Pestle Analysis of Zara Fashion Company

This assignment provides a comprehensive pestle analysis of the Zara fashion company, highlighting its sustainable business practices, adoption of organic materials, use of renewable energy, and emphasis on economic growth. The report also discusses the favorable business environment in Poland, which has led to an increase in foreign trade and investment. Additionally, it touches on the company's lack of focus on political factors, resulting in fines and penalties.

Business organization and
environments in a global
context
Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Relevant information of Zara.......................................................................................................4
Business environment of Poland.................................................................................................5

Application of analytical framework along with its use and examples.......................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business organizations and environment in the global context has changed in recent times
in terms of economic setting. The need for business organizations to operate on global level has
arisen because now domestic market is no more capable to meet the demand of the people all
over the world. Globalization has become possible because of improved communication
technology. Zara, a retail company which has was founded 44 years ago in the year 1975. The
headquarter of the company is in Spain and the company has currently 10000 stores operating all
over the world. This report will include the information of the Zara as well as discussion on the
business environment. furthermore, discussion on the appropriate analytical framework would
also be carried out and its use and application with the help of appropriate data and examples.
MAIN BODY
Relevant information of Zara
Zara is a Spanish fashion retailer, which deals in clothing, shoes, cosmetics and
accessories (Schluep, 2017). The company was founded years ago and is now one of the most
important brand of the world’s largest retailer of apparels that is Inditex group. Currently, Zara
manages around 20 clothing collections in a year. Zara produces quality and creative clothes but
most importantly the company is known for producing a new product and making it available in
its stores within 2 weeks while on the other hand, other companies usually takes around 6
months. This is one of the major reasons behind the success of the company.
Rosalia Mera along with her husband Ortega founded zara in 1975. the company
produces the products as per the recent trends in the market which in turn leads to production of
its clothes to around more than 450 million items in a year. The company has a wide and a very
efficient distribution channel which is the major reason behind company operating its business
smoothly every time (Kardes and Chueke, 2017). With the changing time, company has realised
to need to operate and open online store in order to achieve competitive advantage and hence
opened online stores in few countries and is planning to open more stores online.
The mission of the Zara company is to achieve sustainable development towards the
society as well as to contribute towards the environment in which the company is operating.
While the vision of the company is to provide full satisfaction to customers by satisfying the
desires of the customers through providing them exclusive choice of fashion as per the recent

trends. The company is a Eco- friendly company but does not carry out any kind of marketing in
order to increase the sales of the company (Dev, 2018).
Success story of Zara
Ortega established its first factory, Inditex, for producing dresses in the year 1963. after
few years, he started a small store in the Spain with very low budget with the name Zorba but
soon he changed the name of the store to Zara without any intention. This is how the brand came
into existence and became known for providing world’s best fashion products. Since, the
products of the company were widely accepted and demanded, the company expanded its
operations from a small store to all over Spain but soon the company expanded its operations in
other countries as well and achieved globalization and became one of the most widely accepted
and demanded fashion brand all across the world.
The secret behind success of Zara was the idea of the founders to keep up with street
fashion with the changing time. They kept a constant view on how the brand is changing and
then producing the clothes as per the changing time and making them available in the stores
within 2 weeks which in turn helps the company to beat its competitors and rule the market
(Baena, 2018).
Business environment of Poland
Business environment may be defined as all those factors which have an impact on the
working of the company and includes both internal as well as external factors. When it comes to
business environment of Poland it is very favourable which leads to effective working of the
business environment (Guide to emerging markets, 2007). The various elements of business
environment of Poland are discussed below:
 Poland as a member of European Union
Poland is one of the emerging markets of the world. Since Poland is a member of
European union, its business environment is affected by the trade relations with Hong Kong/
China. In terms of population and economic size, Poland is one of the largest markets. Income
level as well as foreign direct investment of Poland is highest in that particular area. Household
income of people is increasing which in turn has led to increase in their purchasing power thus
leading to increased business of the business organizations.
 Inflow of foreign capital

