing services to needed people and focus on health as
well as care for public (Bharadwaj and et.al., 2013). Main reason behind implementing effective
services is to provide effective services to the population of United Kingdom.
Global Companies – Global simply means worldwide or in simple terms all over the
world. Organisations which are doing there business all over the world are known as global
companies. For instance, Coca-Cola which was a fledgling start-up in 1886 they start providing
drinks to U.S. Soldiers but now over 200 countries are enjoying products of Coca-Cola (Global
Company, 2018).
Transnational company – These are the organisations which do there business in more
than one country and don't consider an particular nation as there national home. One of the major
advantage of transnational companies is that they are capable to keep a greater degree of
responsiveness to the local market where they remain facilities. For instance, Vodafone is the
biggest transnational company.
Cooperatives – Co-operative is the word which stand for the ideas of living together and
working together. It is the form of business in which individual is voluntarily associated together
as an human beings for promotion of economical interest in themselves. For example, The Phone
Co-op Limited is an co-operative telecommunication organisation which provides mobile
telephone, landlines, web hosting, internet and so on in United Kingdom.

Summary – From the above discussion it has been concluded that there are several type of
organisation in business environment and each are performing there work in different manner.
Apart from this, every companies have different motive behind starting there business.
P2
Introduction - Business environment have various type of organisation such as public, private,
Cooperatives, transactional, Global, MNC and so on. All these have there different size, scope,
products and services, vision and mission, structure, stakeholders and many more. This task is
going to explain types of organisation along with there structure, size, scope etc..
Partnership – It is the form of organisation in which two or more than that people form
an company by investing capital (Berg and Kilambi, Siebel Systems Inc, 2014). John Lewis
partnership is the same sector enterprise. Background: John Lewis partnership organisation introduced in 1929 and its headquarter
is in London, England. Products and services: Department stores, Waitrose and partners supermarkets, banking
and financial services as well as other retail related activities. Size: there are approximately 88,900 employees are working in the organisation
 Vision: To apply such partnership approaches which shows then best partnership
organisation. Structure: Respective organisation is following authoritative structure and independent
as well as equal sharing. Objectives: Major objective is to generate more and more revenue by providing better
services to customers. Mission: Openly experience and encourage everyone to buy and get evaluate themselves.
 Stakeholders: Internal stakeholder are employees and other staff members. Whereas,
external are customers, investors and so on.
Sole proprietorship – KURT GEIGER is the sole proprietor organisation and its first
store is opened in London's fashion capital. Background: Respective company is founded in 1963 by Kurt Geiger and its headquarter
is in London, United Kingdom. Products and services: There products are Kurt Geiger London, KG Kurt Geiger, Miss
KG, Carvela and Mini Miss KG.

 Size: KURT GEIGER is located in approx. 70 plus area and there are 1700 something
employees working in the company. Vision: KURT GEIGER wants to become worlds largest footwear and accessories
organisation. Objectives: To offer there footwear's and other accessories at worldwide level. Mission: To serve best quality of products to customers and make them satisfied. Structure: Sole proprietorship follows simple organisational structure because it is
owned as well as operated by the individual. Stakeholders: Sole proprietors also have internal and external stakeholders.
Private limited – This sector is mainly working with the motive of generating more and
more revenue as well as fulfilling demand of customers in better manner. There share is restrict
from publicly trading and owner is liable for all the profit as well as losses (Schaltegger, Lüdeke-
Freund and Hansen, 2012). Zara is the private sector organisation description of the same are as
follows:- Background: Respective organisation is founded in 1975 and its founder is Amancio
Ortega and Rosalia Mera. They are serving clothes and accessories worldwide. Products : Zara is offering men's, women's and children's clothing as well as accessories. Size: Zara have approx. 7,475 stores worldwide and as per the data of 2016, respective
organisation have revenue approximately US$9 Billion annually. Vision and Mission: To offer customers and exclusive choice or variety of fashion
products through quicker turnover of new stock compare to other fashion retail
companies. Objectives: Zara main objectives is that through there business model they contribute in
sustainable development of the society and to the environment also with which they can
interacts.
 Structure: Zara operates in lean organisational structure it is that which create more
customers value by utilising less resources rather than traditional. Stakeholders: Internal stakeholders are employees and other staff members whereas,
external are investors, customers and so on.
PLC (public limited company) - PLC are the organisations which is running by the
government bodies for providing better services to people and uplift there living standard. For

