Zara's Business Environment Analysis

This assignment examines Zara's business environment by conducting a comprehensive SWOT analysis. It explores both internal strengths and weaknesses, as well as external opportunities and threats that influence the company's market position. The analysis highlights key factors such as rapid fashion trends, efficient supply chains, and global brand recognition. The assignment emphasizes how managers leverage this understanding to develop effective strategies and maintain Zara's competitive edge in the dynamic fashion industry.

Business and Business
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Covered in PPT.......................................................................................................................1
TASK 2............................................................................................................................................1
P3 Relationship between various organisational functions and it is related with organisational
objectives and structure..........................................................................................................1
TASK 3............................................................................................................................................3
P4 Positive and negative impact of macro environmental factors.........................................3
P5 Internal and external analysis of ZARA............................................................................6
TASK 4............................................................................................................................................7
P6 How strength and weaknesses are interrelated with external macro factors ....................7
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Environment of a business means internal and external forces which influence business
decisions, these elements are out of control of a business organisation. Business environment is
totally uncertain cause it is quite difficult to predict future happenings, especially when
environment changes occur too frequently due to information technology. An enterprise should
constantly monitor environment and acquire appropriate practices which will improve current
performance and ensure market success for long run. Due to globalisation, business environment
of UK has totally changed in respect of creation of networks and activities that could transcend
economic, social and geographical boundaries of the nation (Hilton and Platt, 2013). ZARA is
the chosen organisation in this present assignment, its a Spanish clothing and accessories
retailing firm that was implemented in 1975. Basically, Zara is a flagship company of Inditex
group which own brands are – Pull and Bear, Massimo Dutti etc. Due to its global market
presence, the brand has a wide network of supply chain. Apart from this, the present report is
going to be described various types of business organisations, such as – public, private and
voluntary. There will be a discussion on interrelationship between all organisational functions in
accomplish goals and objectives. Furthermore, internal and external analysis will be conducted
so as to take imperative business decisions.
TASK 1
Covered in PPT
TASK 2
P3 Relationship between various organisational functions and it is related with organisational
objectives and structure
In this competitive era, large business organisations are tend towards applying
cooperation between all departments of the firm thus to grab better future opportunities. It also
helps the firm to attain and its mission and vision statement at marketplace. Following is defined
various department of Zara, such as -
 Finance department – The most common role of finance department is to make
documentation and put a control over incoming and outgoing cash within an organisation.
Finance manager of Zara determines cash flows and keep them up to date, assess
performance of the organisation as well as evaluate straight away (Cai and Yang, 2014).
Another important role of finance department is preparing budgets, financial statements
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(trading accounts, income statements and balance sheets). Due to introduction of
computerised system, all this can be done far quicker and required less labour incentives.
 Human resource department – This department of the company is liable for managing
entire workforce in a systematic manner so as to reduce labour turnover. Human resource
department of the company is liable for recruitment and selection and for this certain
strategies are put into action. In this tone of competitive vying, firms are trying to retain
best talent and for this HR managers organise several training and development
programmes thus to improve skills and knowledge level of the firm.
 Operational and production department – In manufacturing companies, operational
department is liable for making products which are offered to customers. This division
create outlines for products as well as making plans for productions; it involves quantity
of raw materials, volume of goods etc. Along with this, production department also
ensure about the availability of raw materials and determine whether goods and services
are being delivered to customers on time (Chavis, Klapper and Love, 2011). It also test a
product's quality as it will be satisfy customers' needs or not. Research and development department – This department of the company is responsible
for conducting market research thus to recognise needs and wants of target audiences. It
also collects knowledge current and future market trends as well as who are or will be the
competitors of the company. By gathering adequate marketing information, managers can
easily improve their strategies and policies which supports to attain goals and objectives
of the company.
Organisational structure of Zara -
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(Sources: Organisational structure, 2012)
Zara is affiliated with Inditex group thus, the actual organisational structure of the
company was traditional. Here, department of operation, product development, finance and
department of market research all were independent. But as per the time passes, certain changes
has been made in organisational structure of the company. Buyers is consider at top most for
getting information, orders, sales processes and further developments. Organisational structure of
Zara relies upon buyers of the work of coordination and communication. Since, all departments
of Zara work cooperatively and no barriers of communication (Commander and Svejnar, 2011).
In this, units and its employees are allowed to get free access to take any necessary information
or data. Henceforth, increasing speed of coordination improve operational efficiency of the
company; it results accomplishment of goals and objectives in an effective manner.
TASK 3
P4 Positive and negative impact of macro environmental factors
Macro environment consists all those internal and external factors which has direct and
indirect impact on growth and success of the company. All these elements also reflect decision
making process as well as operational activities of firm; thus management must recognise them
and prepare necessary strategies to compete with macro environment factors. Following is
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Illustration 1: Organisational structure of
ZARA

defined positive and negative impact of external business environment on growth and success of
the company, such as -
Basis Meaning Positive impact Negative impact
Political
factors
Political factors are
those that has a vast
impact on business
associations, i.e.
financial regulations of
the nation. In UK,
government has
interference on public
and private sector as
well through taxes as
well as restricted
certain products
suddenly.