Poland has the benefit of inflow of foreign capital because of 3 major reasons and those
are low cost of production, liberalized investment environment and good trading prospects.
Mostly business firm invest in the sectors such as manufacturing, chemical, pharmaceuticals and
automotive. Foreign investors not only invest in exploring domestic market but are also very
interested in exploring capability of production processes (Kozubíková, Homolka and Kristalas,
2017). Foreign direct investment has helped a lot to the domestic enterprises of Poland towards
improving the quality of their products because of the high competition in the market due to
inflow of foreign capital.
 Growing purchasing power
With the increase in inflow of foreign capital, competition has increased, this has led to
giving employment to more people with more wages which in turn has led to increase in the
household income of the people. Thus, when the household income of people increases, their
purchasing power also increases which lead to increase in the sales volume and revenue of the
business firms. This is the major reason behind the growth of the economy of Poland.
Table 1. Average monthly salary by occupation
(Source: Guide to emerging markets. 2007)
 Poland's industrial sector

Industrial sector of Poland is very wide and one of the major reasons behind this is
foreign direct investment (Skuza, McDonnell and Scullion, 2018). When it comes to industrial
sector food and beverage industry contribute the most towards the sale while on the other hand,
least sales in Poland is done by paper and pulp industry. In the industrial sector of Poland, there
are a wide number of niche supplier of industrial products. Another important reasons behind
Poland consisting of one of the major industrial sectors is because of high export to the other
countries and the high import tariffs which makes the imported product from other countries
expensive which are out of reach or customers to buy them.
Table 2. Sales of major industries in Poland
(Source: Guide to emerging markets. 2007)
 Expansion in foreign trade

There has been vast expansion of foreign trade because of increased economic
activities(Pietrzak, and et.al., 2017). With the changing time not only exports in Poland has been
increased but also imports have been increased and the results of the survey show that most of
the imports and exports are carried out from the Germany. It was also found that majority of the
export is done of the machinery and transport equipment’s.
Hence, these were the major elements of business environment but since the company
chosen is Zara a special discussion needs to be carried out. Since Zara is a clothing company, the
clothing industry of Poland comes under an agreement signed between world trade organization
and agreements on textile and clothing. Under this agreement the restriction in trade has been
eliminated from the year 2005. Thus, this has lead to free trade between the countries of
European union and Hong Kong/china(Goujard, and Guérin, 2018).
Application of analytical framework along with its use and examples
Analytical framework that is used in order to discuss the following report is:
 PESTLE Analysis
Pestle analysis is carried out in order to study the impact of macro- environmental factors
on the working of the business in order to scan the components of environment.
Zara is one of the fastest growing company in the world especially in the fashion
industry. Zara kept on growing because of smarter planning and proper understanding of macro
environmental factors(Pestle analysis of Zara, 2016). Thus, here a pestle analysis would be done
in order to understand what kind of forces affect the smooth functioning of the fashion brand in
this fast changing world.
PESTLE stands for
P - Political
These are those factors which determine the degree to which government would intervene
in the working of the organization and thus includes factors such as government policy, political
instability, trade restrictions, environmental laws and so on.
Political disruption results in disruption of the market as it disturbs the entire supply
chain which restricts the company from carrying out its activities smoothly but the Zara has
overcome this difficulty by limiting its supply chain up-to its domestic country as well as its
nearby countries. Apart from this, in order to run the business efficiently in various countries it is
very necessary for Zara to remain updated with the various policies, political environment,

political stability or instability of every country. If it fails to understand various political factors
then the company won’t be able to maintain its position in the market for a long time as well as it
will attract unnecessary restrictions of the government which will add up to the complexities
arising in running the business smoothly.
Zara has failed in proper understanding of political factors and this evident from the
following example ‘ in Brazil, Zara has been penalized to pay fine because of providing poor
working conditions for its employees’. thus, in order to grow and sustain in long run it is very
essential for Zara to have a clear understand of the impact of political factors as well as constant
watch on the political changes occurring in the fast changing environment.
E - Economical
Organizations should consider all the aspects of the economy in which the company is
operating as they have a major impact on the working of the organization as well as their
profitability. These factors include inflation rate, interest rates, exchange rates, disposable
income, economic growth and so on.
For example: Zara has adopted the strategy of affordable pricing which has helped the
company in attracting more customers and beating the competitors as the company provides high
quality products and even at affordable prices. This strategy has helped Zara a lot in increasing
its market share because even though in the adverse condition such as low economic growth, the
company would be able to operate smoothly because even if the customers try to cut down the
cost, they wont shift to other brands because of quality products at affordable prices provided by
the companies. Further, economic growth in the economy of Spain has helped Zara a lot in
increasing their sales and profitability. There was one situation which drastically affected the
sales of Zara and that was at the time when Britain exit European union which has resulted in
decline in the value of pound thus leading to high inflation rate and hence had a negative impact
on the profitability of the company.
S - Social
A deep understanding of social factors is very important from the point of view of
clothing industry because these factors include the study of lifestyle of people, attitude,
personality, culture and so on. Zara is known for efficient consideration of social factors
For example: Zara lungi skirt for men is very famous specially in the south Asia because
of its high street style(Pestle and swot analysis of Zara, 2018).