instance, NICE ltd. Is the public sector enterprise and it is one of the largest technology
enterprise in Israel. Background: Respective organisation is founded in 1986 and it is public sector company.
Headquarters of NICE is in Ra'anana, Israel. Products and services: They are offering Software, business intelligence, speech and
video analytics as well as business and IT consulting. Size: NICE Ltd. Was firstly serving there goods and services in Israel and then in 1989
the organisation formed partnership with Tekelec which is United States based
telecommunication enterprise. As per the data of 2016, respective organisation have
approx. 4,930 employees. Moreover, operating income is approx. $134.2 million and net
income is $ 116.9 million. Vision: NICE LTD. Wants to become most prestigious corporations through world class
performance. Along with this, by creating values for there stakeholders. Objectives: NICE Ltd. Wants to be one of the leading organisation for gaining public
growth through providing high quality of products and services to customers. Mission: NICE LTD. Mission is to be innovative and informative. Structure: Respective organisation is following matrix organisational structure. Stakeholders: There are several partners in the firm by staff members, authorities and so
on these are external stakeholders. Whereas, customer and shareholders are external
stakeholders.
Global Companies – Coca-Cola is the global company because they are dealing all
around the world. Background: Coca Cola is introduced in 1886 on 8th May and they are serving
worldwide. It was invented in 19th century by John Pemberton and bought out through
Asa Griggs Candler who is an businessman. Products and services: Cavan Cola, Kola Real, Inca Kola, RC Cola and other products
related to respective brand. Size: Sold products more than 200 countries and global market of coca-cola is estimated
at 341.6 Billion U.S. Dollars (Market share, 2018). Vision: Coca cola wants to be a highly effective, lean and fast-moving company.

 Objectives: Main objectives of respective organisation is to be globally known as a
business that conducts responsibility and ethically and to speed up sustainable growth to
operate in tomorrow's world. Mission: To refresh the world in mind, body and spirit, as well as inspire moments of
optimism and happiness through our brands and actions. Moreover, create value and
make a difference.
Structure: The Coca-Cola Company has a Separate International Division organisational
Structure. Because there international personnel’s operate separately which is separate from its
head office (Ballard and et.al., 2012). Stakeholders: Internal stakeholders are employees and other staff members and external
are customers at worldwide level, investors and so on.
Transnational company – Vodafone is the transnational organisation. Background: They are serving there telecommunication products and services at
worldwide level. Products and services: Fixed line telephone, mobile phone, broadband, digital television
and internet television etc.. Size: There are approx. 111,556 employees are working in the organisation as per the
data of 2018. Vodafone is serving their products and services at worldwide level. Vision: Want to be communication leader in the developing connecting world. Objectives: Primary objective of Vodafone as an business entity is profit maximisations. Mission: To be the high financial organisation and the company on whom customers
trust. Structure: Vodafone is following divisional organisational structure. Stakeholders: Investors, employees, customers are the main stakeholders of the
Vodafone.
Cooperatives – Co-operative is the word which stand for the ideas of living together and
working together. Phone Co-op is the cooperatives organisation. Background: It was owned and controlled by customer members to control the business
and United Kingdom based company with approx service motives. Products and services: They provide broadband, telephony, Voice over IP, fibre
connections to their customers.

 Size: Respective organisation have approximately 74 staff members as well as 21 outlets
in United Kingdom. Vision: To become fastest customer service provider all over the world at anytime. Objectives: To add more customers in there portfolio by providing them better services. Mission: To fulfil customers satisfaction by providing them better quality goods and
services.
 Structure: Hybrid organisational structure
 Stakeholders: Investors, owners and customers are the stakeholders of Phone Co-op.
Summary – As per the discussion in this task it has been concluded that every organisation have
there own objective, size, scope, structure, vision and mission of introducing as well as doing
work.
TASK 2
P3
Introduction – This task is going to explain organisational chart and different departments
function along with their interrelation with each other.
Organisational Chart – It is the diagram which shows overall structure of the
organisation and relationship within each other. In simple term, it can be said that organisational
chart is the diagram which shows internal structure of the company.
(Source: Organisational Chart of Company, 2013)
Illustration 1: Organisational Chart