Zara is a multinational
brand located worldwide;
thus the brand is managing
its political relations with
all nations and work by
considering political
decisions (Cuervo‐Cazurra,
2011).
After Brexit, UK economy
will work independently as
there is no interference of
EU in import and exports of
products in any nations.
Changes in laws of industrial
licensing and easy entry in
foreign firms increase the
level of competition for UK
firms.
Apart from this, after leaving
EU, UK economy faces
several circumstances and
issues which covers backlash
to globalization, inequality,
the growing divide between
cities and rural areas,
identity, and the future of the
nation-state.
Economic
factors
It consider all those
elements which
reflects economic
growth of the nation
and the firm as well; it
is essential for decision
makers to keep proper
knowledge about
inflation rates, interest
rates, exchange rates
and so on. It defines
that entire world is
facing global recession
As a developed nation, UK
has strong economic
condition; it results
businesses can easily spread
their market area. Due to
high disposable income,
customers will purchase
qualitative cloths from
brand like Zara.
Apart from this, to compete
with external environment
Zara has acquired
affordable pricing strategy.
In 2008, economic recession
had hurt corporate
associations deeply in
respect of decreasing sales
and profits.
Rises in production or labour
costs also expand financial
burden on companies
(Gebauer, Paiola and
Edvardsson, 2010).
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thus customers will
spend as per their
global recession.
Social
factors
It seems to impinge on
clothing industry as
customers spending or
purchasing habits are
changing as per their
economic stability.
As this over dynamic
environment, needs and
wants of customers are
altering day by day. In
order to determine this,
Zara conducts market
research through social
media sites so as to familiar
with market trends.
In order to attract customers'
it is essential for businesses
to get involved in fulfilling
social responsibilities
towards society.
But the main objective of
firms is to earn high profits
and it is quite difficult for
ZARA to consider value,
cultural and beliefs of
society while performing.
Technologi
cal factors
Digital technology has
made easier the
process of working, i.e.
manufacturing to
marketing to
distribution. It also
help firms to interact
with its target
audiences.
Zara is known as most
disruptive name in fashion
industry; the reason behind
this is to utilise new
technology which increases
sales and profitability of the
firm (Halbert and Ingulli,
2011).
Apart from this,
technological advancement
reduces the need of
workforce which may raise
unemployment in an
economy.
Hacking or cyber crime can
be a big issue.
Environme
ntal factors
In order to sustain for
long run and remain
successful, business
organisations should
fulfil their obligations
towards environment,
i.e. nature and wild life
Zara has capitalised into
sustainability; the brand is a
parent company of Inditex
which pledged its stores
100% eco-friendly by 2020.
Ignorance of hazardous
wastage from supply chain
and not considering
recycling process can affect
market goodwill of ZARA.
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preservation.
Legal
factors
Every nation has
regulated its own laws
and legislations which
must adhere by all
corporate associations
thus not to influence
by them.
As ZARA is tend towards
building positive market
image and for this it focuses
on fulfilling certain laws,
i.e. data protection act,
minimum wages act, health
and safety act, labour
relations act and so on
(Hamilton and Webster,
2015).
If a business is not
performing in legal and
ethical manner means
avoiding government laws
then it would not survive for
long term period.
P5 Internal and external analysis of ZARA
Internal and external analysis of the company can be done through SWOT analysis that is
described as beneath: -
STRENGTH WEAKNESSES
The major strength of Zara is having great
market presence across the world. As per the
latest count, there are over 2100 stores and
average sale of 16 billion in a year. It is
expanding as per the year passes. The brand is
located in 88 countries where its outlets are
located at most famous places.
Zara is ranked 53 in respect of brand ranking
as well as its brand equity is evaluated at
whopping of 10 billion dollars. The main
reason behind strong brand equity is excellent
performance and quality in past decades.
Beside this, having a healthy cultural also
make a brand being loved by people (Hilton
In 2016, BBC news disclosed that it has
founded evidence regrading child labour and
employee exploitation in ZARA. By
managing its safe side, Zara said that there
were some issues but in a one factory not in
all. Beside this, instead of taking actions as
soon as possible it has taken time period of six
months.
Due to having highest cutting edge, the
chances of greatest risk. Zara is known for
new product development and innovation and
risks exists if new innovations may falter. As
competitors also produce same products
which reduces attractiveness of the brand.
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and Platt, 2013).
In its stores, Zara modify its designs in 2
weeks whereas its competitors takes almost 6
weeks. This aspect automatically make the
brand trendiest among customers. On an
average, every year 450 designs are created by
Zara.