T - Technological
It is very important to bring innovation in technology in order to survive in this fast-
changing world. If a company fails to remain updated with technology otherwise it will lag far
behind them and would not be able to grow and survive in long run. It includes factors such as
innovation, technological upgradation and Zara. One of the major reason behind Zara being able
to maintain its market share is its continuous investment in research and development and
efficient implementation o those.
For example: Zara has adopted a new technology with the help of which it can show its
customers how the clothes on model look like when they are worn; when any customer
approaches to the sensor with the smart phones somewhere in the stores.
L - Legal
Legal factors are those factors whose compliance is very necessary in order to run the
business smoothly. If they obligations are not fulfilled then it will not only spoil the image of the
company but also encourage restrictions from the government in some or the other way which in
turn may lead to increase in the complexities of the business in running them smoothly. These
factors include laws such as anti - discrimination act, equal pay act, disability discrimination act,
etc.
Big fashion companies such as Zara need to adopt the copyright act in order to remain
protected from the local companies that may produce same kind of products at cheaper prices
under their brand name which in turn will negatively affect the sales and profitability of the
company as the consumers would prefer cheap product of same quality.
For example: Target clothing company had to pay lot of money in terms of fine and
penalties because it copied the Burberry genuine scarfs.
E - Environmental
A company should have a deep focus on environmental factors in order to improve its
brand image which is very helpful in long run because by adopting sustainable environmental
practices a company can prove that the company is concerned regarding the well being of the
society by adopting corporate social responsibility.
For example: Zara has taken initiative to produce sustainable clothes by preparing it with
organic material using sustainable energy and equipping.

CONCLUSION
From the above report, it has been summarized that because of constant vie on the recent
trends the fashion; company managed to become one of the largest companies in the fashion
brand all across the world. Apart from this, business environment of Poland is very favorable
because the company is a part of European union as well as the inflow of huge foreign
investment due to low production cost and liberal investment facilities which has in turn lead to
increase in the foreign trade. Moreover, pestle analysis on the company was also carried out with
the help of which it was found the company has adopted sustainable practices for fulfilling
environmental factors as well as the economic growth of the country fostered the growth of
company. It was even found that company didn't emphasis much on political factors which lead
to attraction of fines and penalties.

REFERENCES
Books and journal
Schluep, R.B., 2017. Fashion Technology and the Development of New Business Models.
In Advanced Fashion Technology and Operations Management (pp. 1-37). IGI Global.
Kardes, I. and Chueke, G., 2017. Targeting Middle-Class in Emerging Markets: The Case of
Brazil. Rutgers Business Review. 2(3). pp.279-294.
Dev, T., 2018. Demand management in an apparel company: a case study.
Baena, V., 2018. International franchise presence and intensity level: profile of franchisors
operating abroad. Management Research Review. 41(2). pp.202-224.
Kozubíková, L., Homolka, L. and Kristalas, D., 2017. The effect of business environment and
entrepreneurs’ gender on perception of financial risk in the smes sector. Journal of
Competitiveness.
Skuza, A., McDonnell, A. and Scullion, H., 2018. Macro talent management in Poland: The role
of talent and the challenges ahead. In Macro Talent Management in Emerging and Emergent
Markets (pp. 66-83). Routledge.
Pietrzak, M. and et.al., 2017. Entrepreneurial environment at regional level: the case of Polish
path towards sustainable socio-economic development. Entrepreneurship and Sustainability
Issues. 5(2). pp.190-203.
Goujard, A. and Guérin, P., 2018. Financing innovative business investment in Poland.
Online
Guide to emerging markets. 2007. [online]. Available through:
<http://info.hktdc.com/emergingmarketguide/3-2.htm>
Pestle analysis of Zara. 2016. [online]. Available through: <https://freepestelanalysis.com/pestle-
pestel-pest-analysis-of-zara/>
Pestle and swot analysis of Zara. 2018. [online]. Available through:
<https://www.123writing.com/sample/pestle-and-swot-analysis-of-zara-2018>