Every organisation has different departments and all these are linked with objectives of
Company. Working of every division is interlinked with each other for achieving goals and
objectives of business. Zara also have different departments and these are linked with
organisational objectives. Description is as follows:- Human resource department: It is the main department of the organisation because it
shows manage employees in the organisation and if there is requirement of more than
hire new also (Werbach and Hunter, 2012). In Zara human resource department is
interrelated with working of overall departments because it manages human resource. As
well as do several other activities also which are in there favour. Marketing department: This department help Zara in doing promotion of there goods
and services in market. Along with this, marketing division conduct market survey also
for identifying current trends, customers needs and wants. This department is related with
production and manufacturing because they are the one who help in selling manufactured
goods. Finance department: It is the backbone of company because with financial resources no
organisation can do there day to day activities. Finance division of Zara is related to the
other activities of the company such as production department cannot work without funds
because they need raw material and other resources for there working.
 Operation and Production Department: This department of Zara is related with
marketing because what they produce is marketed in particular area or all over the world
through marketing division.
Summary – From the above discussion it has been concluded that, in the organisation there
are several department and they all are interrelated with each other’s activities.
TASK 3
P4
Introduction – Macro environment factor are the elements of outside the organisation
and these are beyond control. As well as these gives wide impact on the working of Zara in
positive and negative manner. In this part PESTEL analysis is going to conduct for identifying
effect of micro as well as macro factors on the operations of the Zara.

PESTEL – It is a tool which assists in determining macro environmental elements along
with their optimistic and pessimistic factors on the organisation. PESTEL of ZARA is mention
below :-
Political Factors – This factor is related to the policies and regulations of government
which include legal as well as economic both aspects. Modifications in all the political factors
give wide effect which can be negative and positive on the operations of Zara.
 Negative impact – Zara plans to spread out there business roots in various other nations
also in these modifications in policies related to government affect working of respective
company in negative manner (Vitale, 2011). Thus, Zara must have knowledge about
entire market expansion system before taking permanent step. Positive impact – Political factor of European Union modify rarely and market extending
in such nation is good for Zara. It will give optimistic impact on operations of same
organisation.
Economic Factors – This factor primarily show the alteration in taxation, inflation in
growth of economy, rate of exchange and interest. These factors give positive as well as negative
impact on the working of Zara.
 Negative impact – Negative effect has been emerges in economy in view of question with
small retailers in view of enormous accessibility of items due to monetary impact of
Brexit. Positive impact – In situation of swelling obtaining intensity of people has been
increment because to magnanimous easy to access of assets.
Social Factors – This emphasize altering trends in the society and its impact on the
organisations buyers.
 Negative impact – nonstop altering trends give pessimistic effect on the working of Zara
because they have to manufacture new clothes and accessories according to the current
need of customers as per the market trend. Positive impact – The optimistic factors as well as components that are related with Zara
so as to connect with customers for building up long haul connection with them.
Technological factors – It focus largely on improvement of technology and the
developed technology impact on Zara as well as its customers.

 Negative impact – most recent technologies are costly and for organisations it is not easy
to apply these technologies in business easily. Positive impact - Because of improvement is technology Zara bring their online shopping
App which result in negative manner and customers stop visiting stores. Instead of this
they started purchasing from online App.
Legal Factors – It is related to laws and legislation as well as legal procedure that Zara
has to undergo. Modification on these factors gives wide impact on operation of same
organisation.
 Negative impact – Several countries have their own version of corporate policies due to
these Zara have to alter their operations and settled policies as per the particular nation
setted legal policies. Positive impact – Zara is following all the legal factors then for them it is easy to expand
their business in several other nations also.
Environmental factors – It includes factors related to environment such as global
warming, greenhouse effect, natural calamities and etc.
 Negative impact – Natural calamities gives negative impact on working of the Zara. For
instance, earthquake in Japan affect supply chain and sales of respective organisation.
 Positive impact – In Asian Countries weather rapidly change and population of those
nation require clothes according to atmosphere which result in increasing sales and
generating profit (Janita and Miranda, 2013).
Summary – From this task it have been identified that macro environmental factors have
negative as well as positive impact on the Zara. All these are identified through PESTEL analysis
which is an analysis tool.
TASK 4
P5
Introduction – Internal and external examination is necessary for determining various
opportunities, threats, strength as well as weakness. All these can be analysed through
conducting SWOT.
Zara is the company which is well known for its fresh designs but for better operations of
enterprise there is need of identifying internal and external factors (Weiss, 2014). It can be done