Another strength of ZARA as it is always
focused on how to keep customers back
towards the organisation. For this purpose, the
brand creates new designs and rotate them as
per the time; it results people will always see
something new whenever they come to the
store. As it is the main reason as the brand has
large group of target audiences.
Zara spends less on promotional and
advertising activities as it is consider as
significant part which directly impact on sales
revenues (Klapper, Lewin and Delgado,
2011).
Government authorise of China are publicly
scolding Zara cause its has listed Taiwan as a
country on their website; it can be another
weakness of the organisation.
OPPORTUNITITIES THREATS
Merger with Inditex group will provide more
investment opportunities to Zara in emerging
markets.
At present, the brand is located in more than 80
nations and now it is trying to expand business
in developing countries; it will offer a chance
to exploit market development to Zara.
Zara is a status symbol which people loves to
wear thus the brand is becoming more popular;
it results growing potentials at marketplace
(Prajogo, 2016).
The main competitors of Zara are GAP,
NEXT, H&M, Bentton and further ne w
entrants that put an eye to recapitalize its
profitability in new markets.
Another threat is increasing production costs
as well as economic downturn may striking
back consumers to spend less.
Raising in Euro rate.
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TASK 4
P6 How strength and weaknesses are interrelated with external macro factors
In this over dynamic environment, it is essential for corporate units to be aware with
environmental changes thus to obtain high cutting and retain its competitiveness over the world.
But in business environment there are certain macro factors, like – political, social, economic ,
social etc. which can affect growth and sustainability of the firm at market. Strength and
weaknesses of the company also interrelate with these macro environmental factors that is
defined as under: -
 Strength – As the main strength of the company is to have great brand image in UK cause
its follows all government laws and regulation which are implemented by British
government. Apart from this, economic condition of UK is also strong thus it is reason
behind strong purchasing power of customers. Brexit reduces involvement of EU thus
United Kingdom will implement its own policies which would beneficial for all
corporations which are operating at there, like Zara.
 Weaknesses – The main weakness of the Zara has it was involved in child labour, labour
exploitation and further social social issues which can reduce brand equity of firm at
marketplace. Therefore, brand which losses attention of social and cultural aspect of
business as well as marketing are considered at the risk of losing its buyers (Savrul,
Incekara and Sener, 2014).
 Opportunities – As Zara spends one third of its profits into research and development
activities; it would be a great opportunity for the firm while entering into new markets.
The brand launch new design in every 2 weeks cause it is highly involved in innovation
and new product development. It has acquired latest technology in its production process
which will help the brand to leave a strong mark on customers' mind in 21st century.
 Threats – Due to flexible political condition of UK, it allows foreign investments which
increases the number of competitors within an organisation. Global economic crises can
also reduces the customers' spending power; it leads customers' will not able to spend
high amount on purchasing.
CONCLUSION
From the above mentioned report it get analysed that business environment plays a vital
role in growth and success of every corporate association as it encompasses all those factors
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which have positive and negative impact on working activities of firm. The report has stated
various types of business associations, i.e. public, private and voluntary by having their own
purpose and legal structure. It is essential for organisations to work cooperatively with all
departments in order to accomplish business goals and objectives in the best possible manner. In
addition to this, managers of ZARA are required to conduct SWOT analysis thus to determine all
those internal and external factors which have a vast impact on future market condition of the
company. Apart from this, after assessing positive and negative impact of macro environment
management can modify its existing business strategies and policies and gain high competitive
edge.
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REFERENCES
Books and Journal
Cai, S. and Yang, Z., 2014. On the relationship between business environment and competitive
priorities: The role of performance frontiers. International Journal of Production
Economics.151. pp.131-145.
Chavis, L. W., Klapper, L. F. and Love, I., 2011. The impact of the business environment on
young firm financing. The world bank economic review. 25(3). pp.486-507.
Commander, S. and Svejnar, J., 2011. Business environment, exports, ownership, and firm
performance. The Review of Economics and Statistics.93(1). pp.309-337.
Cuervo‐Cazurra, A., 2011. Global strategy and global business environment: the direct and
indirect influences of the home country on a firm's global strategy. Global Strategy
Journal.1(3‐4). pp.382-386.
Gebauer, H., Paiola, M. and Edvardsson, B., 2010. Service business development in small and
medium capital goods manufacturing companies. Managing Service Quality: An
International Journal. 20(2). pp.123-139.
Halbert, T. and Ingulli, E., 2011. Law and ethics in the business environment. Cengage Learning.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Klapper, L., Lewin, A. and Delgado, J.M.Q., 2011. The impact of the business environment on
the business creation process. In Entrepreneurship and Economic Development (pp.
108-123). Palgrave Macmillan, London.
Prajogo, D. I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics. 171.
pp.241-249.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-So
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