with the help of SWOT because strength and weakness are inner parts. On the other hand,
opportunities and threats are outer. Description of SWOT analysis is mention below:-
Strength
 Zara offer exclusive design to their clients which can simply confine eyes.
 Same company have strong presence with the help of their business expansion around the
globe. Same organisation launches approx. 1000 of new design every year in the market which
is its major strength (Avramenko, 2012).
Weakness
 Zara have lack of promotion for the reason that it may be expensive for them. Zara is not specialized in something this is the main reason that customers shifts to their
competitors.
Opportunity
 Online E-commerce can be the chance for Zara by offering their goods on only on their
outlets but on other E-commerce sites also. Market expansion can also be opportunity for respective organisation because new
market for all time gives new business and profit.
Threats
 Zara have to increase their advertising skills because for them it became threat.
 There are a lot of competitors for the same company like M&S, H&M, Mango etc..
Summary – As per this, discussion it has been concluded that, SWOT analysis is the best tool
for determining factors related to inside or outside for Zara that assist in grabbing various
opportunities and removing threats.
P6
Introduction - In each association ZARA contains several quality and shortcomings and
outer variables incorporate those part as well as components which are beyond the control of
company gives both positive as well as negative impact on general improvement of business.
Political factor – These elements are linked with the governmental policies, procedure as well as
norms that they control for a business firm. Along with this it involve several laws as well as
legislations given by the the government for business organisation. Brexit is the political factor
which had given wide impact on the economy of UK.

 Strength – After Brexit, government of United Kingdom pay their highest concentration
on the new businesses which help in giving that needed growth for economy growth
practices. Thus, it can be strength for Zara to easy extension in market area.
 Weaknesses – Modification in the policies and procedures of governmental may affect
pessimistically on working of Zara while they planning to enlarge their business on new
place.
Economic factors – This factor is connected to the tax policies of nation, inflations rates as well
as interest rate which can impact on the business practices in easy manner. Economic factors
fluctuate ups and downs come in these elements many time.
 Strength - Population of United Kingdom has been improving their living standard by
the expansive easy access of assets. Thus, it can be strength for Zara.
 Weaknesses – After Brexit, economy of United Kingdom gone through various
pessimistic practices as unsuitable funds for conducting effectual company offerings.
Thus for Zara, emerges in economy can come up with a question because of funds which
can impact convenience of items.
Social factors – These factors are connected with the customer's choice as well as demand
towards specific organisational offerings. It is the most dynamic factor because market trend
always change as well as taste and preferences also.
 Strength – Customer's of United Kingdom are highly encouraged to grabbing goods as
well as services which can improve their living standard. So these types of practices can
be strength for the up-liftment of business growth in the economy of UK.
 Weaknesses – Speedy modification in demand of customer's, trends as well as fashion
can be a feeble point for Zara due to it’s hard to accept these modifications instantly.
Technological factors – It is the factors which related to the modification and advancement of
technology which can influence business practices in a straight line. Updating in the technology
result in doing work in easy manner with its fine quality.
 Strength – Now a days, Zara implement advance technology in their business services
fro the easy payment and business services. Thus, it can be a strengthen point of
operational and functional practices.

 Weaknesses – Frequent changes in technology are hard to adopt easily therefore, it can
be a weak approach of Zara. As well as sometimes it may be expensive because every
time changing technology is not possible.
Summary – from the above topic it has been analysed that macron environmental factors can be
a strength as well as weak point for firm. Therefore it is required for Zara to make impactful
strategy to reduce negative impact of external factors in effective manner.
CONCLUSION
As per the upper discussion it has been come out that, business environment is full of
micro and macro level elements which give direct impact on operation of company. 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 optimistic and pessimistic impact
on working of the enterprise. Whereas, internal elements are in the control as well as managed by
the owner of organisation. For analysing of factors related to internal working of the enterprise
SWOT analysis is conducted. On the other hand, for factors outside the firm are determined by
conducting PESTEL analysis.

REFRENCES